The directors present the strategic report for the year ended 31 December 2021.
About Contino
Contino Solutions Limited is a leading transformation consultancy that helps large, heavily-regulated enterprises to become fast, agile and competitive. "We Advise" by assessing clients’ maturity and creating a cutting-edge strategy to help them succeed. "We Build" - everything from initial lighthouse projects to enterprise-grade platforms and products. "We Upskill" by giving clients the skills they need to be competitive in a cloud-native world.
Since 2014, we’ve grown to a global team and we here to challenge the status quo. Since then, we have delivered over 300 transformation projects with over 150 of the world’s largest brands and partner with the leading cloud providers. Contino were recognised as one of the top 25 start-ups to work for by LinkedIn in 2018 and 2019. The industries that we serve include: Banking and Financial Services; Insurance; Public Sector; Communications, Media & Technology; Energy, Utilities & Natural Resources; Life Sciences & Healthcare; Travel & Transport; Digital Native & Start-Ups.
Our Partners
Contino partners with the world’s leading cloud providers and cutting-edge digital outfits to accelerate our customer’s transformation. Contino is a Premier Services member of the Amazon Web Services Partner Network (APN), a Google Cloud Platform Premier Partner and a leading Microsoft Gold partner with multiple Gold competencies. Our technology partners include: FinOps Foundation, Kubernetes, Snowflake, Databricks, GitLab, Cloud Native Computing Foundation, The Linux Foundation and Cloud Security Alliance.
Acquisition
Contino was acquired in October 2019 by Cognizant, one of the world’s leading professional services companies. Since then, we have been in a stronger position to offer, and more readily deploy, transformative solutions for clients. As part of Cognizant, Contino has been working in close partnership with its Digital Business practices and have had even more opportunities to scale its offerings globally and extend its success. Contino and Cognizant’s shared expertise in cloud technologies, DevOps, digital engineering, and data analytics, along with the experience of serving many of the same leading clients, enabled Contino to seize new global opportunities. During 2020 and 2021 Contino delivered a number of successful projects in partnership with Cognizant.
Contino Solution Limited owns 100% of its Australian subsidiary – Contino Pty Ltd. The ultimate Parent company of Contino Solution Limited has been Cognizant Domestic Holdings Corporation since the acquisition by Cognizant in October 2019. The immediate parent remains Contino Holdings Inc.
FY21 Results
Contino is still a fast-growing company. Our Revenue, Profits and Bookings continue to increase year on year. 2021 produced strong results with record high Revenue and Booked Work. Revenues for 2021 closed at £35,715,250 (2020: £26,869,101), representing a 33% increase year on year. This was achieved by growth in our existing customer accounts as well as the increase in sales of new business. Contino secured £47,441,435 in booked contracts in 2021 (2020 bookings: £30,684,854), which represents 55% increase year on year. Contino continues to build trusted relationships with its customers, using a consultative, outcome-based, value-driven methodologies. We define solutions to customer problems that will deliver meaningful business change, focusing on customer value. In addition to a distinctive approach to helping clients accelerate their digital transformation, our talented consulting teams, unique operating model, as well as innovative engineering culture contributed to the successful performance of the company.
The company results for the year show net profit of £2,865,620 (2020 loss: £3,598,086). Our net profit continues to be impacted by Retention Payments that were agreed as part of the SPA when Cognizant acquired Contino. This impact is however decreasing: £2.1m in 2021 vs £6.2m in 2020. Retention payments are included in our Administrative Expenses.
The company had net asset of £9,368,202 in the year ending 2021 (2020: £6,502,582). This increase in net assets was driven mainly by 1) increase in Cash by £1,071,915, which was achieved by increased collections on higher sales as well as the repayment of the loan by Contino Pty Ltd; 2) reductions in creditors - a loan from Cognizant as well as reduction in VAT liability. Contino took advantage of the COVID-19 VAT payment deferral scheme, allowing to defer VAT payments falling due between 20th March 2020 and 30th June 2020 until 31st March 2021.
