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4 06 08 12 14 32 34 36 44 54 56 60 Page CHAIRMAN AND CEO’S MESSAGE HIGHLIGHTS 2021 CORPORATE GOVERNANCE FINANCIAL AND STOCK PERFORMANCE CORPORATE BODIES PROPOSAL FOR THE ALLOCATION OF PROFITS ANNEXES TO THE MANAGEMENT REPORT NON-FINANCIAL STATEMENTS EUROPEAN TAXONOMY FINANCIAL STATEMENTS AUDIT BOARD AND STATUTORY AUDITOR REPORTS
6 CHAIRMAN AND CEO’S MESSAGE Dear Shareholders, Our 2021 results confirm that our strategy is suited to the challenges we face, revealing a good performance in our main indicators. Our turnover was up 11%, with our international business approaching 60% of the total. Our EBITDA and our Net Profit increased 7% and 16%, respectively, with this last indicator more than doubling in terms of continuing operations. The Net Cash position totalled around €56 million. Next-Gen business increased 15%, thanks to the strong expansion of our international operations by 20%. We won new flagship clients and enhanced our talent pool with 16% more specialists, despite the pandemic. In the Value Portfolio business, we got back to growth and improved profitability, recovering from the impacts of Covid-19 in 2020. The second year of the pandemic continued to bring us challenges, given the constant ups and downs. The maturity of our remote working methodologies and the flexibility of the hybrid model we adopted allowed us to successfully overcome these adversities. A new management term of office also began in 2021. The elected team – more diverse in expertise, experience and gender – has been committed to the sustained creation of value for NOVABASE and all its stakeholders, including society at large. We made relevant progress in environmental, social and governance (ESG) indicators, as described in the various sections of this document.
7 During 2021 the share price soared 60%, accrediting the work of our entire team, to whom I thank for their tremendous dedication in such demanding times. Given the company’s solid balance sheet, we will propose to the 2022 General Meeting of Shareholders a remuneration of €0.43 per share. Our main bets and challenges for 2022 remain the same: the growth of our international business and our talent base. We will also keep looking for assets to buy to accelerate our strategy, but always with a value creation mindset. Unfortunately, at the beginning of the year, we were confronted by an unexpected military conflict in Europe and all its negative and tragic consequences, from a social, economic and, above all, human perspective. As of the date of issue of this Report, there is great uncertainty about how this whole situation will evolve. Despite all of this, we will continue to execute our strategy, believing in our team’s abilities to triumph over the difficulties that lie ahead. Luís Salvado
8 HIGHLIGHTS 2021 ACTIVITY STRATEGY EXECUTION 2019+ NEXT-GEN WITH GREAT MOMENTUM Next-Gen delivered a strong performance in 2021, growing at 20% its international Turnover, benefitting from the focus on resilient sectors and larger sized customers. Although the bolt on M&A initiative is delayed, Next-Gen is making good progress with its transformation and continues to thrive in its organic growth. VALUE PORTFOLIO BACK TO GROWTH The year 2021 marks the recovery of the Value Portfolio, after the pandemic impacts (mainly in the Spanish market) experienced in 2020, especially during the second half. This segment was able to clock improvements in Turnover throughout the quarters, ending the year slightly above the 2020 level. As global economy continues to open, Value Portfolio is well positioned for sustained growth and to generate value to fund Next-Gen strategy.
9 PRESS ZONE NOVABASE ON THE NEWS • New corporate bodies for 2021/2023 triennium. • New brand architecture (www.novabase.com). • New lab space sponsored at Instituto Superior Técnico. • First edition of FutureNet World Middle East & Africa sponsored by Celfocus. • Celfocus is Diamond partner of the Portuguese Software Testing Qualifications Board. • Partnership with ISCTE and Instituto Pedro Nunes to develop “New Digital Talent Ecosystem”, a R&D project using AI and blockchain. • Most innovative company in managing people award for the 3rd consecutive year, by Human Resources Portugal magazine. • Agility in Service Design & Delivery award to Celfocus, at the World Agility Forum Gala 2021. • Multiple initiatives at universities with eyes set on talent , e.g. SINFO conference, SET - Business and Technology Week and Universidade do Algarve Careers Fair. • Internal Mobility Programme “Move My Talent” launched by Neotalent, aimed at increasing motivation and lowering attrition rate. • 700 new talents virtually onboarded by Celfocus. • New hybrid working model deployed: 60% Work From Home policy, aimed at retaining and attracting talent. • Sponsorship of PWIT - Portuguese Women in Tech. • Partnership with PWN Lisbon, aiming at promoting female talent and increase its representation in the STEM areas (Science, Technology, Engineering and Mathematics). • Partnership with Portuguese Red Cross on the Walkinar - Walk for a Cause initiative. • Social Responsibility Programme launched by Celfocus, focused on expanding Technology reach.
10 HIGHLIGHTS 2021 FINANCIAL HIGHLIGHTS AMOUNTS IN M€, EXCEPT OTHERWISE STATED
12 CORPORATE GOVERNANCE NOVABASE has been a publicly-traded company since July 2000. It operates according to a governance model whose suitability and performance are assessed regularly by the Board of Directors to help optimize its performance in closer alignment with the interests of all stakeholders – those interested in NOVABASE’s corporate activities, namely shareholders, investors, customers, suppliers, other business partners and employees. In view of the mounting challenges of internationalization and competition revolving around NOVABASE’s business, the corporate governance system in place at the company needed to be brought up to date by simplifying and streamlining company bodies and procedures, so as to tailor existing solutions to the Company’s size and specific circumstances. Therefore, beginning in 2015, NOVABASE adopted a reinforced Latin corporate governance model comprised of a Board of Directors, Audit Board and Statutory Auditor (ROC). In this model, a substantially more agile day-to-day management structure was implemented, with the Board of Directors able to delegate the day-to-day running of the Company to one or more directors (managing directors) or to an Executive Committee of 3 to 9 members.
13 Following the General Meeting of Shareholders of 25 May 2021 (which, among other decisions, elected the members of the corporate boards and Remuneration Committee for three-year period of 2021-2023), for the purpose of implementing a substantially more agile day-to-day management structure, the elected Board of Directors delegated NOVABASE’s daily management to managing directors Luís Paulo Cardoso Salvado and Álvaro José da Silva Ferreira, thereby not creating an Executive Committee for this term of office. Along these lines, the decision was made to grant special responsibilities to director María del Carmen Gil Marín, pursuant to article 407, paragraph 1 of the Commercial Companies Code. The activities of these managing directors are supervised by the non-executive directors. Moreover, NOVABASE has a general meeting board elected for three-year terms of office, along with a Remuneration Committee appointed by the General Meeting of Shareholders to establish the remuneration of each corporate board member based on the duties performed and the Company’s financial status. The Company also designates a Secretary and respective substitute, under the terms of article 446-A of the Commercial Companies Code, to perform the duties established by law. NOVABASE constantly analyses the implementation of this model in order to refine its corporate governance practices, whenever possible, and tailor the model to the demands and challenges faced by the Company.
14 FINANCIAL AND STOCK PERFORMANCE RELEVANT INFORMATION UPDATE ON COVID-19 IMPACTS The second year of the pandemic has proven to be a year of challenges, with advances and setbacks. 2021 began under a wave of infections and new lockdowns worldwide, but as of the middle of the second quarter, the outlook began to improve. By the end of the year, the pandemic situation worsened again, due to the surge of a new variant. The Group’s Pandemic Task Force continued to support the operations, while taking all necessary health measures to protect the entire community. The evolution of the pandemic was continuously monitored, and implementation of new measures was carried out whenever necessary. There was no material impact on the direct operating conditions during 2021. The Nearshore Agile Delivery Model enabled sound growth and allowed customer operations to continue seamlessly and smoothly. The successful experience of working remotely imposed by the pandemic was key for the deployment of a new hybrid working model: NOVABASE’s employees may work remotely 60% of their time. The new policy brings the flexibility that NOVABASE considers a strategic imperative for attracting and retaining talent.
15 In terms of financials, there were also no relevant Covid-19 impacts. Next-Gen thrived in its organic growth and Value Portfolio recorded a recovery, after experiencing some Covid-effects, especially in the second half of 2020. Other effects of the pandemic include higher complexity in talent retention, delays in the M&A initiatives and challenges in winning new clients, however, the commercial victories achieved during the year are encouraging. The Board of Directors considers that the liquidity situation and the capital levels are sufficient to continue the Group’s activity. NOVABASE will continue monitoring the pandemic’s evolution and giving priority to the implementation of all measures considered adequate to minimise the negative effects on the Group’s operations, in line with the recommendations of the authorities and on all stakeholders’ best interest.
16 KEY FIGURES TURNOVER Turnover grew by 11% YoY, leveraged by Next-Gen (1) Computed based on the location of the client where the project is delivered. (2) Includes holding / shared services.
17 EBITDA EBITDA increased 7% YoY, with Next-Gen representing Ҁ NET PROFIT Net Profit increased 16% YoY, to 8.7 M€ Total Earnings per Share reached 0.28 Euros (0.24 Euros in 2020).
18 EBITDA TO NET PROFIT Net Profit from continuing operations shot up approximately 2.3x Financial results improved 1.8 M€ YoY, due to the exchange differences recorded in foreign operations and re-evaluations of the Venture Capital Funds investments. Income Tax increased +1.6 M€ YoY, benefitting from SIFIDE R&D tax incentives. Discontinued operations, of 1.1 M€ in 2021, comprise R&W provisions reversals and the capital gain adjustment on the sale of Collab (first-year earn-out). In 2020, this heading presented capital gains on the GTE Business and Collab disposals.
19 NET CASH Solid Net Cash position of 55.8 M€ NOVABASE presented a comfortable liquidity situation, which will allow it to support the 2019+ Strategy investments and shareholders’ remuneration commitments. There was a cash generation of 4.3 M€ in 2021 primarily driven by solid net cash provided by operating activities, which also comprises the following movements: • M&A settlement of 4.5 M€, related to the consideration associated to the service hiring guarantees on the acquisition of Celfocus equity stake in 2020, as set out in the agreement; • Payments to Non-controlling interests of 1.3 M€, including dividends and amounts released following the share capital reduction of Novabase Capital I&I Venture Capital Fund. From the 55.8 M€ of Net Cash, 3.1 M€ refers to Non-controlling interests (versus 4.3 M€ in 2020). Net Cash is an Alternative Performance Measure (APM) used by NOVABASE to assist in the analysis of the Company’s liquidity and ability to meet commitments. The detail and breakdown of Net Cash is as follows: (1) Determined by multiplying the number of treasury shares held by the Company at the end of the period by the share price on the last tradable day. AMOUNTS EXPRESSED IN THOUSANDS OF EUROS 2020 2021 Cash and cash equivalents 71,929 68,431 Treasury shares held by the Company (1) 2,172 3,581 Bank borrowings - Non-Current (16,200) (9,400) Bank borrowings - Current (6,400) (6,800) Net Cash 51,501 51,812 Number of treasury shares held by the Company 676,611 699,480 Closing price @ last tradable day (€) 3.210 5.120 Treasury shares held by the Company 2,172 3,581
20 CAPITAL EXPENDITURE Capex (1) of 0.9 M€ Consolidated recurring investment amounted to 0.8 M€ in 2021 (0.9 M€ in 2020). This amount, which corresponds to a cash outflow from the balance sheet, refers to acquisitions of property, plant and equipment, essentially IT equipment for operations and furniture. In 2021, there was also a non-recurring investment of 0.1 M€, which corresponds to a cash outflow from the balance sheet, related to extraordinary or unusual acquisitions of work in progress and computer software. The non-recurring investment includes additions of right-of-use assets of buildings and vehicles recognised under lease contracts that are non-cash items in the amount of 1.1 M€. Additionally, and still in the non-recurring investment, there are the disinvestment parts, which correspond to non-cash write-offs related to right-of-use assets of buildings and vehicles in the amount of 2.5 M€ and other tangible assets in the amount of 0.1 M€ negative. (1) Payments related to the acquisition of property, plant and equipment and intangible assets, disclosed as investment activities in the Consolidated Statement of Cash Flows, which is an integral part of this Annual Financial Report. AMOUNTS EXPRESSED IN THOUSANDS OF EUROS NON-RECURRING RECURRING TOTAL Work in progress 46 - 46 WORK IN PROGRESS 46 - 46 R&D 20 - 20 Industrial Property and Other Rights 2 - 2 INTANGIBLE ASSETS 22 - 22 Transport Equipment / Leasing / OR -97 - -97 Other Tangible Assets -1,391 790 -601 PROPERTY, PLANT AND EQUIPMENT -1,488 790 -698 TOTAL -1,420 790 -630
21 TALENT Talent pool grew 7% YoY Despite the shortage of technology talent accelerated by the pandemic, NOVABASE was able to continue hiring and growing its pool of specialists. In 2021, 157 new university graduates were recruited through Novabase Academy programme (75 in 2020). SEGMENT INFORMATION NOVABASE’s activity is organised into two operating segments: Next-Gen and Value Portfolio NEXT-GEN: NOVABASE’s core segment, which operates under the Celfocus commercial brand according to the new brand architecture. It develops an IT activity with technological offers that tend to be more advanced and targeted mainly to the Financial Services and Telecommunications industries and to the most competitive markets (Europe and the Middle East). VALUE PORTFOLIO: Segment aggregating the activities of IT Staffing, under the Neotalent commercial brand, and venture capital through Novabase Capital, S.C.R., S.A.. Its objective is to generate funds to support Next-Gen strategy. For reporting purposes, the Group’s holding and shared services also belong to Value Portfolio. • NEXT-GEN Next-Gen’s Topline grew at double-digit, +15% YoY Growth was fully organic and driven by international operations.
22 Next-Gen’s EBITDA rose 3% YoY 2021 EBITDA incorporates the impacts of strategic and talent management initiatives. Next-Gen’s Talent Pool increased 16% YoY Next-Gen already represents 60% of the NOVABASE’S average number of employees, in line with the strategic objectives. Turnover per employee kept in line with the value recorded in 2020. Attrition rate (1) of Next-Gen was 21.7% in 2021 (11.7% in 2020), reflecting both a correction to the abnormally low values recorded in 2020 and the new labour dynamics driven by fierce competition for scarce talent. Multi Industry approach delayed due to the pandemic 2021 highlights the Next-Gen still focused on Telco. (1) Determined by the formula: number of leaves at the employee’s initiative ÷ average number of employees.
23 International Turnover increased 20% YoY 64% of Next-Gen’s Turnover was generated outside Portugal. Target markets of Europe & Middle East increased 22% YoY and represented 90% of the segment’s international business. Exposure to Africa declined by 9% YoY. Top Tier clients Revenues grew by 19% YoY Next-Gen focused on building long term relationships and in winning new clients committed to digital. Total number of clients in 2021 increased to 112 (102 in 2020). (1) Top Tier clients (>1 M€) considers the Trailing 12 months.
24 • VALUE PORTFOLIO Value Portfolio’s Turnover 1% above 2020 YoY rise confirms the recovery from the pandemic impacts in the second half of 2020 (mainly in the Spanish market). Value Portfolio’s EBITDA margin increased 160 bps Performance in 2021 reflects the resilience of the IT Staffing business. Value Portfolio’s Talent pool of 741 employees Holding and shared services represented 76 employees in 2021 (versus 82 in 2020).
25 STOCK PERFORMANCE NOVABASE share price soared by 60% in 2021 During all 2021, NOVABASE was part of PSI20, the Lisbon stock exchange main index. NOVABASE share price performed clearly above the reference indexes PSI20 and EuroStoxx Technology, which increased 14% and 34%, respectively. The Board of Directors will propose a remuneration of 0.43 €/share In 2021 no amounts were distributed to shareholders, due to the uncertainties of the pandemic context. The Board of Directors will propose to the next General Meeting of Shareholders a remuneration of 0.43 €/share, just over half of the amount yet to be paid until 2023 according to the Strategic Update 2019+ commitment. NOVABASE acquired around 23 thousand shares in 2021, under the Company’s own shares buy-back programme. At 31 December 2021, NOVABASE held 699,480 own shares (2.23% of its share capital). The average NOVABASE share price weighted by quantity in 2021 was 4.123 Euros per share. 3.6 million shares were traded in all 258 stock exchange sessions in 2021, corresponding to a trading value of 14.6 M€. Market Capitalisation at the end of 2021 was 160.8 M€, with a ttm Price to Sales of 1.25x. Free Float Velocity (1) represented 32% (39% in 2020). At the date of issue of this Report, the average price target disclosed by analysts is 6.35 €, with unanimous recommendation to buy. The average upside is 24%. (1) Considering a free float of 35% in 2021 and 40% in 2020, calculated according to Euronext criteria.
26 RISKS • FINANCIAL RISKS NOVABASE’s activities expose it to a variety of financial risks, namely Foreign exchange risk, Interest rate risk (cash flows and fair value), Credit risk, Liquidity risk and Capital management risk. The Group’s overall risk management programme focuses on the evolution of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. At the end of 2021, uncertainty regarding the pandemic decreased, with the latest data pointing to a control of the infection control in Europe and several countries continuing to lighten restrictions. However, it brought other uncertainties to the financial markets. On the one hand, inflation in the Eurozone speeded up significantly in the last months of the year, mainly due to the spike of energy prices and supply chain problems, increasing the uncertainty regarding a possible interest rate hike by the European Central Bank (ECB). On the other hand, there are more geopolitical risks on the horizon, with the resulting uncertainties. More information on each of the financial risks to which NOVABASE is exposed to, listed below, can be found in the “Financial risk management policy” note included in the Accounts, an integral part of this Annual Financial Report, and for which reading is advised. Foreign exchange risk NOVABASE is exposed to foreign exchange risk, mainly arising from U.S. Dollar, since some subsidiaries perform transactions in this currency, but also arising from Kwanza and British Pound. The finance department is responsible for monitoring the evolution of exchange rates of the currencies referred above, seeking to mitigate the impact of their fluctuations in consolidated results. Whenever expectations of changes in exchange rates justify it, the Group uses derivative financial instruments to hedge those exposures. Interest rate risk (cash flows and fair value) Interest rate risk reflects the possibility of fluctuations in future interest charges in loans obtained, as a result of changes in market interest rate levels. The Group’s financial liabilities are indexed to short-term reference interest rates, revised in periods shorter than one year plus duly negotiated risk spreads. Hence, changes in interest rates can impact NOVABASE’s results. NOVABASE’s exposure to interest rates arises from financial assets and liabilities contracted with a fixed and/or floating rate. In the first case, the Group faces a risk of fair value variation in these assets or liabilities, since every change in market rates involves an opportunity cost. In the second case, such change has a direct impact on interest amount, consequently causing cash variations. Exposure to interest rate risk is monitored continuously by the finance department. The purpose of managing interest rate risk is to reduce the volatility of interest expenses.
27 Credit risk NOVABASE’s credit risk is managed, simultaneously, on a business units level, for the outstanding amounts of trade and other receivables, and on a Group basis, for financial instruments. Credit risk arises from cash and cash equivalents, derivative financial instruments, and credit exposures to customers, including outstanding receivables and committed transactions. For banks and financial institutions, only credible and well-rated counterparties are accepted. Credit risk management of trade and other receivables is based in credit limit ranges, taking into account the financial position of the customer and past experience. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash or liquid financial instruments, the availability of financing sources through an adequate amount of committed credit facilities and the possibility to close out market positions. Management monitors rolling forecasts of NOVABASE’s liquidity reserve (which comprises undrawn committed borrowing facilities and cash and cash equivalents) on the basis of expected cash flows, taking into account the analysis of the remaining contractual maturity of the financial liabilities and the expected date of financial assets inflows. Additionally, the maturity concentration of borrowings and liabilities of NOVABASE are regularly monitored. Capital management risk NOVABASE’s objectives when managing capital, which is a broader concept than the equity disclosed on the face of the consolidated statement of financial position, are: 1. To safeguard the Group’s ability to continue as a going concern and hence to provide returns for shareholders and benefits for other stakeholders; 2. To maintain a solid capital structure to support the development of its business; 3. To maintain an optimal capital structure to reduce the cost of capital. Management monitors the Return on Capital (1) ratio, which measures NOVABASE’s ability to generate cashflows in relation to the capital invested in its business. (1) Determined by the formula: Operating Profit ÷ Total Equity.
28 • EMERGING RISKS In addition to the financial risks inherent to its activity, NOVABASE is also exposed to operational and business risks, which can be materialised into threats and opportunities, and proactively develops adequate mitigation strategies. From those, we highlight: Cyber-risks The growing sophistication and integration of technologies increased the companies exposure to several cyber-risks (such as large-scale cyber attacks, violation and destruction of data, etc.), with possible financial, operational and reputational losses. With the Covid-19 pandemic, and consequent increase of homeworking in society at large, exposure to this risk increased considerably. According to the World Economic Forum (WEF) report released in January 2022, cybercrime worldwide has increased by 31% in 2021. In Portugal, the weekly average of cyber attacks against organisations increased by 81% compared to 2020. NOVABASE has been reinforcing measures to mitigate this risk, supervised directly by the Chief Information Security Officer, namely by strengthening technological security controls and, furthermore, focusing on training on good Work From Home practices and cybercrime awareness. Talent Retention risk NOVABASE’s ability to successfully implement the strategy outlined depends on its ability to attract and retain top talent for each position. The impact of the pandemic combined with the acceleration of digital transformation has brought, and will continue to bring, a profound transformation to the labour market and talent management. The general increase trend in IT wages due to the high demand and shortage of talent in technology, translates into a potential increase in labour costs and consequent increased challenges in employee retention. NOVABASE’s human resources policies are aligned to achieve the strategic objectives, having been adapted and reinforced in view of the new reality. It should be noted, in 2021, the fully digital recruitment of 700 new talents. Also to highlight the launch of the Internal Mobility Programme “Move My Talent” and the deployment of a new hybrid working model, which comprises 60% of remote work, policies aimed at lowering the attrition rate and attracting quality talent. This area was distinguished in 2021, for the 3rd consecutive year, with the “Innovation in People Management” award, attributed by Human Resources Portugal magazine. Delivery risk NOVABASE’s policies to address delivery risk include, among others, the following: • Analysis of each significant commercial proposal in order to reduce possible overselling, considering the available internal capacity; • Permanent scrutiny of the quality of the team to be allocated to the projects;
29 • Maintenance of permanent training programmes in technologies (namely in New-Generation information technologies) and project management methodologies. The Nearshore Agile delivery model that NOVABASE refined in recent years has shown its resilience during the pandemic, proving to be adequate in the post-pandemic period. Strategic and contextual risks NOVABASE is not immune to the contingencies of the markets in which it operates, still facing the so-called “strategic and context risks”. The exposure to this risk increased significantly on account of the Covid-19 pandemic, due to its unprecedented social and economic impacts worldwide and the still high level of uncertainty regarding its evolution. Additionally, geopolitical turbulence has increased, creating an enormous unpredictability. NOVABASE seeks to manage and mitigate these risks through practices of recurring discussion, at the level of the various management chains, on the risks that impact on society / business unit. These discussions address areas of investment / divestment, strategic bets and pending risks at all times, and where the risk appetite at the level of the organisation and its evolution is also discussed. Risks associated with climate change While NOVABASE does not have a significant carbon footprint nor is it directly exposed to physical climate change risk, these factors are considered when making investment decisions. NOVABASE’s performance is crucial in the context of generating return for shareholders, as well as in the context of the wider economy and well-being of the broader community in which it operates. Aware of its role, NOVABASE has been progressively adopting a more rigorous and robust approach to: • Identify, manage and mitigate climate related risks; • Identify and maximise climate change generated opportunities; • Report on how physical and transitional risks associated with climate related risks are managed and what initiatives have been developed, from the point of view of environmental preservation, towards a more sustainable low carbon economy. Among the implemented policies, we highlight that NOVABASE has an Environmental Management System (ISO 14001) and a policy with environmental requirements pertaining to the acquisition / supply of goods and services. More information about the initiatives developed, including the evolution of a set of environmental indicators, can be found in the NON-FINANCIAL STATEMENTS section of this Report, and for which reading is advised.
30 • OUTLOOK The main bets and challenges for 2022 are the growth of both international business and talent pool NOVABASE’s results in 2021 reveal a sound strategy execution under particularly adverse conditions of the Covid-19 pandemic. The main activity indicators posted a good performance, with the double-digit growth in Turnover and the more than doubling of Net Profit from continuing operations to be highlighted. In the Next-Gen, the international business registered a strong expansion, new flagship clients were won and 16% of new talents were added. Value Portfolio got back to growth and improved profitability, recovering from the impacts of Covid-19 in 2020. In what is interpreted as a recognition of the creation of value for shareholders, NOVABASE’s shares price soared 60% on the stock market in 2021. The operating results and commercial victories achieved in 2021 bear testament to the resilience of NOVABASE’s business model and financial strength. The main bets for 2022 remain the same: the growth of international business and the talent base. Winning new clients of size, especially in Europe, together with attracting and retaining talent in an increasingly more competitive market are, likewise, the two biggest challenges that NOVABASE faces. Additionally, NOVABASE will keep looking for assets to buy, in order to accelerate its strategy, with a value creation mindset. Regardless of the uncertain context, NOVABASE believes it is well positioned to seize the opportunities that the current environment provides. • SUBSEQUENT EVENTS The following relevant facts occurred in 2021 up to the date of issue of this report: Shareholder remuneration proposal On 17 February 2022, NOVABASE informed the intention of the Board of Directors to propose, at the 2022 Annual General Meeting of Shareholders, the distribution of EUR 13.5 Million to shareholders. This payment, equal to 155% of the consolidated net profit, represents a remuneration of 43 Euro cents per share. NOVABASE leaves the PSI20, which is renamed PSI Euronext announced, in news of 9 March 2022, that NOVABASE will leave the Lisbon stock exchange main index, the PSI20 (where it traded since 23 March 2020), after the markets close on 18 March. This exit takes place within the framework of the new rules of the index, in which the requirement of the lower limit of the free float of market capitalisation of the constituent companies becomes EUR 100 Million. From that date onwards, the name of the index no longer contains the reference 20 and becomes simply PSI.
31 Situation in Ukraine On 24 February 2022, the Russian military invasion of Ukraine began, an event that significantly changed expectations for growth and inflation in the Eurozone for the worse. Since then, capital markets have plunged into an environment of great uncertainty, the price of oil has climbed above 100 dollars, the price of other raw materials has also soared, and the stock markets had significant drops. The uncertainty of the war also brings the risk of recession, with the fear that high inflation will be combined with a stagnation of economic growth. The European Commission admits, in particular, that the war and possible retaliation by Russia against the sanctions imposed by the EU will have “a negative impact on growth, with repercussions on financial markets, new pressures on energy prices, more persistent bottlenecks in the supply chain and confidence effects”. NOVABASE considers the situation in Ukraine as a non-adjustable subsequent event. Despite not having economic relations with Russia, NOVABASE is not immune to the economic context in which it operates, so the military invasion of Ukraine by Russia could have an impact on future economic performance. Given the exceptional uncertainty at this stage, it is not possible to quantify the magnitude of the impacts, namely on NOVABASE’s activity and profitability during the 2022 financial year. Transactions by person closely associated to director NOVABASE received communications from the company IBI - Information Business Integration, AG, collective person closely associated to the director José Sancho García, related to the acquisition by IBI of 60,000 ordinary shares of NOVABASE, representing 0.191% of its share capital and voting rights. The statements further clarify that these acquisitions by IBI are not linked to the exercise of a stock options programme.
32 CORPORATE BODIES Chairman Luís Paulo Cardoso Salvado (Executive) Members Álvaro José da Silva Ferreira (Executive) María del Carmen Gil Marín (Non-executive) José Afonso Oom Ferreira de Sousa (Non-executive) Pedro Miguel Quinteiro Marques de Carvalho (Non-executive) José Sancho García (Non-executive) Madalena Paz Ferreira Perestrelo de Oliveira (Non-executive) Rita Wrem Viana Branquinho Lobo Carvalho Rosado (Non-executive) Chairman António Manuel da Rocha e Menezes Cordeiro Secretary Catarina Maria Marante Granadeiro Luís Paulo Cardoso Salvado Álvaro José da Silva Ferreira BOARD OF DIRECTORS OFFICERS OF THE GENERAL MEETING DELEGATED DIRECTORS
33 DIRECTOR WITH SPECIAL RESPONSIBILITIES AUDIT BOARD STATUTORY AUDITOR REMUNERATION COMMITTEE COMPANY’S SECRETARY María del Carmen Gil Marín Chairman Álvaro José Barrigas do Nascimento Members Fátima do Rosário Piteira Patinha Farinha João Luís Correia Duque Surrogate Manuel Saldanha Tavares Festas (surrogate member who is replacing the effective member João Luís Correia Duque, under the terms of article 415.º of the Portuguese Commercial Companies Code) Effective Statutory Auditor KPMG & Associados - S.R.O.C., S.A. represented by Susana de Macedo Melim de Abreu Lopes Surrogate Statutory Auditor Maria Cristina Santos Ferreira Chairman Francisco Luís Murteira Nabo Members Pedro Miguel Duarte Rebelo de Sousa João Francisco Ferreira de Almada e Quadros Saldanha Marta Isabel dos Reis da Graça Rodrigues do Nascimento Carolina Duarte Simões Pereira Barrueca (Surrogate)
34 PROPOSAL FOR THE ALLOCATION OF PROFITS Whereas: 1. The Company, in the financial year 2021, recorded in the individual accounts a positive net result of € 1,025,507.61 (one million, twenty-five thousand, five hundred and seven euros and sixty-one cents); 2. Notwithstanding, the Company’s individual accounts as at 31 December 2021 show negative retained earnings of € 5,843,725.47 (five million, eight hundred and forty- three thousand, seven hundred and twenty-five euros and forty-seven cents). In accordance with legal and statutory provisions, the Board of Directors proposes that the positive net profit for the year of € 1,025,507.61 (one million, twenty-five thousand, five hundred and seven euros and sixty-one cents) be transferred to retained earnings, to cover part of the existing retained losses. Lisbon, 27 April 2022 The Board of Directors
36 ANNEXES TO THE MANAGEMENT REPORT LIST OF SHAREHOLDERS WITH QUALIFYING STAKES AS AT 31 DECEMBER 2021 (Under the terms of section b) of paragraph 1 of article 8 of the Portuguese Securities Market Commission - CMVM – Regulation no. 5/2008, with the identification of the respective allocation of voting rights in accordance with paragraph 1 of article 20 of the Portuguese Securities Code) The holdings identified below correspond to the last positions notified to the Company with reference to 31 December 2021 or a previous date. There are no categories of shares with special rights. HOLDERS NO. SHARES % SHARE CAPITAL AND VOTING RIGHTS HNB - S.G.P.S., S.A. (1) 10,810,823 34.43% Pedro Miguel Quinteiro Marques de Carvalho 2,097,613 6.68% Luís Paulo Cardoso Salvado (1) 1 0.00% Álvaro José da Silva Ferreira (1) 1 0.00% José Afonso Oom Ferreira de Sousa (1) 1 0.00% Holding under the Shareholders Agreement concerning NOVABASE (2) 12,908,439 41.11% Partbleu, Sociedade Gestora de Participações Sociais, S.A. (3) 3,180,444 10.13% IBI - Information Business Integration, A.G. (4) 4,549,188 14.49% Lazard Frères Gestion SAS 1,570,870 5.00% TOTAL 22,208,941 70.73%
37 (1) José Afonso Oom Ferreira de Sousa, Luís Paulo Cardoso Salvado and Álvaro José da Silva Ferreira are the controlling shareholders and directors of HNB – S.G.P.S., S.A., having executed a shareholder’s agreement concerning the entirety of the share capital of this company. (2) The total holding is attributed to José Afonso Oom Ferreira de Sousa, Luís Paulo Cardoso Salvado, Álvaro José da Silva Ferreira and Pedro Miguel Quinteiro Marques de Carvalho, under the terms of the Shareholders Agreement concerning NOVABASE described in item 6 of the Corporate Governance Report, attached to this Management Report. (3) When NOVABASE was notified of this holding, it was informed that this company was indirectly held in 72% by Mr. Miguel Pais do Amaral, and therefore the corresponding voting rights were attributed to him. (4) When NOVABASE was notified of this holding, it was informed that José Sancho García is the controlling shareholder of this company, and therefore the corresponding voting rights are attributed to him. During 2021, NOVABASE did not maintain any significant business relationship with shareholders with qualifying stakes or entities that, as far as the Company is aware, are or were related to them.
