The directors present the strategic report for the year ended 31 December 2021.
Overall Assessment
The consolidated group accounts for 4Wall Holdings UK Ltd comprise the main trading entity (4Wall Entertainment UK Ltd) and the holding company (4Wall Holdings UK Ltd). The holding company does not trade, but simply holds the investment in 4Wall Entertainment UK Ltd and the associated loan with the group parent company that has funded all UK acquisitions to date.
As such, the group accounts need to be viewed with this context in mind; that being that there is a significant intercompany loan and associated interest charge, resulting in a notable P&L loss and overall Net Liabilities.
It should also be noted that from 1 January 2021 the Company’s Blackburn and Harlow operations merged to fall within 4Wall Entertainment UK Ltd. Further, the prior period was 16 months and as such, the prior year figures cannot be compared on a like for like basis.
With strong, underlying profitability and a positive, growing EBITDA, management are satisfied that the core business is in a good position to continue this positive trajectory. At the point of writing, 2022 has seen significant year on year growth in the first 3 months of trading, and it is management’s expectation that 2022 performance will show a marked improvement on 2021.
Fair Review of the Business
The effects of the COVID-19 pandemic continued to be felt throughout 2021 by businesses globally. As a business who operates in the events sectors, our business practices have been significantly impacted by government restrictions on large gatherings and international travel.
Due to government lockdown or restrictions, the vast majority of all ‘in-person’ events that we would have supplied AV to from January 2021 to May 2021 were cancelled or postponed, which has impacted revenue negatively. Our revenue during this period was almost exclusively virtual services or from retail or permanent installations, demonstrating the importance of the diversification we have worked to achieve. Events began to return from June 2021, albeit at a lower level compared to pre COVID-19.
Acquisition update
Despite the continuing impact of COVID-19 making it difficult to fully harness the value of the synergies available through the new ownership structure, in 2021 there were some great examples of value that has been driven by the new structure. We expect the number of these to grow in 2022:
4Wall Entertainment UK Limited have delivered on significant new Motorshow contracts across Europe and Asia, through growing existing relationships that existed through the US Parent company;
We have continued our aggressive capital expenditure strategy, keeping our UK fleet at the cutting edge of technology;
We have broadened the range of services we offer a number of our long-standing customers, who traditionally may have only used us for video services.
Strategic Partnership
In 2021 4Wall Entertainment UK Limited has formed a close working relationship with Transition Video who supply video solutions to tours, festivals, broadcast and television. This has further broadened the range of services 4Wall offer and will provide great opportunities for cross pollination of clients and cross selling of services in 2022.
In 2021 we completed the installation of our permanent Studio, Studio 19, at the Royal Lancaster hotel. This replaces the temporary studio we installed in 2020 and which continued to operate for the first half of 2021. Studio 19 has already hosted several client Events and has a strong pipeline of confirmed jobs and client demos going into 2022. Our Studio 19 facility puts us in a strong competitive position to capitalize on client behavioural changes towards virtual formats.
The business undertook a successful cost cutting exercise in 2020 to keep operating losses to a minimum. We started 2021 by continuing to operate at this reduced cost level, but since then we have selectively invested in order to capitalize on market opportunities and to enhance our strong market position. Investments included the set-up of Studio-19, new hardware as required and building a strategic partnership with Transition Video. Going into 2022 we are investing in staff with new hires, which will allow us to drive revenue and profit growth.
| 12 months ended 31 Dec 21 | 16 months ended 31 Dec 20 | Change |
Turnover | 11,191,982 | 4,029,598 | 7,162,384 |
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EBITDA (exc. Exceptional Items) | 1,344,761 | (1,624,072) | 2,968,833 |
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Turnover for 2021 was stunted by Covid in the first 7 months of the year, but picked up significantly from the end of July, driven by the return of events. Overall the 12 month period ended 31 Dec 21 was 178% up on the 16 month period ended 31 December 2020.
EBITDA (excluding exceptional items) is arguably the most critical indicator to management of the business’ core underlying performance and ability to generate positive cashflows. In order that this metric most closely reflects the underlying core business performance, we have excluded the following when arriving at this figure: exceptional costs associated with the acquisition of Smart AV (such as rebranding), exchange rate gains/losses and fair value revaluations of financial instruments.
EBITDA (excluding exceptional items was £1,344,761 (2020 16 months: -£1,624,072). In the context of the adverse trading conditions the company has faced in the period, the directors see this as a very positive outcome and a sign of how resilient the business has been.
Covid 19
The largest risk to the business is the continuing uncertainty surrounding the impact of COVID-19 on the future of trade shows and conferences. However, because we have diversified and have a range of virtual offerings that we have delivered for over a year, we can offer our clients relevant AV services no matter the format of the event. Whether in person, virtual or indeed hybrid, we have a range of solutions that we can offer our client base. With the successful vaccine program and booster roll out we have seen an increase in consumer confidence and expect an increase in trade show and conference activity in 2022.
Exchange Rate Risk
The majority of our equipment purchases are made in dollars, and as such there are times in the year where the business is susceptible to exchange rate movements. Management utilise forward contracts to mitigate such risks where necessary.
Equipment Failure or Loss
The company’s hire fleet comprises equipment which is subject to the risk of mechanical or electronic failure, theft or damage. These risks are mitigated through appropriate maintenance and quality control programs, as well as the existence of various insurance policies.