Political and Economic uncertainties
Contino is a global company with clients based in UK, Europe and rest of the world. Any negative political, legal or economic conditions might impact on our business. On 31st January 2020 the United Kingdom formally left the European Union, which impacted freedom of movement between United Kingdom and European Union countries. In the past Contino engaged with the Clients based in Europe and employees previously were able to travel freely to these countries without the need to obtain visas or work permits. The impact on our business so far has been limited but in the future Contino could be adversely impacted by the new post-Brexit travel and working arrangements. Some of our potential projects in Europe could be delayed, with recruitment of skilled workforce from Europe could also be negatively impacted.
Conflict in Ukraine
Russia invaded Ukraine on 24th February 2022. The war in Ukraine has been having a huge impact on people’s lives and forcing millions of people to flee the country with no place to stay - many of whom are arriving in the UK every day. Whilst Contino has no clients, operations or employees located in either Ukraine or Russia, the Directors have been closely monitoring the events unfolding in Ukraine. The company has been supporting employees, families and friends who have been affected by the situation and encouraging charity donations and volunteering.
One of the indirect impacts of the war is an increased global inflation. Rising global energy prices are affecting companies across the whole economy and Russian invasion of Ukraine might keep inflation for longer by triggering a further increase in prices. This increased inflation might have a negative impact on Contino’s operating cost and net margins. To mitigate these risks the company will focus on building a closer partnership with Cognizant in 2022 that will drive greater cost efficiencies, with synergies expected in areas like administrative expenses, rent and IT costs. Contino will also be implementing better cost controls through improved expenses policies.
In March 2020 the World Health Organisation declared the coronavirus (COVID-19) outbreak a global pandemic. In an attempt to stop the spread of COVID-19, the British government enforced a lockdown and the closure of all non-essential businesses. The outbreak and the response of Government in dealing with the pandemic did not cause a significant interference with general activity levels and the operations of our business. The Company’s main business activities are to provide the cloud-native technology solutions and despite the challenging times during the pandemic in 2020, Contino managed to maintain revenue levels similar to 2019, and increased revenue by 33% in 2021. One of the side effects of the pandemic has been the acceleration of many businesses to shift to operating with digital business models and Contino specialises in digital transformation.
During the Coronavirus pandemic Contino’s top priority was the safety of all its employees. The Company followed the Government guidance and advised all employees to work from home. The Company issued Remote Working Guidelines and allowed employees to purchase office equipment to make working from home more comfortable (through its own ‘Contishop’). The transition was seamless as Contino had already full remote capabilities before COVID-19 hit.
Contino uses a unique Squad Operating Model where all the functions of the business (including Sales, Consulting, Engineering, Finance, Marketing, People, Talent) are collectively working towards KPIs. The goal is to collaboratively apply diverse skill sets to an engagement in order to deliver a deep transformation program that results in more than just a technical outcome.
The Company measures its performance using the below Key Performance Indicators:
Team Health - measured using various employee engagement surveys, feedback tools, end of project reviews and performance reviews.
Delivery of Business Outcome – successful delivery of projects and adding value to our customers is crucial to company’s success. Some of the core KPI’s of our customers include: cost reduction by x, increase time to market by x, regulatory compliance and customer satisfaction.
Financial Model - financial KPIs include measures like Revenue Growth (% year on year growth is 33% in 2021), Gross Margin (47.7% in 2021 vs 45.4% in 2020) and Net Profit (company reported profit of £2,865,620 in 2021).
Account Growth – which includes booked work, key accounts and close relationships with key stakeholders, new opportunities within existing clients and new logos.
Strategic Focus Areas for Contino for 2022 include:
Driving Growth
Contino will continue to drive growth in 2022 and this will be achieved by: Building an opinionated Contino point of view on key themes and topics, building the engineering and consulting IPs; Designing, mapping and delivering upon transformation journeys for our clients to successfully deliver upon their strategic needs; Building a differentiated partner ecosystem that accelerates our customers’ transformation journey and enables them to work with the best partners without having to go through their own learning and experimentation phase. Contino will also build closer partnership with Cognizant against key capabilities to build a transformation powerhouse that clients love to work with. Contino’s growth strategy will be focused on maturing and scaling existing services rather than introducing any new services offerings.