38 INFORMATION CONCERNING STAKES HELD BY MEMBERS OF THE BOARD OF DIRECTORS AND SUPERVISORY BODIES AS AT 31 DECEMBER 2021 (Under the terms of paragraph 5 of article 447 of the Portuguese Commercial Companies Code) The shareholding of each of these members of the Corporate Boards corresponds to the last position notified to the Company with reference to 31 December 2021 or a previous date. The responsibilities of each of these Corporate Bodies are described in the CORPORATE BOARDS section of this Report. (1) Luís Paulo Cardoso Salvado, Álvaro José da Silva Ferreira and José Afonso Oom Ferreira de Sousa are shareholders of HNB – S.G.P.S., S.A., where they hold management positions. HNB – S.G.P.S., S.A. held 10,810,823 shares representing 34.43% of NOVABASE’s share capital and respective voting rights at 31 December 2021. HOLDERS NO. SHARES % SHARE CAPITAL AND VOTING RIGHTS Pedro Miguel Quinteiro Marques de Carvalho 2,097,613 6.68% Manuel Saldanha Tavares Festas 74,986 0.24% María del Carmen Gil Marín 23,001 0.07% João Luís Correia Duque 500 0.00% Luís Paulo Cardoso Salvado (1) 1 0.00% Álvaro José da Silva Ferreira (1) 1 0.00% José Afonso Oom Ferreira de Sousa (1) 1 0.00% José Sancho García (2) 0 0.00% Madalena Paz Ferreira Perestrelo de Oliveira 0 0.00% Rita Wrem Viana Branquinho Lobo Carvalho Rosado 0 0.00% Álvaro José Barrigas do Nascimento 0 0.00% Fátima do Rosário Piteira Patinha Farinha 0 0.00% KPMG & Associados - S.R.O.C., represented by Susana de Macedo Melim de Abreu Lopes (3) 0 0.00% Maria Cristina Santos Ferreira 0 0.00% TOTAL 2,196,103 6.99%
39 (2) José Sancho García is the controlling shareholder of IBI - Information Business Integration, A.G., company that held 4,549,188 shares representing 14.49% of NOVABASE’s share capital and respective voting rights at 31 December 2021. (3) Until 22 December 2021, it was represented by partner Paulo Alexandre Martins Quintas Paixão. In addition to those mentioned to in this document (at the management transactions item), no encumbrances or other acquisitions or changes in the ownership of shares representing the Company’s share capital (or of a company in a control or group relationship with the Company) were undertaken by the Members of the Board of Directors and Supervisory Bodies, nor any promissory, option or repurchase agreements, nor other agreements with similar effects on such shares. No other transactions of the type described above were likewise carried out by any person falling under the scope of sections a) to d) of paragraph 2 of article 447 of the Portuguese Companies Code. Finally, it should be clarified that neither the Company nor any company in a control or group relationship with it is an issuer of bonds. MANAGEMENT TRANSACTIONS (Under the terms of European Union market abuse regulation) During 2021, the following transactions on NOVABASE shares were carried out by the persons falling under the scope of article 447 of the Portuguese Companies Code: (1) Company managed and administered by the spouse of the director José Sancho García. (2) These shares were deposited in a securities account jointly held by the aforementioned director and his spouse Pilar Thomas Ríos. DIRECTOR / CLOSELY ASSOCIATED PERSON TRANSACTION DATE LOCATION NO. SHARES PRICE PER SHARE (€) HNB – S.G.P.S., S.A. Acquisition 13/01/2021 Outside regulated market 650,924 3.300 HNB – S.G.P.S., S.A. Acquisition 28/05/2021 Outside regulated market 1,025,070 3.715 IBI - Information Business Integration, A.G Acquisition 24/06/2021 Outside regulated market 341,690 3.715 Rent Profit, S.L. (1) Disposal 30/07/2021 Euronext Lisbon 10 4.530 José Sancho García / Pilar Thomas Ríos (2) Disposal 30/07/2021 Euronext Lisbon 3,704 4.561 IBI - Information Business Integration, A.G Acquisition 30/07/2021 Euronext Lisbon 3,714 4.509 IBI - Information Business Integration, A.G Acquisition 08/11/2021 Euronext Lisbon 40,208 4.650 IBI - Information Business Integration, A.G Acquisition 09/11/2021 Euronext Lisbon 59,792 4.750 IBI - Information Business Integration, A.G Acquisition 15/11/2021 Euronext Lisbon 1,634 4.744 IBI - Information Business Integration, A.G Acquisition 17/11/2021 Euronext Lisbon 12,905 4.746
40 OWN SHARES TRANSACTIONS (Under the terms of section d) of paragraph 5 of article 66 of the Portuguese Commercial Companies Code) At 31 December 2020, NOVABASE held 676,611 own shares, representing 2.15% of its share capital. Following the resolution of the Board of Directors of 22 July 2021, regarding to the attribution of options over NOVABASE shares under the stock options plan of the Company, NOVABASE started trading, on 29 September 2021, in the context of the buy- back programme of own shares (“Buy-back Programme”), pursuant to the terms and limitations set forth in the Annual General Meeting of Shareholders of NOVABASE held on the 25 May 2021. The maximum number of shares to be acquired under the scope of this buy-back program is 270,000 shares, corresponding to the estimated number of shares necessary to settle the options granted. During 2021, NOVABASE acquired 22,869 own shares on the market, under this buy-back programme, at the average net price of 4.85 Euros. At 31 December 2021, NOVABASE held 699,480 own shares, representing 2.23% of its share capital and voting rights to which the own shares held would correspond. Without prejudice, 91,539 shares of the aforementioned 699,480 own shares were attributed during 2020 to Paulo Jorge de Barros Trigo, at the time executive director, following the exercise of NOVABASE ordinary stock options that he held. The shares corresponding to the options exercised will be retained by NOVABASE for a three-year period from the respective exercise, and their ownership will only be transferred once such period has elapsed and conditioned to the positive performance of the Company during the same period. During 2021, NOVABASE shares always had a nominal value of 1.74 Euros. Own shares transactions are detailed below:
41 TRANSACTION DATE LOCATION NO. SHARES PRICE PER SHARE (€) Acquisition 30/09/2021 Euronext Lisbon 95 4.710 Acquisition 5/10/2021 Euronext Lisbon 511 4.730 Acquisition 7/10/2021 Euronext Lisbon 64 4.750 Acquisition 7/10/2021 Euronext Lisbon 121 4.750 Acquisition 7/10/2021 Euronext Lisbon 122 4.750 Acquisition 7/10/2021 Euronext Lisbon 121 4.750 Acquisition 7/10/2021 Euronext Lisbon 121 4.750 Acquisition 7/10/2021 Euronext Lisbon 48 4.750 Acquisition 7/10/2021 Euronext Lisbon 114 4.680 Acquisition 7/10/2021 Euronext Lisbon 119 4.680 Acquisition 8/10/2021 Euronext Lisbon 1,771 4.800 Acquisition 11/10/2021 Euronext Lisbon 250 4.810 Acquisition 11/10/2021 Euronext Lisbon 250 4.810 Acquisition 13/10/2021 Euronext Lisbon 560 4.700 Acquisition 13/10/2021 Euronext Lisbon 256 4.700 Acquisition 15/10/2021 Euronext Lisbon 1,200 4.680 Acquisition 15/10/2021 Euronext Lisbon 83 4.660 Acquisition 15/10/2021 Euronext Lisbon 83 4.670 Acquisition 18/10/2021 Euronext Lisbon 210 4.700 Acquisition 18/10/2021 Euronext Lisbon 45 4.700 Acquisition 20/10/2021 Euronext Lisbon 150 4.680 Acquisition 20/10/2021 Euronext Lisbon 129 4.680 Acquisition 22/10/2021 Euronext Lisbon 195 4.700 Acquisition 22/10/2021 Euronext Lisbon 245 4.700 Acquisition 25/10/2021 Euronext Lisbon 911 4.680
42 TRANSACTION DATE LOCATION NO. SHARES PRICE PER SHARE (€) Acquisition 25/10/2021 Euronext Lisbon 1,000 4.690 Acquisition 26/10/2021 Euronext Lisbon 22 4.640 Acquisition 26/10/2021 Euronext Lisbon 20 4.640 Acquisition 8/11/2021 Euronext Lisbon 16 4.610 Acquisition 8/11/2021 Euronext Lisbon 5 4.610 Acquisition 8/11/2021 Euronext Lisbon 1 4.610 Acquisition 9/11/2021 Euronext Lisbon 250 4.660 Acquisition 9/11/2021 Euronext Lisbon 210 4.650 Acquisition 9/11/2021 Euronext Lisbon 15 4.680 Acquisition 9/11/2021 Euronext Lisbon 10 4.680 Acquisition 17/11/2021 Euronext Lisbon 300 4.750 Acquisition 17/11/2021 Euronext Lisbon 300 4.750 Acquisition 17/11/2021 Euronext Lisbon 400 4.750 Acquisition 17/11/2021 Euronext Lisbon 125 4.750 Acquisition 17/11/2021 Euronext Lisbon 48 4.750 Acquisition 17/11/2021 Euronext Lisbon 827 4.750 Acquisition 18/11/2021 Euronext Lisbon 1,500 4.790 Acquisition 19/11/2021 Euronext Lisbon 50 4.770 Acquisition 19/11/2021 Euronext Lisbon 200 4.770 Acquisition 23/11/2021 Euronext Lisbon 45 4.800 Acquisition 23/11/2021 Euronext Lisbon 75 4.800 Acquisition 24/11/2021 Euronext Lisbon 77 4.860 Acquisition 26/11/2021 Euronext Lisbon 76 4.810 Acquisition 29/11/2021 Euronext Lisbon 179 4.810 Acquisition 3/12/2021 Euronext Lisbon 100 4.960 Acquisition 3/12/2021 Euronext Lisbon 100 4.940 Acquisition 3/12/2021 Euronext Lisbon 1,250 4.940
43 TRANSACTION DATE LOCATION NO. SHARES PRICE PER SHARE (€) Acquisition 3/12/2021 Euronext Lisbon 1,950 4.940 Acquisition 3/12/2021 Euronext Lisbon 900 4.930 Acquisition 6/12/2021 Euronext Lisbon 22 4.890 Acquisition 6/12/2021 Euronext Lisbon 35 4.890 Acquisition 6/12/2021 Euronext Lisbon 100 4.890 Acquisition 6/12/2021 Euronext Lisbon 40 4.890 Acquisition 8/12/2021 Euronext Lisbon 45 5.060 Acquisition 8/12/2021 Euronext Lisbon 124 5.060 Acquisition 8/12/2021 Euronext Lisbon 83 5.060 Acquisition 9/12/2021 Euronext Lisbon 10 5.080 Acquisition 9/12/2021 Euronext Lisbon 2 5.020 Acquisition 10/12/2021 Euronext Lisbon 250 5.100 Acquisition 10/12/2021 Euronext Lisbon 34 5.020 Acquisition 13/12/2021 Euronext Lisbon 10 5.020 Acquisition 16/12/2021 Euronext Lisbon 500 5.080 Acquisition 16/12/2021 Euronext Lisbon 2,000 5.080 Acquisition 20/12/2021 Euronext Lisbon 241 5.120 Acquisition 20/12/2021 Euronext Lisbon 524 5.120 Acquisition 27/12/2021 Euronext Lisbon 24 5.120 Acquisition 29/12/2021 Euronext Lisbon 1,000 5.120
44 NON-FINANCIAL STATEMENTS PART I – INFORMATION ON POLICIES A. INTRODUCTION | THE NOVABASE GROUP Pursuant to article 508-G of the Commercial Companies Code, as amended by Decree Law no. 89/2017 of 28 July, which transposed Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 into Portuguese legislation, NOVABASE explains in this document the “information for a sufficient understanding of the developments, performance, position and impact of the group’s activities, at minimum with regard to environmental, social and employee-related issues, equality between men and women, non-discrimination, respect for human rights and fighting corruption and attempted bribery” in relation to the NOVABASE Group for the year ending 31 December 2021. Information on the NOVABASE Group’s business and corporate structure is available in the 2021 Annual Report and Accounts (Notes to the Consolidated Financial Statements for the year ending 31 December 2021), as well as in the 2021 Corporate Governance Report (Part I, Section B., Point 21). B. BUSINESS MODEL This information is described in Part I, Letter B., Section II. “ADMINISTRATION AND SUPERVISION (Board of Directors, Executive Board of Directors and General and Supervisory Board)” from the 2021 Corporate Governance Report. C. MAIN RISK FACTORS The NOVABASE Group is subject to both standard market risks and specific risks related to its business. NOVABASE believes that the risk management policy is of vital importance in running and developing a business which has historically had a higher risk appetite profile, since this is intrinsically necessary in such a dynamic and disruptive sector. NOVABASE also has internal control systems and procedures to prevent and manage risks within the context of its organization and activities. Additional information on NOVABASE’s internal control and risk management can be found in Part I, Letter C, Section III. “Internal Control and Risk Management” of the 2021 Corporate Governance Report.
45 D. POLICIES IMPLEMENTED i. Environment NOVABASE has implemented an Environmental Management System (ISO 14001) as part of its Integrated Management System (Quality, Environment, Occupational Health and Safety). The Integrated Management System is governed by a policy which has been incorporated into NOVABASE’s vision and values and aligned with the needs of stakeholders. Internal and external audits are done annually, the latter by certifying entities. As in 2020, no non-conformities were found in 2021. NOVABASE has a policy which identifies environmental and safety requirements to be met for the acquisition/provision of goods and services. NOVABASE monitors a number of indicators: consumption of electricity, thermal energy, water, diesel and gas; recycling of plastic, cardboard, paper and glass; and the emission of greenhouse gases. In view of the remote work and/or working from home imposed by rules to fight the Covid-19 pandemic, the following indicators were of note in 2021: Measures implemented: Centralized Management System to control operating times, replacement of all fluorescent lighting with LED lighting. Measures implemented: Centralized Management System to control operating times of the climate control system.
46 Measures implemented: decreased water flow and installation of regulating valves in faucets. Measures implemented: Awareness on decreasing the use of paper. Measures implemented: Replacement of disposable plastic with reusable materials (glass). The recycling rate went down significantly, while the volume of waste was also reduced.
47 VEHICLE TYPE 2019 2020 2021 Hybrid 0 0 0 Hybrid Plug In 19 21 43 Electric 4 3 8 With regard to emissions: NOVABASE’s fleet has environmentally-friendly vehicles, as shown in the following table:
48 In addition to measures already known (e.g. remote meetings, video calls, the existence of offices in other regions), other measures to offset these emissions are being analysed. In 2020/2021, NOVABASE was part of the “A Tree for the Forest” reforestation campaign (Quercus/CTT). The amounts received for the recovery of toners and ink cartridges sent for recycling were used for the acquisition of kits with native trees and/or shrubs, which will be planted in spring in protected zones or areas affected by fire. ii. Social and Fiscal NOVABASE has implemented a number of measures aimed at well-being and a balance between the professional, family and personal lives of its employees. Some noteworthy measures include: Online fitness classes, webinars on the topic of mental health, preventive eye care, campaign to quit smoking, osteopathy appointments, psychology appointments to help those in need (with guaranteed anonymity). NOVABASE implemented the “Second Life” program for equipment at the end of its professional life, allowing NOVABASE Group employees to use this equipment at home. 70 pieces of equipment were sold in 2021. In 2021, NOVABASE developed and participated in several welfare initiatives, including the following: • Almada-Seixal Health Centre Group, the Seixal Municipality “Via Verde Saúde” (VVS) service for users without a family physician: • 7 laptops; • 6 monitors. • Celfocus • “Zero Waste Policy”: meaning that any material sent or given to the people of Celfocus should have a utility and useful life beyond the time denoted. Being useful and reusable is a matter of principle. • Volunteer program: allowing everyone to take one work day to volunteer at an institution of their choice. The results of the initiatives carried out in 2021 were: • Volunteer Day – 91 hours of volunteering by 16 employees. • Donation of technology equipment: • Student Keep – 7 computers + 7 monitors • 12 Workstations – monitors + computers • Collection and donation of non-food items: • Portuguese Refugee Council
49 • Senhora da Conceição Parish Church • Angels Animal Shelter • Society of Saint Vincent de Paul (SSVP) volunteer organization – Senhora da Hora. • Neotalent • Donation to Banco do Bebé - Neotalent supported this association by donating articles of clothing and toiletries needed for the layettes of newborns, who are often born without essential fundamental items for their first months of life. Banco do Bebé, headquartered at the Alfredo da Costa maternity ward, also needed technology equipment (such as cell phones to install apps which could be used via wireless), allowing contact between mothers and their families. In total, the following were donated: • 50 articles of clothing • 50 toiletry articles • 8 packages of infant formula • 6 baby bottle sterilizers • 1 breast pump • 1 wireless landline phone • 6 cell phones • Donation to Just a Change - through the Association of Professional Spanish Women in Lisbon (AMPEL), presided over by a Neotalent employee, Neotalent sponsored a drawing in the benefit raffle. This initiative raised funds for a non-profit organization as part of AMPEL’s Solidarity Christmas Dinner. Neotalent donated a pack of “Odisseias” experiences which, together with other raffle items, helped to raise €1,600 (one thousand, six hundred euros) for the Just a Change association, which is dedicated to rehabilitating the homes of needy people and families in Portugal, thanks to the mobilization of volunteers from various countries. iii. Employees and Gender Equality and Non-Discrimination Council of Ministers Resolution no. 19/2012 of 08 March 2012 requires the mandatory adoption of an equality plan by all entities in the state corporate sector, with a view to achieving equal treatment and equal opportunities between men and women, eliminating discrimination and reconciling personal, family and professional life. This obligation was extended to listed companies through Law no. 62/2017 of 1 August, which passed the scheme for equal representation between men and women in the managing and supervisory boards of entities from the corporate public sector and listed companies. Article 7 of this law establishes the obligation to prepare annual equality
50 plans “aimed at effectively achieving equal treatment and equal opportunities between men and women, eliminating gender discrimination and reconciling personal, family and professional life”. In this context, on 15 September 2021, NOVABASE presented a new version of its Gender Equality and Diversity Plan with measures and practices for the years 2021/2022, including the following: • Continued use and promotion of inclusive language both inside and outside the company; • Give-away of book “O Longo Caminho para a Igualdade (“The Long Way To Equality”) to new employees in onboarding kit; • Communication and awareness activities; • Consolidation of partnership with Valor T (employment agency for disabled persons); • Sharing and dissemination of mentoring programs, namely the PWN program. The key indicator is the proportion of men and women vis-à-vis all employees, which should tend to be balanced. In 2021, this indicator had a proportion of 69% men and 31% women, slightly different from 2020 when the proportion was 68% men and 32% women. At NOVABASE, we believe in equal opportunities and mutual respect regardless of ethnicity, gender, religion, beliefs, social background or sexual orientation. These differences tend to enhance the quality of decision-making processes through multiple perspectives, greater intellectual and cultural richness and a better representation of reality and of those involved. For this reason, we also believe that diversity in our corporate boards helps to improve NOVABASE’s performance and competitiveness. As such, we are committed to the following policy: • Compliance with Law no. 62/2017 of 01 August, since gender diversity provides different management styles and complementary approaches; • With regard to age, there must be a balance between experience and maturity and the youth and energy needed for the fast-paced innovation of our highly dynamic sector (information technologies); • With regard to qualifications and education, in addition to areas associated with technology, various other areas of knowledge must also be represented, in view of the mounting importance of multidisciplinarity in team performance. NOVABASE will monitor this policy’s implementation, in accordance with its corporate governance model, and will review it whenever deemed appropriate.
51 iv. Human Rights NOVABASE ensures and has specific principles related to (i) respecting human rights (ii) collective bargaining, and (iii) guaranteed non-existence of child and forced/ mandatory labour. It has a Code of Conduct, which was reviewed and approved by the Board of Directors in 2021, to solidify these principles. This Code lays out the principles and rules governing NOVABASE’s relationships with its stakeholders, in the broadest sense. They represent a commitment to NOVABASE’s customers and partners, but also a commitment by and to its employees in terms of how they relate with the company and among themselves. It covers a range of topics from integrity, transparency, respect, health and safety, the use of information, intellectual property, the use of resources, social and environmental responsibility, managing conflicts of interest, corruption and bribery, including various aspects such as legal compliance, best environmental and labour practices, including human rights, and applying these principles in third-party procurement. The Code of Conduct is available at the website’s institutional area and on the Intranet. Our ethical concerns also extend to our suppliers and partners. The principles and rules described in NOVABASE’s Code of Conduct must be strictly followed by any partner or supplier working with NOVABASE, and incorporated into their day-to-day routines. In its contractual agreements with suppliers, NOVABASE includes a commitment to adhere to NOVABASE’s Code of Conduct. v. Anti-Corruption and Attempted Bribery NOVABASE has adopted a whistleblowing system for reporting irregularities (known as “SPI”) that may occur within the Group. Any report of irregularities made through the SPI is directed to a member of the Audit Board specifically designated for this purpose. Additional information on reporting irregularities through NOVABASE’s SPI can be found in Part I, Letter B., Section II. “WHISTLEBLOWING” of the 2021 Corporate Governance Report. Also in 2021, Law no. 93/2021 of 20 December was published establishing the general scheme for protecting whistleblowers, transposing Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 into the Portuguese legal system. Given that this law will enter into force 180 days after the publication of the legal instrument, NOVABASE is currently weighing up amendments made regarding the protection of whistleblowers, in order to adapt its current SPI to comply with the new legal requirements. Council of Ministers Resolution no. 37/2021 of 6 April passed the 2020-2024 National Anti-Corruption Strategy, which calls all sectors, including the private corporate sector, to be part of a joint anti-corruption effort primarily focused on the prevention of corruptive phenomena. NOVABASE, fully aware of these risks, albeit potential, sought to identify them through the Prevention Plan for the Risks of Corruption and Related Offences in the specific ecosystem to which NOVABASE belongs and address them, thereby ensuring that our corporate culture is rooted in the fundamental values of legality, uprightness, trust and ethics. NOVABASE approved the Plan in December 2021 and published it at its website.
52 PART II – INFORMATION ON STANDARDS AND GUIDELINES FOLLOWED In view of the NOVABASE Group’s size, the nature of its business, its business model and the industries in which it operates, no formal policies have been approved for all of the items referred to in article 508-G (2) of the Commercial Companies Code. Nonetheless, various aspects of the NOVABASE Group’s business are governed by applicable legislation, and by applicable regulations and recommendations of the Portuguese Securities Market Commission and other domestic and international entities. In addition, the NOVABASE Group internally uses a number of reference documents, diligence proceedings and systems regarding practices to be employed in certain areas, taking the Group and its needs into account, together with its employees, professionals and other stakeholders, with a view to ensuring sustainable growth. NOVABASE Group companies are also subject to a number of different internal and external audits. In this context, the main aspects, documents, practices and processes in place at the NOVABASE Group, which it believes have an impact on non-financial issues relevant to the Group (namely involving the environment, society, labour, gender equality, non-discrimination, human rights and the fight against corruption), are listed below: • NOVABASE’s business and the conduct of employees and professionals are governed by applicable law in relevant jurisdictions, and by NOVABASE’s Code of Conduct (published at its corporate website), an internally approved document in effect at the Group since 2011 aimed at guiding the conduct of NOVABASE’s professionals through values cultivated by the Group in its customer and interpersonal relations; • The company’s business is managed in accordance with the Integrated Management System (Quality, Environment, Occupational Health and Safety); • NOVABASE’s companies are audited by its financial auditors; its certifications in quality (ISO 9001), environmental management (ISO 14001) and occupational health and safety (ISO 45001) are renewed each year after internal and external audits, the latter conducted by certifying entities; • The company regularly monitors customer satisfaction, along with its employees’ and professionals’ satisfaction with company services and other issues of interest to the management; • In compliance with Portuguese Corporate Governance Institute recommendations regarding the governance of listed companies, and in view of fostering a culture of responsibility and compliance, NOVABASE has adopted a whistleblowing system for reporting irregularities (known as “SPI”) that may occur within its Group. Any report of irregularities made through the SPI is directed to a member of the Audit Board specifically designated for this purpose. Additional information on reporting irregularities through NOVABASE’s SPI can be found in Part I, Letter B., Section II. “WHISTLEBLOWING” of the 2021 Corporate Governance Report; • The company also has “Internal Regulations on Business Dealings with Qualified NOVABASE, S.G.P.S. S.A. Shareholders” in effect.
54 EUROPEAN TAXONOMY BACKGROUND By means of Regulation (EU) 2020/852, the European Commission created the concept of EU Taxonomy in environmentally sustainable activities, an economic activity classification system aimed at identifying those which contribute towards European environmental objectives, thereby creating a framework facilitating sustainable investment. Commission Delegated Regulation (EU) 2021/2139 was published in 2021, establishing the first list of activities qualifying for inclusion in EU Taxonomy, together with criteria for assessing their contribution towards two of the environmental objectives: mitigating and adapting to climate change. As such, for 2021, there is mandatory reporting on the means and the extent to which activities accommodate EU Taxonomy in terms of turnover, capital expenditure (CapEx) and operating expenses (OpEx), whose disclosure is limited to the activities referred to in the Delegated Regulation (eligible activities). ACTIVITIES ELIGIBLE FOR TAXONOMY An assessment was done of the NOVABASE Group’s economic activities, which concluded that those eligible for Taxonomy and generating turnover for the Group are as follows: • 8.1. Data processing, hosting and related activities: Storage, manipulation, management, movement, control, display, switching, interchange, transmission or processing of data through data centres, including edge computing (NACE code: J.63.11); • 8.2. Data-driven solutions for GHG emissions reductions: Development or use of ICT solutions that are aimed at collecting, transmitting, storing data and at its modelling and use where those activities are predominantly aimed at the provision of data and analytics enabling GHG emission reductions. Such ICT solutions may include, inter alia, the use of decentralized technologies (i.e. distributed ledger technologies), Internet of Things (IoT), 5G and Artificial Intelligence (NACE code: J.61, J.62 and J.63.11). TURNOVER Turnover corresponds to total sales originating from Taxonomy-aligned economic activities. Therefore, the eligible numerator corresponds to the portion of turnover originating from the eligible activities of “8.1 Data processing, hosting and related activities” and “8.2 Data-driven solutions for GHG emissions reductions”. For 2021, the numerator’s value is zero, since no amounts were recorded in relation to the above-mentioned eligible activities. The denominator corresponds to the Group’s total turnover in 2021.
55 OPERATING EXPENSES Eligible operating expenses correspond to the portion related to assets and taxonomy- related economic activities, including all non-capitalized direct costs originating from research and development (R&D) activities, acquisition costs for the production of taxonomy-aligned economic activities and with individual measures enabling the transformation of these activities into low-carbon activities or activities which reduce greenhouse gas emissions. The numerator used for the calculation shown in the table corresponds to average electricity costs for charging electric vehicles at the Group’s facilities in 2021. The denominator corresponds to non-capitalized direct costs involving research and development, building renovation measures, short-term leasing, maintenance and repair, and any other direct expenses for the day-to-day maintenance of tangible fixed assets, by the company or by subcontractors, as needed to ensure the ongoing effective functioning of these assets. CAPITAL EXPENDITURE (CAPEX) Eligible capital expenses are assets and Taxonomy-related economic activities which are part of a five-year plan to expand (or to better align) economic activities related to taxonomy or to individual measures enabling their transformation into activities which help to mitigate or adapt to climate change. The value used to calculate the numerator corresponds to the amount invested by the Group in 2021 in electric and hybrid vehicles. The denominator used was the Group’s total gross investment in 2021, as presented in Note 7, “Tangible Fixed Assets” and Note 8, “Intangible Assets” of the consolidated financial statements. PROPORTION OF ELEGIBLE ACTIVITIES TOTAL THOUSAND € ELEGIBLE FOR TAXONOMY % ELEGIBLE FOR TAXONOMY THOUSAND € NOT ELEGIBLE FOR TAXONOMY % NOT ELEGIBLE FOR TAXONOMY THOUSAND € Turnover 138,788 0.0% - 100.0% 138,788 Operating expenses 3,120 0.2% 6 99.8% 3,115 Capital expenditure 1,991 19.2% 382 80.8% 1,609
56 FINANCIAL STATEMENTS TURNOVER Ɓ 138.8 M€ (2020: 125.1 M€) (' +11%) EBITDA Ɓ 12.7 M€ (2020: 11.8 M€) (' +7%) NET PROFIT Ɓ 8.7 M€ (2020: 7.5 M€) (' +16%)
57 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AMOUNTS EXPRESSED IN THOUSANDS OF EUROS 31.12.21 31.12.20 ASSETS NON-CURRENT ASSETS Property, plant and equipment 6,840 9,095 Intangible assets 11,873 12,063 Investments in associates 160 223 Financial assets at fair value through profit or loss 13,615 12,601 Deferred tax assets 9,443 7,947 Other non-current assets 1,997 2,025 TOTAL NON-CURRENT ASSETS 43,928 43,954 CURRENT ASSETS Inventories 7 10 Trade and other receivables 42,634 42,660 Accrued income 4,691 3,556 Income tax receivable 1,236 2,988 Derivative financial instruments 16 64 Other current assets 4,105 4,290 Cash and cash equivalents 68,431 71,929 TOTAL CURRENT ASSETS 121,120 125,497 Assets from discontinued operations 396 342 TOTAL ASSETS 165,444 169,793 EQUITY Share capital 54,638 54,638 Treasury shares (1,217) (1,177) Share premium 226 226 Reserves and retained earnings 3,235 (4,124) Profit for the year 8,706 7,486 TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 65,588 57,049 Non-controlling interests 10,361 10,047 TOTAL EQUITY 75,949 67,096 LIABILITIES NON-CURRENT LIABILITIES Borrowings 12,417 21,493 Provisions 3,391 5,233 Other non-current liabilities 2,120 3,705 TOTAL NON-CURRENT LIABILITIES 17,928 30,431 CURRENT LIABILITIES Borrowings 9,583 9,432 Trade and other payables 37,775 40,313 Income tax payable 96 53 Derivative financial instruments 71 9 Deferred income and other current liabilities 19,711 16,148 TOTAL CURRENT LIABILITIES 67,236 65,955 Liabilities from discontinued operations 4,331 6,311 TOTAL LIABILITIES 89,495 102,697 TOTAL EQUITY AND LIABILITIES 165,444 169,793
58 CONSOLIDATED STATEMENT OF PROFIT AND LOSS AMOUNTS EXPRESSED IN THOUSANDS OF EUROS 12 M * 31.12.21 31.12.20 CONTINUING OPERATIONS Services rendered 138,788 125,080 External supplies and services (41,518) (37,379) Employee benefit expense (85,913) (80,176) Net impairment losses on trade and other receivables (272) (72) Other gains/(losses) - net 1,582 4,378 Depreciation and amortisation (3,521) (4,356) OPERATING PROFIT 9,146 7,475 Finance income 1,945 1,240 Finance costs (1,816) (2,928) Share of loss of associates (66) (58) PROFIT BEFORE INCOME TAX 9,209 5,729 Income tax expense (293) (1,912) Profit from continuing operations 8,916 3,817 DISCONTINUED OPERATIONS Profit from discontinued operations 1,060 4,509 PROFIT FOR THE YEAR 9,976 8,326 PROFIT ATTRIBUTABLE TO: Owners of the parent 8,706 7,486 Non-controlling interests 1,270 840 9,976 8,326 EARNINGS PER SHARE FROM CONTINUING AND DISCONTINUED OPERATIONS ATTRIBUTABLE TO OWNERS OF THE PARENT (EUROS PER SHARE) BASIC EARNINGS PER SHARE From continuing operations 0.25 Euros 0.10 Euros From discontinued operations 0.03 Euros 0.15 Euros FROM PROFIT FOR THE YEAR 0.28 Euros 0.24 Euros DILUTED EARNINGS PER SHARE From continuing operations 0.25 Euros 0.10 Euros From discontinued operations 0.03 Euros 0.15 Euros FROM PROFIT FOR THE YEAR 0.28 Euros 0.24 Euros 12 M * - period of 12 months ended
59 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AMOUNTS EXPRESSED IN THOUSANDS OF EUROS 12 M * 31.12.21 31.12.20 PROFIT FOR THE YEAR 9,976 8,326 Other comprehensive income for the year Items that may be reclassified to profit or loss Exchange differences on foreign operations, net of tax 162 22 OTHER COMPREHENSIVE INCOME FOR THE YEAR 162 22 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 10,138 8,348 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent 8,456 6,948 Non-controlling interests 1,682 1,400 10,138 8,348 12 M * - period of 12 months ended
60 AUDIT BOARD AND STATUTORY AUDITOR REPORTS
1/3 REPORT AND OPINION OF THE AUDIT BOARD ON THE CONSOLIDATED FINANCIAL STATEMENTS OF NOVABASE – SOCIEDADE GESTORA DE PARTICIPAÇÕES SOCIAIS, S.A. FOR THE FINANCIAL YEAR ENDED ON DECEMBER 31, 2021 To the Shareholders, INTRODUCTION In compliance with the Law and for the purposes of paragraph g) of article 420 of the Portuguese Companies Code and the Company’s bylaws, the Audit Board hereby presents for appreciation its Report on the supervising activity that was carried out and issues its Opinion on the Management Report and Consolidated Financial Statements of Novabase – Sociedade Gestora de Participações Sociais, S.A. for the financial year ended on December 31, 2021. ACTIVITIES CARRIED OUT Supervision of the Company During the financial year, the Audit Board regularly followed up the evolution of the company’s business and the business of its subsidiaries, ensuring compliance with the law and the relevant bylaws, and monitored the Company's management, the efficiency of the risk management and internal control systems and the preparation and disclosure of financial information, as well as the regularity of the accounting records, the accuracy of the consolidated financial statements and the accounting policies and metrical valuation criteria adopted by the company, in order to verify that they lead to an adequate expression of its consolidated assets, results and cash flows. It should also be noted that on the date of the General Meeting of shareholders of May 25, 2021, after Mr. João Duque's communication to that effect, Novabase's Audit Board resolved to approve the declaration of this member as being temporarily prevented from starting his functions as such, under the terms and for the purposes of paragraph 3 of article 415 of the Portuguese Companies Code. Indeed, due to the position of member of the General and Supervisory Board that Mr. João Duque holds in the bank Caixa Central de Crédito Agrícola Mútuo, C.R.L., the beginning of his functions as member of the Audit Board of Novabase is subject to prior assessment and authorization by Bank of Portugal, which is currently being submitted to the regulator. In this context, Novabase's Audit Board has decided to substitute this member, until the issuance of the referred Bank of Portugal decision, by Manuel Saldanha Tavares Festas, alternate member of the Audit Board elected at the same General Meeting, under the terms and for the purposes of article 415 of the Commercial Companies Code. The referred replacement was in force during the financial year of 2021 and is currently in force. During the year, the Audit Board met five times and the respective meetings were formally recorded in minutes. At these meetings there was an attendance of 100% by the Chairman and Fátima Farinha, and
2/3 of 66,6% by Manuel Festas; the number of meetings indicated corresponds to those that took place after the appointment of the Audit Board at the General Meeting of May 25, 2021. To this date, the previous Audit Board held 2 meetings in the year 2021. The Chairman and Fátima Farinha were part of the previous Audit Board, having also attended all meetings held in 2021 until the appointment of the new Audit Board. Additionally, the Audit Board participated in the Board of Directors meeting that approved the Management Report and the Consolidated Financial Statements for the financial year 2021. Within its duties, the Audit Board maintained the necessary contacts with the representatives of the Chartered Accountants Company and External Auditor, in order to monitor the planning and audit work that was carried out and to take note of the respective findings. The meetings held with the representatives of the Chartered Accountants Company and External Auditor enabled the Audit Board to reach a positive opinion on the integrity, rigor, skill, quality of work and objectivity with which they carried out their work, as well as the reliability of the financial information. Relevant matters concerning auditing were also analysed with the representatives of the Chartered Accountants Company and External Auditor; the Audit Board refers to their report on the consolidated financial statements for the description of the essential elements subject to analysis. During the meetings of the Audit Board, the main risks affecting Novabase Ͳ Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter were analysed and discussed with Management and the Statutory Auditor, based on presentations prepared by these corporate bodies. The Audit Board considers that it has obtained the explanations and clarifications considered relevant. Communication of irregularities The Audit Board declares that during the financial year 2021 it has not received, through the means defined for this purpose, any communication of irregularities. Related Party Transactions During the 2021 financial year, no related party transactions, in accordance with the regulation in force, were submitted to assessment by the Audit Board. Independence of the External Auditor The Audit Board received the statement by the Statutory Auditor confirming its independence in relation to the Company and communicating all relationships that may be perceived as a threat to its independence, as well as the safeguards that were implemented. RESPONSIBILITY STATEMENT Pursuant to paragraph 1/c) of article 29.º Ͳ G of the Portuguese Securities Code, applicable by virtue of paragraph 1/a) of article 8 of the CMVM Regulation no. 5/2008 (Information Duties), we hereby declare that, to the best of our knowledge and belief, the aforementioned financial statements were prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, giving a true and appropriate view of the assets and liabilities, financial position and results of Novabase Ͳ Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter, and the management report faithfully describes the evolution of the business, performance
3/3 and position of Novabase Ͳ Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter, containing an adequate description of the main risks and uncertainties which they face. OPINION The Audit Board analysed the Management Report and the Consolidated Financial Statements for the 2021 financial year, which comprise the Consolidated Statement of Financial Position as at December 31, 2021, the Consolidated Statement of Profit and Loss, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows, as well as the accompanying notes, which were prepared in accordance with the International Financial Reporting Standards, as adopted in the European Union. Within its duties the Audit Board has analysed the Legal Certification of Accounts and the Audit Report on the Consolidated Financial Information for the 2021 financial year, prepared by the Statutory Auditor, document which does not present any reservation and with which the Audit Board agrees. The Audit Board further analysed the Corporate Governance Report for the 2021 financial year, which is attached to the Management Report prepared by the Board of Directors in compliance with the CMVM Regulation no. 4/2013 (Corporate Governance of Listed Companies), and the Audit Board certifies that it includes all the elements referred to in article 29ͲH of the Portuguese Securities Code. In this context, it is the Audit Board’s opinion that: x There are no objections to the approval of the Management Report for the 2021 financial year; x There are no objections to the approval of the Consolidated Financial Statements for the 2021 financial year. Lisbon, April 27, 2022 The Audit Board Álvaro José Barrigas do Nascimento – Chairman Fátima do Rosário Piteira Patinha Farinha – Member Manuel Saldanha Fortes Tavares Festas – Alternate Member 1 1 Alternate member that is substituting in the office the effective member João Luís Correia Duque, under the terms of article 415 of the Portuguese Companies Code.
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. Edifício FPM41 - Avenida Fontes Pereira de Melo, 41 – 15º 1069-006 Lisboa - Portugal +351 210 110 000 | www.kpmg.pt KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese private limited company and a member firm of the KPMG Global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., Capital Social: 3.916.000 Euros - Pessoa Colectiva Nº PT 502 161 078 - Inscrito na O.R.O.C. Nº 189 - Inscrito na C.M.V.M. Nº 20161489 Matriculada na Conservatória do registo Comercial de Lisboa sob o Nº PT 502 161 078 STATUTORY AUDITORS’ REPORT (Free translation from a report originally issued in Portuguese language. In case of doubt the Portuguese version will always prevail.) REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Opinion We have audited the accompanying consolidated financial statements of Novabase, S.G.P.S, S.A. (the Group), which comprise the consolidated statement of financial position as at 31 December 2021 (showing a total of 165,444 thousand euros and total equity of 75,949 thousand euros, including non-controlling interests of 10,361 thousand euros and a profit for the year of 8,706 thousand euros), and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the accompanying 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, in all material respects, of the consolidated financial position of Novabase, S.G.P.S, S.A. as at 31 December 2021 and of its financial performance and its cash flows for the year then ended in accordance with the International Financial Reporting Standards as adopted by the European Union. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and further technical and ethical standards and guidelines as issued by Ordem dos Revisores Oficiais de Contas (the Portuguese Institute of Statutory Auditors). Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the consolidated Financial Statements” section below. We are independent of the Group in accordance with the law and we have fulfilled other ethical requirements in accordance with the Ordem dos Revisores Oficiais de Contas’ code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
2 Revenue recognition (Euro 178,788 thousand) See Note 5 to the consolidated financial statements. The Risk Our response to the identified risk The revenue recognition policy for advisory projects on a turnkey basis, which represent a significant part of the Group’s business, requires judgment as disclosed in Note 4 (d) of the notes to the consolidated financial statements. The recognition of such overtime projects in accordance with the applicable accounting policy, as described in Note 2.19 (a), involves a number of qualitative factors such as estimated billing, costs to be incurred, including contingency values for contractual risks, which justify that the recognition of revenue has been considered as a key audit matter. Our audit procedures included, amongst others, those that we describe below: We have analysed the revenue recognition policy adopted by the Group with reference to the applicable accounting standards; We have evaluated the design and implementation and operational effectiveness of relevant controls, including application controls and general IT controls, related to the revenue recognition process; We have critically analysed the estimates and assumptions made by the management, namely regarding estimated billing, costs to be incurred and contingencies; We have carried out substantive analytical procedures and detailed tests to the accounting records in order to identify and test the risk of fraud and potential derogation to implemented controls; and,; We assessed the adequacy of the respective disclosures to the financial statements, in accordance with the applicable accounting framework.