Credit Risk
Whilst credit risk is something that exists in any business, it is tightly controlled by our finance team and we do not believe that any one customer represents a material risk to the company in this regard.
Brexit
With the UK out of the European Union, the administrative process of transporting equipment into Europe on a temporary basis to service European based events is more complicated. However, through careful planning and strict adherence to customs regulations, we do not believe that this risk is material.
On behalf of the board
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 10.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Rickard Luckin Limited were appointed as auditor to the company 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 4Wall Holdings UK 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.
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our: general commercial and sector experience; through verbal and written communications with those charged with governance and other management, and via inspection of the group’s regulatory and legal correspondence.
We discussed with those charged with governance and other management the policies and procedures regarding compliance with laws and regulations.
We communicated identified laws and regulations to our team and remained alert to any indicators of non-compliance throughout the audit, we also specifically considered where and how fraud may occur within the group.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the group is subject to laws and regulations that directly affect the financial statements, including: the company’s constitution; relevant financial reporting standards; company law; tax legislation and distributable profits legislation and we assess the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly the group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on the amounts or disclosures in the financial statements, for instance through the imposition of fines and penalties, or through losses arising from litigations. We identified the following areas as those most likely to have such an affect: employment legislation; health and safety legislation; GDPR; anti-bribery and anti-corruption legislation.
ISAs (UK) limit the required procedures to identify non-compliance with these laws and regulations to the procedures, and no procedures over and above those already noted are required. These limited procedures did not identify any actual or suspected non-compliance which laws and regulations that could have a material impact on the financial statements.
In relation to fraud, we performed the following specific procedures in addition to those already noted:
Challenging assumptions made by management in its significant accounting estimates in particular depreciation of hire assets;
Identifying and testing journal entries, in particular any entries posted with unusual nominal ledger account combinations, journal entries crediting cash or any revenue account;
Performing analytical procedures to identify unexpected movements in account balances which may be indicative of fraud;
Ensuring that testing undertaken on both the performance statement, and the Balance Sheet includes a number of items selected on a random basis;
These procedures did not identify any actual or suspected fraudulent irregularity that could have a material impact on the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with ISAs (UK). For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the procedures that we are required to undertake would identify it. In addition, as with any audit, there remains a high risk of non-detection of irregularities, as these might involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal controls. We are not responsible for preventing non-compliance with laws and regulations or fraud, and cannot be expected to detect non-compliance with all laws and regulations or every incidence of fraud.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £3,018,556 (2020 - £2,237,544 loss).
4Wall Holdings UK Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is .
The group consists of 4Wall Holdings UK 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 certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company 4Wall Holdings UK 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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The company has reported a loss for the period after taxation of £6,354,996, resulting in an overall Net Liability position of £12,881,934. However, it must be noted that only c. £2m of that loss is driven by weaker trading resulting from the Covid 19 pandemic, with the rest being predominantly made up by Amortisation charged on Goodwill, and intercompany interest charged by the parent company. The Amortisation charge has no cash impact, and the intercompany loan is not repayable in the foreseeable future, and so management do not believe that either of these charges negatively impact the ability for the company to continue as a Going Concern. The company’s diversification into virtual event services and the returning confidence in events suggests a far more positive future outlook. The directors have made reasonable assumptions in forecasting future cash-flows through 2022 and beyond, working on scenarios which include a return to trading "normality".
At the time of approving the financial statements, the directors have a reasonable expectation that the company has sufficient resources to continue to operate for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Audio visual technology rental and associated income is recognised over the period of the rental and where additional services are provided at the point at which the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from the permanent installation of audio visual equipment is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on installation of the product), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
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.
Comparative fees are for the standalone audit work on the parent company and the subsidiary company respectively and were undertaken by two different audit firms.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
As total directors' remuneration was less than £200,000 in the current year, no disclosure is provided for that year.
The actual charge/(credit) for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Earn out payments relating to the acquisition of a group company in the prior year were revised. This has resulted in an increase in the goodwill of £750,000.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
The assets of the parent company were transferred to its trading subsidiary on 1 January 2021.
Earn out payments relating to the acquisition of a group company in the prior year were revised. This has resulted in an additional investment of £750,000 on the company balance sheet and an equivalent adjustment to Goodwill at Group level.
Details of the company's subsidiaries at 31 December 2021 are as follows:
Amounts owed to group undertakings on the Group balance sheet are amounts owed to the parent company of 4Wall Holdings UK Limited, a company incorporated in the USA, which does not form part of this consolidated UK group.
Other borrowings include £28,563,512 (2020: £24,526,792) which is due to the parent company, 4Wall Entertainment Inc.
Bank loans relate to loans taken out with National Westminster Bank Plc under the Coronavirus Large Business Interruption Loan scheme (CLBIL) and the Recovery Loan Scheme. These loans are secured by a debenture on the assets of the trading subsidiary.
Loans from the group undertakings are not due for repayment until at least 12 months from the date of these financial statements.
Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The lease obligations are secured by fixed charges on the assets to which they relate.
Provisions are balances owed for further revenue costs in relation to a company acquisition from a previous year where the recognition criteria for provisions are met.
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:
The Group has an intercompany loan with their US parent company totalling £28,563,512. The original loan is denominated in US dollars and therefore any exchange gains/losses arising are reflected accordingly in these financial statements. The loan is charged interest at a rate of 8.75%.