Operational Excellence
Contino will aim to improve operational process in 2022 with a focus on resourcing and onboarding experience, project delivery governance and account lifecycle governance, management, leadership and continues growth.
Our People and Culture
Our mission is to nurture and maintain a culture that enables our employees to thrive and Contino to grow. To achieve this, Contino will focus on delivering the sustainable workforce by hiring and retaining the best talent; making Contino the best place to work by offering an inclusive and diverse place to work and creating an exceptional opportunities and career development for our employees.
Sustainability
Contino strategy will be achieved in a way that ensures the long-term health and future of the Company. The Business will continue to be profitable by selling high-value services to high-value customers. Our aim is also to help our customers build a sustainable business and value propositions via accelerated adoption of Digital.
This statement is intended by the Directors to set out how they have approached and met their responsibilities under Section 172 of the Companies Act 2006 in the financial period ending 31st December 2021.
The Directors of Contino act in accordance with a set of general duties, including those under Section 172 of the Companies Act 2006 to promote the success of the company for the benefit of its members as a whole. In doing so they complied with the below factors:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct,
(f) the need to act fairly as between members of the company.
Decision Making
The Directors understand the business and the markets within which we operate. By focusing on our purpose, vision and strategy set by the Directors and Leadership Team is to ensure that we continue to deliver value to our people, customers, partners and other stakeholders. All matters that, under the Company’s governance arrangements, are reserved for decision by the Directors are presented at Board meetings. Directors are briefed on any potential impacts and risks for our people, customers, partners and other stakeholders and how these are to be managed. The Directors consider these factors before making a final decision, which as a Board, they believe is in the best interests of the Company. During 2020 and 2021 this included assessing the continued impact of COVID-19, as well as making decisions on the remote working policy and the extent to which our offices will be accessible by our employees.
Employees
Contino is a business driven by people and that’s why the primary focus for Directors of the Company is employee engagement. Employees at Contino are encouraged and empowered to contribute to improving business performance. The Directors are involved in and support the following initiatives that are aimed at keeping employees informed and at gathering their feedback:
Monthly Contino Gathering – project, company-wide and leadership updates with Q&A sessions
Monthly “Ask me Anything” sessions with the Managing Director
Annual Employee Engagement Survey
Weekly pulse surveys which measure individual and team health
Weekly updates via company communicator by the Managing Director, highlighting all the important matters that happened in that week
Fostering Business Relationships with Suppliers, Customers and Others
The Directors recognise that fostering business relationships with key stakeholders, such as customers, suppliers, partners and regulatory authorities, is essential to the company’s success. Contino is part of the Cognizant Group and follows the group wide Code of Business Conduct and Ethics, which provides all employees of the Group with guidance on the key principles that each employee should follow.
Contino’s services delivery focuses on Customer values. Contino Directors ensure that the Company build trusted long term relationships with its customers, using a consultative, outcome-based, value-driven methodology. Contino works with regulated enterprise clients to understand their strategies and goals to build and scale their capabilities necessary to deliver high quality, compliant and secure software change.
Contino follows Cognizant’s global process for onboarding new vendors that comply with Corporate Security, Ethics & Compliance and Data Privacy policies.
Impact on the Community and the Environment
The Directors recognise the importance of leading a company that not only generates value for shareholders but also contributes to wider society. Contino strive to act in an environmentally friendly way and is always aspiring to give back to the community. Contino Employees are encouraged to take part in charitable initiatives, each employee can take one day off to volunteer within the community of their choice.
Maintaining a reputation for high standards of business conduct
The Directors of the company promote the following values and behaviours (“The Contino Way”):
One Team: Collaboration is key, through this we build expertise - together as a team.
Own It: All Employees are accountable for their actions. When we say we’re going to do something we do it.
Seek Solutions: Problems are an opportunity for us to excel. We focus on the big picture and leave our egos at home.