3 Recoverability of goodwill (Euro 11,501 thousand) See Note 8 to the consolidated financial statements which describes the net book value of the goodwill of the Next-Gen and NeoTalent business areas. The Risk Our response to the identified risk The determination of the recoverable value of these assets is subjective due to the uncertainty inherent to the financial projections and to the discount of future cash flows, since many key assumptions are based on management expectations, not observable in the market. The Group performs, on an annual basis, impairment tests on goodwill based on the discounted cash flow method, considering a 5-year business plan estimated by management, as mentioned in Notes 2.7 (1), 4 (a) and 8. The complexity and inherent degree of judgment justify that the recoverability of goodwill has been considered a key audit matter. Our audit procedures included, amongst others, those that we describe below: We have evaluated the design and implementation and operational effectiveness of the key controls implemented by the Group in connection with this matter and have reviewed the budgeting procedures on which the projections are based, by comparing the current performance against estimates made in prior periods, and the integrity of the discounted cash flow model; We have assessed the internal and external assumptions used and the reasonableness of such as current business trends, market performance, inflation, projected economic growth and discount rates; We have performed sensitivity analyses on the robustness of the assumptions and forecasts used; We have involved out experts in benchmarking the average cost of capital ratio; and, We assessed the adequacy of the respective disclosures to the financial statements, in accordance with the applicable accounting framework.
4 Recoverability of deferred tax assets (Euro 9,443 thousand) See Note 11 to the consolidated financial statements which describes the amount of deferred tax assets, of which 8,782 thousand euros related to tax benefits arising from Research and Development projects presented under the SIFIDE incentive scheme. The Risk Our response to the identified risk Deferred tax assets recorded by management are based on its best estimate on the timing and future amounts required for their recovery, using assumptions that require judgment, as mentioned in Notes 2.15 and 4 (c). The associated level of uncertainty and the degree inherent to the judgement justify that the recoverability of deferred tax assets has been considered as a key audit matter. Our audit procedures included, amongst others, those that we describe below: We have evaluated the design and implementation and operational effectiveness of the key controls implemented by the Group in connection with this matter and have analysed the budgeting procedures on which the projections are based, by comparing the current performance with estimates made in prior periods; We have analysed the assumptions and methodology used by management to assess the recoverability of deferred tax assets, namely projections of taxable income; and, We assessed the adequacy of the respective disclosures to the financial statements, in accordance with the applicable accounting framework.
5 Responsibilities of management and the supervisory body for the consolidated financial statements Management is responsible for: the preparation of consolidated financial statements that give a true and fair view of the Group’s consolidated financial position, financial performance and the consolidated cash flows, in accordance with the International Financial Reporting Standards as adopted by the European Union; the preparation of the consolidated management report, the corporate governance report, the consolidated non-financial information and the remunerations’ report, in accordance with applicable laws and regulations; designing and maintaining an appropriate internal control system to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; the adoption of accounting policies and principles appropriate in the circumstances; and, assessing the Group’s ability to continue as a going concern, and disclosing, as applicable, the matters that may cast significant doubt about the Group’s ability to continue as a going concern. The supervisory body is responsible for overseeing the Group’s financial reporting process. Auditors’ responsibilities for the audit of the financial statements Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatements whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs 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 financial statements. As part of an audit in accordance with ISAs, 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 management;
6 conclude on the appropriateness of management’s 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 auditors’ report to the related disclosures in the 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 auditors’ report. 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 financial statements represent the underlying transactions and the events in a manner that achieves fair presentation; obtain sufficient appropriate audit evidence regarding the financial information of the entities or 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; and, communicate with those charged with governance regarding, including the supervisory body, 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; determine, from the matters communicated with those charged with governance, including the supervisory body, those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes their public disclosure; and, provide the supervisory body with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. Our responsibility also includes the verification that the information contained in the consolidated management report is consistent with the consolidated financial statements, and the verification of the requirements as provided in numbers 4 and 5 of article 451 of the Portuguese Companies’ Code regarding the corporate governance report, as well as the verification that the consolidated non-financial information and the remunerations report were presented. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS On the consolidated management report Pursuant to article 451, nr. 3, al. (e) of the Portuguese Companies' Code, it is our opinion that the consolidated management report was prepared in accordance with the applicable legal and regulatory requirements, the information contained therein is consistent with the audited consolidated financial statements and, having regard to our knowledge and assessment of the Group, we have not identified any material misstatements. As defined in the article 451, nr. 7 of the Portuguese Companies’ Code, this opinion is not applicable to the non-financial statement that is included in the management report.
7 On the corporate governance report Pursuant to article 451, nr. 4, of the Portuguese Companies' Code, it is our opinion that the corporate governance report includes the information required to the Group to provide under article 29-H of the Securities Code, and we have not identified any material misstatements on the information provided therein in compliance with paragraphs c), d), f), h), i) and l) of nr. 1 of that article. On the non-financial information Pursuant to article 451, nr. 6, of the Portuguese Companies' Code, we inform that the Group has included in its management report the non-financial statement defined in article 508-G of the Portuguese Companies’ Code. On the remunerations’ report Pursuant to article 26-G, nr. 6, of the Securities Code, we inform that the Group has prepared a remunerations report where includes the information defined in nr. 2 of that article. On the European single electronic format (ESEF) The consolidated financial statements of Novabase, S.G.P.S, S.A. for the year ended 31 December 2021 have to comply with the applicable requirements established by the European Commission Delegated Regulation 2019/815 of 17 December 2018 (ESEF Regulation). Management is responsible for the preparation and presentation of the annual report in accordance with the ESEF Regulation. Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements, included in the annual report, have been prepared in accordance with the requirements of the ESEF Regulation. Our procedures considered the OROC (Portuguese Institute of Statutory Auditors) technical application guide on ESEF reporting and included, amongst others: obtaining an understanding of the financial reporting process, including the presentation of the annual report in a valid XHTML format. identifying and assessing the risks of material misstatement related to the tagging of information in the financial statements, in XBRL format using iXBRL technology. This assessment was based on an understanding of the information tagging process implemented by the Entity. In our opinion, the consolidated financial statements, included in the annual report, are presented, in all material respects, in accordance with the requirements established by the ESEF Regulation.
8 On the additional matters provided in article 10 of the Regulation (EU) nr. 537/2014 Pursuant to article 10 of the Regulation (EU) nr. 537/2014 of the European Parliament and of the Council, of 16 April 2014, and in addition to the key audit matters mentioned above, we also report the following: We were first appointed as auditors of the Group in the shareholders general assembly held on 29 April 2015 for a first mandate from 2015 to 2017. We were appointed as auditors of the Group in the shareholders general assembly held on 10 May 2018 for a second mandate from 2028 to 2020. We were reappointed as auditors of the Group in the shareholders general assembly held on 25 May 2021 for a third mandate from 2021 to 2023. Management as confirmed to us that they are not aware of any fraud or suspicion of fraud having occurred that has a material effect on the financial statements. In planning and executing our audit in accordance with ISAs we maintained professional skepticism, and we designed audit procedures to respond to the possibility of material misstatement in the financial statements due to fraud. As a result of our work, we have not identified any material misstatement of the consolidated financial statements due to fraud. We confirm that the audit opinion we issue is consistent with the additional report that we prepared and delivered to the supervisory body of the Group on 27 April 2022. We declare that we have not provided any prohibited services as described in article 5 of the Regulation (EU) nr. 537/2014 of the European Parliament and of the Council, of 16 April 2014, and we have remained independent of the Group in conducting the audit. 27 April 2022 SIGNED ON THE ORIGINAL KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (no. 189 and registered at CMVM with the nr. 20161489) represented by Susana de Macedo Melim de Abreu Lopes (ROC no. 1232 and registered at CMVM with the nr. 20160843)
64 CORPORATE GOVERNANCE REPORT 2021
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68 BOARD OF DIRECTORS’ REPORT ON REMUNERATION 2021
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70 | RELATÓRIO DA COMISSÃO DE VENCIMENTOS REPORT OF THE RENUMERATIONS COMMITTEE 2021
1 Report of the Remunerations Committee regarding the 2021 Financial Year The Remunerations Committee of Novabase SGPS (RC) met twice in the 2021 financial year, through telematic means on April 23, 2021 and at the company’s office on June 2, 2021. This Remunerations Committee (RC) is composed by Francisco Luís Murteira Nabo (Chairman) and the members Pedro Rebelo de Sousa and João Quadros Saldanha. All members were present at the meetings referred to above. The RC’s work was framed in this financial year by the remuneration policies applicable to the corporate bodies that were approved by the shareholders at the General Meeting. This report summarizes the decisions of the remunerations committee taken during the 2021 financial year. The RC further states that, during the 2021 financial year and since the entry into force of the Remuneration Policy (as set out below), there has been no deviation from the implementation procedure of the Remuneration Policy or any derogations regarding said policy. Prior Note: As usual, the remunerations committee clarifies that the decisions regarding variable remunerations mentioned in this report relate to decisions taken by the RC in 2021 and, therefore, such decisions were taken with reference to the directors’ performance in 2020. After this clarification, below is a summary of the decisions taken by the RC. AT THE MEETING OF APRIL 23, 2021: About the remuneration policy of the members of the management and supervisory board of the Company, under the Portuguese Securities Code, as amended by Law no. 50/2020 of August 25, to be proposed to the General Meeting of Shareholders. It was resolved to unanimously approve the remuneration policy of the members of the management and supervisory board of NOVABASE SGPS elaborated by the members of the RC and propose said remuneration policy to the Annual General Meeting of Shareholders of Novabase SGPS that took place on May 25, 2021. It was further unanimously resolved, and considering that said General Meeting should also resolve about the election of the corporate bodies of Novabase SGPS for the three-year period 2021-2023, including the Remuneration Committee, that the proposal approved should be subject to the suspensive condition of the members of the RC being elected to perform such positions for the mandate correspondent to the three-year period 2021-2023 in such General Meeting. AT THE MEETING OF 2 JUNE, 2021: At this meeting, before entering the agenda, the Chairman of the Remuneration Committee mentioned, as an introductory note, that at the General Meeting of Novabase SGPS of May 25, 2021 was approved a Remuneration Policy of the Members of the Management and Supervisory Board of Novabase SGPS (“ Remuneration Policy”) under the terms of article 26.º-A et seq. of the Portuguese Securities Code, as amended
2 by Law no. 50/2020, of 25 August, as proposed by this Remuneration Committee, under the terms of the resolution proposal dated as of April 29, 2021. The Remuneration Policy, which is available at the Company’s website, entered into force on the date of its approval by the General Meeting of Novabase SGPS, whereby the Remuneration Committee shall determine, since the respective entry into force, the remunerations of the members of the corporate bodies of Novabase in accordance with said policy, as well as supervise and oversee the enforcement and compliance of the same. In this sense, the resolutions taken concerning the remuneration to be earned in the 2021 financial year by the members of the management and supervisory board of Novabase SGPS comply with the provisions of the approved Remuneration Policy. About the remuneration of the members of the General Meeting Board of Novabase SGPS for the 2021 financial year. At the General Meeting of Novabase SGPS held on May 25, 2021 were elected, respectively, to the positions of President and Secretary of the General Assembly Board, António Manuel da Rocha e Menezes Cordeiro and Catarina Maria Marante Granadeiro. It was resolved to assign to the members of the Board a remuneration in attendance vouchers for each General Assembly meeting. For the President the amount defined is EUR 3,000 (three thousand euros) and for the Secretary of EUR 2,000 (two thousand euros). These amounts were not updated in relation to the previous year. These deliberations were taken unanimously. About the fixed remuneration of the Directors of Novabase SGPS for the 2021 financial year. At the General Assembly of Novabase SGPS held on May 25, 2021 were elected for the company’s management positions: (i) Luís Paulo Cardoso Salvado as Chairman, (ii) Álvaro José da Silva Ferreira, (iii) María del Carmen Gil Marín, (iv) Rita Wrem Viana Branquinho Lobo Carvalho Rosado, (v) José Afonso Oom Ferreira de Sousa, (vi) HNB – S.G.P.S., S.A., which nominated to perform the position under its own name, under the terms of article 390 no. 4 of the Commercial Companies Code, Madalena Paz Ferreira Perestrelo de Oliveira, (vii) Pedro Miguel Quinteiro Marques de Carvalho, and (viii) José Sancho Garcia, all as members. Subsequently, at the Board of Directors meeting held on the same day – May 25, 2021 – it was decided to delegate the every-day management of Novabase SGPS on the delegated-directors Luís Paulo Cardoso Salvado and Álvaro José da Silva Ferreira. At the same meeting, it was also decided to grant special responsibilities (encargos especiais) to the director María Del Carmen Gil Marín, under the terms of number 1 of article 407 of the Commercial Companies Code, and it was decided that this director would be in charge of the business area related to Novabase Capital and for the areas of relationships with investors, marketing and communication and information technology (IT). Thus, in view of the above, it was unanimously decided to set the following annual gross amounts for each member of the Board of Directors, to be paid in 12 monthly instalments, that consider, on the one hand, their know-how and experience, the nature of their functions and responsibilities and, when applicable, the management functions performed and, on the other hand, market practices for similar responsibilities, as well as the context described above:
3 x Luís Paulo Cardoso Salvado (Chairman of the Board of Directors/ CEO / delegated-director) – EUR 324,000 (three hundred and twenty four thousand euros); x Álvaro José da Silva Ferreira (delegated-director) – EUR 270,000 (two hundred and seventy thousand euros); x María del Carmen Gil Marín (director with special responsibilities) – EUR 180,000 (one hundred and eighty thousand euros); x Rita Wrem Viana Branquinho Lobo Carvalho Rosado (non-executive director) – EUR 20,000 (twenty thousand euros); x José Afonso Oom Ferreira de Sousa (non-executive director) – EUR 42,000 (forty two thousand euros); x Madalena Paz Ferreira Perestrelo de Oliveira (non-executive director) – EUR 42,000 (forty two thousand euros); x Pedro Miguel Quinteiro Marques de Carvalho (non-executive director) – EUR 42,000 (forty two thousand euros); x José Sancho Garcia (non-executive director) – EUR 42,000 (forty two thousand euros). Additionally, it was referred that, as stated at the Annual General Meeting of Novabase referred above, the director Rita Wrem Viana Branquinho Lobo Carvalho Rosado will keep on performing the legal tasks in a participated entity of the group, maintaining the terms and conditions. The total annual fixed remuneration of the Directors of Novabase SGPS is now defined at EUR 962,000, compared to EUR 1,340,340 in 2020. Variable remuneration of the Directors of Novabase SGPS, related to performance in the 2020 financial year. It was referred by the President of the RC that all decisions regarding the variable remuneration of the directors contained in this point are related to the performance of the same throughout the 2020 financial year, so in its determination it was considered the remuneration policy previously in force at the Company, specially the decision previously taken by the General Meeting of April 2009 that set the general lines of the remuneration conditions of the directors and that was reiterated in the several General Meetings held in the last years. The 2020 performance was especially positive in the most relevant aspects for the success and sustainability of the company – especially given the demanding and uncertain context generated by the Covid-19 pandemic – of which we highlight: x Strategy o Acquisition of the total shareholding at Celfocus enabling unification and accelerating the transformation of the business segment Next-Gen, in addition to the resulting synergies; o Disposal of Collab business with capital gains; x Financial Indicators o Growth (organic) of turnover by 10%, being 11% in the Next-Gen segment; o EBITDA of 9,5% o Net profit of 7,5M or 0,24€/share; o Net cash of 51,5M€; x Shareholder Value
4 o Total Shareholder Return of +24% (Vs. -6$ of PSI20 and +14% of EuroStoxxTech); o Increase in the visibility and liquidity of the security NBA; x Governance and Sustainability o Good functioning of the corporate bodies of the company, in particular of the Board of Directors and the Executive Committee, for its agility and assertiveness in pursuing the company’s interests; o Management of the Covid-19 crisis in an efficient manner, always putting safety and health first, as confirm the results of the internal inquiries performed (98% trust the leadership of Novabase to make the right decisions, whereby 83% are very or extremely trusting); o Update of policies and regulations to improve transparency, monitoring mechanisms, corporate governance and sustained value creation; o Implementation of diversity and gender equality initiatives. o Improvement of 52% in the relevant environmental indicators (annual average), as consumptions, recycling rate, waste production and emissions of CO2; The pandemic had a positive impact in this reduction; o Improvement on the risk profile of clients and geographies. Therefore, the RC unanimously decided to attribute to each of the following directors in office in 2020, and without prejudice of the provisions of points four and five below, the following amounts: x Luís Paulo Cardoso Salvado (Chairman of the Board of Directors on a full-time basis / full-time Chairman) – EUR 318,160 (three hundred and eighteen thousand, one hundred and sixty euros); x João Nuno da Silva Bento (Chairman of the Executive Committee / CEO) – EUR 318,160 (three hundred and eighteen thousand, one hundred and sixty euros); x Álvaro José da Silva Ferreira (executive director) – EUR 199,380 (one hundred and ninety nine thousand and three hundred and eighty euros); x María del Carmen Gil Marín (executive director) – EUR 159,080 (one hundred and fifty nine thousand and eighty euros); x Francisco Figueiredo Morais Antunes (executive director) – EUR 159,080 (one hundred and fifty nine thousand and eighty euros); x Paulo Jorge de Barros Pires Trigo (executive director) – EUR 201,170 (two hundred and one thousand and one hundred and seventy euros); x José Afonso Oom Ferreira de Sousa – EUR 63,630 (sixty three thousand and six hundred and thirty euros); x Pedro Miguel Quinteiro Marques de Carvalho – EUR 63,630 (sixty three thousand and six hundred and thirty euros). The total variable remuneration of the Directors of Novabase SGPS regarding their performance in the 2020 financial year corresponds, therefore, to EUR 1,482,290 (one million four hundred and eighty two thousand and two hundred and ninety euros), which compares to EUR 2,596,679 regarding the performance in the 2019 financial year. The variable remuneration of the directors José Afonso Oom Ferreira de Sousa and Pedro Miguel Quinteiro Marques de Carvalho is justified by their availability and great commitment in critical matters for the company. In particular, the involvement and contributions in the preparation of the new mandate shall be highlighted, which is
5 particularly demanding given the significant change in the context (Strategic Update 2019+ of the company and pandemic situation). On deferring of the payment of part of the amounts attributed as variable remuneration It was also unanimously resolved to pay in 2021 only half of the amount granted to each director in office in 2020, as variable remuneration, and delay the remaining 50% for payment during the next three years (2022, 2023 and 2024). Therefore, in each of these years, 1/3 of this second half of the amount now granted will be paid, subject to the positive performance of the company during such periods, in line with what was resolved and implemented from 2011 to 2020. On pension supplements for directors receiving variable remuneration In light of the current and foreseeable economic environment for the national economy in the medium and long term, under which great difficulties will remain due to the weight of external private or public debt, to which will be added, in the short term, a very significant demographic pressure, which will emphasize the viability and sustainability risks affecting pensions systems (national and european), it will be a prudent practice, and in that sense it is unanimously resolved: (i) To channel 20% (twenty per cent) of the funds allocated as fixed remuneration in point two above to each of the executive directors – namely, Luís Paulo Cardoso Salvado, Álvaro José da Silva Ferreira e María del Carmen Gil Marín – to reinforce capitalization insurance contributions currently in force in the Company in lieu of payment of that part of the fixed remuneration, under the terms foreseen in Clause 5 of the Remuneration Policy; (ii) To channel the funds allocated in point three above as variable remuneration (as the ones previously deferred) to reinforce capitalization insurance contributions currently in force in the company in lieu of payment of such variable remuneration. On the allocation of stock options of the company, under the terms of the Stock Options Plan Regulation approved at the General Meeting of the Company held on September 26, 2019 As provided for in the Remuneration Policy, the variable remuneration of the members of the management body of Novabase SGPS may consist, namely, of plans based on securities of Novabase SGPS, notably the participation in the Stock Options Plan of the Company approved in the 2019 General Meeting (“Plan”) as well as the regulation of the referred plan (“Regulation”) currently in force. All capitalized terms that are not defined hereafter shall have the same meaning that is attributed to them in the Regulation. Given the current social-economic context, the Remuneration Commission considers that the attribution of a variable remuneration, to the two delegated-directors and to the director with special responsibilities, through participation in the Plan, seems to be an adequate way to remunerate these members for the functions exercised and inherent responsibilities, reinforcing at the same time the alignment of the interests of management with the interests of the Company, in the medium and long term, as well as its sustainability, given the characteristics of the Plan.
6 Under these terms, and considering the functions to be performed by Luís Paulo Cardoso Salvado, Chairman of the Board of Directors, CEO and delegated-director, and by Álvaro José da Silva Ferreira, delegated-director, both will be in charge of the day-to-day management of the Company, with the inherent responsibility to such positions to be performed on a full-time basis, as well as the duties and responsibilities attributed to the director María del Carmen Gil Marín, who is responsible for several areas relevant to the business of Novabase group, it was unanimously decided to attribute to the referred directors the following Stock Options of the Company under the Regulation: x Luís Paulo Cardoso Salvado- 250 000 Stock Options; x Álvaro José da Silva Ferreira - 200 000 Stock Options; x María del Carmen Gil Marín -75 000 Stock Options. The adherence of these directors to the Plan shall be effected through the execution of a contract between them and the Company, under the terms of Clause 5.1 of the Regulation, and their participation in the Plan shall be governed by the provisions of said Regulation. The "Date of Granting" to be considered for the Options now granted (525,000) is June 1, 2021. Any additional granting of Options to the same directors will be deferred to a future date, depending on their performance in the execution of the company's Strategic Update 2019+, as well as to other directors, as applicable and under the terms set forth in the Stock Options Regulation. About the attribution of fringe benefits to the members of the Board of Directors In addition to the fringe benefits granted to the members of the Board of Directors under the terms of the remuneration practices in force in Novabase group and applicable to its employees (including, health insurance and food allowance), it was resolved by the Remuneration Committee to grant the members of the Board of Directors, as a fringe benefit, the provision of a vehicle by the Company, authorizing the possibility of using such vehicle not only for professional purposes but also for personal purposes, should the director so determine, within the corresponding legal and tax framework. It was further resolved to attribute to the members of the Board of Directors an additional health insurance as a complement to the health insurance they already benefit from and which includes, in general terms, regular check-ups and international treatments with broad coverage. It was also resolved to authorize the Board of Directors, within the framework and limits now exposed, to proceed with the analysis, selection and contracting of this health insurance with an insurance company, national or international, with proven reputation in the industry. On the remuneration of the members of Novabase SGPS Supervisory Board for the 2021 financial year At the General Meeting of Novabase SGPS held on May 25, 2021 were elected to be part of the Supervisory Board: Álvaro José Barrigas do Nascimento as President and Fátima do Rosário Piteira Patinha Farinha and João Luís Correia Duque as members. Entering item sixth on the agenda, it was stated that, in accordance with article 422.º - A of the Commercial Companies Code and the Remuneration Policy, the remuneration of the members of the supervisory board shall consist of a fixed amount and in line with
7 market practice. Under these terms, the following fixed remunerations are attributed for the 2021 financial year: x Álvaro José Barrigas do Nascimento (Chairman) - EUR 10,000 (ten thousand euros); x Fátima do Rosário Piteira Patinha Farinha - EUR 7,500 (seventy five hundred euros); x João Luís Correia Duque- 7,500 EUR (seventy five hundred euros). These amounts were updated by a total of EUR 2 000 (two thousand euros) in relation to the previous year, in order to align them with market practices. It was also mentioned that, as communicated to this RC by the Chairman of Novabase's Supervisory Board, member João Luís Correia Duque was declared temporarily prevented from starting his functions as such, following the communication sent by this member to the Supervisory Board, having been replaced in the position by the alternate member Manuel Saldanha Tavares Festas until the end of the respective impediment. In this sense, the remuneration decided for this member will be received by the alternate member, in a proportional way to the period of time he is in office, and the referred remuneration shall be received by the member João Luís Duque Correia after the termination of his current impediment, also in a proportional way to the period of time he will effectively be in office at Novabase's Supervisory Board. On the remuneration of the Chartered Accountant for the 2021 financial year Under the terms of the Remuneration Policy, it was unanimously resolved that the Chartered Accountant be remunerated in accordance with normal market remuneration practices and conditions for the type of services in question, in accordance with the service agreement entered into with the Chartered Accountant following a proposal to that effect from the Company's Supervisory Board. On the enforceability or unenforceability of payments relating to the dismissal or termination of appointment of directors In this regard, since the matter in question is already duly provided for and regulated by law, it was unanimously resolved not to attribute to the Company's directors any right to receive damages or compensation beyond what is legally provided for, nor to establish any general prohibition for the Company to establish such compensations in the future, if and when it sees fit. Lisbon, March 28, 2022 The Remunerations Committee Francisco Luís Murteira Nabo (Chairman) Pedro Rebelo de Sousa (Member)
8 João Quadros Saldanha (Member)
NOVABASE S.G.P.S., S.A. 2021 CONSOLIDATED FINANCIAL STATEMENTS
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INDEX I. 5 Ƚ Consolidated Statement of Financial Position as at 31 December 2021 6 Ƚ 7 Ƚ Consolidated Statement of Comprehensive Income for the year ended 31 December 2021 8 Ƚ Consolidated Statement of Changes in Equity for the year ended 31 December 2021 9 Ƚ Consolidated Statement of Cash Flows for the year ended 31 December 2021 10 Ƚ 11 Note 1. General information 11 Note 2. Significant accounting policies 11 Note 3. Financial risk management policy 25 Note 4. Critical accounting estimates and judgements 29 Note 5. Segment information 30 Note 6. Companies included in consolidation 32 Note 7. Property, plant and equipment 34 Note 8. Intangible assets 35 Note 9. Investments in associates 37 Note 10. Financial assets at fair value through profit or loss 37 Note 11. Deferred tax assets 38 Note 12. Other non-current assets 39 Note 13. Financial instruments by category 39 Note 14. Trade and other receivables 40 Note 15. Accrued income 41 Note 16. Derivative financial instruments 41 Note 17. Other current assets 41 Note 18. Cash and cash equivalents 41 Note 19. Share Capital, share premium and treasury shares and stock options 42 Note 20. Reserves and retained earnings 43 Note 21. Non-controlling interests 44 Note 22. Borrowings 44 Note 23. Provisions 46 Note 24. Other non-current liabilities 46 Note 25. Trade and other payables 47 Note 26. Deferred income and other current liabilities 47 Note 27. External supplies and services 48 Note 28. Employee benefit expense 48 Note 29. Other gains/(losses) - net 48 Note 30. Depreciation and amortisation 49 Note 31. Finance income 49 Note 32. Finance costs 49 Note 33. Share of loss of associates 49 Note 34. Income tax expense 50 Note 35. Earnings per share 51 Note 36. Dividends per share 51 Note 37. Commitments 51 Note 38. Related parties 52 Note 39. Discontinued operations 56 Note 40. Fair value measurement of financial instruments 57 Note 41. Contingencies 59 Note 42. Additional information required by law 60 Note 43. Events after the reporting period 60 Note 44. Note added for translation 60 II. REPORTS ISSUED BY THE SUPERVISORY BOARD AND BY THE CMVM REGISTERED AUDITOR 61 Ƚ 63 Ƚ 67 III. SECURITIES ISSUED BY THE COMPANY AND OTHER GROUP COMPANIES, HELD BY CORPORATE BODIES 75 Ƚ 77 CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2021 Report and Opinion of the Supervisory Board - Consolidated Financial Statements Auditors' Report - Consolidated Financial Statements Securities issued by the Company and Companies in a control or group relationship with Novabase S.G.P.S., held by members of the corporate bodies of Novabase S.G.P.S. Notes to the Consolidated Financial Statements for the year ended 31 December 2021 Consolidated Statement of Profit or Loss for the year ended 31 December 2021 3
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I. CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2021 5
NOVABASE S.G.P.S., S.A. Consolidated Statement of Financial Position as at 31 December 2021 (Amounts expressed in thousands of Euros) Note 31.12.21 31.12.20 Assets Non-Current Assets Property, plant and equipment 7 6,840 9,095 Intangible assets 8 11,873 12,063 Investments in associates 9 160 223 Financial assets at fair value through profit or loss 10 13,615 12,601 Deferred tax assets 11 9,443 7,947 Other non-current assets 12 1,997 2,025 Total Non-Current Assets 43,928 43,954 Current Assets Inventories 7 10 Trade and other receivables 14 42,634 42,660 Accrued income 15 4,691 3,556 Income tax receivable 1,236 2,988 Derivative financial instruments 16 16 64 Other current assets 17 4,105 4,290 Cash and cash equivalents 18 68,431 71,929 Total Current Assets 121,120 125,497 Assets from discontinued operations 39 396 342 Total Assets 165,444 169,793 Equity and Liabilities Equity Share capital 19 54,638 54,638 Treasury shares 19 (1,217) (1,177) Share premium 19 226 226 Reserves and retained earnings 20 3,235 (4,124) Profit for the year 8,706 7,486 Total Equity attributable to owners of the parent 65,588 57,049 Non-controlling interests 21 10,361 10,047 Total Equity 75,949 67,096 Liabilities Non-Current Liabilities Borrowings 22 12,417 21,493 Provisions 23 3,391 5,233 Other non-current liabilities 24 2,120 3,705 Total Non-Current Liabilities 17,928 30,431 Current Liabilities Borrowings 22 9,583 9,432 Trade and other payables 25 37,775 40,313 Income tax payable 96 53 Derivative financial instruments 16 71 9 Deferred income and other current liabilities 26 19,711 16,148 Total Current Liabilities 67,236 65,955 Liabilities from discontinued operations 39 4,331 6,311 Total Liabilities 89,495 102,697 Total Equity and Liabilities 165,444 169,793 THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS The accompanying notes are an integral part of these consolidated financial statements 6
NOVABASE S.G.P.S., S.A. Consolidated Statement of Profit or Loss for the year ended 31 December 2021 (Amounts expressed in thousands of Euros) 12 M * Note 31.12.21 31.12.20 Continuing operations Services rendered 5 138,788 125,080 External supplies and services 27 (41,518) (37,379) Employee benefit expense 28 (85,913) (80,176) Net impairment losses on trade and other receivables 14 (272) (72) Other gains/(losses) - net 29 1,582 4,378 Depreciation and amortisation 30 (3,521) (4,356) Operating Profit 9,146 7,475 Finance income 31 1,945 1,240 Finance costs 32 (1,816) (2,928) Share of loss of associates 33 (66) (58) Earnings Before Taxes (EBT) 9,209 5,729 Income tax expense 34 (293) (1,912) Profit from continuing operations 8,916 3,817 Discontinued operations Profit from discontinued operations 39 1,060 4,509 Profit for the Year 9,976 8,326 Profit attributable to: Owners of the parent 8,706 7,486 Non-controlling interests 21 1,270 840 9,976 8,326 Earnings per share from continuing and discontinued operations attributable to owners of the parent (Euros per share) Basic earnings per share From continuing operations 35 0.25 Euros 0.10 Euros From discontinued operations 35 0.03 Euros 0.15 Euros From profit for the year 35 0.28 Euros 0.24 Euros Diluted earnings per share From continuing operations 35 0.25 Euros 0.10 Euros From discontinued operations 35 0.03 Euros 0.15 Euros From profit for the year 35 0.28 Euros 0.24 Euros 12 M * - period of 12 months ended THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS The accompanying notes are an integral part of these consolidated financial statements 7
NOVABASE S.G.P.S., S.A. Consolidated Statement of Comprehensive Income for the year ended 31 December 2021 (Amounts expressed in thousands of Euros) 12 M * Note 31.12.21 31.12.20 Profit for the Year 9,976 8,326 Other comprehensive income for the year Items that may be reclassified to profit or loss Exchange differences on foreign operations, net of tax 162 22 Other comprehensive income for the year 162 22 Total comprehensive income for the year 10,138 8,348 Total comprehensive income attributable to: Owners of the parent 8,456 6,948 Non-controlling interests 1,682 1,400 10,138 8,348 12 M * - period of 12 months ended THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS The accompanying notes are an integral part of these consolidated financial statements 8
NOVABASE S.G.P.S., S.A. Consolidated Statement of Changes in Equity for the year ended 31 December 2021 (Amounts expressed in thousands of Euros) Attributable to owners of the parent Stock Exch. dif. Other res. Non- Note Share Treasury Share Legal options on foreign & retained -controlling Total capital shares premium reserves reserves operations earnings interests Equity Balance at 1 January 2020 54,638 (655) 226 3,140 7 (4,521) 16,456 18,329 87,620 Profit for the year - - - - - - 7,486 840 8,326 Other comprehensive income for the year 20, 21 - - - - - (538) - 560 22 Total comprehensive income for the year - - - - - (538) 7,486 1,400 8,348 Transactions with owners Dividends 20, 21 - - - - - - - - - Treasury shares movements 19, 20 - (522) - - - - (368) - (890) Share-based payments 19 - - - - 34 - - - 34 Change in consolidation perimeter 21, 39 - - - - - - - (672) (672) Transactions with owners - (522) - - 34 - (368) (672) (1,528) Transactions with non-controlling interests 20, 21 - - - - - 145 (18,479) (9,010) (27,344) Balance at 31 December 2020 54,638 (1,177) 226 3,140 41 (4,914) 5,095 10,047 67,096 Balance at 1 January 2021 54,638 (1,177) 226 3,140 41 (4,914) 5,095 10,047 67,096 Profit for the year - - - - - - 8,706 1,270 9,976 Other comprehensive income for the year 20, 21 - - - - - (250) - 412 162 Total comprehensive income for the year - - - - - (250) 8,706 1,682 10,138 Transactions with owners Dividends 20, 21 - - - - - - - (309) (309) Treasury shares movements 19, 20 - (40) - - - - (71) - (111) Share-based payments 19 - - - - 175 - - - 175 Change in consolidation perimeter 21, 39 - - - - - - - - - Transactions with owners - (40) - - 175 - (71) (309) (245) Transactions with non-controlling interests 20, 21 - - - - - - 19 (1,059) (1,040) Balance at 31 December 2021 54,638 (1,217) 226 3,140 216 (5,164) 13,749 10,361 75,949 THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS Changes in ownership interests in subsidiaries that do not result in a loss of control Changes in ownership interests in subsidiaries that do not result in a loss of control The accompanying notes are an integral part of these consolidated financial statements 9
NOVABASE S.G.P.S., S.A. Consolidated Statement of Cash Flows for the year ended 31 December 2021 (Amounts expressed in thousands of Euros) 12 M * Note 31.12.21 31.12.20 Cash flows from operating activities Cash receipts from customers 133,846 126,845 Cash paid to suppliers and employees (126,651) (116,340) Cash generated from operations 7,195 10,505 Income taxes received / (paid) 714 (2,628) Other operating proceeds / (payments) 583 (1,933) 1,297 (4,561) Net cash from operating activities 8,492 5,944 Cash flows from investing activities Proceeds: Sale of subsidiaries 39 215 42,823 Sale of associates and other participated companies 96 9 Disposal of debt securities - 2,467 Sale of property, plant and equipment 13 212 Interest received 3 92 Dividends received 31 90 43 417 45,646 Payments: Acquisition of subsidiaries 39 (215) (3,456) Acquisition of property, plant and equipment (791) (663) Acquisition of intangible assets (67) (253) (1,073) (4,372) Net cash from / (used in) investing activities (656) 41,274 Cash flows from financing activities Proceeds: Proceeds from borrowings 22 - 10,000 - 10,000 Payments: Repayment of borrowings 22 (6,400) (6,194) Dividends paid and share capital reductions 21 (222) - Transactions with non-controlling interests 20 (1,040) (20,000) Payment of lease liabilities 22 (2,756) (3,785) Interest paid (800) (1,115) Purchase of treasury shares 19, 20 (111) (890) (11,329) (31,984) Net cash used in financing activities (11,329) (21,984) Cash and cash equivalents at 1 January 18 71,948 48,782 Net increase (decrease) of cash and cash equivalents (3,493) 25,234 Effects of change in consolidation perimeter - (1,857) Effect of exchange rate changes on cash and cash equivalents (22) (211) Cash and cash equivalents at 31 December 18 68,433 71,948 12 M * - period of 12 months ended THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS The accompanying notes are an integral part of these consolidated financial statements 10