Deliver Value: Work with purpose and drive real business value. We’re trusted to deliver real transformation.
In addition to that, The Directors foster an open and collaborative culture where employees are encouraged to support each other, give regular feedback, share knowledge and new ideas.
The need to act fairly between members of the company
The Directors recognise their responsibility in ensuring that all members of the company are treated equally, regardless of age, gender and orientation. The company has implemented a number of programs to promote diversity, equality and to create inclusive environments, which include: Wellbeing and Diversity, Belonging & Inclusiveness programs. As a business driven by people, Contino’s Directors are committed to treating everyone with respect, fairness and equality. Contino is committed to encouraging the equality and diversity of our workforce and eliminating any unlawful discrimination. We aim for Contino to be truly representative of all sections of society and our customers and for each employee to feel respected and able to give their best.
Greenhouse Gas Emissions
It is deemed that the energy consumed by the group is less than 40,000 kWh, therefore the exemption has been taken not to disclose the energy used during the period.
The directors present their annual report and financial statements for the year ended 31 December 2021.
The results for the year are set out on page 14.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
Azets Audit Services were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of Contino Solutions Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the IT services consultancy sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
understanding the design of the company’s remuneration policies
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 3 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigations and claims; and
reviewing correspondence with HMRC, relevant regulators and the company’s legal advisors.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £2,865,620 (2020 - £3,598,086 loss).
Contino Solutions Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 37 Commercial Road, Poole, Dorset, BH14 0HU. The trading address on the company is 34-37 Liverpool Street, London, EC2M 7PP.
The group consists of Contino Solutions Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Contino Solutions Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future, although the company continued to be loss making this year and has net liabilities as at the year end.
In addition the company is expected to have continued financial and operation support from its parent company, Cognizant Technology Solutions Corporation, thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Revenue from Fixed Price contracts is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is based on the Effort Complete and is calculated by comparing total effort to date (days worked) as a proportion of total effort to date (days worked) and effort remaining (days remaining). Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that is probable will be recovered.
Revenue recognition for Time and Materials projects is based on the time worked in the month multiplied by the daily billing rate.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Recoverability of trade debtors
The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of debtors, the ageing profile of debtors and historical experience.
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £231,266 (2020 - £288,116).
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Investment income includes the following:
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2021 are as follows:
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax asset set out above is expected to start reversing within the near future and relates to the utilisation of tax losses against future expected profits of the same period. The deferred tax liability set out above is expected to reverse over future years and relates to accelerated capital allowances that are expected to mature within the same period.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Other related party transactions
During the year the company made the following related party transactions:
Parent Company
During the year a total of £Nil (2020: £745,883) was advanced to Contino Solutions Limited by the parent company as a capital contribution. No interest was charged on this balance. At the balance sheet the amount included within other reserves was £14,205,219 (2020: £14,205,219).
During the year Contino Solutions Limited made sales totalling £8,245,125 (2020: £1,585,803) to the ultimate parent company and purchased services totalling £Nil (2020: £Nil).
During the year Contino Solutions Limited received funding amounting to £5,723,057 (2020: £5,998,429) from the ultimate parent company.
At the balance sheet date the amount due to the ultimate parent company and included within other creditors was £390,559 (2020: £2,912,626).
Under common control
During the year Contino Solutions Limited made sales totalling £287,169 (2020: £632,480) to a related company and purchased services totalling £146,327 (2020: £195,076).
At the balance sheet date the amount due from the related company and included within other debtors was £1,403,302 (2020: £1,262,460).
During the year Contino Solutions Limited made sales totalling £353,991 (2020: £554,732) to a related company. Interest of £106,309 (2020: £194,346) was charged on the outstanding balance.
At the balance sheet date the amount due to / (from) the related company and included within other debtors was £36,540 (2020: £(4,244,955)).
Related parties
During the year, Contino Solutions Limited purchased services from a related party totalling £83,068 (2020: £nil).
At the balance sheet date the amount due to the related company and included within other creditors was £3,245.
During the year Contino Solutions Limited made sales totalling £9,746 to a related company. The balance at year end with this company was £nil.