NOVABASE S.G.P.S., S.A. Notes to the Consolidated Financial Statements for the year ended 31 December 2021 1. General information 2. Significant accounting policies 2.1. Basis of preparation The consolidated financial statements of Novabase have been prepared in accordance with International Financial Reporting Standards - IFRS, as adopted by the European Union (EU) as at 31 December 2021. The most significant accounting policies applied in the preparation of these consolidated financial statements are described below. These accounting policies have been consistently applied to all years presented in these financial statements. Novabase, Sociedade Gestora de Participações Sociais, S.A. (hereinafter referred to as Novabase, Novabase Group or Group), with head office in Av. D. João II, 34, Parque das Nações, 1998-031 Lisbon, Portugal, was incorporated in 11 May 1989 in Portugal. Novabase holds and manages financial holdings in other companies as an indirect way of doing business, being the Holding Company of Novabase Group. The consolidated financial statements were prepared to present fairly the Group's operations, as well as its financial position, financial performance and cash flows. These consolidated financial statements were approved and authorised for issue by the Board of Directors on 27 April 2022. The share capital is represented by 31,401,394 shares (2020: 31,401,394 shares), and all shares have a nominal value of 1.74 Euros each (2020: 1.74 Euros). (i) Next-Gen (NG) - This area, which operates under the Celfocus commercial brand according to Novabase's new brand architecture, develops activities of IT consulting and services with technology offerings that tend to be more advanced and targeted mainly to the Financial Services (Banks, Insurance and Capital Markets) and Telecommunications (Operators) industries, and to the most competitive markets (Europe and Middle East); (ii) Value Portfolio (VP) - This area of Novabase, where the Neotalent commercial brand operates, develops activities of IT consulting and services of IT Staffing. It also develops a venture capital activity through Novabase Capital, S.C.R., S.A.. Novabase's activity is aggregated into 2 operating segments: These financial statements are presented in thousands of Euros (EUR thousand), rounded to the nearest thousand, except otherwise stated. It should be understood as being part of those Standards, whether the IFRS issued by the International Accounting Standards Board (“IASB”), or the IAS issued by the International Accounting Standards Committee (“IASC”) and respective interpretations - IFRIC and SIC, issued, respectively, by the International Financial Reporting Interpretations Committee (“IFRIC”) and Standard Interpretations Committee (“SIC”). These standards and interpretations will be referred to generically as IFRS. Novabase is listed on the Euronext Lisbon. These consolidated financial statements will be subject to approval at the Shareholders' General Meeting scheduled for 24 May 2022. Following a 2020 marked by the success on the execution of some M&A operations relevant to the Group's strategy, namely the acquisition of the remaining stake in Celfocus (the core asset of Novabase's 2019+ Strategy of becoming a “Next-Gen IT Services Company”), the adjustment to the consideration on the sale of GTE Business and the disposal of the subsidiary Collab, 2021 was characterised by intense operational activity and strong performance of the businesses, and no changes occurred in the composition of the Group or the reportable segments nor were recorded operations or items considered unusual: • Next-Gen delivered a strong performance in 2021, growing at double-digits, +15% compared to the same period of last year, a fully organic growth and mainly driven by international operations (+20%). In the target geographies – Europe and Middle East – Next-Gen grew 22%, rising the non-domestic business to almost 2/3 of its Turnover. Next-Gen’s profitability also improved, with Operating Profit excluding Depreciation and amortisation (EBITDA) increasing 3% year-on-year; • Value Portfolio was back to growth and improved profitability in 2021, recovering from the covid-effects experienced especially during the second half of 2020, in the Spanish market of IT Staffing. Turnover in this segment was 1% higher than in 2020 and the EBITDA margin rose 160 basis points year-on-year to 12.6%, confirming the resilient performance of the IT Staffing business. 2021 continued to be marked by the Covid-19 pandemic, the disease caused by the novel coronavirus, declared as a pandemic by the World Health Organization on 11 March 2020 (see note 2.2.). The 2021 General Meeting of Shareholders held on 25 May appointed new corporate bodies for the 2021/2023 triennium. To be noted that the new team is now comprised of Luís Paulo Salvado and Álvaro Ferreira as directors with delegated powers, and María Gil Marín as director with special responsibilities. 11
Notes to the Consolidated Financial Statements • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, ‘Interest rate benchmark reform - phase 2’. The amendments to the standards introduced by the IASB in this second phase, address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one, and provide for the application of exemptions such as: i) changes to designations and hedge documentation ii) amounts accumulated in the cash flow hedge reserve; iii) assessment the retrospective effectiveness of a hedge relationship under IAS 39; iv) changes in the hedge relationships for groups of items; v) presumption that an alternative benchmark rate designated as a non-contractually specified risk component, is separately identifiable and qualifies as a hedged risk; and vi) updating the effective interest rate, without recognising gain or loss, for financial instruments measured at amortised cost with changes in contractual cash flows as a result of the benchmark interest rates reform, a situation that also applies to lease liabilities which are indexed to a reference interest rate. New standards, interpretations and amendments to existing standards that have been published at the reporting date and are mandatory for annual periods beginning on or after 1 January 2022, but that the Group has not early adopted • Amendment to IFRS 16, 'Leases - Covid-19-Related Rent Concessions after 30 June 2021' (effective for annual periods beginning on or after 1 April 2021, early adoption is permitted, contingent on the adoption of the first amendment to IFRS 16). This amendment extends the application date of the amendment to IFRS 16 – 'Leases - Covid-19-Related rent concessions' from 30 June 2021 to 30 June 2022. The conditions for applying the practical expedient are maintained, whereby: i) if the lessee is already applying the 2020 practical expedient, it must continue to apply it to all leases with similar characteristics, and under comparable conditions; and (ii) where the lessee has not applied the practical expedient to the 2020 eligible rent Concessions, it cannot apply the extension to the 2020 amendment. The amendment is applied retrospectively with the impacts reflected as an adjustment to the opening balance of retained earnings of the annual reporting period in which the lessee first applies this amendment. • Annual improvement cycle 2018 - 2020 (effective for annual periods beginning on or after 1 January 2022). This improvement cycle affects the following standards (themes): IFRS 1 - 'First adoption of IFRS' (subsidiary as a first-time adopter of IFRS), IFRS 9 - 'Financial instruments' (derecognition of financial liabilities - costs incurred to be included in the “10 percent” variation test), IFRS 16 - 'Leases' (lease incentives) and IAS 41 - 'Agriculture' (taxation and fair value measurement). • Amendment to IFRS 16, 'Leases - Covid-19-Related rent concessions' (effective for annual periods beginning on or after 1 June 2020, early adoption having been permitted). This amendment to IFRS 16, arising in the context of the global pandemic caused by the new coronavirus, introduces a practical expedient for lessees, which exempts them from assessing whether rent concessions awarded by lessors in the scope of Covid-19, and exclusively these concessions, qualify as leases modifications. Lessees who choose the application of this exemption, account for the change in rent payments, as rental variable rent in the period(s) in which the event or condition leading to the payment reduction occurs. The practical expedient is only applicable when all of the following conditions are met: i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; ii) any reduction in lease payments affects only payments due on or before 30 June 2021; and iii) there is no substantive change to other terms and conditions of the lease. No standard, interpretation or amendment to existing standards adopted by the Group for the first time this year had a significant impact on the consolidated financial statements. • Amendment to IAS 16, ‘Property, plant and equipment - Proceeds before intended use’ (effective for annual periods beginning on or after 1 January 2022). This amendment is part of the "narrow scope amendments" published by the IASB in May 2020, and prohibits the deduction of amounts received as consideration for items sold that resulted from the production in test phase to the property, plant and equipment, to the book value of those same assets. The consideration received for the sale of the “outputs” obtained during the testing phase must be recognised in profit or loss for the year, in accordance with the applicable regulations, as well as directly related expenses. • Amendment to IFRS 3, ‘Business combinations - Reference to the Conceptual Framework’ (effective for annual periods beginning on or after 1 January 2022). This change is also part of the changes of the narrow scope amendments published by the IASB in May 2020, and updates the references to the Conceptual Framework in the text of IFRS 3, regarding the identification of an asset or a liability within a business combination, without introducing changes to the accounting requirements for recording business combinations. This amendment also clarifies that in applying the purchase method, liabilities and contingent liabilities must be analysed in the light of IAS 37 and/or IFRIC 21 and not according to the definition of liability in the Conceptual Framework, and that the contingent assets of the acquiree cannot be recognised in a business combination. • Amendment to IAS 37, ‘Onerous contracts - cost of fulfilling a contract (effective for annual periods beginning on or after 1 January 2022). This change is part of the narrow scope amendments published by the IASB in May 2020, and specifies what are the costs that the entity should consider when assessing whether a contract is onerous or not. Only expenses directly related to the performance of the contract are accepted, and these may include: i) the incremental costs of fulfilling that contract such as the cost of labour required and materials; and ii) the allocation of other expenses that are directly related to the fulfilment of the contract, such as the allocation of the depreciation expenses of a given tangible fixed asset used to carry out the contract. This change should be applied to contracts that, at the beginning of the first annual reporting period to which the change is applied, still include contractual obligations to be satisfied, without there being any need to restate the comparison. Any impact should be recognised against retained earnings (or another component of equity, as appropriate), on the same date. New standards, amendments to existing standards and interpretations that became effective in 2021 12
Notes to the Consolidated Financial Statements 2.2. Quantitative and qualitative information on the impacts of Covid-19 In terms of financials, there were also no relevant Covid impacts. The main activity indicators posted a good performance, with the double- digit growth in Turnover and the more than doubling of Net Profit from continuing operations to be highlighted. Next-Gen thrived in its organic growth, growing 15% thanks to the strong expansion of international business by 20%. New flagship clients were won and 16% of new talents were added to the team of specialists. Value Portfolio got back to growth and improved profitability, recovering from the impacts of Covid-19 in 2020, especially in the second half of the year. An update of the main quantitative and qualitative impacts related to Covid-19 on the Novabase Group in 2021 are presented below. Other effects of the pandemic include higher complexity in talent retention, delays in the M&A initiatives and challenges in winning new clients, however, the commercial victories achieved during the year are encouraging. The Group's consolidated financial statements were prepared on a going concern basis (see also note 2.2.), based on the historical cost principle except for 'Financial assets at fair value through profit or loss' and 'Derivative financial instruments', which were measured at fair value (notes 10 and 16). The Board of Directors believes that the estimates and assumptions adopted do not involve significant risks that may, during the next financial year, cause material adjustments in the amount of assets and liabilities. The second year of the pandemic has proven to be a year of challenges, with advances and setbacks. 2021 began under a wave of infections and new lockdowns worldwide, but as of the middle of the second quarter, the outlook began to improve. By the end of the year, the pandemic situation worsened again, due to the surge of a new variant. The Group's Pandemic Task Force continued to support the operations, while taking all necessary health measures to protect the entire community. The evolution of the pandemic was continuously monitored, and implementation of new measures was carried out whenever necessary. There was no material impact on the direct operating conditions during 2021. The Nearshore Agile Delivery Model enabled sound growth and allowed customer operations to continue seamlessly and smoothly. It is not expected for new standards, interpretations and amendments to existing standards not yet mandatory and not early adopted, to have a significant impact on the consolidated financial statements. • Amendment to IAS 1, ‘Presentation of financial statements - Classification of liabilities as current or non-current’ (effective for annual periods beginning on or after 1 January 2023). The amendment to this standard is still subject to endorsement by the European Union and introduces a clarification on the classification of liabilities as current or non-current balances depending on the rights that an entity has to defer its payment, at the end of each reporting period. The classification of liabilities is unaffected by the expectations of the entity or events after the reporting date, such as a breach of “covenant”. An additional clarification is made regarding the meaning of the 'settlement' of a liability, which is now defined as the extinguishment of a liability through the transfer: a) of cash or other economic resources, or b) an entity’s own equity instruments. • Amendment to IAS 12, 'Income taxes - Deferred taxes related to assets and liabilities arising from a single transaction' (effective for annual periods beginning on or after 1 January 2023). The amendment to this standard is still subject to endorsement by the European Union and clarifies how entities should recognise deferred tax on certain specific transactions when their initial recognition gives rise to equal amounts of taxable and deductible temporary differences. The subject transactions relate to the recording of: i) right-of-use assets and lease liabilities; and ii) provisions for decommissioning, restoration or similar liabilities with the corresponding amounts recognised as part of the cost of the related asset, when at the date of initial recognition they are not relevant for tax purposes. These temporary differences are not within the scope of the exemption of initial recognition of deferred taxes. The cumulative effect of the initial application of this amendment is recognised as an adjustment to the opening balance of profit or loss for the earliest comparative period presented. • Amendment to IAS 1, 'Presentation of financial statements - Disclosure of accounting policies' (effective for annual periods beginning on or after 1 January 2023). This amendment requires entities to disclose their accounting policies based on the definition of 'material' rather than 'significant'. Information about an accounting policy is considered material if, in its absence, users of financial statements would not be able to understand other financial information included in those financial statements. Immaterial information regarding accounting policies need not be disclosed. IFRS Practice Statement 2 - 'Making Materiality Judgements' was also amended by the IASB to clarify how the concept of 'material' applies to the disclosure of accounting policies. • Amendment to IAS 8, 'Accounting policies, changes in accounting estimates and errors - Disclosure of accounting estimates' (effective for annual periods beginning on or after 1 January 2023). This amendment introduces the definition of accounting estimate and how it is distinguished from changes in accounting policies. Accounting estimates are now defined as monetary amounts subject to measurement uncertainty that are used to achieve the objective(s) of an accounting policy. The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on the Management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4. The successful experience of working remotely imposed by the pandemic was key for the deployment of a new hybrid working model: Novabase’s employees may work remotely 60% of their time. The new policy brings the flexibility that Novabase considers a strategic imperative for attracting and retaining talent. 13
Notes to the Consolidated Financial Statements 2.3. Basis of consolidation (1) Subsidiaries (2) Transactions with non-controlling interests (3) Associates The Group recognises any non-controlling interest in a business combination either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. This option is performed separately for each transaction. In any acquisition to non-controlling interests, the difference between any consideration paid and the carrying amount of the relevant shares acquired is recorded in equity. Gains or losses on disposals to non-controlling interests that do not result in a loss of control are also recorded in Equity. Novabase will continue monitoring the pandemic’s evolution and giving priority to the implementation of all measures considered adequate to minimise the negative effects on the Group's operations, in line with the recommendations of the authorities and on all stakeholders' best interest. Despite the uncertain context regarding the evolution of the pandemic, these results and the robust liquidity position reinforce Novabase's confidence in its roadmap. The Board of Directors considers that the liquidity situation and the capital levels will be sufficient to continue the Group's activity, therefore the going concern principle has been applied to the preparation of these financial statements. In this context, the Board of Directors decided that will propose to the next General Meeting of Shareholders a remuneration of 0.43 €/share (note 43). Finally, itshould be noted that despite the context of the Covid-19 pandemic, there were no material changes that significantlyaffect the risk assessment to which Novabase is exposed to. Likewise, the main sources of uncertainty associated with the most relevant estimates and judgments, used in the preparation of these financial statements, did not undergo significant changes as a result of the incorporation of the new pandemic context, namely regarding the impairment of goodwill, the fair value of financial instruments, impairment of financial assets, recoverability of deferred taxes and provisions. When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured at its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as a financial asset. Non-controlling interests corresponds to the proportion of the fair value of assets, liabilities and contingent liabilities of acquired subsidiaries, which are not directly or indirectly attributable to Novabase. Transactions with non-controlling interests are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group, and the fair value of the acquirer’s previously held equity interest in the acquiree before control is transferred to the Group. Acquisition-related costs are expensed as incurred. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the acquisition cost, the fair value of the acquirer’s previously held equity interest in the acquiree before control is transferred to the Group and the fair value of non-controlling interest, over the net identifiable assets acquired and liabilities assumed is recorded as goodwill. If the acquisition cost, the fair value of the acquirer’s previously held equity interest in the acquiree before control is transferred to the Group and the fair value of non-controlling interest, is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. The consolidated financial statements, with reference to 31 December 2021, include assets, liabilities and results of the Group companies, understood as Novabase and its subsidiaries and associates, which are presented in note 6. Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted by the equity method and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of subsidiaries are changed when necessary to ensure consistency with the policies adopted by the Group. Subsidiaries are all entities (including structured entities) over which the Group has the power to manage the relevant activities, that is, is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. These are de-consolidated from the date that control ceases. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date, regardless of the probability of occurrence. Subsequent changes to the fair value of the contingent consideration do not affect goodwill. 14
Notes to the Consolidated Financial Statements 2.4. Segment reporting 2.5. Foreign currency translation (1) Functional and presentation currency (2) Transactions and balances Euro foreign exchange reference rates Rate on Average rate (x foreign exchange units per 1 Euro) 31.12.21 31.12.20 2021 2020 • Angolan Kwanza (AOA) 638.8172 820.7955 742.9051 636.3932 • Mozambican Metical (MZN) 73.0074 92.8056 72.6746 73.9044 • Turkish Lira (TRY) 15.2335 9.1131 11.0266 9.5343 • US Dollar (USD) 1.1326 1.2271 1.1877 1.1397 • British Pound (GBP) 0.8403 0.8990 0.8623 0.8860 (3) Group companies General information on how Novabase identified its reportable operating segments, including the organisational basis, activities developed by each segment, as well as the types of products and services from which each operating segment derives its revenues are presented in note 5. Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in thousands of Euros (EUR thousand). Euro is the Company’s functional and presentation currency. Translation differences on non-monetary financial assets such as equities held at fair value through profit or loss are recognised in results for the period in the consolidated statement of profit and loss. Translation differences on monetary items are included in other comprehensive income in the consolidated statement of comprehensive income. (ii) income and expenses in results are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and An operating segment is a component or a set of components of the Group that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the Management and for which discrete financial information is available. The results and financial position of all the Group's entities that have a functional currency different from the presentation currency that is not the currency of a hyperinflationary economy, are translated into the presentation currency as follows: The subsidiaries included in consolidation with a functional currency different from the Group's presentation currency are those operating in Angola, in Mozambique, in Turkey and in the United Kingdom, as shown in the table of note 6. (i) assets and liabilities at the reporting date are translated at the closing exchange rate in force at the reporting date; Except for AOA and MZN, all exchange rates used are the official EUR exchange rate at 31.12.21 as published on 'Banco de Portugal' website. Regarding the AOA and the MZN exchange rates, it was used the most appropriate exchange rate as if the transactions were settled at the reporting date, according to IAS 21.26. For information on the most relevant changes observed after the reporting date in the exchange rates to which the Group is most exposed to, see note 3 a). Novabase monitors the performance of its operations according to the main guidelines of the strategic plan for the 2019-2023 horizon, disclosed to the market on July 2019, based on which it identified the following reportable operating segments: Next-Gen, the betting segment of Novabase, who has the ambition to become a “Next-Gen IT Services Company”, and Value Portfolio, segment aimed at generating the necessary funds to support the Next-Gen growth and transformation. Novabase did not aggregate operating segments. The Group’s share of its associates post-acquisition profit or losses is recognised in the statement of profit and loss, and its share of post- acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of associates are changed when necessary to ensure consistency with the policies adopted by the Group. The main exchange rates applied on the reporting date are those listed below: Operating segments are reported consistently with the internal reporting provided to the Management. (iii) all resulting exchange differences are recognised in the statement of comprehensive income. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. 15
Notes to the Consolidated Financial Statements 2.6. Property, plant and equipment Property, plant and equipment are essentially composed of buildings and other constructions, basic and transport equipment. Property, plant and equipment are stated at acquisition cost, net of accumulated depreciation. The acquisition cost is considered to be the costs directly attributable to the acquisition of the assets (sum of the respective purchase price with the expenses incurred directly or indirectly to put it in its state of use). (iv) all items of the income statement are restated by applying the change in the general price index from the dates when the items of income and expenses were initially recorded in the financial statements. When a foreign entity is sold or liquidated, the accumulated exchange differences are recognised in profit or loss as part of the gain or loss on the sale. In the partial sale of a subsidiary without loss of control, the corresponding portion of the accumulated exchange differences is reclassified to non-controlling interests, within equity. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of profit and loss during the financial period in which they are incurred. (ii) assets and liabilities linked by agreement to changes in prices are adjusted in accordance with the agreement in order to ascertain the amount outstanding at the end of the reporting period; The Group assesses annually whether any of the economies in emerging countries where it has subsidiaries meet the main criteria to be considered hyperinflationary in accordance with IAS 29 - ‘Financial reporting in hyperinflationary economies’. As a result of this assessment, Angola has qualified as a hyperinflationary economy in 2017 and 2018, but in 2019 no longer fulfilled the criteria, so the Group ceased the application of IAS 29 to the subsidiary NBASIT-Sist. de Inf. e Telecomunic., S.A. accounts for the year ended 31 December 2019. In 2021, Novabase reassessed the economies where it operates in accordance with this standard, with special attention to the Angolan economy, which registered an annual inflation rate of 27% and an accumulated inflation for the last three years of approximately 86%, concluding that none of those economies met the necessary conditions to be considered as a hyperinflationary economy. Loans between Group companies and related foreign exchange gains or losses are eliminated on consolidation. However, when the loan is between Group companies that have different functional currencies, the foreign exchange gain or loss cannot be eliminated in full and is recognised in the consolidated result, unless the settlement of the loan is not planned nor likely to occur in the foreseeable future and, therefore, is in substance an extension of the net investment in a foreign operation. (iii) all other assets and liabilities are non-monetary and are restated (with the exception of some non-monetary items that are carried at amounts current at the end of the reporting period, such as net realisable value and market value); When an economy ceases to be hyperinflationary and an entity interrupts the preparation and presentation of financial statements prepared in accordance with IAS 29 - 'Financial reporting in hyperinflationary economies', it must address the amounts expressed in the current unit of measurement at the end of the previous reporting period as the basis for the carrying amounts in its subsequent financial statements. In 2020, the Group performed an assessment of the perspective of receiving loans and balances granted to its foreign subsidiaries, having re- designated part of the balances receivable from the Angolan subsidiary (those whose settlement is not expected in the “foreseeable future”) as part of the net investment, due to the economic uncertainties resulting from the pandemic, and also considering the current political and economic context of this geography and the fact that the subsidiary sold all investments in Treasury Bonds that it held in its portfolio as at 31 December 2019 to settle certain balances. For Novabase Group, property, plant and equipment comprise own assets and right-of-use assets (see also note 2.21.). In this case, exchange rate differences - whether they arise from the translation of net investments in foreign operations (that is, from the conversion of monetary items at rates different from those at which they were converted in the initial recognition or in previous financial statements) or the early repayment of monetary items that are part of the net investment in a foreign entity - are recognised in other comprehensive income, under the heading 'Exchange differences on foreign operations', remaining in reserves until the sale or liquidation of such foreign entities. As soon as the criteria for continuing to classify the amount receivable (in part or in whole) as a net investment in foreign entities are no longer verified, the future foreign exchange gains and losses related to it are recorded in profit or loss, but the historical gains and losses recorded up to that moment are not reclassified to profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. If the entity operates in a hyperinflationary economy, before translating from the functional currency to the presentation currency as described above, the amounts relating to the assets, liabilities, equity, income and expenses of that entity must first be monetarily restated, based on a general price index that reflects changes in the general purchasing power of the currency of the country in which transactions are generated, as follows: (i) monetary items are not restated because they are already expressed in terms of the monetary unit current at the end of the reporting period; The gain or loss on the net monetary position is included in profit or loss and separately disclosed. 16
Notes to the Consolidated Financial Statements No. of years • Buildings and other constructions 3 to 50 • Basic equipment 3 to 4 • Transport equipment 4 • Tools and utensils 4 • Furniture, fittings and equipment 3 to 10 2.7. Intangible assets (1) Goodwill (2) Internally generated intangible assets (3) Industrial property and other rights (4) Work in progress 2.8. Financial assets and liabilities The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and are included in profit or loss. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Goodwill (that has an undetermined useful life), is carried at cost less accumulated impairment losses, being tested annually for impairment, in the second half of the year. Impairment losses on goodwill are recognised whenever its carrying amount exceeds its recoverable amount, and are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Fair value is determined using the quoted price in an active market, or based in valuation methods and techniques (when there is no active market). A market is regarded as 'active', and therefore liquid, if transactions for the asset take place on a regular basis. Industrial property and other rights are recorded at acquisition cost. These assets have a finite useful life and are recognised at cost less accumulated amortisation for a period between 3 to 10 years. Amortisation is calculated using the straight-line method to allocate the cost of the industrial property and other rights over their estimated useful lives. Intangible assets in progress refer to, mainly, the ongoing internal development of software products. Trade receivables, at the initial recognition, are recognised at their transaction price, as defined in IFRS 15. At the initial recognition, except for trade accounts receivable, financial assets are recognised at fair value plus directly attributable transaction costs, except for assets at fair value through profit or loss in which transaction costs are recognised immediately in profit or loss. The subsequent measurement depends on the category of the investment, Level 1, Level 2 or Level 3, which are described in note 40. Financial assets are recognised in the consolidated statement of financial position on the trade or contracting date. The cash generating units identified by Novabase represent the way the entity monitors its operations and makes its decisions on the continuation or disposal of its assets and operations: Next-Gen and Neotalent. There is no unallocated goodwill to those cash generating units. Note 8 gives information on the goodwill's allocation to the CGUs. For the purpose of performing impairment tests, goodwill is allocated to cash generating units (CGUs). Cash generating units represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and cannot be larger than an operating segment before aggregation. Amortisation is calculated using the straight-line method, for periods between 3 to 10 years. Impairment of internally generated assets in progress is tested at each reporting date. These assets are recorded at its production or acquisition cost, which include the acquisition cost of the assets plus employee costs directly involved in the production or outsourcing costs incurred for the same purpose, as well as an appropriate portion of relevant overheads. Depreciation is calculated using the straight-line method, over their estimated useful lives, as follows: Research expenses in the search for new technical or scientific knowledge are recognised in the statement of profit and loss as and when incurred. Development expenses are accounted as intangible fixed assets when: i) it is technically feasible to complete the asset or process; ii) the Group has the intention and capacity to complete its development; iii) market viability is assured and iv) its cost can be reliably measured. Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'Intangible assets'. Goodwill on acquisitions of associates is included in 'Investments in associates'. 17
Notes to the Consolidated Financial Statements 2.9. Impairment of non-financial assets ln accordance with IFRS 9, financial liabilities are subsequently measured at amortised cost, except for: • Financial liabilities that arise when a transfer of a financial asset does not meet the conditions for derecognition or when the continued involvement approach is applied; The Group's financial assets are mostly classified in the category of 'Financial assets measured at amortised cost' and include trade and other receivables, other assets, accrued income and cash and cash equivalents. These items are included in the statement of financial position in current assets, except for maturities greater than 12 months after the end of the reporting period that are classified as non-current assets. Financial liabilities are classified according to the contractual substance regardless of their legal form. They are derecognised only when they are extinguished, that is, when the obligation is settled, cancelled or expired. For the purposes of assessing impairment, assets are allocated by cash generating units, given that it is at this level that management monitors its return on investment. • Commitments to grant a loan at a lower interest rate than the market; The value in use is the present value of the estimated future cash flows from the continuous use of the asset and from its sale at the end of its useful life. In determining the value in use, estimated future cash flows are discounted using a pre-tax rate that reflects current market assessments of the time value of money and the specific risks of the asset in question. Management determines the classification of its investments at the date of acquisition and reassesses this classification at each reporting date. Regarding changes in the fair value measurement from period to period, the Group considers whether the inputs of the models initially used in its measurement became, for instance, observable and whether they have adherence to the financial instrument under analysis. If the inputs are observable and representative, Novabase changes the category from Level 3 to Level 2. • The contingent consideration recognised in a business combination to which IFRS 3 applies, which shall be subsequently measured at fair value, with changes recognised in profit or loss. Are those financial assets that are part of a business model whose objective is achieved through the collection of contractual cashflows and the sale of financial assets, these contractual cashflows being solely payments of principal and interest. The Group has also financial assets classified at fair value through profit or loss, such as derivative financial instruments and certain interests in companies mainly held through its Venture Capital Funds, NB Capital Inovação e Internacionalização and NB Capital +Inovação. In this category, fair value is calculated using the method of discounted cash flows, except in cases where fair value is observable in the market, with the changes in fair value recognised in profit or loss in the period in which they occur. (i) Financial assets measured at amortised cost • Financial guarantee contracts; • Financial liabilities at fair value through profit or loss. These liabilities, including derivatives that are liabilities, should subsequently be measured at fair value; Novabase classifies its financial assets into the following categories: (i) financial assets measured at amortised cost, (ii) financial assets at fair value through other comprehensive income, and iii) financial assets at fair value through profit or loss. lts classification depends on the entity's business model to manage the financial assets (business model test) and the contractual characteristics in terms of the cash flows of the financial asset (SPPI test). This category includes derivative financial instruments and equity instruments that the Group has not classified in category (ii). This category also includes all financial instruments whose contractual cashflows are not exclusively capital and interest. (iii) Financial assets at fair value through profit or loss Assets that have an indefinite useful life are not subject to amortisation and depreciation and are tested annually for impairment. Assets that are subject to amortisation and depreciation are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Financial assets are derecognised when: (i) the contractual rights of the Group to receive their cash flows expire; (ii) the Group has transferred substantially all the risks and rewards of the ownership; or (iii) despite retaining a portion, but not substantially all the risks and rewards of the ownership, the Group has transferred control over the assets. Are those financial assets that are included in a business model whose purpose is to hold financial assets in order to collect the contractual cashflows, and these contractual cashflows represent solely payments of principal and interest. The Group's financial liabilities include borrowings, trade and other payables, derivative financial instruments and other liabilities. They are classified in the statement of financial position as non-current liabilities if the remaining maturity is greater than 12 months and as current liabilities if their maturity is less than 12 months. (ii) Financial assets at fair value through other comprehensive income 18
Notes to the Consolidated Financial Statements 2.10. Impairment of financial assets Regarding debt securities andbankbalances, impairments are calculatedby assigning i) a Probability ofDefault (PD) that derives from the rating of the issuer or counterparty, and ii) a Loss Given Default (LGD) that results from market parameters. Since the PD available on the market corresponds to the expected losses in the 12-month period, Novabase applied a PD adjusted to the maturity of the instrument on a 'pro rata' basis to the value of debt securities and bank balances. In 2021, the LGD used corresponded to 60% for Portugal (2020: 60% for Portugal and 60% for Angola). With regard to trade and other receivables, Novabase measures loss allowances at an amount equal to lifetime ECLs. With receivables being recorded by the various group companies under IFRS 15, the Group applies the simplified approach to measure the expected credit losses, that means, it uses an allowance matrix per company, which is based on the past experience of actual losses over a period considered statistically relevant and representative of the specific characteristics of the underlying credit risk. These allowance matrices are reviewed whenever there is a significant change in the company’s credit risk, changes in the type of customers or significant changes in the business or macroeconomic environment. When determining whether the credit risk of a financial asset has increased significantly, the Group considers all reasonable and supportable information that is relevant and available without undue cost or effort, which includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and forward-looking information. Novabase defines a financial asset relating to trade and other receivables to be in default when is more than 360 days past due. Regarding the statement of profit and loss, the Group has applied judgement in determining an appropriate presentation of impairment losses under IFRS 9, considering the specific requirements to present the effect of certain events or circumstances as a single amount in the statement of profit and loss, ensuring that the chosen presentation is relevant to the users’ understanding of its financial statements. Consequently, the Group has disaggregated the impairment loss amount into: The impairment losses related to investment in debt securities and bank balances are recorded in profit or loss, under 'Finance costs' heading. If the Group's exposure declines or if the annual reassessment of the PD and LGD used to calculate the impairment leads to a reduction of the ECLs, the carrying amount of these assets is increased, against 'Finance income' in the statement of profit and loss. ECLs are a probability-weighted estimate of credit losses and are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive), discounted at the effective interest rate of the financial asset. Theobjective of this impairment policy is to recognise expected credit losses over the respective duration of financialinstruments that have undergone significant increases in credit risk since initial recognition, assessed on an individual or collective basis, considering all reasonable and sustainable information, including available prospective information. lf, at the reporting date, the credit risk associated with a financial instrument has not increased significantly since the initial recognition, the Group measures loss allowances relating to that financial instrument by an amount equivalent to the expected credit losses within a period of 12 months. The Group considers a debt security or a short term bank deposit to have a low credit risk when its credit risk rating is equivalent to CCC or higher (weighted-average rating per various agencies, namely, Standard & Poor's and Moody's). At each reporting date, Novabase assesses whether financial assets carried at amortised cost are credit-impaired and recognise loss allowances for ECLs on: (1) Trade, debtors and other receivables, and (2) Debt securities and bank balances. For these assets the Group measures loss allowances at 12-month ECLs (or a shorter period if the expected life of the instrument is less than 12 months) provided that the credit risk has not increased significantly since its initial recognition. The impairment losses are recordedin profit or loss under 'Net impairment losses on trade and other receivables'. When an amount receivable from customers and debtors is considered unrecoverable, it is written off using the same heading in the income statement. The Group expects no significant recovery from the amounts written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. Subsequent recoveries, if any, are recorded in profit or loss under 'Net impairment losses on trade and other receivables'. (2) Debt securities and bank balances • Impairment related to debt securities and bank balances, which is included in 'Finance costs' or 'Finance income' (in the case of reversals) due to materiality considerations. (1) Trade, debtors and other receivables Despite the 90 days past due presumption under IFRS 9, the Group considers 360 days past due to be a more appropriate default definition, because it's in line with the entity's current credit risk management policies, as it corresponds to the period in which the sending of credit for litigation is triggered, and since its experience of actual losses before this maturity is reduced, apart from the fact that there are no sales / contracts with significant financing components in accordance with the principles of IFRS 15. It should be noted that the Group, based on balances and specific past events and considering counterparties historical information, its risk profile and other observable data, assesses whether there are objective indicators of impairment, and records impairment losses accordingly. Furthermore, the Group assessed the impact of considering 360 days of default over 90 days and concluded that the 'Expected Credit Losses' would not change significantly. • Impairment related to trade and other receivables, which is presented separately in the statement of profit and loss under the heading 'Net impairment losses on trade and other receivables'; and In terms of the presentation in the statement of financial position, loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. 19
Notes to the Consolidated Financial Statements 2.11. Trade and other receivables 2.12. Cash and cash equivalents 2.13. Share capital 2.14. Borrowings 2.15. Current and deferred tax Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Incremental costs directly attributable to the issue of new shares or stock options of the Company and its subsidiaries are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or stock options, or for the acquisition of a business, are included in the cost of acquisition as part of the purchase consideration. For Novabase Group, borrowings comprise bank borrowings and lease liabilities (see also notes 2.21.). Trade and other receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less impairment losses. Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Deferred tax is determined using tax rates that are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term highly liquid investments with original maturities of three months or less, or with contractual terms of immediate demobilization and which are subject to an insignificant risk of change in value. Ordinary shares are classified as equity. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be used. The tax expense for the year comprises current and deferred tax. Tax is recognised in the statement of profit and loss, except to the extent that it relates to items recognised directly in equity. The current income tax charge is calculated on the basis of profit before income tax, adjusted according to the tax laws enacted at the reporting date. Deferred tax is recognised, using the liability method at the reporting date, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax is not accounted for if it arises from the recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The 'Treasury shares' heading presents treasury shares at their par value (nominal value) and the premium/discount between the acquisition cost and the par value is shown as an adjustment to other reserves or retained earnings. For the purpose of presentation in the statement of cash flows, this heading also includes bank overdrafts. Bank overdrafts are shown within 'Borrowings' in current liabilities in the statement of financial position. Interest costs on borrowings are included in the statement of profit and loss under 'Finance costs' heading. Where the Company or any group companies acquire treasury shares of Parent company, they are recorded at cost and the consideration paid is deducted from the equity attributable to owners of the parent, and presented according to the below paragraph, until the shares are cancelled, reissued or sold. When such shares are subsequently sold or reissued, any consideration received is included in equity attributable to owners of the parent. 20
Notes to the Consolidated Financial Statements 2.16. Employee benefits Bonus Liabilities with holiday, holiday allowance and Christmas allowance Labour Compensation Fund (FCT) and Labour Compensation Guarantee Fund (FGCT) Stock options 2.17. Provisions Legal claims in progress Provisions are reviewed at each reporting date and adjusted to reflect the best estimate at that date. Whenever possible, the time effect is taken into account in the annual adjustment of provisions. The Group does not discount the provisions for which there is no predictability of the moment of reversal. The Group recognises a provision for onerous contracts on the date on which it is established that the costs to be incurred to satisfy the obligation assumed exceed the future economic benefits. This analysis is made on an individual basis. Provisions for legal claims in progress are recorded for the amounts estimated to represent future outflows in accordance with the risk assessments made by Management, supported by its legal experts and advisers (internal and/or external) opinions, based on success rates. The fair value of the services received is recorded as a cost in the statement of profit and loss, against an increase in equity (equity settled portion) or liability (cash settled portion), over the period of acquisition of rights by the employee. The total amount to be recorded as a cost is determined based on the fair value of the options granted, which is estimated only using market conditions. Acquisition conditions that are not market conditions are considered to estimate the number of options that at the end of the acquisition period will have acquired rights. At each reporting date, Novabase reviews the estimate of the number of options it expects to become exercisable and recognises the impact of the revision of the original estimate in profit or loss. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any of the items included in the same class of obligations may be small. Note 23 gives information about the type of provisions. In accordance with Portuguese legislation, employees have, annually, the right to receive two months of salary, for a holiday period and a holiday allowance, right earned in the previous year to its settlement. The employees also have, annually, the right to a Christmas allowance, which is earned over the year and paid each December. These obligations are recorded in the respective period in which the right is earned, regardless its payment date. Personnel expenses are recognised when the service is rendered by employees regardless of their date of payment. Some specificities are disclosed below: The Group estimates a liability and an expense for bonuses, based on the individual performance of the employees and the financial performance of the Company. Onerous contracts According to Law No. 70/2013 and Order No. 294-A/2013, companies that hire a new employee are required to deduct a percentage of the respective salary for the Labour Compensation Fund (FCT) – 0.925% – and for the Labour Compensation Guarantee Fund (FGCT) – 0.075%, in order to ensure, in the future, the partial payment of the compensation in the event of dismissal. Considering the characteristics of each Fund, Novabase considers the following: At the General Meeting of Shareholders held on 26 September 2019, it was approved the implementation of a medium or long-term plan to grant a variable remuneration to the members of the Board of Directors of the Company and to employees of Novabase, based on the performance of the Novabase's shares. According to this resolution, Novabase may approve the attribution of stock options plans, equity settled and cash settled, as a form of remuneration able to promote the alignment of the Board Members and employees' interests with the Company's interests and to stimulate and incentivize their creativity and productivity. Provisions are recognised at the reporting date when: i) the Group has a present legal or constructive obligation as a result of past events; ii) it is probable that an outflow of resources will be required to settle the obligation and; iii) the amount has been reliably estimated. Provisions for restructuring include all liabilities to be paid, namely employee termination payments. These provisions do not include any estimated future operating losses or estimated profits from the disposal of assets. • the monthly deliveries to FGCT, made by Novabase, are recognised as an expense in the period to which they relate; For legal proceedings where the probability of having an unfavourable outcome is less than probable, the Group does not recognise provisions but disclosure is made in note 41, unless the possibility of an outflow of resources is remote, in which case it is not disclosed. For each legal proceeding a brief description of the process is given, as well as an estimate of its financial effect, and when practicable an indication of the uncertainties that relate to the moment of any outflow. If any repayment is possible, this information is also included in the 'Contingencies' note. • the monthly deliveries to FCT, made by Novabase, are recognised as a financial asset, measured at fair value with changes recognised in the income statement. 21
Notes to the Consolidated Financial Statements 2.18. Trade and other payables 2.19. Revenue recognition Revenue from time and materials consulting projects is recognised at the date the services are rendered, given that is the time when the benefits of the performance obligation are transferred to the customer (the customer simultaneously receives and consumes the benefits of the goods and services provided). In cases where the customer does not receive or consume goods and services over time, Novabase does not recognise any revenue, recognising only when the performance obligation is satisfied. • recognition of revenue when or as the entity meets a performance obligation. • allocation of transaction price to performance obligations; and ln determining and allocating the transaction price of each performance obligation, the Group uses the stand-alone prices of the promised products and services, at the date of conclusion of the contract with the customer. (b) Interest income (a) Services rendered • determination of the price of the transaction; (c) Dividends Dividends are recognised when the shareholders' rights to receive such amounts are appropriately established and communicated. Revenues from the services rendered in 'turn key' projects are recognised, in each year, according to the performance obligation to which they comply, depending on it percentage of completion. That is, for each performance obligation, the Group recognises revenue over time by measuring progress towards full compliance with such performance obligation. The assessment of the percentage of completion of each performance obligation is reviewed periodically considering the most recent information available from project managers and subject to further review by the respective controllers. The amount of the transaction whose receipt is conditional to the completion of the services rendered is recognised as a contract asset (included in accrued income) rather than a receivable. Novabase's revenues derive from: (a) services rendered, (b) interest income and (c) dividends. The recognition of revenue is detailed below, by type of revenue: Trade and other payables balances are obligations to pay goods or services that have been acquired in the ordinary course of the business. They are initially recognised at fair value and subsequently at amortised cost accordingly with the effective interest rate method. • identification of the contract with the customer; Thus, at the beginning of each contract, the Group evaluates the promised goods or services and identifies, as a performance obligation, every promise of transfer to the customer of any distinct good or service (alone or together). These promises in customer contracts may be explicit or implicit, since such promises create a valid expectation on the customer that the entity will transfer a good or service to the customer, based on the entity's published policies, specific statements, or customary business practices. Revenue recognition occurs at the time of the fulfilment of each performance obligation. Revenue from outsourcing or maintenance projects is recognised as a single performance obligation on a straight-line basis over the contract period. Interest received is recognised on the accrual basis, considering the outstanding balance and the effective rate during the period up to maturity. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount (estimated future cash flows, discounted at the original effective rate of the instrument), and records the discount as a financial gain. Revenue from services rendered is recognised in the statement of profit and loss when all the following conditions have been satisfied: i) the amount of revenue can be reliably measured; ii) it is probable that future economic benefits associated with the transaction will flow to the Group; iii) the stage of completion of the performance obligation at the reporting date can be reliably measured; and (iv) the costs incurred for the transaction and the costs to complete the transaction can be reliably measured. For Novabase Group, the revenue from services rendered relates to 'time and materials' projects, 'turn key' projects and outsourcing or maintenance projects. Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is shown net of Value Added Tax (V.A.T.), rebates and discounts and after eliminating intra-group transactions. According to this model, the recognition of revenue depends on whether performance obligations are satisfied over time ("over time") or whether, on the contrary, control over goods or services is transferred at a given time ("point in time"), being measured by the consideration that the entity expects to be entitled to receive in return for the delivery of these goods or services. Whenever the performance obligations at the reporting date have an estimated initial duration of 1 year or less, the Group does not disclose additional information about them, as permitted by IFRS 15. 7KH UHFRJQLWLRQ RI WKH *URXSV UHYHQXH LV EDVHG RQ WKH ILYHúVWHS PRGHO HVWDEOLVKHG E\ ,)56 • identification of performance obligations; 22
Notes to the Consolidated Financial Statements 2.20. Grants 2.21. Leases Novabase applies the short-term lease recognition exemption to its short-term leases of facilities that have a lease term of 12 months or less. The Group recognises the lease payments associated with these leases as an expense under the straight-line method over the lease term. The Group has no low-value assets leases. • Right-of-use assets The Group recognises a right-of-use asset at the lease commencement date (i.e., the date the underlying asset is available for use). The right- of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. Operating grants are aimed at covering the costs, incurred and recorded, with training initiatives and research projects for new technological or scientific knowledge, and are recognised in the statement of profit and loss as the related expenses are incurred, regardless of when the grant is received. In addition, the carrying amount of lease liabilities is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, the revised lease payments are discounted using an unchanged discount rate, and a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. If there is a lease modification that do not qualifies to be accounted for as a separate lease, Novabase remeasures the liability (and adjusts the corresponding right-of-use assets) by discounting the revised lease payments, using a revised discount rate at the effective date of the modification. The Group's leases refer mainly to the lease agreement of the Company's headquarters and to lease agreements of other facilities where Novabase operates, with initial terms between 1 and 5 years, which may have renewal options. Lease payments are updated annually to reflect inflation and/or market values. Non-refundable grants to finance development projects are recorded as a liability at the reporting date, in 'Other non-current liabilities' heading, if the remaining maturity is greater than 12 months or in 'Deferred income and other current liabilities' if the maturity is less than 12 months, and are recognised in profit or loss of each period by the useful life of the financed assets. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. • Short-term leases and leases of low-value assets • Lease liabilities Government grants are recognised at fair value, when there is a high likelihood of the grant being received and the Group fulfils all the requirements to receive it. A contract is, or contains, a lease if the contract conveys a right to use an identified asset for a period of time in exchange for consideration. Under IFRS 16, the Group recognises 'right-of-use assets' and 'lease liabilities' for most leases - meaning, those leases are recorded in the statement of financial position - except for 'Short-term leases and leases of low-value assets', where Novabase applies the exemption provided for in the standard. Atthe commencement date of the lease, the Group recognises lease liabilities measured at the present value oflease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase or renewal options reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. In determining the present value of the lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. Subsequently, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. 23
Notes to the Consolidated Financial Statements 2.22. Derivative financial instruments (1) Hedging derivatives (2) Trading derivatives 2.23. Dividend distribution 2.24. Discontinued operations • • • 2.25. Comparatives Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which dividends are approved by the Company's shareholders. Novabase uses derivative financialinstruments to hedge foreign exchange risks to whichis exposed. The financialinstruments used to manage this risk are the forward foreign exchange contracts. Novabase does not take speculative positions. The treasury department is responsible for managing derivative financial instruments, under the guidance of the Executive Committee. Derivative financial instruments are measured initial and subsequently by its fair value. The method of recognising the resulting gain or loss depends on the nature and objective of the item being hedged. Where the hedging relationship fails to comply with the qualifying criteria to be designated as hedge accounting, the fair value changes of the hedging instrument are recognised in profit or loss. The consolidated financial statements for the year ended 31 December 2021, are comparable in all material aspects with 2020, and no changes in accounting policies have occurred when compared to those used for preparation of the financial statements of the previous year, presented for comparative effects. Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation, the comparatives of the statement of profit and loss and of the statement of other comprehensive income are re-presented as if the operation had been discontinued from the start of the comparative year. Regarding derivative financial instruments that, although complying with the Group’s financial risk management policies, do not comply with all the requirements of IAS 39 to qualify for hedge accounting, the respective changes in fair value are included in the consolidated statement of profit and loss, under financial results, in the period in which they occur. Pursuant to IFRS 9, Novabase Group is applying the hedge accounting requirements in IAS 39. Thus, the possibility of qualifying a derivative financial instrument as a hedging instrument meets the criteria of IAS 39, namely, in what respect to the documentation required and effectiveness assessment, which is performed at the inception of the hedge and on an ongoing basis. A discontinued operation is a component of the Group's business that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Group, and: is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or represents either a separate major line of business or a geographical area of operations; For hedging relationships designated as a net investment in a foreign operation hedge and that are determined to be an effective hedge, the gain or loss in the fair value of the hedging instrument is recognised in other comprehensive income. The ineffective portion is recognised immediately as a financial result of the period. is a subsidiary acquired exclusively with a view to resale and the disposal involves loss of control. In terms of the statement of profit and loss, results are recognised in 'Profit from discontinued operations' and, in terms of the statement of financial position, under the headings 'Assets from discontinued operations' and 'Liabilities from discontinued operations'. The cumulative foreign exchange gains and losses relating to a net investment and its respective hedging operation, both registered in other comprehensive income, are included in the consolidated statement of profit and loss when the foreign operation is disposed of, liquidated or discontinued, as an integral part of the gain or loss on sale. 24
Notes to the Consolidated Financial Statements 3. Financial risk management policy a) Foreign exchange risk At 31 December 2020 Euro Dollar Kwanza Pound Other Total Assets Financial assets at fair value through profit or loss 12,601 - - - - 12,601 Other non-current assets 2,016 9 - - - 2,025 Trade and other receivables 34,995 1,510 124 (43) 24 36,610 Accrued income 3,555 - 1 - - 3,556 Derivative financial instruments 64 - - - - 64 Cash and cash equivalents 70,843 214 503 92 277 71,929 124,074 1,733 628 49 301 126,785 Liabilities Borrowings 30,925 - - - - 30,925 Other non-current liabilities 3,705 - - - - 3,705 Trade and other payables 39,802 141 142 186 42 40,313 Derivative financial instruments 9 - - - - 9 Deferred income and other current liabilities 16,148 - - - - 16,148 90,589 141 142 186 42 91,100 The finance department is responsible for monitoring the evolution of the exchange rate of the currencies mentioned above, in order to reduce the impact of their fluctuations in consolidated results. The Group uses derivative financial instruments to hedge certain risk exposures (see note 16). These financial instruments do not comply with hedge accounting requirements therefore being classified as trading derivatives, with changes in fair value recognised in profit or loss. The Group’s exposure to foreign currency exchange rate risk as at 31 December, based on the amounts of the Consolidated Statement of Financial Position of the Group’s continued operations financial assets and liabilities, is as follows: Referring to the rates disclosed in note 2.5. (2) Transactions and balances, the most significant change observed after the reporting date was in the EUR/AOA exchange rate. From the reporting date until 31 March, the Kwanza appreciated 27.57% against the Euro, taking this currency to levels similar to October 2019. The EUR/USD exchange rate, on the other hand, had its second lowest value since April 2020, in what appears to be a reflection of the difference in the pace of changes in monetary policy, with the U.S. Federal Reserve having a less accommodative behaviour than the European Central Bank, in the face of inflation, in the withdrawal of monetary stimulus and in the plans to raise interest rates, which has favoured the appreciation of the U.S. Dollar, which has appreciated by 2.03% against the Euro, since the reporting date and until 31 March. Finally, it should be noted that the EUR/GBP exchange rate showed an almost null variation, with the British Pound appreciating against the Euro by only 0.67%, from the reporting date to 31 March, which confirms the trend towards appreciation of this currency against the Euro despite the low pace of this evolution. At the end of 2021, the uncertainty regarding the pandemic decreased, with the latest data indicating that the infection was under control in Europe and several countries were easing restrictions. However, it brought other uncertainties to the financial markets, with inflation in the Eurozone accelerating significantly in the last months of the year, mainly due to the soaring energy prices and problems in the supply chains, and more geopolitical risks on the horizon, with the resulting uncertainties. The Group is exposed to foreign exchange risk, mainly arising from U.S. Dollar (USD) exposure, since some subsidiaries perform transactions in this currency, but also arising from Kwanza (AOA) and British Pound (GBP) exposures. The Group’s activities expose it to several financial risks, namely, Foreign exchange risk, Interest rate risk (cash flows and fair value), Credit Risk, Liquidity risk and Capital management risk. Despite the uncertain context, Novabase believes that its current financial risk management policies remain adequate to Novabase's profile, and their reformulation was not necessary. However, due to the context of great uncertainty, Novabase continues to monitor risks on an ongoing basis, seeking to anticipate and manage any impacts not currently contemplated. Historically, the British economy registers higher inflation rates than the Eurozone, also because their labour market is substantially different. The high pressure in wages due to the shortage of workers in the UK is noticeable, which may be linked to the Brexit phenomenon. Despite this, Novabase does not expect to see its foreign exchange risk significantly worsened as a result of the abovementioned uncertainties. On the one hand, the Group already had a policy of maintaining a high level of hedge regarding the U.S. Dollar exposure, and on the other hand, the Group's exposure to currencies from emerging markets and to British Pound is currently quite low, as illustrated in the following table. The Group’s risk management policy focuses on the evolution of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. In 2020, volatility in foreign exchange markets increased as result of the Covid-19 pandemic context, with currencies in emerging markets suffering a significant depreciation. At the end of 2021, uncertainty decreased regarding the pandemic, however, the gradual economic recovery from the Covid-19 crisis is again threatened with the increase in geopolitical tensions in Europe, bringing other uncertainties to the financial markets, namely the soaring inflation rates in the Eurozone and in the United Kingdom, which could lead to a greater volatility in the foreign exchange markets according to the purchasing power parity theory. 25
Notes to the Consolidated Financial Statements At 31 December 2021 Euro Dollar Kwanza Pound Other Total Assets Financial assets at fair value through profit or loss 13,615 - - - - 13,615 Other non-current assets 1,988 9 - - - 1,997 Trade and other receivables 34,858 3,311 355 (50) 41 38,515 Accrued income 4,691 - - - - 4,691 Derivative financial instruments 16 - - - - 16 Cash and cash equivalents 67,316 105 744 65 201 68,431 122,484 3,425 1,099 15 242 127,265 Liabilities Borrowings 21,896 - - - 104 22,000 Other non-current liabilities 2,120 - - - - 2,120 Trade and other payables 37,140 157 235 188 55 37,775 Derivative financial instruments 71 - - - - 71 Deferred income and other current liabilities 19,711 - - - - 19,711 80,938 157 235 188 159 81,677 b) Interest rate risk (cash flows and fair value) As at 31 December 2021, approximately 19% of bank borrowings are contracted at fixed rates (2020: 18%). However, as a result of the negative indexes during the year, this amount rises to 100%, bearing in mind that the remaining borrowings are negotiated at variable rates but with minimum index level conditions. All of the borrowings were denominated in Euros. Exposure to interest rate risk is monitored continuously by the finance department. The purpose of managing interest rate risk is to reduce the volatility of interest expenses. The Group’s exposure to interest rates arises from financial assets and liabilities contracted with a fixed and/or floating rate. In the first case, the Group faces a risk of fair value variation in these assets or liabilities, since every change in market rates involves an opportunity cost. In the second case, such change has a direct impact on interest value, consequently causing cash variations. Interest rate risk reflects the possibility of changes in future interest charges in loans obtained as a result of changes in market interest rate levels. (iv) Changes in the fair values of derivative financial instruments and other financial assets and liabilities are estimated by discounting the future cash flows of net present values using appropriate market rates prevailing at the year end. (iii) Changes in market interest rates affect the fair value of derivative financial instruments and other financial assets and liabilities; Under this assumption, with a 10% strengthening or weakening of Euro against all exchange rates, profit before income tax (and inherent capital) would have increased or decreased, respectively, by EUR 404 thousand in 2021 (2020: EUR 220 thousand). There are no direct impacts on equity since the Group does not hold financial instruments with fair value changes recognised in equity nor is applying hedge accounting. Under these assumptions, an increase or decrease of 0.5% in market interest rates, would impact respectively in an increase or decrease of profit before income tax of approximately EUR 276 thousand in 2021, and in an increase or decrease, respectively, of approximately EUR 267 thousand in 2020. There are no impacts on shareholders' equity without being those inherent to the impact on results. In the last months of 2021, the Eurozone inflation accelerated significantly - especially due to the soaring energy prices (gas, oil and electricity) and supply chain problems - reaching a new record of 5.1% in January 2022, according to Eurostat's flash estimate released in February 2022, and with an upward trend. Additionally, the geopolitical turbulence rose significantly. These factors increase the uncertainty regarding a possible increase in key interest rates by European Central Bank (ECB) still in 2022, which in future periods could translate into increased costs in financing. However, no relevant impacts are expected since Novabase's exposure to interest rate risk is currently quite low, because of its cash surplus position. The Group uses a sensitivity analysis technique that measures the estimated changes in profit or loss and shareholders' equity of either an instantaneous 10% strengthening or weakening in Euro against all other currencies, from the rates applicable as at 31 December 2021, for each class of financial instrument with all other variables held constant. This analysis has illustrative purposes only, as in practice market rates rarely change alone. (i) Changes in market interest rates affect the interest income or expense of variable interest financial instruments; The Group uses a sensitivity analysis technique that measures the estimated changes in profit or loss and shareholders' equity of either an instantaneous increase or decrease of 0.5% (50 basis points) in market interest rates, from the rates applicable at 31 December 2021, for each class of financial instrument with all other variables held constant. This analysis has illustrative purposes only, as in practice market rates rarely change alone. The sensitivity analysis is based on the following assumptions: Novabase Group’s financial liabilities are indexed to short-term reference interest rates, revised in periods shorter than one year plus duly negotiated risk spreads. Hence, changes in interest rates can impact the Group’s earnings. (ii) Changes in market interest rates only affect interest income or expense in relation to financial instruments with fixed interest rates if these are recognised at their fair value; 26
Notes to the Consolidated Financial Statements c) Credit Risk 31.12.21 31.12.20 Portugal 28% 40% Europe 57% 45% Middle East 10% 4% Africa 5% 10% Rest of the world - 1% 100% 100% 31.12.21 31.12.20 Telecommunications 73% 69% Financial Services 16% 15% Energy 2% 2% Public Administration 2% 3% Information Technology 1% 3% Other 6% 8% 100% 100% 31.12.21 31.12.20 A1 5,764 7,909 A3 41,777 8,056 Baa1 - 32,815 Baa2 18,145 - Baa3 - 14,199 B2 1,237 5,363 66,923 68,342 Credit risk is managed, simultaneously, on a business units' level, for the amounts of outstanding trade and other receivables, and on a Group basis, for financial instruments. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently well rated parties are accepted. Credit risk management of trade and other receivables is based in credit limits, considering the financial position of the customer and past experience. Note 14 provides information on the exposure to credit risk and ECLs for the Group's trade receivables, by intervals of maturity, as at 31 December 2021 and 31 December 2020. All bank deposits are highly liquid, readily convertible to known amounts of cash. In the challenging context as the one that results from the Covid-19 pandemic and the geopolitical tensions in Europe, there is greater uncertainty in the financial markets, which may lead rating agencies to take adverse rating actions (downgrade or negative outlook) on banks and financial institutions, with the consequent increase of impairments in the future. The general deterioration of the financial situation of counterparties worldwide may also have an impact on the credit quality of Novabase's trade and other receivables. Despite this context, Novabase does not anticipate relevant impacts to this date, continuing to monitor the evolution of this risk. On the one hand, its exposure to credit risk through bank deposits is currently low, given that the Group already had a policy of accepting only banks and financial institutions with credibility in the sector. On the other hand, the Group's main customers and counterparties are from the Telco industry, which emerges as one of the least affected by the pandemic, and/or customers with a solid credit profile. At 31 December 2021, the 60 customers with greater balances of the Group represented approximately 92.6% of the total balance (2020: 92.5%). The ratings attributed by Moody's Investors Services to the financial institutions with whom the Group as higher balances of bank deposits (note 18) at 31 December 2021 and 31 December 2020, are analysed as follows. These balances are shown before impairment losses recognised according to IFRS 9. The distribution by business sector of those customers is shown in the table below: The distribution by geographical market of those customers is shown in the table below: 27
Notes to the Consolidated Financial Statements d) Liquidity risk Euro 31.12.21 31.12.20 Banco BPI (BPI) 10,600 12,800 Bankinter 7,500 9,500 Caixa Geral de Depósitos (CGD) 5,000 5,000 Novo Banco 3,000 4,000 Banco Comercial Português (BCP) 2,600 3,800 ABanca (*) 1,000 1,000 29,700 36,100 (*) e) Capital management risk 31.12.21 31.12.20 Operating Profit 9,146 7,475 Total Equity 75,949 67,096 Return on Capital 12.0 % 11.1 % In the current geopolitical situation and the Covid-19 pandemic, the Group evaluated possible impacts at the level of additional liquidity needs, concluding that the current liquidity situation remains adequate. Novabase expects to satisfy all its treasury needs by using its liquidity reserves and, if necessary, using existing available credit lines. Novabase also believes that compliance with the current covenants associated with borrowings is ensured. (iii) To maintain an optimal capital structure to reduce the cost of capital. Details on the borrowings balances and short-term credit lines negotiated by Novabase Group, by financial institution, are as follows: Since 30 November 2021, Novo Banco Spain was bought and integrated into ABanca. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of financing through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. The Group’s objectives when managing capital, which is a broader concept than ‘equity’ in the consolidated statement of financial position, are: The available short and medium-term credit lines not used amount to approximately EUR 13,500 thousand as at 31 December 2021 (31.12.20: EUR 13,500 thousand), being sufficient to meet any immediate requirement. In addition to these credits, the Group has EUR 68,431 thousand of 'Cash and cash equivalents' as at 31.12.21, as stated in the Consolidated Statement of Financial Position, which combined with the credit facilities amounts to EUR 81,931 thousand of liquidity. Management monitors rolling forecasts of the Group's liquidity reserve (which comprises undrawn committed borrowing facilities and cash and cash equivalents) on the basis of expected cash flows, taking into account the analysis of the remaining contractual maturity of the financial liabilities and the expected date of financial assets inflows. Additionally, the maturity concentration of derivative financial instruments, borrowings and liabilities of the Group are regularly monitored. Notes 16 and 22 present those Novabase's liabilities, respectively, by intervals of contractual residual maturity at 31 December 2021 and 31 December 2020. As stated in the Consolidated Statement of Cash Flows, Novabase Group finances itself through cash flows generated by its operations. Additionally, and as shown in the analysis of the table above, the Group maintains a diversified portfolio of loans and has access to credit amounts that are not fully used but that are at its disposal. These credits can cover all loans that are repayable in 12 months. (ii) To maintain a solid capital structure to support the development of its business; Management monitors the Return on Capital (ROC) ratio, which the Group defines as the 'Operating Profit' divided by 'Total Equity', to measure the Group ability to generate cash flows related to the capital invested in its business. It should also be noted that, considering that in the last couple of years no amounts were released to shareholders in order to maintain the capital structure and support the development of the business during the Covid-19 pandemic, and also taking into account the strength of the balance sheet and the shareholder remuneration commitments assumed in the 2019-2023 Strategic Plan, the Board of Directors decided to propose to the 2022 General Meeting of Shareholders a shareholder remuneration of 43 cents per share (see note 43). The Group has the objective to maintain ROC above the cost of capital (measured by WACC - Weighted Average Cost of Capital), which allows the Group to add value. The Group's WACC is around 7.6% (2020: 8.9%). In 2021, the objective was achieved. (i) To safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders; 28
Notes to the Consolidated Financial Statements 4. Critical accounting estimates and judgements a) Goodwill impairment analysis b) Financial instruments measured at fair value c) Income taxes and deferred taxes d) Revenue recognition e) Impairment losses on financial assets Loss allowances for trade and other receivables are based on risk default assumptions and expected loss rates. The Group uses judgements for these assumptions and selects the inputs to the impairment calculation, based on the group’s past history (such as the ageing of accounts receivable balances and historical write-off experience, customer credit worthiness and changes in customer payment terms), existing market conditions and forward-looking estimates at the end of each reporting period. If the customer's financial conditions deteriorate, actual impairment losses and write-offs might be higher than expected. With regard to loss allowances for debt securities and bank balances, the Group also assesses whether credit risk has increased significantly since initial recognition. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax assets and liabilities in the period in which such determination is made. The fair value of financial instruments not quoted on an active market is determined based on valuation methods and financial theories. The use of valuation methodologies requires using assumptions, with some assumptions requiring the use of estimates (see note 40). Therefore, changes in those assumptions could result in a change in the fair value reported. The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes and the use of deferred tax assets and liabilities. Deferred tax assets and liabilities were determined based on tax legislation currently in effect for the Group's companies, or on legislation already published for future application. Changes in the tax legislation may influence the value of deferred taxes. Revenue recognition in respect of 'turn key' projects requires the use of judgements, starting with the application of the five-step model established in IFRS 15, namely, in the identification of performance obligations and in the allocation of the transaction price to defined performance obligations, based on their relative stand-alone selling prices. In addition, Management carries out analysis and estimates of the current and future developments of consulting projects in place, which may have a different development in the future from the present estimates performed by project managers. The Group tests annually, on the second half of the year, whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7.. The recoverable amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of estimates, to forecast the cash flows of each cash generating unit, and the choice of a discount rate and a perpetual grow rate (see note 8). Eventual changes in the estimates would be reflected under 'Accrued income' and 'Deferred income and other current liabilities' captions in the statement of financial position and under 'Services rendered' in the statement of profit and loss, however, historically there have been no material deviations in the estimates of costs to be incurred in ongoing projects from the year before (which represent approximately 3% in 2021 and 3% in 2020) nor in the outcome of the transaction. The preparation of financial statements requires the use of certain critical accounting estimates by the Management, that affect assets, liabilities, and the disclosure of assets and contingent liabilities at the reporting date in the financial statements, as well as income and expenses during the reporting period, consequently actual results can differ from the estimated ones. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group recognises deferred tax assets related to tax incentives obtained under SIFIDE based on estimates. The final amount of these tax incentives is only known in future years based on the approval by the competent body of the Group's applications to these incentives. The booked amount of tax credits not yet approved reach EUR 2,437 thousand (2020: EUR 862 thousand), their approval is probable. The estimates and judgements considered more relevant in the preparation of these financial statements are presented below. 29
Notes to the Consolidated Financial Statements f) Legal claims provisions g) Bonus h) Leases 5. Segment information Ƚ Next-Gen Ƚ Value Portfolio Operating segments are reported consistently with the internal reporting that is provided to the Management, based on which it evaluates the performance of each segment and allocates the available resources. The Value Portfolio segment comprises the IT Staffing and venture capital activities, developed by Neotalent and Novabase Capital, respectively. The main goal of Value Portfolio is to maximise its operating profitability in order to generate the necessary funds to support the focus on the Next-Gen growth. This segment derives its revenues mainly from time and materials projects. Regarding the venture capital activity, this segment revenues also derives from the valuation and sale of Venture Capital Fund's investees and advisory services in purchase and sale and M&A processes. The Next-Gen segment comprises the assets held in Financial Services and Telecommunications. This segment aims to achieve an accelerated growth through focus on Next-Gen IT (Design & UX, Insights Through Data, Cloud native & scalable, Digital Architecture, API Exposure, AI / Analytics, Test Automation & Engineering, Continuous Delivery, Intelligent Operations) for the Telco and Financial Services industries and Europe and the Middle East geographies. This segment derives its revenues from time and materials consulting projects, turn-key consulting projects and outsourcing and maintenance projects, and may also include a small component of sales. The Group also applies judgement to determine the incremental borrowing rate to apply to each portfolio of leases identified and to measure residual value guarantees, which forms part of lease payments. In this case, according to IFRS 16, the Management considers in the measurement of the lease liabilities the amount that it expects to pay under a residual value guarantee. The Group exercises judgment in measuring and recognising provisions and its exposure to contingent liabilities related to legal proceedings, based on the assessment of its specialists and legal advisers (internal and/or external). This judgment is necessary to determine the probability of the outcome for each lawsuit. Provisions are recognised when the Group expects that the proceedings in progress will result in cash outflows or disclose it in the notes when the probability of having an unfavourable outcome is less than probable - unless the possibility of an outflow of resources is remote, where disclosure is not required. These estimates are subject to changes as new information becomes available. Due to the uncertainties inherent in the evaluation process, real losses may be different from those originally estimated. Novabase's activity is aggregated into two operating segments: The companies considered in each operating segment are presented in note 6. For the purposes of segment reporting, Novabase S.G.P.S., S.A. and Novabase Serviços, S.A. (companies including the Group's top management and shared services, respectively) were considered to be an integral part of the Value Portfolio segment. The Group applies judgement to determine the lease term for some lease contracts that include renewal options, that is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew. The amounts reported in each operating segment result from the aggregation of the subsidiaries defined in each segment perimeter and the elimination of transactions between companies of the same segment. The Group recognises on a monthly basis an estimate for bonus and other variable remunerations, which considers the theoretical amounts agreed with employees, the monitoring of the expected objective's achievement rates and the general situation of the Company's business. The variable remuneration of the elements of the Board of Directors is set by the Remuneration Committee based on the evaluation of the previous year performance. Therefore, the cost estimate for the current exercise booked under 'Trade and other payables' heading, is prepared based on the Management's best estimate to the performance of the current year, where the actual final outcome is only known in the following exercise, after the Remuneration Committee's deliberation. More information about Novabase's remuneration policy and Directors' remuneration during the year can be found in chapter D. Remunerations of the Corporate Governance Report, which forms an integral part of this Annual Financial Report. The Group discloses in 'Contingencies' (note 41) all the legal proceedings in which it considers that there is a possibility of an outflow of resources, although it is not probable, reason why no liabilities are recognised. For such legal proceedings, the Management believes that there is sufficient substance for its defence in court, based on the opinions of its specialists and legal advisors (internal and/or external), and therefore considers that such actions will have a successful outcome. 30
Notes to the Consolidated Financial Statements Value Portfolio Next-Gen Novabase At 31 December 2020 44,256 91,613 135,869 9,888 901 10,789 34,368 90,712 125,080 1,081 6,394 7,475 (762) (926) (1,688) (58) - (58) (115) (1,797) (1,912) 146 3,671 3,817 4,509 - 4,509 (2,687) (1,669) (4,356) 755 2,462 3,217 (24) (48) (72) Value Portfolio Next-Gen Novabase 43,909 104,365 148,274 9,232 254 9,486 34,677 104,111 138,788 2,180 6,966 9,146 290 (161) 129 (66) - (66) 1,096 (1,389) (293) 3,500 5,416 8,916 1,060 - 1,060 (2,190) (1,331) (3,521) 892 950 1,842 Total segment revenues Sales and services rendered - inter-segment Sales and services rendered - external customers Operating Profit Finance results Share of loss of associates (note 33) Income tax expense Profit from continuing operations Profit from discontinued operations (note 39) Other information: Depreciation and amortisation (Provisions) / Provisions reversal Net impairment losses on trade and other receivables At 31 December 2021 Total segment revenues 1 Sales and services rendered - inter-segment Sales and services rendered - external customers Operating Profit Finance results Share of loss of associates (note 33) Income tax expense Profit from continuing operations Profit from discontinued operations (note 39) Other information: Depreciation and amortisation (Provisions) / Provisions reversal Net impairment losses on trade and other receivables (19) (253) (272) Value Portfolio Next-Gen Novabase Total % At 31 December 2020 Sales and services rendered - external customers 34,368 90,712 125,080 100.0% Portugal 20,686 35,376 56,062 44.8% Europe and Middle East 12,315 48,840 61,155 48.9% Rest of the World 1,367 6,496 7,863 6.3% Value Portfolio Next-Gen Novabase Total % At 31 December 2021 Sales and services rendered - external customers 34,677 104,111 138,788 100.0% Portugal 21,114 37,960 59,074 42.6% Europe and Middle East 12,224 59,641 71,865 51.8% Rest of the World 1,339 6,510 7,849 5.7% As part of the control of the strategic plan execution, Management monitors Turnover by geography, based on the location of the client where the project is delivered, being this geographical criterion also used for the disaggregation of revenue in investors presentations. 1 Net of intra-segment revenues (in 2020: EUR 18,589 thousand, of which EUR 7,270 thousand in Value Portfolio and EUR 11,319 thousand in Next-Gen, and in 2021: EUR 13,210 thousand, of which EUR 4,993 thousand in Value Portfolio and EUR 8,217 thousand in Next-Gen). Sales and services rendered by geography in 2020 and 2021 are analysed as follows: Novabase does not disclose information on assets and liabilities for each reportable segment since it does not provide such information to those responsible for operational decision making. Revenues from operating segments, as well as other measures of profit or loss and material items within the consolidated statement of profit or loss, can be analysed as follows: 31
Notes to the Consolidated Financial Statements 6. Companies included in consolidation The companies consolidated by the full method, as at 31 December 2021, were the following: Holding Company Principal place Share capital % Interest held and Subsidiaries of business 31.12.21 31.12.21 31.12.20 Parent company: Novabase S.G.P.S., S.A. Portugal 54,638,426 € - - Next-Gen: Novabase E.A., S.A. Portugal 150,000 € 100.0% 100.0% (ii) Celfocus, S.A. Portugal 101,000 € 100.0% 100.0% Novabase Solutions Middle East FZ-LLC EAU 699,670 € 100.0% 100.0% &HOIRFXV % 7 7 + 7 /LPLWHG ā Turkey 100,000 TRY 100.0% 100.0% Celfocus LTD UK 15,000 GBP 100.0% 100.0% Celfocus B.V. The Netherlands 20,000 € 100.0% 100.0% (i) Novabase Business Solutions, S.A. Portugal 3,365,000 € 100.0% 100.0% (iv) Binómio, Lda. Portugal 2,626 € 100.0% 100.0% Value Portfolio: NBMSIT, Sist. de Inf. e Tecnol., S.A. ** Mozambique 74.0% 74.0% Novabase Neotalent, S.A. Portugal 52,630 € 95.0% 95.0% Novabase Neotalent España S.A.U Spain 1,000,000 € 95.0% 95.0% NBASIT-Sist. de Inf. e Telecomunic., S.A. *** Angola 49.4% 49.4% Novabase Capital S.C.R., S.A. Portugal 2,500,000 € 100.0% 100.0% (iii) FCR NB Capital Inovação e Internacionalização Portugal 9,260,000 € 51.8% 51.6% FCR Novabase Capital +Inovação Portugal 6,450,142 € 57.8% 57.8% Novabase Consulting S.G.P.S., S.A. Portugal 11,629,475 € 100.0% 100.0% NOVABASE IMS 2, S.A. Portugal 220,500 € 100.0% 100.0% TVLab, S.A. Portugal 52,517 € 70.0% 70.0% Nbase International Investments B.V. The Netherlands 1,220,800 € 100.0% 100.0% Novabase Shared Services: (v) Novabase Serviços, S.A. Portugal 50,000 € 100.0% 100.0% (*) (**) (***) (i) (ii) (iii) (iv) (v) Associates Principal place Share capital % Interest held Equity Net Profit (see notes 9 and 33) of business 31.12.21 31.12.21 31.12.20 31.12.21 31.12.21 Novabase Capital Fundo Capital Risco * Portugal 7,142,857 € 30.0% 30.0% 573 (207) (*) 8,235,000 MZN The company included in the consolidation using the equity method, as at 31 December 2021, under the Value Portfolio segment, was the following: Novabase does not disclose geographical information of non-current assets since the cost of preparing this information, which is not used by the Management, would be excessive. For some information on non-current assets in Angola, see note 6 - A. Subsidiaries with material non- controlling interests. Novabase discontinued the activity in this subsidiary since late 2019, following the sale agreement of its GTE Business to VINCI Energies Portugal, S.G.P.S., S.A. (note 39). As part of the corporate reorganisation of the Next-Gen business, a spin-off and merger operation was carried out, with part of the Novabase Business Solutions, S.A. assets and liabilities being detached and merged into the subsidiary Celfocus, S.A., with reference to 1 January 2021. On 20 January 2021, this subsidiary changed its social designation from Celfocus - Soluções Informáticas para Telecomunicações, S.A. to Celfocus, S.A.. On 8 February 2021, the Group increased its participation in the subsidiary FCR NB Capital Inovação e Internacionalização by 0.2%, following a return of the share capital of the Fund to its Participants (see notes 20 and 21). On 17 September 2021, the subsidiary Novabase Consulting S.G.P.S., S.A. sold its 100% financial holding in Binómio, Lda. to Celfocus S.A., within the scope of the corporate reorganisation of the Next-Gen business. On 31 December 2021, Novabase S.G.P.S., S.A. sold its 100% financial holding in Novabase Serviços, S.A. to Celfocus S.A., within the scope of the corporate reorganisation of the Next-Gen business. 47,500,000 AOA Novabase has control of this company, as described in note 2.3., therefore it is fully consolidated. In 2021, the following changes occurred in the consolidation perimeter: Subsidiary in liquidation process. On 22 June 2021, Novabase Capital, as the managing entity of Novabase Capital Fundo Capital Risco, started the process of liquidating this fund, which is expected to be concluded during the first half of 2022. 32
Notes to the Consolidated Financial Statements A. Subsidiary Principal activity Novabase Neotalent, S.A. NBASIT-Sist. de Inf. e Telecomunic., S.A. FCR NB Capital Inovação e Internacionalização FCR Novabase Capital +Inovação Novabase Neotalent, S.A. NBASIT (Angola) FCR NB Capital II FCR NB Capital +Inovação 31.12.21 31.12.20 31.12.21 31.12.20 31.12.21 31.12.20 31.12.21 31.12.20 Financial position: Total Non-Current Assets 3,453 3,469 - 1 12,964 12,259 728 577 Total Current Assets 8,885 12,892 1,155 737 5,004 7,260 4,941 4,912 Total Non-Current Liabilities (1,453) (1,395) - (2) - - - - Total Current Liabilities (7,891) (7,479) (3,293) (2,798) (314) (313) (4) (20) Net Assets 2,994 7,487 (2,138) (2,062) 17,654 19,206 5,665 5,469 Net Assets attrib. to NCI 200 424 617 (610) 8,504 9,292 2,389 2,306 Results and comprehensive income: Sales and Services rendered 28,392 27,010 999 1,077 - - - - Profit for the year 1,694 2,739 416 (211) 547 335 196 (423) Total compr. income for the year 1,694 2,739 416 (211) 547 335 196 (423) Compr. income attrib. to NCI 85 137 814 326 270 168 83 (198) Cash flows: Cash, cash eq. at 1 January 6,653 2,978 550 346 7,251 7,435 205 344 Cash, cash eq. at 31 December 1,968 6,653 787 550 4,994 7,251 228 205 Change in cash, cash equiv. (4,685) 3,675 237 204 (2,257) (184) 23 (139) Dividends paid to NCI (note 21) 222 - - - - - - - B. Summarised financial information on subsidiaries with material Non-controlling interests (amounts before inter-company eliminations): Novabase considers that the main subsidiaries with material non-controlling interests are those set out below, which together represent 99% of the profit or loss attributable to 'Non-controlling interests' related to subsidiaries that have NCI as at 31 December 2021 (2020: 99%). The share capital of these subsidiaries consists solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business. Novabase Capital Fundo Capital Risco presents, in its financial statements as at 31 December 2021, a Total Assets in the amount of EUR 635 thousand (all Current) and a Total Liabilities of EUR 62 thousand (all Current), for a Total Net Assets of EUR 573 thousand. Given the venture capital activity developed by this associate, Turnover is nil, while Net Profit for the year equalled Earnings Before Taxes, in the amount of EUR -207 thousand. In 2021, change in Cash and cash equivalents amounted to EUR -198 thousand, for a balance at the end of the period of EUR 570 thousand. This associate did not attribute nor pay dividends in any of the periods of this report. Venture capital activity through the financing of investment projects aimed at innovation, modernisation and internationalization of small and medium-sized technology-based companies in early development or expanding phases Associates that are material to the Group Novabase considers that its 30% ownership interest in Novabase Capital Fundo Capital Risco is not a material interest to the Group (see note 9). However, in order to provide useful information to the users of the financial statements, some financial information on this associate is disclosed below, in addition to that presented in the table of the companies included in the consolidation by the equity method. Subsidiaries with material non-controlling interests Venture capital activity through the financing of investment projects aimed at innovation, modernisation and internationalization of small and medium-sized technology-based companies in early development or expanding phases Production, commercialisation, import and export of goods and IT services and related activities, and information systems Consulting, training and development of information technologies, operating in the business areas of resource assignment and application outsourcing 33
Notes to the Consolidated Financial Statements 7. Property, plant and equipment 31.12.21 31.12.20 Accumulated Net book Accumulated Net book Cost depreciation value Cost depreciation value Buildings and other constructions 27,380 22,894 4,486 28,660 21,699 6,961 Basic equipment 8,120 6,616 1,504 7,442 6,111 1,331 Transport equipment 1,767 1,102 665 1,864 1,297 567 Furniture, fittings and equipment 1,731 1,546 185 1,731 1,496 235 Other tangible assets 12 12 - 12 11 1 39,010 32,170 6,840 39,709 30,614 9,095 During 2020, movements in property, plant and equipment were as follows: Change in Balance at Acquisitions consolidation Exchange Balance at 01.01.20 / increases Write-offs Transfers perimeter differences 31.12.20 Cost: Buildings and other constructions 31,090 1,337 (3,881) 114 - - 28,660 Basic equipment 7,661 576 (744) - (44) (7) 7,442 Transport equipment 2,728 308 (1,138) - - (34) 1,864 Furniture, fittings and equipment 1,771 39 (99) 28 (5) (3) 1,731 Other tangible assets 11 1 - - - - 12 43,261 2,261 (5,862) 142 (49) (44) 39,709 Accumulated depreciation: Buildings and other constructions 22,064 2,752 (3,117) - - - 21,699 Basic equipment 6,083 634 (556) - (44) (6) 6,111 Transport equipment 1,624 553 (846) - - (34) 1,297 Furniture, fittings and equipment 1,514 65 (79) - (2) (2) 1,496 Other tangible assets 11 - - - - - 11 31,296 4,004 (4,598) - (46) (42) 30,614 During 2021, movements in property, plant and equipment were as follows: Change in Balance at Acquisitions consolidation Exchange Balance at 01.01.21 / increases Write-offs Transfers perimeter differences 31.12.21 Cost: Buildings and other constructions 28,660 557 (1,837) - - - 27,380 Basic equipment 7,442 787 (112) - - 3 8,120 Transport equipment 1,864 576 (686) - - 13 1,767 Furniture, fittings and equipment 1,731 4 (7) - - 3 1,731 Other tangible assets 12 - - - - - 12 39,709 1,924 (2,642) - - 19 39,010 Accumulated depreciation: Buildings and other constructions 21,699 2,165 (970) - - - 22,894 Basic equipment 6,111 600 (98) - - 3 6,616 Transport equipment 1,297 443 (651) - - 13 1,102 Furniture, fittings and equipment 1,496 55 (7) - - 2 1,546 Other tangible assets 11 1 - - - - 12 30,614 3,264 (1,726) - - 18 32,170 In 2020, change in consolidation perimeter refers to the effect of the subsidiary Collab disposal (see note 39). In 2021, no events or circumstances that indicated that the carrying amount of property, plant and equipment exceeded its recoverable amount were identified. Consequently, no impairment tests have been performed. Acquisitions of property, plant and equipment in 2021 primarily refer to 'Basic equipment' for the operations, mainly comprised of laptops, and right-of-use assets of 'Buildings and other constructions' and 'Transport equipment' (see detail below). Depreciation is included in 'Depreciation and amortisation' heading in the statement of profit and loss (note 30). 34
Notes to the Consolidated Financial Statements 31.12.21 31.12.20 Buildings and Transport Buildings and Transport other constr. equipment Total other constr. equipment Total Cost 24,063 1,703 25,766 25,343 1,814 27,157 Accumulated depreciation (19,884) (1,038) (20,922) (18,778) (1,247) (20,025) 4,179 665 4,844 6,565 567 7,132 31.12.21 31.12.20 Buildings and Transport Buildings and Transport other constr. equipment Total other constr. equipment Total Balance at 1 January 6,565 567 7,132 8,681 1,104 9,785 557 576 1,133 1,290 308 1,598 (867) (35) (902) (764) (292) (1,056) Acquisitions / increases Write-offs Depreciation charge (L) (2,076) (443) (2,519) (2,642) (553) (3,195) Balance at 31 December 4,179 665 4,844 6,565 567 7,132 8. Intangible assets 31.12.21 31.12.20 Accumulated Net book Accumulated Net book Cost amortisation value Cost amortisation value Internally generated intangible assets 10,568 10,476 92 10,549 10,325 224 Industrial property and other rights 9,884 9,844 40 9,882 9,738 144 Work in progress 240 - 240 194 - 194 Goodwill 11,501 - 11,501 11,501 - 11,501 32,193 20,320 11,873 32,126 20,063 12,063 During 2020, movements in intangible assets were as follows: Change in Balance at Acquisitions Impairm. ch. consolidation Balance at 01.01.20 / increases / Write-offs Transfers perimeter 31.12.20 Cost: Internally generated intangible assets 13,622 - - - (3,073) 10,549 Industrial property and other rights 11,439 - (1,563) 6 - 9,882 Work in progress 272 253 - (148) (183) 194 Goodwill 11,501 - - - - 11,501 36,834 253 (1,563) (142) (3,256) 32,126 Accumulated amortisation: Internally generated intangible assets 12,790 179 - - (2,644) 10,325 Industrial property and other rights 11,077 224 (1,563) - - 9,738 23,867 403 (1,563) - (2,644) 20,063 Right-of-use assets included in 'Property, plant and equipment', by class of assets, are as follows: Acquisitions of rights-of-use assets of 'Buildings and other constructions' comprise (i) the accounting of a new lease contract with an estimated lease term of 24 months in the amount of EUR 104 thousand, (ii) the extension of the lease term of two existing contracts in the amount of EUR 437 thousand, and (iii) the remeasurement of existing contracts dependent on an index or rate in the amount of EUR 16 thousand. The write-offs of rights-of-use assets of 'Buildings and other constructions' refer to the repeal without penalties of an office and parking lease agreement. (i) Included in 'Depreciation and amortisation'. Acquisitions and write-offs of right-of-use assets of 'Transport equipment' are part of the usual renewal of the Group's fleet. For short-term leases considered in the exemption from recognition provided for in IFRS 16, the Group recognised this year the amount of EUR 170 thousand (2020: EUR 178 thousand) under the heading 'External supplies and services'. Movements in right-of-use assets were as follows: Information on the movements that occurred during the year in lease liabilities related to these right-of-use assets, namely, interest expense and lease payments, can be found in note 22. 35
Notes to the Consolidated Financial Statements During 2021, movements in intangible assets were as follows: Change in Balance at Acquisitions Impairm. ch. consolidation Balance at 01.01.21 / increases / Write-offs Transfers perimeter 31.12.21 Cost: Internally generated intangible assets 10,549 19 - - - 10,568 Industrial property and other rights 9,882 2 - - - 9,884 Work in progress 194 46 - - - 240 Goodwill 11,501 - - - - 11,501 32,126 67 - - - 32,193 Accumulated amortisation: Internally generated intangible assets 10,325 151 - - - 10,476 Industrial property and other rights 9,738 106 - - - 9,844 20,063 257 - - - 20,320 31.12.21 31.12.20 Balance at 1 January 11,501 11,501 Balance at 31 December 11,501 11,501 31.12.21 31.12.20 Balance at 1 January - - Balance at 31 December - - Impairment tests for goodwill 31.12.21 31.12.20 Next-Gen 8,115 8,115 Neotalent (Value Portfolio) 3,386 3,386 11,501 11,501 31.12.21 31.12.20 Next-Gen Neotalent Next-Gen Neotalent Discount rate (post-tax) 7.6% 7.6% 8.9% 8.9% Perpetual growth rate 2.0% 2.0% 2.0% 2.0% Annual average growth rate of turnover 9.1% 11.5% 14.7% 7.5% The amount with research and development recognised as a cost, related to the main research projects, reached approximately EUR 3.0 Million (2020: EUR 3.0 Million), and essentially refers to man-hours with employees allocated to projects recorded in 'Employee benefit expense'. The impairment tests for goodwill were performed based on the discounted cash flow method, using a 5-year business plan forecasted by Management, with the following key assumptions: Movements in goodwill impairment were as follows: Goodwill is allocated to the Group's Cash-Generating Units (CGUs), identified according to how Novabase monitors its operations and makes its decisions on the continuation or disposal of its assets and operations, as follows: The captions 'Internally generated intangible assets' and 'Work in progress' include costs incurred in software development projects. Movements in gross goodwill were as follows: The amount of amortisation recognised in profit and loss and included in 'Depreciation and amortisation' is EUR 257 thousand (2020: EUR 352 thousand), and included in 'Profit from discontinued operations' is EUR zero thousand (2020: EUR 51 thousand). The application of the previously described method generates a recoverable amount (determined by value in use) of assets exceeding its carrying amount, therefore it is concluded that there is no need for an impairment charge to the goodwill allocated to the Cash Generating Units. A possible increase or decrease of 1 percentage point in the WACC would not result in an Equity Value of the Next-Gen CGU and Neotalent CGU, in any of the situations, lower than the carrying amount of assets. In 2020, change in consolidation perimeter refers to the effect of the subsidiary Collab disposal (see note 39). 36
Notes to the Consolidated Financial Statements 9. Investments in associates % Interest held directly Amount 31.12.21 31.12.20 31.12.21 31.12.20 Novabase Capital Fundo Capital Risco (notes 6 and 33) 30.0% 30.0% 160 223 160 223 10. Financial assets at fair value through profit or loss % Interest held directly Amount 31.12.21 31.12.20 31.12.21 31.12.20 (i) Feedzai, S.A. 1.4% 1.7% 11,323 10,564 (ii) Globaleda, S.A. 25.1% 25.1% 624 598 (iii) FCR IStart I 11.6% 11.6% 382 391 (iv) CB Talents Global, S.A. - 13.3% - - (v) Aixtel Technologies, S.A. 5.7% 5.7% 419 408 (vi) Probely, Lda. 3.3% 3.3% 159 63 (vii) Bright Innovation, Lda. 90.0% 90.0% - - (viii) Powergrid, Lda. 88.9% 88.9% - - (ix) Powerdata, Lda. 80.0% 80.0% - - (x) Radical Innovation, Lda. 80.0% 80.0% - - (xi) Glarevision, S.A. 5.7% 5.7% 15 - (xii) Habit Analytics PT, Lda. 4.6% 4.6% 3 - xiii) Other 690 577 13,615 12,601 (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) Company, held by Novabase Capital Fundo Capital Risco and FCR NB Capital Inovação e Internacionalização, dedicated to business intelligence solutions for utilities (electricity, gas and water) in liberalised markets or in the process of liberalisation. Company, held by Novabase Capital Fundo Capital Risco and FCR NB Capital Inovação e Internacionalização, specialised in the incubation of projects in the area of ICT and the provision of integrated services in the administrative and financial areas, training and assistance for applications, aimed at ICT SMEs of the Lisbon Region. Company specialised in incubate projects in the area of Information and Communication Technologies (ICT) and provide integrated services in the administrative and financial areas, training and assistance for ICT SMEs applications, supported by a multi-channel platform. This company is held by FCR NB Capital Inovação e Internacionalização. Held by Novabase Business Solutions S.A., this company is a technology-based company in the area of information systems and telecommunications engineering. Novabase does not have control of the companies held by FCR NB Capital Inovação e Internacionalização and FCR Novabase Capital +Inovação, understood as the power to manage the relevant activities of an entity, being exposed to the risks of variation of the return obtained and having the capacity to affect those returns through its power over the entity, therefore they were not considered subsidiaries or associates. Company held by FCR NB Capital Inovação e internacionalização, dedicated to the development of solutions for processing large volumes of data in real time, which applies advanced machine learning and artificial intelligence models to combat fraud in financial services and e-commerce. Company held by FCR Novabase Capital +Inovação, specialised in the international recruitment of IT professionals. It was sold at 27 September 2021. In 2021 and 2020, the amount is fully related to FCT - Labour Compensation Fund. Company, held by FCR Novabase Capital +Inovação, focused on developing a real-time data platform that aggregates and analyses multiple sources of data, from Internet of Things (‘IoT’) devices. Company, held by FCR NB Capital Inovação e Internacionalização, focused on developing an application platform for Smart Grids. Venture Capital Fund established in 2011 and held by Novabase Capital S.C.R., S.A., focused on creating proofs-of-concept and prototypes and developing intellectual property and business models. This Fund is managed by Armilar Venture Partners SCR. Company, held by FCR Novabase Capital +Inovação, focused on developing solutions based on augmented reality for industrial maintenance. Company held by FCR Novabase Capital +Inovação, focused on cybersecurity. Company held by FCR NB Capital Inovação e internacionalização and FCR Novabase Capital +Inovação, which developed FIBERCLOUD, a network management platform for the global market. 37
Notes to the Consolidated Financial Statements 31.12.21 31.12.20 Balance at 1 January 12,601 12,175 Acquisitions / share capital increase 55 90 Net fair value adjustments (see notes 31 and 32) 959 356 Change in consolidation perimeter (note 39) - (20) Balance at 31 December 13,615 12,601 11. Deferred tax assets 31.12.21 31.12.20 Balance at 1 January 7,947 9,585 Profit or loss charge (note 34) 1,474 (458) Other comprehensive income charge 22 - Change in consolidation perimeter (note 39) - (1,180) Balance at 31 December 9,443 7,947 Tax Provisions / Tax Losses / Incentives Adjustments Other Total Balance at 1 January 2020 8,068 1,521 (4) 9,585 Profit or loss charge 44 (506) 4 (458) Change in consolidation perimeter (1,059) (121) - (1,180) Balance at 31 December 2020 7,053 894 - 7,947 Profit or loss charge 1,729 (233) (22) 1,474 Other comprehensive income charge - - 22 22 Balance at 31 December 2021 8,782 661 - 9,443 Tax Provisions / Tax Losses / Incentives Adjustments Other Total Between 2 and 3 years 1,246 - - 1,246 Between 3 and 4 years 791 - - 791 Between 4 and 5 years 1,189 - - 1,189 Between 5 and 6 years 1,246 - - 1,246 Over 6 years 4,310 - - 4,310 With no defined date - 661 - 661 8,782 661 - 9,443 Finally, worthy of mention is that, following a new round of investment by Feedzai, S.A. in March 2021, FCR NB Capital Inovação e Internacionalização diluted its stake in the aforementioned company to 1.4% (previously: 1.7%). The net fair value adjustments recognised in profit and loss of Level 1 instruments amounted to EUR 58 thousand while the net fair value adjustments of Level 3 instruments amounted to EUR 901 thousand (see note 40). Note 40 provides information on the fair value hierarchy of these financial assets, valuation techniques, unobservable inputs and sensitivity analysis, and valuation processes. Deferred taxes are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred tax assets and liabilities relate to the same tax authority. Deferred tax assets related to tax incentives result from projects of research and development submitted under the incentive program SIFIDE. The movement in deferred tax assets was as follows: The movement in deferred tax assets during the year, without considering the offsetting of balances within the same tax jurisdiction, is as follows: The amount recognised in profit or loss and included in 'Income tax expense' is EUR 1,474 thousand (2020: EUR -451 thousand), and included in 'Profit from discontinued operations' is null in 2021 (2020: EUR -7 thousand). The expiry date of the deferred tax assets can be analysed as follows: In 2021 also occurred the sale of shares held by FCR Novabase Capital +Inovação in the company CB Talents Global, S.A., in the amount of EUR 50 thousand. This company had a nil fair value in the accounts, therefore the capital gain on the sale equalled its sale price (see note 31), which was fully received in the year. Movements in this heading were as follows: Acquisitions in 2021 and 2020 are related to the contributions made to FCT - Labour Compensation Fund. 38
Notes to the Consolidated Financial Statements 12. Other non-current assets 31.12.21 31.12.20 Loans to related parties (note 38 iii) 5,033 5,033 Financial holdings disposal (note 39) 215 215 Provision for impairment of loans to related parties (note 38 iii) (3,251) (3,223) 1,997 2,025 The fair value of 'Other non-current assets' balance approximates its carrying amount. Movements in the provision for impairment of loans to related parties are analysed as follows: 31.12.21 31.12.20 Balance at 1 January 3,223 3,125 Impairment (note 32) 57 98 Impairment reversal (note 31) (29) - Balance at 31 December 3,251 3,223 13. Financial instruments by category Financial Assets/ assets at liabilities Other Non-financial amortised at fair value financial assets/ At 31 December 2020 cost through P&L liabilities liabilities Total Assets Financial assets at fair value through profit or loss - 12,601 - - 12,601 Other non-current assets 2,025 - - - 2,025 Trade and other receivables 36,610 - - 6,050 42,660 Accrued income 3,556 - - - 3,556 Derivative financial instruments - 64 - - 64 Other current assets - - - 4,290 4,290 Cash and cash equivalents 71,929 - - - 71,929 114,120 12,665 - 10,340 137,125 Liabilities Borrowings - - 30,925 - 30,925 Other non-current liabilities - - 3,705 - 3,705 Trade and other payables - - 40,313 - 40,313 Derivative financial instruments - 9 - - 9 Deferred income and other current liabilities - - 16,148 - 16,148 - 9 91,091 - 91,100 Financial Assets/ assets at liabilities Other Non-financial amortised at fair value financial assets/ At 31 December 2021 cost through P&L liabilities liabilities Total Assets Financial assets at fair value through profit or loss - 13,615 - - 13,615 Other non-current assets 1,997 - - - 1,997 Trade and other receivables 38,515 - - 4,119 42,634 Accrued income 4,691 - - - 4,691 Derivative financial instruments - 16 - - 16 Other current assets - - - 4,105 4,105 Cash and cash equivalents 68,431 - - - 68,431 113,634 13,631 - 8,224 135,489 Liabilities Borrowings - - 22,000 - 22,000 Other non-current liabilities - - 2,120 - 2,120 Trade and other payables - - 37,775 - 37,775 Derivative financial instruments - 71 - - 71 Deferred income and other current liabilities - - 19,711 - 19,711 - 71 81,606 - 81,677 For more information about the categories of financial assets and liabilities, see policy in note 2.8.. 39
Notes to the Consolidated Financial Statements 14. Trade and other receivables 31.12.21 31.12.20 Trade receivables 38,666 36,200 Impairment allowance for trade receivables (901) (876) 37,765 35,324 Financial holdings disposal (note 39) - 215 Capital subscribers of FCR Novabase Capital +Inovação 1,898 1,898 Value added tax 2,144 3,990 Receivables from financed projects (note 26) 1,402 1,491 Prepayments to suppliers 71 156 Employees 6 6 Other receivables 406 684 Impairment allowance for other receivables (1,058) (1,104) 4,869 7,336 42,634 42,660 The fair value of 'Trade and other receivables' balance approximates its carrying amount. Weighted- Gross -average carrying Loss Credit- At 31 December 2020 loss rate amount allowance impaired Current (not past due) 1.04% 25,725 49 No 1-180 days past due 4.08% 8,473 19 No 181-360 days past due 27.33% 433 18 No More than 360 days past due 89.83% 1,569 790 Yes 36,200 876 Weighted- Gross -average carrying Loss Credit- At 31 December 2021 loss rate amount allowance impaired Current (not past due) 0.39% 22,780 92 No 1-180 days past due 3.12% 13,908 117 No 181-360 days past due 17.94% 813 78 No More than 360 days past due 78.40% 1,165 614 Yes 38,666 901 Movements in impairment allowances for trade and other receivables are analysed as follows: Trade receivables Other receivables Total 31.12.21 31.12.20 31.12.21 31.12.20 31.12.21 31.12.20 Balance at 1 January 876 1,154 1,104 1,061 1,980 2,215 Impairment 437 146 - 51 437 197 Impairment reversal (119) (125) (46) (8) (165) (133) Exchange differences 39 (64) - - 39 (64) Write-offs (332) (206) - - (332) (206) Change in consolidation perimeter - (29) - - - (29) Balance at 31 December 901 876 1,058 1,104 1,959 1,980 The review of the expected credit loss matrices in 2021 resulted in a decrease in the % ECL's, especially in the range of balances overdue by more than 181 days, reflecting Novabase's focus on large customers, in resilient sectors in the current context such as Telco, and in less volatile geographies. The exposure to credit risk and ECLs for the Group's trade receivables as at 31 December 2020 and 31 December 2021 is analysed as follows. The carrying amount of this heading plus the balance of 'Accrued income' (see note 15) represents the maximum exposure to credit risk. Details on the Group's customer concentration / dependency as well as the distribution of the customers with higher balances by geographical market and business sector can be found in note 3 c). Impairment and impairment reversal for trade and other receivables recognised in profit or loss and included in 'Net impairment losses on trade and other receivables' is EUR -272 thousand (31.12.20: EUR -72 thousand), and included in 'Profit from discontinued operations' is EUR zero thousand (31.12.20: EUR 8 thousand). 40
Notes to the Consolidated Financial Statements 15. Accrued income 31.12.21 31.12.20 - Ongoing projects 4,621 3,537 - Other accrued income 70 19 4,691 3,556 16. Derivative financial instruments The fair value of derivative financial instruments can be analysed as follows: Assets Liabilities 31.12.21 31.12.20 31.12.21 31.12.20 - Forward foreign exchange contracts 16 64 71 9 16 64 71 9 17. Other current assets The amounts recorded regarding prepayments of contracted services are as follows: 31.12.21 31.12.20 - Consulting 3,235 2,531 - Insurances 380 318 - Software maintenance 145 1,136 - Other specialised services 253 204 - Rents 92 86 - Software licensing - 15 4,105 4,290 18. Cash and cash equivalents 31.12.21 31.12.20 - Cash 19 28 - Short-term bank deposits 68,414 71,920 Cash and cash equivalents at 31 December 68,433 71,948 - Impairment allowance for short-term bank deposits (2) (19) Cash and cash equivalents 68,431 71,929 The forward foreign exchange contracts are the financial instruments used to manage this risk, and they are contracted on the net exposure to currencies, according to the terms of receipts and payments agreed with third parties, in order to set the exchange rate associated with these operations. The nature of the hedged risk is the exchange variation recorded in foreign currency denominated transactions. At 31 December 2021, the Group had forward foreign exchange contracts to sell currency with the notional amount of USD 12,535,514 and forward foreign exchange contracts to buy currency with the notional amount of USD 680,504. In order to ensure the proper balancing of the services provided by third parties, expenses were deferred and will be recognised in profit and loss in the next period. With reference to the statement of cash flows, the detail and description of cash and cash equivalents is analysed as follows: The fair value is classified as a non-current asset or liability if the remaining maturity is greater than 12 months and as current asset or liability if the remaining maturity is less than 12 months. In 2021, derivative financial instruments were classified as current assets and liabilities. Although contracted with the purpose of economic hedge in accordance with the Group's risk management policies, changes in the fair value of these derivatives were recognised in profit and loss (see note 2.22. (2)). Note 40 provides information on the fair value hierarchy of these financial assets and liabilities. The Group is exposed to foreign exchange risk, primarily with respect to the U.S. Dollar, since some of its subsidiaries carry out transactions in this currency. Novabase's exposure to foreign exchange risk also arises from its presence in several markets, namely in Angola, although the exposure to this geography decreased significantly in the past two years. The balances with ongoing projects refer to differences in the progress of projects and contractual invoicing times. This framework is typical of this industry. 41
Notes to the Consolidated Financial Statements Movements in impairment allowance for short-term bank deposits are analysed as follows: 31.12.21 31.12.20 Balance at 1 January 19 27 Impairment (note 32) - 5 Impairment reversal (note 31) (17) (13) Balance at 31 December 2 19 19. Share Capital, share premium and treasury shares and stock options No. Shares Share Treasury Share (thousands) capital shares premium Total Balance at 1 January 2020 31,401 54,638 (655) 226 54,209 Treasury shares purchased - - (522) - (522) Balance at 31 December 2020 31,401 54,638 (1,177) 226 53,687 Treasury shares purchased - - (40) - (40) Balance at 31 December 2021 31,401 54,638 (1,217) 226 53,647 It should be noted that, 91,539 shares of the aforementioned 699,480 own shares were attributed during 2020 to Paulo Jorge de Barros Trigo, at the time executive director, following the exercise of Novabase ordinary stock options that he held. The shares corresponding to the options exercised will be retained by Novabase for a period of three years from the respective exercise, and their ownership will only be transferred once such period has elapsed and conditioned to the positive performance of the company during this period. During 2021, Novabase acquired 22,869 own shares on the market, under this buy-back programme, at the average net price of 4.85 Euros (total amount of EUR 111 thousand - see also note 20). At 31 December 2021, Novabase S.G.P.S. held 699,480 treasury shares, representing 2.23% of its share capital. At 31 December 2020, Novabase S.G.P.S. held 676,611 treasury shares, representing 2.15% of its share capital. 'Treasury shares' reflects the number of shares held by the Group at its nominal value. According to the legislation in force, by deliberation of the General Meeting of Shareholders held on 25 May 2021, the purchase of treasury shares by Novabase S.G.P.S. is allowed up to a maximum of 10% of its share capital. Following the resolution of the Board of Directors of 22 July 2021, regarding to the attribution of options over Novabase shares under the stock options plan of the Company (see next section), Novabase started trading, on 29 September 2021, in the context of the buy-back programme of own shares (“Buy-back Programme”), pursuant to the terms and limitations set forth in the Annual General Meeting of Shareholders of Novabase held on the 25 May 2021. The maximum number of shares to be acquired under the scope of this Buy-back Programme is 270,000 shares, corresponding to the estimated number of shares necessary to settle the options granted. Issuance share premiums resulted from gains obtained with share capital increases. According to the current legislation, the amounts included under this heading can be used only to increase share capital or to absorb losses carried forward (no need for prior use of other reserves), but it cannot be used for attribution of dividends or purchase of treasury shares. 'Cash and cash equivalents' evolution in 2021 includes the payment to non-controlling interests of dividends and amounts released following a share capital reduction, in the total of EUR 1,262 thousand (see notes 20 and 21). The ratings attributed to the financial institutions with whom the Group has higher balances of bank deposits are detailed in note 3 c). The fair value of 'Cash and cash equivalents' balance approximates its carrying amount. The share capital as at 31 December 2021, fully subscribed and paid in the amount of 54,638,425.56 Euros, is represented by 31,401,394 shares with a nominal value of 1.74 Euros each. At 31 December 2021 and 31 December 2020, no restrictions existed as to the use of the amounts recorded in ‘Cash and cash equivalents’ heading, considering the following about Angola. Since 2019, restrictions on transfers outside the country lowered, with Novabase significantly decreasing its exposure to this geography. As such, 'Short-term bank deposits' includes only EUR 787 thousand from the subsidiary based in Angola. 87% of the balance of cash and cash equivalents (net of impairment losses) refers to fully-owned Novabase subsidiaries. Of the remainder, 21% is related to subsidiaries based outside Portugal. At 31 December 2021, 70.73% of Novabase's share capital (22,208,941 shares) is held by shareholders with qualifying stakes. The list of shareholders with qualifying stakes can be found in the annexes to the management report, included in the Management Report, which is an integral part of the Annual Financial Report. 42
Notes to the Consolidated Financial Statements Stock options (i) Spot: 4.27€ (ii) Exercise price: 1.801€ (iii) Volatility: 27.547% - obtained using a sample mean of a series of historical volatilities based on 180 daily closing prices (iv) Options' time-to-maturity: 2 years (v) Risk free interest rate: -0.471537% (2 years) 20. Reserves and retained earnings 31.12.21 31.12.20 Balance at 1 January (4,124) (5,318) Profit for the previous year 7,486 20,400 Exchange differences on foreign operations (250) (538) Purchase and sale of treasury shares (note 19) (71) (368) Share-based payments (note 19) 175 34 Transactions with non-controlling interests 19 (18,334) Balance at 31 December 3,235 (4,124) At 31 December 2021, a Stock Options Plan Regulation ("Regulation") is in effect, approved at the General Meeting of Shareholders held on 26 September 2019. This Regulation sets out the general terms and conditions under which options over ordinary shares of the Company may be attributed to the Board of Directors and Novabase employees. According to the terms of the Regulation, the options exercised are settled as follows: i) 50% through the attribution of Novabase shares ('net share settlement') held by the Company, and ii) the remaining 50% through the attribution of Novabase shares ('net share settlement') or, alternatively, in cash ('net cash settlement'), by choice of the participant. The same Regulation also establishes that the maturity date of the options corresponds to the 2nd anniversary counting from the grant's date (without prejudice of the participant choice to exercise on the 1st anniversary), and that the retention period (period during which the shares corresponding to the exercised options will be retained by Novabase) corresponds to three years counting from the exercise date. The assigned options have as sole condition of acquisition, the employee's permanence on the dates defined in the terms of the plan, and automatically expire whenever the employee ceases to be at the service of any of the Group companies. In 2021 the Group recognised in the statement of profit and loss, under 'Employee benefit expense' heading, a cost in the amount of EUR 618 thousand (see note 28), against Stock options reserves in the amount of EUR 175 thousand (see note 20) and a liability in the amount of EUR 443 thousand (see note 25). According to the legislation in force, Portuguese based companies that integrate Novabase Group are required to transfer a minimum of 5% of annual net profit to legal reserves until this balance reaches at least 20% of the share capital. This reserve cannot be distributed to shareholders, though it may be used to absorb losses carried forward or to increase share capital. Also, according to Article 324, paragraph 1 b) of the Portuguese Companies Code, Novabase constitutes an unavailable reserve of an amount equal to the amount recorded in treasury shares (31.12.21: EUR 2,028 thousand). In 2021, 600 thousand options were granted according to the terms and conditions of the Stock Options Plan Regulation, with a total estimated value of the plan of EUR 1,512 thousand. The fair value of options granted during the period using the Monte Carlo model was EUR 2.4585. The significant inputs into the model were the following: Movements in 'Reserves and retained earnings' are analysed as follows: According to the regulation, the share options exercise price is adjusted by dividends' distribution, therefore the options may be evaluated based on the exercise price already set and assuming a dividend yield null. In 2021 and 2020 no amounts were distributed to shareholders due to the high level of uncertainty resulting from the Covid-19 pandemic, and as preventive measure aimed both at ensuring Novabase's financial resilience and competitiveness. 43
Notes to the Consolidated Financial Statements Total purchase (Decrease) Impact on consideration / increase Equity attrib. / assets of NCI to owners decrease (note 21) of the parent At 31 December 2020 (i) Acquisition of 45.003% in Celfocus, S.A. 27,450 (9,162) (18,288) (ii) Increase of 4.70% interest in FCR Novabase Capital +Inovação 571 (525) (46) (iii) NBASIT-Sist. de Inf. e Telec., S.A. - 677 - 28,021 (9,010) (18,334) At 31 December 2021 (iv) Increase of interest in FCR NB Capital Inovação e Internacionalização 1,040 (1,059) 19 1,040 (1,059) 19 (i) (ii) (iii) (iv) 21. Non-controlling interests 31.12.21 31.12.20 Balance at 1 January 10,047 18,329 Transactions with non-controlling interests (notes 6 and 20) (1,059) (9,010) (*) Distribution of dividends to non-controlling interests (309) - Exchange differences on foreign operations 412 560 Profit attributable to non-controlling interests 1,270 840 Change in consolidation perimeter - (672) Balance at 31 December 10,361 10,047 (*) 22. Borrowings 31.12.21 31.12.20 Non-current Bank borrowings 9,400 16,200 Lease liabilities 3,017 5,293 12,417 21,493 Current Bank borrowings 6,800 6,400 Lease liabilities 2,783 3,032 9,583 9,432 Total borrowings 22,000 30,925 Acquisition of 45% in Celfocus, S.A. to Vodafone Portugal, S.A. and, consequently, of the remaining financial holding in Celfocus B. T. T. H. T. Limited ā Celfocus LTD and Celfocus B.V.. From the total consideration on the acquisition, 20 Million Euros were paid in 2020, corresponding to the initial consideration (see also notes 24 and 25). In 2020 and 2021, the Group performed transactions with non-controlling interests (NCI) with the following impact: Angolan subsidiary losses absorption according to the profit-sharing agreement in force. In 2021, Novabase Neotalent, S.A. paid dividends to its shareholders. Of the total amount, EUR 222 thousand were paid in the year of their attribution (see note 6 - A. Subsidiaries with material non-controlling interests), with the remaining amount due on 31.12.21 (see note 25). Following the capital decrease of FCR Novabase Capital + Inovação by the NCI Fundo Capital e Quase Capital (FC&QC), the Group increased its interest in the referred Fund by 4.70%. Following a FCR NB Capital Inovação e Internacionalização share capital return to its Participants (distribution of excess cash), the Group increased its interest in the referred Fund by 0.2% (see notes 6 and 21). The correspondent payment to NCI is included in the 'Transactions with non-controlling interest' heading, in Cash flows from financing activities of the Consolidated Statement of Cash Flows. 44
Notes to the Consolidated Financial Statements 6 months or less 6 to 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total Bank borrowings 3,200 3,200 6,800 9,400 - 22,600 Lease liabilities 1,452 1,580 2,511 2,782 - 8,325 At 31 December 2020 4,652 4,780 9,311 12,182 - 30,925 Bank borrowings 2,700 4,100 4,200 5,200 - 16,200 Lease liabilities 1,381 1,402 2,331 686 - 5,800 At 31 December 2021 4,081 5,502 6,531 5,886 - 22,000 31.12.21 31.12.20 Balance at 1 January 8,325 11,568 1,133 1,598 (902) (1,056) 327 491 Increases (L) Termination of lease contracts Interest expense (ii) Lease payments (iii) (3,083) (4,276) Balance at 31 December 5,800 8,325 (a) 31.12.21 31.12.20 Cash and cash equivalents (amount before impairment losses) 68,433 71,948 Borrowings - repayable within one year (including overdrafts) (9,583) (9,432) Borrowings - repayable after one year (12,417) (21,493) Net debt 46,433 41,023 6ROYDELOLW\ UDWLR 1HW GHEW (%,7'$ This section sets out an analysis of net debt and the movements in net debt for each of the periods presented. Covenants During the 2021, loan repayments with banking institutions amounted to EUR 6.4 Million (31.12.20: EUR 6.2 Million). No new loans were contracted in the period, nor were renegotiated the conditions or covenants in relation to the loans existing on 31 December 2020. Movements in lease liabilities are as follows: Good standing with tax and social security authorities Bond seniority determined pari passu (ii) Included in 'Finance costs' (see note 32). 1HW GHEW (%,7'$ (i) Includes new lease contracts, remeasurement of leases that depend on an index or rate and lease modifications that are not accounted for as a separate lease (lease term). The covenants of the Group's bank borrowings are as follows: (iii) Classified as 'Cash flows from financing activities' in the Consolidated Statement of Cash flows. 1HW GHEW (%,7'$ At 31 December 2021, the Group was complying with all contractual covenants. It should be noted that, in 2020, the solvability ratio greater than 40% from one of the BPI borrowings was not complied, and this institution granted a waiver regarding its applicability in 2020. The borrowing was settled at maturity in October 2021. Published accounts The weighted average effective interest rate of bank borrowings at the reporting date is 1.457% (31.12.20: 1.485%). The Group uses its incremental borrowing rate when determining the present value of future lease payments, based on the features of the agreement (underlying asset, guarantees and lease term). The weighted average rate applied at the reporting date is 2.466% (31.12.20: 2.484%). This note presents lease liabilities already discounted of the future finance charges, which amounts to EUR 446 thousand as at 31 December 2021 (31.12.20: EUR 606 thousand). The exposure of the Group’s current bank borrowings to the contractual repricing dates are as follows: Information disclosure obligations regarding court disputes Active insurance policies Cross Default Net debt reconciliation Note 7 provides information on the right-of-use assets of the Group related to these lease liabilities. 45
Notes to the Consolidated Financial Statements Lease Lease Cash Bank borrow. Bank borrow. liabilities liabilities and cash due within due after due within due after Net equivalents 1 year 1 year 1 year 1 year debt At 1 January 2020 48,782 (5,194) (13,600) (3,887) (7,681) 18,420 Cash flows 25,234 6,194 (10,000) 3,785 - 25,213 Acquisitions - lease liabilities - - - - (1,598) (1,598) Effect of exchange rate changes (211) - - - - (211) Change in consolidation perimeter (1,857) - - - - (1,857) Other non-cash movements - (7,400) 7,400 (2,930) 3,986 1,056 At 31 December 2020 71,948 (6,400) (16,200) (3,032) (5,293) 41,023 Cash flows (3,493) 6,400 - 2,756 - 5,663 Acquisitions - lease liabilities - - - - (1,133) (1,133) Effect of exchange rate changes (22) - - - - (22) Other non-cash movements - (6,800) 6,800 (2,507) 3,409 902 At 31 December 2021 68,433 (6,800) (9,400) (2,783) (3,017) 46,433 23. Provisions Movements in provisions for other risks and charges are analysed as follows: 31.12.21 31.12.20 Balance at 1 January 5,233 8,623 Charge for the year (note 29) 318 475 Reversals / charge-off (note 29) (2,160) (3,692) Change in consolidation perimeter (note 39) - (173) Balance at 31 December 3,391 5,233 24. Other non-current liabilities 31.12.21 31.12.20 Acquisition of financial holdings 1,698 3,165 Research and development grants 422 540 2,120 3,705 The due date of these liabilities is as follows: 31.12.21 31.12.20 Between 1 and 2 years 1,829 1,943 Between 2 and 5 years 291 1,762 2,120 3,705 The fair value of 'Other non-current liabilities' balance approximates its carrying amount. In 2021, the evolution of the caption 'Acquisition of financial holdings' reflects the update of the contingent consideration associated with the acquisition of Celfocus S.A. in the amount of EUR +33 thousand (see note 32), and the disclosure as current of a portion of this consideration, EUR -1,500 thousand (see note 25), taking into account the contractual maturity. As at 31 December 2021, this caption comprises the balances with a maturity of more than 12 months related to (i) the contingent consideration associated with guarantees of contracting services for the acquisition of Celfocus S.A., in the amount of EUR 1,483 thousand, and (ii) the consideration for the acquisition of the non- controlling interests of Novabase Digital, S.A. - which preceded the sale of 100% of the GTE Business in 2019 - in the amount of EUR 215 thousand (see note 39). • Liabilities with costs to be incurred with possible contractual penalties related to ongoing projects; The balance of 'Provisions' is intended to cover different risks and charges, namely the situations listed below, the settlement of which may result in cash outflows and other probable liabilities, for which it is not possible to estimate reliably the time of occurrence of the expense: 'Other non-current liabilities' also includes the amount of grants for research and development with a maturity of more than 12 months. The portion of grants for research and development with a maturity of less than 12 months is included in 'Deferred income and other current liabilities' (note 26). • Other risks related to events / disputes of various kinds, which include, among others, contingencies of tax and labour natures, and involve customers, suppliers, business partners, employees or others. 46
Notes to the Consolidated Financial Statements 25. Trade and other payables 31.12.21 31.12.20 Trade payables 4,508 5,621 Remunerations, holiday and holiday allowance 9,705 7,842 Bonus 11,617 11,546 Acquisition of financial holdings 1,500 4,715 Ongoing projects 2,480 2,463 Value added tax 1,305 2,542 Social security contributions 2,371 2,090 Income tax withholding 1,551 1,389 Employees 66 82 Stock options plan (note 19) 443 - Amount to be paid to non-controlling interests (note 21) 88 1 Prepayments from trade receivables 2 2 Other accrued expenses 1,911 1,869 Other payables 228 151 37,775 40,313 31.12.21 31.12.20 No later than 1 year 37,775 40,313 37,775 40,313 26. Deferred income and other current liabilities 31.12.21 31.12.20 Consulting projects 19,442 15,884 Research and development grants 269 242 Training grants - 22 19,711 16,148 Contracted Acum. received amount amount Grants: 1,706 718 995 581 2,701 1,299 The balances with ongoing projects refer to differences in the progress of projects and contractual invoicing times. This framework is typical of this industry. In 2021, the decrease in 'Trade and other payables' is mainly due to the settlement of EUR 4,500 thousand regarding contingent consideration associated to service hiring guarantees on the acquisition of Celfocus S.A. and the payment of EUR 215 thousand on the acquisition of the non- controlling interests of Novabase Digital, S.A. which preceded the GTE Business disposal. Additionally, the evolution of 'Acquisition of financial holdings' heading reflects the recording as current – that is, with a maturity of up to 12 months at the reporting date – of EUR 1,500 thousand classified as non-current in the previous year (see note 24), related to Celfocus, S.A. acquisition. The fair value of 'Trade and other payables' balance approximates its carrying amount. - P2020 - Portugal 2020 The table below shows the financial incentives for research and development open on 31 December 2021, by type of incentive program. The balances to be received are presented in note 14. The maturity of these liabilities is as follows: - FAI - Innovation Support Fund 47
Notes to the Consolidated Financial Statements 27. External supplies and services 31.12.21 31.12.20 Subcontracts 32,370 29,237 Commissions and consultancy fees 2,016 1,960 Transportation, travel and accommodation expenses 1,224 1,495 Specialised services and rents 3,163 2,026 Advertising and promotion 390 270 Water, electricity and fuel 410 395 Communications 264 318 Insurance 372 385 Utensils, office supplies and technical documentation 756 593 Other supplies and services 553 700 41,518 37,379 28. Employee benefit expense 31.12.21 31.12.20 Key management personnel compensation (note 38 i) 1,539 4,835 Wages and salaries of the employees 67,819 58,821 Employees social security contributions 12,366 11,284 Stock options granted (notes 19 and 38 i) 618 322 Other employee expenses 3,571 4,914 85,913 80,176 The average number of employees is analysed as follows: 31.12.21 31.12.20 (*) Value Portfolio 741 772 Next-Gen 1,125 968 1,866 1,740 (*) 29. Other gains/(losses) - net 31.12.21 31.12.20 Impairment and impairment reversal of inventories (3) (19) Provisions for other risks and charges (note 23) 1,842 3,217 (*) Other operating income and expense (257) 1,180 1,582 4,378 (*) In 2020, this caption includes higher supplementary income, mainly related to backoffice services, which continued to be provided for part of the year in the divested subsidiaries Novabase Digital, S.A. and Collab, and to a non-regular receipt related to the outcome of an old judicial process in the amount of EUR 409 thousand. In 2021, the increase in 'Employee benefit expense' comprises two effects: on the one hand, a decrease in key management compensation, mainly related to variable remuneration, due to the reversal of bonuses from the previous period, and on the other hand, a significant increase in IT specialists team expenses, driven by the 7% enhanced talent pool year-on-year and by talent management initiatives focused on their retention. At 31 December 2021, the number of employees was 2011 (2020: 1775), 31% of whom are women (2020: 32%). Includes holding / shared services representing 76 employees in 2021 (82 in 2020). Other employee expenses include labour accident insurance, social responsibility costs, training costs and indemnities. 'External supplies and services' evolution in 2021 is in line with the Turnover growth. Subcontracts mostly refer to amounts incurred for services rendered by external entities used by the Group to support projects for clients. 48
Notes to the Consolidated Financial Statements 30. Depreciation and amortisation 31.12.21 31.12.20 Property, plant and equipment (note 7): Buildings and other constructions 2,165 2,752 Basic equipment 600 634 Transport equipment 443 553 Furniture, fittings and equipment 55 65 Other tangible assets 1 - 3,264 4,004 Intangible assets (note 8): Internally generated intangible assets 151 128 Industrial property and other rights 106 224 257 352 3,521 4,356 31. Finance income 31.12.21 31.12.20 Interest received 11 108 Foreign exchange gains 780 141 Fair value of financial assets adjustment (note 10) 968 797 (*) Dividends of financial assets 90 43 Provisions for loans to related parties (note 12) 29 - (**) Gain on disposal of financial assets 50 - Reversal of impairment losses on bank balances (note 18) 17 13 Reversal of impairment losses on debt securities - 138 1,945 1,240 (*) (**) 32. Finance costs 31.12.21 31.12.20 Interest expenses - Borrowings (306) (416) - Lease liabilities (note 22) (327) (491) - Other interest (2) (10) Bank guarantees charges (23) (28) Bank services and commissions (97) (118) Foreign exchange losses (962) (1,305) Fair value of financial assets adjustment (note 10) (9) (441) Provisions for loans to related parties (note 12) (57) (98) Fair value adjustment for contingent consideration (note 24) (33) - Impairment losses on bank balances (note 18) - (5) Other financial losses - (16) (1,816) (2,928) 33. Share of loss of associates 31.12.21 31.12.20 Novabase Capital Fundo Capital Risco (notes 6 and 9) (66) (58) (66) (58) Dividends received on the investment in Globaleda, S.A.. Investment in CB Talents Global, S.A. (see also note 10). 49
Notes to the Consolidated Financial Statements 34. Income tax expense This heading is analysed as follows: 31.12.21 31.12.20 Current tax 1,767 1,461 Deferred tax on temporary differences (note 11) (1,474) 451 293 1,912 31.12.21 31.12.20 Earnings before taxes 9,209 5,729 Income tax expense at nominal rate (21% in 2021 and 2020) 1,934 1,203 Provisions reversal (146) (106) Dividends (19) (9) Autonomous taxation 319 370 Results in companies where no deferred tax is recognised (112) 176 Expenses not deductible for tax purposes 211 209 Differential tax rate on companies located abroad 40 (2) Research & Development tax benefit (2,446) (310) Municipal Surcharge and State Surcharge 252 241 Impairment of Special Payment on Account, tax losses and withholding taxes 95 128 Other 165 12 Income tax expense 293 1,912 Effective tax rate 3.2% 33.4% Since 1 January 2009, Novabase is being taxed in Corporate Income Tax under the Special Taxation Regime for Groups of Companies (Group taxation relief). For taxation purposes, this group includes companies held in 75% or more by Novabase S.G.P.S. which comply with the further requirements under article 69 and following of the Corporate Income Tax Code. Regarding the 2021 State Budget Law (Law No. 75-B/2020), the fiscal changes were surgical. Worthy of note is that the plug-in hybrid passenger vehicles, whose plug-in battery can be charged through connection to the power grid and that have a minimum autonomy, in electric mode, of 50 km and official emissions below 50 gCO2 / Km, are the only ones who benefit from the reduced autonomous tax rates (5%, 10% and 17.5%). This change didn't have a significant impact on the income tax expense of Novabase's Group. Legislative changes that became effective on 1 January 2021 The variation in the effective rate is mainly due to the recording in 2021 of a higher volume of tax benefits associated with Research and Development projects under the SIFIDE incentive scheme. The net income generated by foreign subsidiaries is taxed at local tax rates applicable based on their taxable profits, namely, those generated in Spain, in Angola, in Mozambique, in The Netherlands, in the United Kingdom and in Turkey are taxed at 25%, 25%, 32%, 15%, 19% and 25%, respectively. The Group's income tax expense for the year differs from the theoretical amount that would arise using the weighted average rate applicable to profits of the country of the Parent-Company due to the following: The remaining subsidiaries, not contemplated by this mechanism, are taxed individually, based on their taxable profits and the tax rates applicable. According to the current tax legislation, in general terms tax returns can be reviewed by the tax authorities during a subsequent period. In Portugal, this period is 4 years or, if any deduction is made or tax benefit granted, the exercise term of that right. Therefore, all annual tax returns for the year 2018 through 2021 are still open to such review. Novabase andits subsidiaries withhead offices in Portugal are subject to Corporate Income Tax at the nominal rate of 21%,which can be increased by a Municipal Surcharge up to a maximum rate of 1.5% of taxable income, resulting in a total tax rate of 22.5%. Additionally, taxable income exceeding EUR 1,500 thousand and up to EUR 7,500 thousand is subject to a State Surcharge at the rate of 3%, from EUR 7,500 thousand and up to EUR 35,000 thousand is subject to a State Surcharge at the rate of 5%, and the part of taxable income exceeding EUR 35,000 thousand is subject to a State Surcharge at the rate of 9%. 50
Notes to the Consolidated Financial Statements 35. Earnings per share Basic Diluted Earnings per share are analysed as follows: 31.12.21 31.12.20 Weighted average number of ordinary shares in issue 30,721,008 30,815,777 Stock options adjustment 429,466 91,539 Adjusted weighted average number of ordinary shares in issue 31,150,474 30,907,316 Profit attributable to owners of the parent 8,706 7,486 Basic earnings per share (Euros per share) 0.28 Euros 0.24 Euros Diluted earnings per share (Euros per share) 0.28 Euros 0.24 Euros Profit from continuing operations attributable to owners of the parent 7,646 2,977 Basic earnings per share (Euros per share) 0.25 Euros 0.10 Euros Diluted earnings per share (Euros per share) 0.25 Euros 0.10 Euros Profit from discontinued operations attributable to owners of the parent 1,060 4,509 Basic earnings per share (Euros per share) 0.03 Euros 0.15 Euros Diluted earnings per share (Euros per share) 0.03 Euros 0.15 Euros 36. Dividends per share 37. Commitments Bank 31.12.21 31.12.20 (*) Novabase S.G.P.S., S.A. Santander 2,500 2,500 Novabase S.G.P.S., S.A. Bankinter 1,935 3,870 Novabase Business Solutions, S.A. BCP 2,114 2,253 Novabase Business Solutions, S.A. Santander 233 299 Novabase Business Solutions, S.A. Novo Banco 20 48 Novabase Business Solutions, S.A. BPI 216 33 Novabase Business Solutions, S.A. Bankinter 42 75 Novabase Neotalent, S.A. BPI 8 - Novabase Serviços, S.A. BPI - 135 Novabase Serviços, S.A. Novo Banco 410 410 Celfocus, S.A. Santander 50 50 Novabase Neotalent España S.A.U Abanca (**) 90 132 NBMSIT, Sist. de Inf. e Tecnol., S.A. BIM - 136 7,618 9,941 (*) (**) In 2021 and 2020 no amounts were distributed to shareholders (see also note 20). For the calculation of the 'Stock options adjustment', the number of shares that would be acquired at fair value (determined by the average over the period of the market price of Novabase shares) is determined, which is then compared with the number of shares that would be issued if all options were exercised, except for cases where the options have already been exercised (but their ownership has not been transferred to the plan participant) and the number of shares corresponding to those options has been determined, situations in which this number prevails. The financial commitments not included in the Consolidated Statement of Financial Position related with bank guarantees provided to third parties for ongoing projects and leases of the Group, or resulting from the sale of businesses, are analysed as follows: Basic earnings per share is determined by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares (note 19). Bank guarantee entered into within the scope of the commitments undertook following the sale of IMS Business at the end of 2016, which have expired on 5 January 2022, with the subsequent guarantee being cancelled. Diluted earnings per share are determined by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all potential dilutive ordinary shares. Theoretically, Novabase has only one type of potential dilutive ordinary shares: stock options. Since 30 November 2021, Novo Banco Spain was bought and integrated into ABanca. 51
Notes to the Consolidated Financial Statements Group of companies Plafond Novabase S.G.P.S.; NB Business Solutions, S.A. EUR 5.0 Million Novabase S.G.P.S.; Novabase Serviços, S.A.; Novabase Neotalent, S.A.; NB Business Solutions, S.A. EUR 7.0 Million 38. Related parties i) Key management personnel compensation 31.12.21 31.12.20 Short-term employee benefits 1,112 3,389 Other long-term benefits 427 1,446 Stock options granted (note 19) 618 322 2,157 5,157 For reporting purposes, related parties include subsidiaries and associates (detailed in note 6), other participated companies classified as financial assets at fair value through profit or loss (detailed in note 10), shareholders and key elements in the management of the Group. In 2021, the Group had the following grouped credit lines contracted: By unanimous decisions of the Remuneration Committee, fixed remuneration components were set for members of the Novabase Board of Directors in 2021, along with annual variable remuneration. This remuneration is distributed among the members of the Board of Directors in accordance with the breakdown stipulated by the Remuneration Committee, whereby directors receive a fixed remuneration in cash, and being able to receive a variable remuneration that may be variable remuneration in cash and a variable remuneration based on stock options. This remuneration is distributed among the directors in view of their responsibilities at Novabase and as indicated by the Remuneration Committee. The remuneration of non-executive and non-independent directors may include a variable component. The performance of remunerated duties by these members of the Board of Directors allows Novabase to leverage their extensive know-how acquired, namely by the company founders and accumulated over 30 years, especially since these directors continue to have major responsibilities in the Group. Following the sale of GTE Business at the end of 2019, Novabase undertook the following commitments: A Liability Cap for guarantees relating to ownership title, capitalization and corporate structure in the amount corresponding to 100% of the initial price received (EUR 4.5 Million received in March with the conclusion of the transaction + EUR 1.022 Million received in November from the Holdback), during 3 years after completion of the Transaction, that is, until 19 March 2023; A Liability Cap of EUR 3.87 Million by irrevocable bank guarantee of equal amount for a period of 18 months (duration of guarantees), which means, between 9 January 2020 and 9 July 2021, reduced to EUR 1.935 Million between 18 months and 5 years (expiry of tax and Social Security guarantees), that is, between 10 July 2021 and 9 January 2025; Non-competition obligation for 3 years between VINCI Energies Portugal, S.G.P.S., S.A. and Novabase in its core business areas, which means, until 9 January 2023. Remuneration assigned to the Board of Directors and other key management personnel, during the years ended 31 December 2021 and 2020, are as follows: The total variable remuneration assigned to the Board of Directors of Novabase S.G.P.S. and other key management elements of the Group, regardless the year of allocation, which payment is deferred, amounts to EUR 1,997 thousand (31.12.20: EUR 2,104 thousand). At 31 December 2021 there are current payable balances outstanding with key management personnel in the amount of EUR 4 thousand, and current receivable balances outstanding with key management personnel in the same amount, EUR 4 thousand (31.12.20: EUR 10 thousand payable balances). Constitution of a basket deductible of EUR 100 thousand, no de minimis ; Non-competition obligation for 3 years between COLLAB and Novabase in its core business areas, which means, until 19 March 2023. 'Other long-term benefits' caption corresponds to the portion of the variable remuneration recognised in the year on the accrual basis (the final amount is only known in the following exercise after the Remuneration Committee's deliberation - see note 4 g)), with payment to be deferred for more than 1 year after the reporting date. Following the sale of COLLAB – Sol. I. Com. e Colab., S.A. in March 2020, Novabase undertook, jointly and severally with the remaining Sellers, the following commitments: A Liability Cap for all other guarantees provided by Sellers of EUR 3 Million between 2 years and 30 business days and 5 years and 30 business days (expiry of tax and Social Security guarantees), that is, between 24 April 2022 and 5 May 2025; The maximum aggregate Liability CAP under the terms referred to above corresponds to 100% of the initial price received (EUR 4.5 Million received in March with the conclusion of the transaction + EUR 1.022 Million received in November from the Holdback); Constitution of a basket deductible for further corrections in the amount of EUR 306 thousand, minimis of EUR 30.6 thousand, until the end of the period, which means, 9 January 2025; The remuneration policy of the Board of Directors and Supervisory Board of Novabase S.G.P.S., the parent company of Novabase Group, is detailed in Chapter D. Remunerations of the Corporate Governance Report, which is an integral part of this Annual Financial Report, which is summarised below. 52
Notes to the Consolidated Financial Statements Director 1 Fixed annual remuner. (€) 2 Annual variable remuner. in cash paid in 2021 (€) 3, 4 Total partial (fixed + variable in cash paid in 2021) (€) Variable in cash paid in 2021 / Total partial (%) Deferred annual variable remuner. (€) 5 Variable remuner. No. options @ 1.801 Luís Paulo Cardoso Salvado 311,880 324,969 636,849 51.03 389,673 250,000 Álvaro José da Silva Ferreira 242,208 182,455 424,663 42.96 244,195 200,000 Executives Total 554,088 507,424 1,061,512 47.80 633,868 450,000 (% total) 63.96 64.81 64.36 64.38 María del Carmen Gil Marín 165,768 145,576 311,344 46.76 194,837 75,000 José Afonso Oom Ferreira de Sousa 42,000 64,993 106,993 60.74 77,934 - Pedro Miguel Quinteiro de Marques Carvalho 42,000 64,993 106,993 60.74 77,934 - Madalena Paz Ferreira Perestrelo de Oliveira 25,200 - 25,200 - - - José Sancho García 25,200 - 25,200 - - - Rita Wrem Viana Branquinho Lobo C. Rosado 12,000 - 12,000 - - - Non-Executives Total 312,168 275,561 587,729 46.89 350,704 75,000 (% total) 36.04 35.19 35.64 - 35.62 - TOTAL 866,256 782,985 1,649,241 47.48 984,572 525,000 1 2 3 4 5 The amount shown represents the total amount paid to each director in 2021 (excluding the variable component based on stock options, as applicable): 50% of the total amount allocated for 2020 in 2021, plus, in the case of directors who were in office in such years and to whom it was decided to allocate variable remuneration in cash under the terms opportunely disclosed, 1/6 of the amount allocated for 2019 in 2020, 1/6 of the amount allocated for 2018 in 2019 and 1/6 of the amount allocated for 2017 in 2018. The remaining 50% of the amount allocated for 2020 in 2021 will be paid in the following 3 years (2022, 2023 and 2024) in equal parts (corresponding to 1/6 of each year’s total), conditional upon company's positive performance during this time period. The directors Madalena Paz Ferreira Perestrelo de Oliveira, José Sancho García and Rita Wrem Viana Branquinho Lobo Carvalho Rosado were elected at the General Meeting of 25 May 2021, and the remunerations presented here, relating to these directors, only refer to the period after-election. It should also be noted that the director Rita Wrem Viana Branquinho Lobo Carvalho Rosado, earned amounts in 2021 through other companies of the Group regarding her role of Head of Legal of the Novabase Group, which she continued to exercise after the election. These values are not considered in this table and are presented below. Amounts allocated for 2020 in 2021 but deferred for the following 3 years. Regarding the directors who were in office in such years and to whom it was decided to allocate variable remuneration in cash under the terms opportunely disclosed, there are also deferred amounts referring to amounts allocated for 2019 in 2020 and allocated for 2018 in 2019 according to the criteria disclosed in the Corporate Governance Reports of the respective years. The remuneration paid by Novabase S.G.P.S. in 2021 to the directors of the Company in office on 31 December 2021 are as follows: The amount shown includes the amounts allocated as a fixed remuneration at the Remuneration Committee of 2 June 2021, which were channelled to retirement complements through the reinforcement of capitalization insurance contributions currently in force in the Company, replacing the payment of that part of the fixed remuneration - namely, Luís Paulo Cardoso Salvado (38,880 Euros), Álvaro José da Silva Ferreira (32,400 Euros) and María del Carmen Gil Marín (21,600 Euros). Additionally, during 2021, 525,000 stock options of Novabase have been granted, under the Stock Options Plan, to the delegated directors Luís Paulo Cardoso Salvado and Álvaro José da Silva Ferreira and to the director with special responsibilities María del Carmen Gil Marín, as shown in the table below. Note that 75,000 options were also granted, for a total of 600,000 options granted in 2021 (see note 19), to former director Francisco Paulo Figueiredo Morais Antunes, taking into account the duties performed and responsibilities inherent after the cessation of duties at the General Meeting of 25 May 2021, as director of several companies of the Novabase Group and person responsible for several areas relevant to the Group's business, including the financial area. It should also be noted that the Remuneration Committee decided during 2021: To channel 20% of the amounts allocated as fixed remuneration for the year 2021 to each of the directors with executive functions and to the director with special responsibilities to reinforce the capitalization insurance contributions currently in force in the Company, replacing the payment of that part of fixed remuneration; To channel the amounts allocated as variable remuneration in cash related to the performance of Novabase's directors in 2020 (as well as those previously deferred) to reinforce the capitalization insurance contributions currently in force in the Company, replacing the payment of that variable remuneration. Amount used to reinforce capitalization insurance contributions currently in effect at the company. The variable component in cash of directors' remuneration must be determined annually by the Remuneration Committee, based on the criteria described in the Remuneration Policy and in point 70 of the Corporate Governance Report. Without prejudice, the resolutions regarding the directors' variable remuneration taken to date and in particular taken by the Remuneration Committee in 2021 concern the directors' performance during 2020, and therefore the remuneration policy previously in force in the Company was considered in their determination. In view of these principles, the purpose of setting the variable component was to align the part of the variable component of Board members remuneration with the organisation’s performance in the year in question, measured by the net profits generated, and being correlated with the responsibility and performance of each director in particular. A proper balance is also ensured between the fixed and variable portions of those remunerations. 53
Notes to the Consolidated Financial Statements Director Fixed annual remuner. (€) Annual variable remuner. in cash paid in 2021 (€) 6 Total partial (fixed + variable in cash paid in 2021) (€) Variable in cash paid in 2021 / Total partial (%) Deferred annual variable remuner. (€) 7 Francisco Paulo Figueiredo Morais Antunes 50,750 162,484 213,234 76.20 194,837 Paulo Jorge de Barros Pires Trigo 65,000 109,480 174,480 62.75 118,375 João Nuno da Silva Bento 118,296 291,152 409,448 71.11 389,673 Marta Isabel dos Reis G. R. do Nascimento 16,917 - 16,917 - - TOTAL 250,963 563,116 814,079 69.17 702,885 6 7 Director Fixed annual remuner. (€) 8 Annual variable remuner. in cash paid in 2021 (€) 9 Total partial (fixed + variable in cash paid in 2021) (€) Variable in cash paid in 2021 / Total partial (%) Deferred annual variable remuner. (€) 10 María del Carmen Gil Marín - 67,756 67,756 100.00 - Paulo Jorge de Barros Pires Trigo - 82,559 82,559 100.00 76,257 Rita Wrem Viana Branquinho Lobo C. Rosado 104,421 - 104,421 - - 8 9 10 The amount shown represents the total amount paid to each director in 2021: 50% of the total amount allocated for 2020 in 2021, 1/6 of the amount allocated for 2019 in 2020, 1/6 of the amount allocated for 2018 in 2019 and 1/6 of the amount allocated for 2017 in 2018. The remaining 50% of the amount allocated for 2020 in 2021 will be paid in the following 3 years (2022, 2023 and 2024) in equal parts (corresponding to 1/6 of each year’s total), conditional upon company's positive performance during this time period. The members of Novabase's Board of Directors are paid only by this entity, not receiving any other remuneration by any other company in a domain or group relationship with Novabase, or by a company subject to common domain with Novabase, except for the remunerations indicated in the following paragraph. In 2021, no additional remuneration was awarded in the form of profit sharing and/or payment of bonuses. No compensations were paid, nor are any compensations owed, to former executive directors as a result of their duties no longer being performed in 2021, in addition to those legally due. Amounts allocated for 2020 in 2021 but deferred for the following 3 years. Regarding the directors who were in office in such years and to whom it was decided to allocate variable remuneration in cash under the terms opportunely disclosed, there are also deferred amounts referring to amounts allocated for 2019 in 2020 and allocated for 2018 in 2019 according to the criteria disclosed in the Corporate Governance Reports of the respective years. The table below shows the remuneration paid by Novabase S.G.P.S. in 2021, to the Company's directors who ceased their duties at the General Meeting of 25 May 2021: In 2021, an additional amount of 13,384.43 Euros was paid to the members of the Board of Directors in meal allowances. There are no relevant amounts of non-monetary benefits considered as remuneration and not covered by the previous situations. There are no formal mechanisms regulating the possibility of requesting the refund of the variable remuneration earned by the directors of Novabase. However, according to the general principles that guide Novabase's remuneration policy, when the Company's performance is a criterion for determining a variable remuneration, its deterioration may justify, in view of the concrete circumstances, the limitation of such remuneration. The deferred annual variable remuneration to the outgoing director Paulo Jorge de Barros Pires Trigo corresponds to 2/6 of the amount allocated for 2019 in 2020 and 1/6 of the amount allocated for 2018 in 2019. The amount paid to the director Rita Wrem Viana Branquinho Lobo Carvalho Rosado relates to the performance of the functions of Legal Director of the Novabase Group, which she performs under a service rendered contract. The amount shown represents the last 1/6 of the amount allocated for 2017 in 2018 in the case of the director María del Carmen Gil Marín, and to 1/6 of the total amount allocated for 2019 in 2020, 1/6 of the amount allocated for 2018 in 2019 and 1/6 of the amount allocated for 2017 in 2018 in the case of outgoing director Paulo Jorge de Barros Pires Trigo. In 2021, the director María del Carmen Gil Marín and the outgoing director Paulo Jorge de Barros Pires Trigo received and will receive the amounts shown in the table below, respectively by Novabase Capital S.C.R., S.A. and Celfocus, S.A., companies directly or indirectly held at 100% by Novabase S.G.P.S., S.A.. These amounts refer to remuneration earned before their election as members of the Board of Directors. Also, in relation to the director Rita Wrem Viana Branquinho Lobo Carvalho Rosado, the amounts below were settled by Novabase Serviços, S.A., a company 100% held by Novabase S.G.P.S., S.A., and refer to the exercise of the functions of Head of Legal of the Novabase Group. 54
Notes to the Consolidated Financial Statements ii) Balances and transactions with related parties 31.12.21 31.12.20 31.12.21 31.12.20 Associates 47 47 - - Other participated companies 1 40 - - 48 87 - - Impairment allowances for trade and other receivables - - 48 87 Services rendered Supplementary income Interest received 31.12.21 31.12.20 31.12.21 31.12.20 31.12.21 31.12.20 Associates 182 182 - - - - Other participated companies 140 144 5 4 5 5 322 326 5 4 5 5 iii) Other balances with related parties Non-current (note 12) 31.12.21 31.12.20 Associates - - Other participated companies Loan to Powergrid, Lda. 2,050 2,050 Loan to Bright Innovation, Lda. 1,477 1,477 Loan to Radical Innovation, Lda. 994 994 Loan to Power Data, Lda. 248 248 Loan to Glarevision, S.A. 180 180 Loan to Probe.ly, Lda. 75 75 Loan to Habit Analytics, Inc. 9 9 5,033 5,033 Impairment allowance for loans to related parties (3,251) (3,223) 1,782 1,810 Trade and Group companies have commercial relations with each other that qualify as related parties transactions. In consolidation, all of these transactions are eliminated, since the consolidated financial statements disclose information regarding the holding company and its subsidiaries as if they were a single entity. Balances and transactions with related parties are as follows: Accounts receivable and payable with related parties will be cash settled and are not covered by any guarantees. other payables Besides balances and transactions described in the tables above, no other balances or transactions exist with the Group’s related parties. other receivables Trade and These loans take the legal form of quasi-equity supplementary payments. 55
Notes to the Consolidated Financial Statements 39. Discontinued operations 31.12.20 COLLAB GTE IMS Novabase Results of discontinued operations: Results from operating activities, net of tax 20 1,215 - 1,235 Gain on sale of Business 335 2,939 - 3,274 Income tax on gain on sale of Business - - - - 355 4,154 - 4,509 Assets and liabilities from discontinued operations: - - - - Assets from discontinued operations - 342 - 342 Liabilities from discontinued operations (1,128) (5,151) (32) (6,311) (1,128) (4,809) (32) (5,969) Cash flows from (used in) discontinued operations: Net cash used in operating activities (467) (2,206) - (2,673) Net cash used in investing activities 4,001 35,366 - 39,367 Net cash used in financing activities (1) (45) (16) (62) 3,533 33,115 (16) 36,632 31.12.21 COLLAB GTE IMS Novabase Results of discontinued operations: Results from operating activities, net of tax 260 742 9 1,011 Gain on sale of Business 49 - - 49 Income tax on gain on sale of Business - - - - 309 742 9 1,060 Assets and liabilities from discontinued operations: - - - - Assets from discontinued operations - 396 - 396 Liabilities from discontinued operations (817) (3,497) (17) (4,331) (817) (3,101) (17) (3,935) Cash flows from (used in) discontinued operations: Net cash used in operating activities (5) (882) 9 (878) Net cash used in investing activities - - - - Net cash used in financing activities - (16) (15) (31) (5) (898) (6) (909) The financial information on discontinued operations by subsidiary / business sold can be presented as follows: COLLAB In March 2020, the Group sold its 72.45% stake in COLLAB, S.A. to the Swedish Netadmin System i Sverige AB, held by the subsidiary Novabase Business Solutions, S.A. (also 17.75% held by the associate of the Group Novabase Capital Fundo Capital Risco) for an initial purchase price of EUR 6,000 thousand, to which a potential annual earn-out could be added, up to a maximum of three annual periods, depending on COLLAB, S.A.’s performance. The subsidiary was reported in the financial statements for that year as a discontinued operation. Novabase recognised profits and losses for the first two months up to the time of disposal of EUR 20 thousand and recorded a gain on the sale of EUR 335 thousand. Of the initial purchase price agreed, EUR 1,500 thousand was temporarily retained by the buyer as a 'Holdback Amount', and in November 2020 EUR 1,022 thousand of this amount was paid. 56
Notes to the Consolidated Financial Statements 31.12.20 Consideration received or receivable: Cash received 4,001 Fair value of contingent consideration - Total disposal consideration 4,001 Carrying amount of net assets sold (2,197) Provision for Reps & Warranties (1,580) Gain on sale of the equity stake held by Novabase Capital Fundo Capital Risco 111 Gain on sale before income tax 335 Income tax expense on gain - Gain on sale after income tax 335 40. Fair value measurement of financial instruments In June 2021, Novabase was informed by the purchaser of the First Additional Purchase Price (first year earn-out) calculation, totalling EUR 63 thousand, an amount fully received in the year. Since no amount had been considered for contingent consideration in this business at the time of the sale, according to the Management best estimate at that time, the Group recognised, in 2021, an adjustment to the gain in the amount of EUR 49 thousand. During 2021, R&W provisions in the amount of EUR 51 thousand were also used (2020: EUR 452 thousand), and provisions of EUR 260 thousand were reversed, considering the time-effect on the elapsed warranty period. During 2021, provisions for Reps & Warranties created upon the sale of the GTE Business were used, in the amount of EUR 885 thousand (2020: EUR 2,194 thousand) and were reversed, in the net amount of EUR 776 thousand (2020: EUR 1,215 thousand), considering the guarantee period already elapsed. As at 31 December 2021, the balance of provisions for responsibilities still outstanding, recognised in 'Liabilities from discontinued operations', amounts to EUR 3,213 thousand. The closure of the Mozambican subsidiary depends on the completion of the contracts in force at the date of sale, given that NBMSIT, Sist. of Info and Tecnol., S.A. shall ensure the relationship between the end customer and the buyer of the GTE Business, as established at the time of disposal. As at 31 December 2021, this subsidiary has assets in the amount of EUR 396 thousand (2020: EUR 342 thousand) and liabilities of EUR 284 thousand (2020: EUR 277 thousand). Final note to mention that during 2021, EUR 215 thousand were received and settled (see notes 14 and 25), corresponding to 50% of the amount retained by VINCI Energies Portugal, S.A. and indexed to the acquisition of 9.9% of Novabase Digital, S.A. to minority shareholders by Novabase (condition precedent to the deal), according to the terms provided for in the contract. As at 31 December 2021, there are still outstanding balances receivable and payable of EUR 215 thousand, recorded in 'Other non-current assets' (note 12) and 'Other non-current liabilities' (note 24), based on the contractual maturity of the liability. IMS BUSINESS During 2021, provisions of EUR 15 thousand were used (2020: EUR 16 thousand) and a recovery of debts considered uncollectible was recognised, in the amount of EUR 9 thousand. Liabilities with the IMS Business occurred within the limits of the provision created, with 31 December 2021 showing a residual balance of EUR 17 thousand in 'Liabilities from discontinued operations'. Also worthy of note, is that the period of guarantees / liabilities regarding the sale of the IMS Business, discontinued at the end of 2016, ended at 5 January 2022. The details of the sale of COLLAB, S.A. are as follows: The Group's financial assets and liabilities measured at fair value are the following: Derivative financial instruments (assets and liabilities) – Refer to the forward foreign exchange contracts ('FX Forwards') used to manage the Group's exposure to foreign exchange risk (see note 16). Although contracted to hedge foreign exchange risks according to the Group’s financial risk management policies, changes in fair value of these derivatives are included in the consolidated statement of profit or loss (see note 2.22). Financial assets at fair value through profit or loss – This category includes certain interests of the Group in companies mainly held through its Venture Capital Funds, NB Capital Inovação e Internacionalização and Novabase Capital +Inovação, and the participation units held in FCT - Labour Compensation Fund (see note 10). The voluntary arbitration process between the parties, started in 2020, regarding the 'Holdback Amount' paid by the buyer, is still ongoing. On 20 December 2021, the Statement of Claim was presented by the arbitration applicants (Novabase Capital Fundo Capital Risco and Novabase Business Solutions, S.A.), and the deadline for a response from Netadmin System i Sverige AB is running. GTE BUSINESS In 2020, the Group recognised an adjustment to the gain of EUR 2,939 thousand, on the sale of 100% of Novabase Digital S.A. to VINCI Energies Portugal, S.G.P.S., S.A. occurred in December 2019, following the verification of the earn-out and the final determination of the usual price clauses in this type of business, as established in the contract, increasing the consideration obtained with the sale of the GTE Business to EUR 39,252 thousand. It is recalled that as a result of this sale, the Group abandoned its GTE Business, developed in the sold subsidiary but also in the Mozambican subsidiary NBMSIT, Sist. of Info and Tecnol., S.A., in relation to which the Group initiated the procedures for the cessation of activity. 57
Notes to the Consolidated Financial Statements 31.12.21 31.12.20 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Financial assets at fair value Financial assets at fair value through profit or loss 690 - 12,925 577 - 12,024 Derivative financial instruments - 16 - - 64 - 690 16 12,925 577 64 12,024 Financial liabilities at fair value Derivative financial instruments - 71 - - 9 - - 71 - - 9 - A. Valuation techniques B. Fair value measurements using significant unobservable inputs (Level 3) 31.12.21 31.12.20 Balance at 1 January 12,024 11,681 Profit or loss charge 901 343 Balance at 31 December 12,925 12,024 Specific valuation techniques used to determine fair values of financial instruments include: The following table presents the changes in Level 3 instruments for the years ended 31 December 2021 and 31 December 2020: The Group also has a number of financial instruments which are not measured at fair value in the statement of financial position. At 31 December 2021, the fair values of these instruments are not materially different to their carrying amounts, since the interest receivable / payable is either close to current market rates or the instruments are short-term in nature. For FCT participation units – fair value is based on the observable quote of the Participation Units (PU's) at the reporting date (Level 1 in the fair value hierarchy). At 31 December 2021 and 31 December 2020, the Group’s financial assets and financial liabilities measured and recognised at fair value on a recurring basis are as follows: Level 3: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques, and the main inputs are not based on observable market data. The Group classifies its financial instruments into the three Levels of fair value hierarchy prescribed under the accounting standards: Level 1: The fair value of financial instruments is based on quoted prices in active and liquid markets at the reporting date. Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Main inputs used on these valuation models are based on observable market data. For derivative financial instruments (namely the FX Forwards) – fair value is calculated by using the Market-to-Market (MtM) quotes provided by the dealers with whom those transactions were entered with. Those valuations represent the dealers current estimate of the value of the transaction or instrument as at the specified date (Level 2 in the fair value hierarchy). For other financial instruments (where FCR NB Capital Inovação e Internacionalização and FCR Novabase Capital +Inovação' participated companies are included) – fair value is determined using valuation models and financial theories in which the significant inputs are unobservable (Level 3 in the fair value hierarchy). The discounted cash flow method is used, considering a 5-year business plan forecasted by Management. Net fair value adjustments of Level 3 instruments recorded in the year refer essentially to an appreciation of the investment in Feedzai, S.A. (EUR 759 thousand) and at Probely, Lda. (EUR 96 thousand). Positive fair value adjustments were recognised in profit or loss and included in 'Finance income' (see note 31), while negative fair value adjustments were recognised in profit or loss and included in 'Finance costs' (see note 32). There were no transfers between the Levels 3 and 2 for the purposes of fair value measurement in the 2021. There were also no changes made to any of the valuation techniques applied as of 31 December 2020. 58
Notes to the Consolidated Financial Statements Feedzai 31.12.21 31.12.20 Discount rate (post-tax) 12.9% 16.0% Perpetual growth rate 0.5% 0.5% Annual average growth rate of turnover 46.9% 50.9% 41. Contingencies Growth rates of Turnover: The evolution of this indicator is made individually for each participated company after an in-depth analysis of the evolution of each company's business as well as its growth prospects. The growth prospects of the market as a whole in which the participated company operates are also taken into account, considering not only the growth of the market itself but also the evolution of the company's product and its fit in the market and prospects for expansion into new markets. Perpetual growth rates: In all participated companies, the perpetual growth rate is +0.5%. The Group has a team responsible for the Level 3 fair value measurements of the companies held by NB Capital Inovação e Internacionalização and Novabase Capital +Inovação, which reports directly to the finance manager. Discussions of valuation processes and results are held between the finance manager and the valuation team at least once every six months, in line with the Group’s half-yearly reporting periods to the market. The main Level 3 inputs used by the Group in measuring the fair value of financial instruments are derived and evaluated as follows: Discount rates: These are determined by calculating the weighted average cost of capital (“WACC”) for each participated company in each Fund. To calculate the cost of capital, the return on the risk-free asset corresponds to the average yield of the 10-year Portuguese Bonds for the 12 months previous to valuation (risk-free), plus the risk premium for Portugal (Market Risk Premium) at the time of valuation, where the risk factor referring to the participated company (beta) is obtained through the average of comparable companies listed in the stock markets. Finally, a conservative risk premium (alpha) is added to the cost of capital. To calculate the cost of the financial debt of each participated company, the risk-free cost of capital is used, to which a spread is added depending on the risk rating of the participated company to be evaluated, all adjusted by the corporate tax rate to be paid. According to sensitivity analyses performed, a possible increase or decrease of1 percentage point in WACC would result ina Feedzai's fair value change of approximately EUR -1,088 thousand and EUR +1,292 thousand, respectively. As for a possible increase or decrease of 0.5 percentage point in the perpetual growth rate implicit in the calculation of the Terminal Value of the valuation, with all other variables held constant, would result in a fair value change of approximately EUR +414 thousand and EUR -382 thousand, respectively. These sensitivity analyses have illustrative purposes only. At 31 December 2021, the Group was part in the following legal process: The quantitative information about the significant unobservable inputs used in Level 3 fair value measurement of Feedzai, S.A., the main asset in this category representing approximately 88% of these instruments at 31 December 2021, as well as the relationship of some of those unobservable inputs to fair value is set out below. Additionally, in the course of its activity, Novabase is exposed to risks of a civil, labour, contractual nature, among others, whose probability of outcome is evaluated using legal advisors, whenever applicable. At 31 December 2021, the contingencies graded as possible amounted to about EUR 7.6 Million. Probable contingencies are recorded under the heading 'Provisions' (note 23) or under the heading 'Liabilities from discontinued operations' (note 39). Risk adjustments specific to the counterparties (including assumptions about credit default rates): Adjustments for risks specific to the counterparties are mostly reflected in the discount rates calculated for each participated company. Novabase's valuation team analyses the several risks of each company individually, reflecting the necessary adjustments to the WACC, whenever justified. The Company has been served a notice from the Ghana High Circuit Court - Commercial Division, of a lawsuit filed by Rhema Systems Associates Ltd, Novabase's partner in Ghana, for the payment of amounts that it considers to be due for profit sharing in the scope of some business contracts signed with customers. The global amount claimed is USD 1,568,801.76. According to Rhema's allegations, the distribution of profit was not made according to the terms agreed upon in the partnership contract, existing to date divergence as to the executed terms. The stage of the judicial process is suspended because the parties have chosen to initiate a mediation procedure, involving an external mediator from the University of Ghana Law School. Arguments were presented by all parties, and a new date for a mediation meeting is to be scheduled. There are provisions (included in note 23) for probable liabilities associated with the process, and additional costs to those already included in these accounts are not expected. Changes in Level 2 and 3 fair values are analysed at the end of each reporting period during the half-yearly valuation discussion between the finance manager and the valuation team. As part of this discussion, it is considered whether the inputs of the models initially used in its measurement became, for instance, observable and whether they have adherence to the financial instrument under analysis. If the inputs are observable and representative, Novabase changes the category from Level 3 to Level 2. 59
Notes to the Consolidated Financial Statements 42. Additional information required by law (i) (ii) (iii) 43. Events after the reporting period 44. Note added for translation In accordance with article 508-F of the Portuguese Commercial Companies Code, we hereby inform of the following: In addition to all operations described in the notes above, as well as in the Management’s Report, there are no other operations considered relevant which are not already contained either in the consolidated statement of financial position or its notes; Note 38 of the Notes to the Consolidated Financial Statements includes all the related parties' disclosures, in accordance with the International Financial Reporting Standards. The total remuneration of the Statutory Auditor in 2021 was 110,350 Euros (2020: 110,350 Euros), which corresponds in full to the legal accounts audit services, to which 1,500 Euros were added, relating to spin-off-merger opinions required by law under the terms of the legal provisions of the Commercial Companies Code; These financial statements are a free translation of financial statements originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails. In 2022 and up to the date of issue of this report, the following material events occurred: Transactions by person closely associated to director Novabase received communications from the company IBI - Information Business Integration, AG, collective person closely associated to the director José Sancho García, related to the acquisition by IBI of 60,000 ordinary shares of Novabase, representing 0.191% of its share capital and voting rights. The statements further clarify that these acquisitions by IBI are not linked to the exercise of a stock options programme. Novabase leaves the PSI20, which is renamed PSI Euronext announced, in news of 9 March 2022, that NOVABASE will leave the Lisbon stock exchange main index, the PSI20 (where it traded since 23 March 2020), after the markets close on 18 March. This exit takes place within the framework of the new rules of the index, in which the requirement of the lower limit of the free float of market capitalization of the constituent companies becomes 100 Million Euros. From that date onwards, the name of the index no longer contains the reference 20 and becomes simply PSI. Situation in Ukraine Novabase considers the situation in Ukraine as a non-adjustable subsequent event. Despite not having economic relations with Russia, Novabase is not immune to the economic context in which it operates, so the military invasion of Ukraine by Russia could have an impact on future economic performance. Given the exceptional uncertainty at this stage, it is not possible to quantify the magnitude of the impacts, namely on Novabase's activity and profitability during the 2022 financial year. Shareholder remuneration proposal On 17 February 2022, Novabase informed the intention of the Board of Directors to propose, at the 2022 Annual General Meeting of Shareholders, the distribution of EUR 13.5 Million to shareholders. This payment, equal to 155% of the consolidated net profit, represents a remuneration of 43 Euro cents per share. On 24 February 2022, the Russian military invasion of Ukraine began, an event that significantly changed expectations for growth and inflation in the Eurozone for the worse. Since then, capital markets have plunged into an environment of great uncertainty, the price of oil has climbed above 100 dollars, the price of other raw materials has also soared and, on the stock markets, the share had significant drops. The uncertainty of the war also brings the risk of recession, with the fear that high inflation will be combined with a stagnation of economic growth. The European Commission admits, in particular, that the war and possible retaliation by Russia against the sanctions imposed by the EU will have “a negative impact on growth, with repercussions on financial markets, new pressures on energy prices, more persistent bottlenecks in the supply chain and confidence effects ". 60
II. REPORTS ISSUED BY THE SUPERVISORY BOARD AND BY THE CMVM REGISTERED AUDITOR 61
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1/3 REPORT AND OPINION OF THE AUDIT BOARD ON THE CONSOLIDATED FINANCIAL STATEMENTS OF NOVABASE – SOCIEDADE GESTORA DE PARTICIPAÇÕES SOCIAIS, S.A. FOR THE FINANCIAL YEAR ENDED ON DECEMBER 31, 2021 To the Shareholders, INTRODUCTION In compliance with the Law and for the purposes of paragraph g) of article 420 of the Portuguese Companies Code and the Company’s bylaws, the Audit Board hereby presents for appreciation its Report on the supervising activity that was carried out and issues its Opinion on the Management Report and Consolidated Financial Statements of Novabase – Sociedade Gestora de Participações Sociais, S.A. for the financial year ended on December 31, 2021. ACTIVITIES CARRIED OUT Supervision of the Company During the financial year, the Audit Board regularly followed up the evolution of the company’s business and the business of its subsidiaries, ensuring compliance with the law and the relevant bylaws, and monitored the Company's management, the efficiency of the risk management and internal control systems and the preparation and disclosure of financial information, as well as the regularity of the accounting records, the accuracy of the consolidated financial statements and the accounting policies and metrical valuation criteria adopted by the company, in order to verify that they lead to an adequate expression of its consolidated assets, results and cash flows. It should also be noted that on the date of the General Meeting of shareholders of May 25, 2021, after Mr. João Duque's communication to that effect, Novabase's Audit Board resolved to approve the declaration of this member as being temporarily prevented from starting his functions as such, under the terms and for the purposes of paragraph 3 of article 415 of the Portuguese Companies Code. Indeed, due to the position of member of the General and Supervisory Board that Mr. João Duque holds in the bank Caixa Central de Crédito Agrícola Mútuo, C.R.L., the beginning of his functions as member of the Audit Board of Novabase is subject to prior assessment and authorization by Bank of Portugal, which is currently being submitted to the regulator. In this context, Novabase's Audit Board has decided to substitute this member, until the issuance of the referred Bank of Portugal decision, by Manuel Saldanha Tavares Festas, alternate member of the Audit Board elected at the same General Meeting, under the terms and for the purposes of article 415 of the Commercial Companies Code. The referred replacement was in force during the financial year of 2021 and is currently in force. During the year, the Audit Board met five times and the respective meetings were formally recorded in minutes. At these meetings there was an attendance of 100% by the Chairman and Fátima Farinha, and
2/3 of 66,6% by Manuel Festas; the number of meetings indicated corresponds to those that took place after the appointment of the Audit Board at the General Meeting of May 25, 2021. To this date, the previous Audit Board held 2 meetings in the year 2021. The Chairman and Fátima Farinha were part of the previous Audit Board, having also attended all meetings held in 2021 until the appointment of the new Audit Board. Additionally, the Audit Board participated in the Board of Directors meeting that approved the Management Report and the Consolidated Financial Statements for the financial year 2021. Within its duties, the Audit Board maintained the necessary contacts with the representatives of the Chartered Accountants Company and External Auditor, in order to monitor the planning and audit work that was carried out and to take note of the respective findings. The meetings held with the representatives of the Chartered Accountants Company and External Auditor enabled the Audit Board to reach a positive opinion on the integrity, rigor, skill, quality of work and objectivity with which they carried out their work, as well as the reliability of the financial information. Relevant matters concerning auditing were also analysed with the representatives of the Chartered Accountants Company and External Auditor; the Audit Board refers to their report on the consolidated financial statements for the description of the essential elements subject to analysis. During the meetings of the Audit Board, the main risks affecting Novabase Ͳ Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter were analysed and discussed with Management and the Statutory Auditor, based on presentations prepared by these corporate bodies. The Audit Board considers that it has obtained the explanations and clarifications considered relevant. Communication of irregularities The Audit Board declares that during the financial year 2021 it has not received, through the means defined for this purpose, any communication of irregularities. Related Party Transactions During the 2021 financial year, no related party transactions, in accordance with the regulation in force, were submitted to assessment by the Audit Board. Independence of the External Auditor The Audit Board received the statement by the Statutory Auditor confirming its independence in relation to the Company and communicating all relationships that may be perceived as a threat to its independence, as well as the safeguards that were implemented. RESPONSIBILITY STATEMENT Pursuant to paragraph 1/c) of article 29.º Ͳ G of the Portuguese Securities Code, applicable by virtue of paragraph 1/a) of article 8 of the CMVM Regulation no. 5/2008 (Information Duties), we hereby declare that, to the best of our knowledge and belief, the aforementioned financial statements were prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, giving a true and appropriate view of the assets and liabilities, financial position and results of Novabase Ͳ Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter, and the management report faithfully describes the evolution of the business, performance
3/3 and position of Novabase Ͳ Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter, containing an adequate description of the main risks and uncertainties which they face. OPINION The Audit Board analysed the Management Report and the Consolidated Financial Statements for the 2021 financial year, which comprise the Consolidated Statement of Financial Position as at December 31, 2021, the Consolidated Statement of Profit and Loss, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows, as well as the accompanying notes, which were prepared in accordance with the International Financial Reporting Standards, as adopted in the European Union. Within its duties the Audit Board has analysed the Legal Certification of Accounts and the Audit Report on the Consolidated Financial Information for the 2021 financial year, prepared by the Statutory Auditor, document which does not present any reservation and with which the Audit Board agrees. The Audit Board further analysed the Corporate Governance Report for the 2021 financial year, which is attached to the Management Report prepared by the Board of Directors in compliance with the CMVM Regulation no. 4/2013 (Corporate Governance of Listed Companies), and the Audit Board certifies that it includes all the elements referred to in article 29ͲH of the Portuguese Securities Code. In this context, it is the Audit Board’s opinion that: x There are no objections to the approval of the Management Report for the 2021 financial year; x There are no objections to the approval of the Consolidated Financial Statements for the 2021 financial year. Lisbon, April 27, 2022 The Audit Board Álvaro José Barrigas do Nascimento – Chairman Fátima do Rosário Piteira Patinha Farinha – Member Manuel Saldanha Fortes Tavares Festas – Alternate Member 1 1 Alternate member that is substituting in the office the effective member João Luís Correia Duque, under the terms of article 415 of the Portuguese Companies Code.
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. Edifício FPM41 - Avenida Fontes Pereira de Melo, 41 – 15º 1069-006 Lisboa - Portugal +351 210 110 000 | www.kpmg.pt KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese private limited company and a member firm of the KPMG Global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., Capital Social: 3.916.000 Euros - Pessoa Colectiva Nº PT 502 161 078 - Inscrito na O.R.O.C. Nº 189 - Inscrito na C.M.V.M. Nº 20161489 Matriculada na Conservatória do registo Comercial de Lisboa sob o Nº PT 502 161 078 STATUTORY AUDITORS’ REPORT (Free translation from a report originally issued in Portuguese language. In case of doubt the Portuguese version will always prevail.) REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Opinion We have audited the accompanying consolidated financial statements of Novabase, S.G.P.S, S.A. (the Group), which comprise the consolidated statement of financial position as at 31 December 2021 (showing a total of 165,444 thousand euros and total equity of 75,949 thousand euros, including non-controlling interests of 10,361 thousand euros and a profit for the year of 8,706 thousand euros), and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the accompanying 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, in all material respects, of the consolidated financial position of Novabase, S.G.P.S, S.A. as at 31 December 2021 and of its financial performance and its cash flows for the year then ended in accordance with the International Financial Reporting Standards as adopted by the European Union. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and further technical and ethical standards and guidelines as issued by Ordem dos Revisores Oficiais de Contas (the Portuguese Institute of Statutory Auditors). Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the consolidated Financial Statements” section below. We are independent of the Group in accordance with the law and we have fulfilled other ethical requirements in accordance with the Ordem dos Revisores Oficiais de Contas’ code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
2 Revenue recognition (Euro 178,788 thousand) See Note 5 to the consolidated financial statements. The Risk Our response to the identified risk The revenue recognition policy for advisory projects on a turnkey basis, which represent a significant part of the Group’s business, requires judgment as disclosed in Note 4 (d) of the notes to the consolidated financial statements. The recognition of such overtime projects in accordance with the applicable accounting policy, as described in Note 2.19 (a), involves a number of qualitative factors such as estimated billing, costs to be incurred, including contingency values for contractual risks, which justify that the recognition of revenue has been considered as a key audit matter. Our audit procedures included, amongst others, those that we describe below: We have analysed the revenue recognition policy adopted by the Group with reference to the applicable accounting standards; We have evaluated the design and implementation and operational effectiveness of relevant controls, including application controls and general IT controls, related to the revenue recognition process; We have critically analysed the estimates and assumptions made by the management, namely regarding estimated billing, costs to be incurred and contingencies; We have carried out substantive analytical procedures and detailed tests to the accounting records in order to identify and test the risk of fraud and potential derogation to implemented controls; and,; We assessed the adequacy of the respective disclosures to the financial statements, in accordance with the applicable accounting framework.
3 Recoverability of goodwill (Euro 11,501 thousand) See Note 8 to the consolidated financial statements which describes the net book value of the goodwill of the Next-Gen and NeoTalent business areas. The Risk Our response to the identified risk The determination of the recoverable value of these assets is subjective due to the uncertainty inherent to the financial projections and to the discount of future cash flows, since many key assumptions are based on management expectations, not observable in the market. The Group performs, on an annual basis, impairment tests on goodwill based on the discounted cash flow method, considering a 5-year business plan estimated by management, as mentioned in Notes 2.7 (1), 4 (a) and 8. The complexity and inherent degree of judgment justify that the recoverability of goodwill has been considered a key audit matter. Our audit procedures included, amongst others, those that we describe below: We have evaluated the design and implementation and operational effectiveness of the key controls implemented by the Group in connection with this matter and have reviewed the budgeting procedures on which the projections are based, by comparing the current performance against estimates made in prior periods, and the integrity of the discounted cash flow model; We have assessed the internal and external assumptions used and the reasonableness of such as current business trends, market performance, inflation, projected economic growth and discount rates; We have performed sensitivity analyses on the robustness of the assumptions and forecasts used; We have involved out experts in benchmarking the average cost of capital ratio; and, We assessed the adequacy of the respective disclosures to the financial statements, in accordance with the applicable accounting framework.
4 Recoverability of deferred tax assets (Euro 9,443 thousand) See Note 11 to the consolidated financial statements which describes the amount of deferred tax assets, of which 8,782 thousand euros related to tax benefits arising from Research and Development projects presented under the SIFIDE incentive scheme. The Risk Our response to the identified risk Deferred tax assets recorded by management are based on its best estimate on the timing and future amounts required for their recovery, using assumptions that require judgment, as mentioned in Notes 2.15 and 4 (c). The associated level of uncertainty and the degree inherent to the judgement justify that the recoverability of deferred tax assets has been considered as a key audit matter. Our audit procedures included, amongst others, those that we describe below: We have evaluated the design and implementation and operational effectiveness of the key controls implemented by the Group in connection with this matter and have analysed the budgeting procedures on which the projections are based, by comparing the current performance with estimates made in prior periods; We have analysed the assumptions and methodology used by management to assess the recoverability of deferred tax assets, namely projections of taxable income; and, We assessed the adequacy of the respective disclosures to the financial statements, in accordance with the applicable accounting framework.
5 Responsibilities of management and the supervisory body for the consolidated financial statements Management is responsible for: the preparation of consolidated financial statements that give a true and fair view of the Group’s consolidated financial position, financial performance and the consolidated cash flows, in accordance with the International Financial Reporting Standards as adopted by the European Union; the preparation of the consolidated management report, the corporate governance report, the consolidated non-financial information and the remunerations’ report, in accordance with applicable laws and regulations; designing and maintaining an appropriate internal control system to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; the adoption of accounting policies and principles appropriate in the circumstances; and, assessing the Group’s ability to continue as a going concern, and disclosing, as applicable, the matters that may cast significant doubt about the Group’s ability to continue as a going concern. The supervisory body is responsible for overseeing the Group’s financial reporting process. Auditors’ responsibilities for the audit of the financial statements Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatements whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs 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 financial statements. As part of an audit in accordance with ISAs, 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 management;
6 conclude on the appropriateness of management’s 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 auditors’ report to the related disclosures in the 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 auditors’ report. 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 financial statements represent the underlying transactions and the events in a manner that achieves fair presentation; obtain sufficient appropriate audit evidence regarding the financial information of the entities or 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; and, communicate with those charged with governance regarding, including the supervisory body, 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; determine, from the matters communicated with those charged with governance, including the supervisory body, those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes their public disclosure; and, provide the supervisory body with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. Our responsibility also includes the verification that the information contained in the consolidated management report is consistent with the consolidated financial statements, and the verification of the requirements as provided in numbers 4 and 5 of article 451 of the Portuguese Companies’ Code regarding the corporate governance report, as well as the verification that the consolidated non-financial information and the remunerations report were presented. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS On the consolidated management report Pursuant to article 451, nr. 3, al. (e) of the Portuguese Companies' Code, it is our opinion that the consolidated management report was prepared in accordance with the applicable legal and regulatory requirements, the information contained therein is consistent with the audited consolidated financial statements and, having regard to our knowledge and assessment of the Group, we have not identified any material misstatements. As defined in the article 451, nr. 7 of the Portuguese Companies’ Code, this opinion is not applicable to the non-financial statement that is included in the management report.
7 On the corporate governance report Pursuant to article 451, nr. 4, of the Portuguese Companies' Code, it is our opinion that the corporate governance report includes the information required to the Group to provide under article 29-H of the Securities Code, and we have not identified any material misstatements on the information provided therein in compliance with paragraphs c), d), f), h), i) and l) of nr. 1 of that article. On the non-financial information Pursuant to article 451, nr. 6, of the Portuguese Companies' Code, we inform that the Group has included in its management report the non-financial statement defined in article 508-G of the Portuguese Companies’ Code. On the remunerations’ report Pursuant to article 26-G, nr. 6, of the Securities Code, we inform that the Group has prepared a remunerations report where includes the information defined in nr. 2 of that article. On the European single electronic format (ESEF) The consolidated financial statements of Novabase, S.G.P.S, S.A. for the year ended 31 December 2021 have to comply with the applicable requirements established by the European Commission Delegated Regulation 2019/815 of 17 December 2018 (ESEF Regulation). Management is responsible for the preparation and presentation of the annual report in accordance with the ESEF Regulation. Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements, included in the annual report, have been prepared in accordance with the requirements of the ESEF Regulation. Our procedures considered the OROC (Portuguese Institute of Statutory Auditors) technical application guide on ESEF reporting and included, amongst others: obtaining an understanding of the financial reporting process, including the presentation of the annual report in a valid XHTML format. identifying and assessing the risks of material misstatement related to the tagging of information in the financial statements, in XBRL format using iXBRL technology. This assessment was based on an understanding of the information tagging process implemented by the Entity. In our opinion, the consolidated financial statements, included in the annual report, are presented, in all material respects, in accordance with the requirements established by the ESEF Regulation.
8 On the additional matters provided in article 10 of the Regulation (EU) nr. 537/2014 Pursuant to article 10 of the Regulation (EU) nr. 537/2014 of the European Parliament and of the Council, of 16 April 2014, and in addition to the key audit matters mentioned above, we also report the following: We were first appointed as auditors of the Group in the shareholders general assembly held on 29 April 2015 for a first mandate from 2015 to 2017. We were appointed as auditors of the Group in the shareholders general assembly held on 10 May 2018 for a second mandate from 2028 to 2020. We were reappointed as auditors of the Group in the shareholders general assembly held on 25 May 2021 for a third mandate from 2021 to 2023. Management as confirmed to us that they are not aware of any fraud or suspicion of fraud having occurred that has a material effect on the financial statements. In planning and executing our audit in accordance with ISAs we maintained professional skepticism, and we designed audit procedures to respond to the possibility of material misstatement in the financial statements due to fraud. As a result of our work, we have not identified any material misstatement of the consolidated financial statements due to fraud. We confirm that the audit opinion we issue is consistent with the additional report that we prepared and delivered to the supervisory body of the Group on 27 April 2022. We declare that we have not provided any prohibited services as described in article 5 of the Regulation (EU) nr. 537/2014 of the European Parliament and of the Council, of 16 April 2014, and we have remained independent of the Group in conducting the audit. 27 April 2022 SIGNED ON THE ORIGINAL KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (no. 189 and registered at CMVM with the nr. 20161489) represented by Susana de Macedo Melim de Abreu Lopes (ROC no. 1232 and registered at CMVM with the nr. 20160843)
III. SECURITIES ISSUED BY THE COMPANY AND OTHER GROUP COMPANIES, HELD BY CORPORATE BODIES 75
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Share capital Total number of shares / quotas No. shares / quotas held by corporate bodies at 31.12.20 Transactions No. shares / quotas held by corporate bodies at 31.12.21 % held by corporat e bodies at 31.12.21 Novabase S.G.P.S., S.A. 54,638,426 € 31,401,394 12,727,528 2,135,937 17,556,114 55.9% 9,134,829 1,675,994 10,810,823 34.4% N/A 459,943 4,549,188 14.5% 2,097,613 0 2,097,613 6.7% 74,986 0 74,986 0.2% 23,001 0 23,001 0.1% N/A 0 500 0.0% 1 0 1 0.0% 1 0 1 0.0% 1 0 1 0.0% N/A 0 0 0.0% N/A 0 0 0.0% N/A 0 0 0.0% 0 0 0 0.0% 0 0 0 0.0% 0 0 0 0.0% 0 0 0 0.0% 1,366,761 0 N/A - 30,335 0 N/A - 0 0 N/A - 0 0 N/A - 0 0 N/A - NBASIT - Sist. Inf e Telecomunicações, S.A. 47,500,000 AOA 100,000 800 0 600 0.6% Álvaro José da Silva Ferreira 400 0 400 0.4% Luís Paulo Cardoso Salvado 200 0 200 0.2% Francisco Paulo Figueiredo Morais Antunes (e) 200 0 N/A - Novabase reports in the above table the securities held directly by members of the board of directors and supervisory bodies of the Company or by the persons closely associated to them. SECURITIES ISSUED BY THE COMPANY AND COMPANIES IN A CONTROL OR GROUP RELATIONSHIP WITH NOVABASE S.G.P.S., HELD BY MEMBERS OF THE CORPORATE BODIES OF NOVABASE S.G.P.S. HNB - S.G.P.S., S.A. (a) IBI - Information Business Integration, A.G. (E) Pedro Miguel Quinteiro Marques de Carvalho Manuel Saldanha Tavares Festas María del Carmen Gil Marín João Luís Correia Duque (c) Luís Paulo Cardoso Salvado Álvaro José da Silva Ferreira José Afonso Oom Ferreira de Sousa José Sancho García (c) Rita Wrem Viana Branquinho Lobo Carvalho Rosado (c) Madalena Paz Ferreira Perestrelo de Oliveira (c) Álvaro José Barrigas do Nascimento Fátima do Rosário Piteira Patinha Farinha KPMG & Associados – S.R.O.C., represented by Susana de Macedo Melim de Abreu Lopes (d) Maria Cristina Santos Ferreira João Nuno da Silva Bento (e) Francisco Paulo Figueiredo Morais Antunes (e) Paulo Jorge de Barros Pires Trigo (e) Marta Isabel dos Reis da Graça Rodrigues do Nascimento (e) Miguel Tiago Perestrelo da Câmara Ribeiro Ferreira (e) (a) José Afonso Oom Ferreira de Sousa, Luís Paulo Cardoso Salvado and Álvaro José da Silva Ferreira are the controlling shareholders and directors of HNB - S.G.P.S., S.A., having executed a shareholder’s agreement concerning the entirety of the share capital of this company. (b) José Sancho García is the controlling shareholder of IBI - Information Business Integration, A.G., therefore this holding and corresponding voting rights is attributable to him. (c) Designated as member of the Company's corporate bodies as of 25 May 2021. (d) Until 22 December 2021, it was represented by the partner Paulo Alexandre Martins Quintas Paixão. (e) No longer belongs to the Company's corporate bodies as of 25 May 2021. 77
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NOVABASE S.G.P.S., S.A. STATEMENT OF COMPLIANCE
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Statement of the Board of Directors and persons responsible within Novabase (Free translation from the original version in Portuguese) SIGNED ON THE ORIGINAL Francisco Paulo Figueiredo Morais Antunes Finance Manager and Director of several companies of Novabase Group Luís Paulo Cardoso Salvado Pursuant to the terms of section c) of paragraph 1 of article 29-G of the Portuguese Securities Code, the members of the Board of Directors and persons responsible within Novabase, Sociedade Gestora de Participações Sociais, S.A., below identified declare, in the quality and scope of their duties as referred to therein, that, to the best of their knowledge and based on the information to which they had access, namely within the Board of Directors: (i) the information contained in the management report, annual accounts, Auditors’ Report and all other accounting documentation required by law or regulation, regarding the year ended 31 December 2021, was prepared in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, financial position and results of Novabase S.G.P.S., S.A. and the companies included in the consolidation perimeter; and (ii) the management report faithfully states the evolution of the businesses, performance and position of Novabase S.G.P.S., S.A. and the companies included in the consolidation perimeter, containing (namely) an accurate description of the main risks and uncertainties which they face. Lisbon, 27 April 2022 José Sancho García Non-Executive member of the Board Chairman and Director with delegated powers (CEO) José Afonso Oom Ferreira de Sousa Non-Executive member of the Board Pedro Miguel Quinteiro Marques de Carvalho Álvaro José da Silva Ferreira Non-Executive member of the Board Director with delegated powers María del Carmen Gil Marín Director with special responsibilities Rita Wrem Viana Branquinho Lobo Carvalho Rosado Non-Executive member of the Board Madalena Paz Ferreira Perestrelo de Oliveira Non-Executive member of the Board
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Statement by the members of the Audit Board under paragraph 1, c) of article 29º-G of the Portuguese Securities Code Álvaro José Barrigas do Nascimento, chairman of the Audit Board of Novabase S.G.P.S. S.A. declares that, to the best of his knowledge, the information contained in the management report, the annual accounts, the chartered accountant legal certification and all other financial statement documentation regarding the year ended 31 December 2021 was drafted in accordance with the applicable accounting standards, give a true and appropriate view of the assets and liabilities, the financial position and the results of the issuer and, when applicable, of the companies included in the consolidation perimeter, and the management reports faithfully state the evolution of the businesses, performance and position of the issuer and, when applicable, of the companies included in the consolidation perimeter, containing a description of the main risks and uncertainties which they face. Lisbon, April 27, 2022 Fátima do Rosário Piteira Patinha Farinha, member of the Audit Board of Novabase S.G.P.S. S.A. declares that, to the best of her knowledge, the information contained in the management report, the annual accounts, the chartered accountant legal certification and all other financial statement documentation regarding the year ended 31 December 2021 was drafted in accordance with the applicable accounting standards, give a true and appropriate view of the assets and liabilities, the financial position and the results of the issuer and, when applicable, of the companies included in the consolidation perimeter, and the management reports faithfully state the evolution of the businesses, performance and position of the issuer and, when applicable, of the companies included in the consolidation perimeter, containing a description of the main risks and uncertainties which they face. Lisbon, April 27, 2022 Manuel Saldanha Fortes Tavares Festas, alternate member of the Audit Board of Novabase S.G.P.S. S.A. who is replacing the effective member João Luís Correia Duque, under the terms of article 415 of the Portuguese Companies Code declares that, to the best of his knowledge, the information contained in the management report, the annual accounts, the chartered accountant legal certification and all other financial statement documentation regarding the year ended 31 December 2021 was drafted in accordance with the applicable accounting standards, give a true and appropriate view of the assets and liabilities, the financial position and the results of the issuer and, when applicable, of the companies included in the consolidation perimeter, and the management reports faithfully state the evolution of the businesses, performance and position of the issuer and, when applicable, of the companies included in the consolidation perimeter, containing a description of the main risks and uncertainties which they face. Lisbon, April 27, 2022
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