The directors present the strategic report for the period ended 31 December 2022.
The directors are pleased to report the business’s results for the period ended 31 December 2022, which covers the acquisition of Spa Worldwide Limited, trading as Global App Testing. The group has a strong business model based on long-term software as a service licence, with contracts typically of one to three years duration. Customers now rely on Global App Testing’s impact-first approach to quality, allowing agile and DevOps teams to release faster and more often.
Key highlights for the period:
Secured additional growth investment from FPE Capital LLP
Acquired the Global App Testing group
The group has traded strongly with new logos
The board regularly reviews and considers potential risks for all group entities. The group’s operations are exposed to a variety of financial and operational risks which could have a material impact on the group’s long term performance. The key risks are set out below.
Foreign exchange currency risk
The Group is exposed to foreign exchange risk from future commercial transactions, recognised assets and liabilities and investments in, and loans between, group undertakings with different functional currencies. The group manages such risk, primarily within undertakings whose functional currencies are the US dollar, by:
Use of natural hedges via income and expenditure for multi-currency income;
Pricing adjustments with key stakeholders in relation to GBP and USD exchange movements;
Regular reviews of individual currency funbding requirements and associated exchange rate movements;
The principal transaction exposures are to the pound sterling, Romanian leu and the Polish zloty.
Interest rate risk
The group is financed through a revolving facility linked to SONIA and is therefore subject to risk around interest rate volatility. The board reviews the capital structure of the group continually.
Liquidity risk
The group manages its cash and borrowing requirements centrally to ensure that each entity has sufficient liquid resources to meet the operating needs of its businesses.
Credit risk
The group’s credit risk is primarily attributable to customer payments, customers are often billed annually in advance, reducing the amount of credit risk. Smaller customers are offered payment terms which in some cases lead to unrecoverable debt. Credit exposures to these credit risks are monitored on an ongoing basis and provisions are made in the financial statements.
Skill and employee's risk
The group’s strategy is underpinned by the quality of employees. We continue to develop, nurture and recruit the highest calibre of staff in order to support the group's vision.
Price risk
The group enters into pricing agreements with its suppliers, where possible and commercially feasible, in order to mitigate pricing risk.
The group aims to be one of the world’s leading software testing solutions. The group leverages a global community of testers to conduct real-world testing of mobile apps, websites, and software products to allow companies to release high-quality software at speed - anywhere in the world. The group has an excellent team of passionate professionals who have deep knowledge of the changing landscape. The group develops, nurtures and recruits the highest calibre of staff as it continues to invest in its platform and services offering.
Performance is monitored for all group entities monthly and reported to the board of directors against the agreed budgets along with a number of other key performance indicators.
Key measures of the group’s performance in the period from 16 August 2022 were as follows:
Turnover | $3,623,145 |
EBITDA | ($1,664,362) |
Closing Headcount | 97 |
On behalf of the board
The directors present their annual report and financial statements for the period ended 31 December 2022.
The results for the period are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
Basis for 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 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
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 period 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.
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 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.
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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the 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. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. 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.
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.
Gamma Midco Limited is a private company limited by shares incorporated in England and Wales. The registered office is 2nd Floor, 90-92 Pentonville Road, London, United Kingdom, N1 9HS.
The accounting period of the company has been changed from 30 June to 31 December so as to be conterminous with the year end of a subsidiary company. Accordingly, the current financial statements are prepared for 7 months from incorporation on 21 June 2022 to 31 December 2022.
The financial statements are prepared in US Dollars, which is the presentational currency of the company. Monetary amounts in these financial statements are rounded to the nearest $.
The functional currency of the company is deemed to be pounds sterling.
This 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:
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 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
Gamma Midco Limited is a wholly owned subsidiary of Gamma Topco Limited and the results of Gamma Midco Limited are included in the consolidated financial statements of Gamma Topco Limited which are available from 2nd Floor, 90-92 Pentonville Road, London, N1 9HS.
Interest bearing loans owed by group entities that are due for settlement in more than one year have been classified as fixed asset investments. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss. Unpaid amounts in relation to interest receivable on loan notes are allocated to the principal amount owed annually on 31 December and thus recognised within fixed asset investments.
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 are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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 company 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 company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company 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 company.
Related party exemption
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.
In the application of the company’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.
The average monthly number of persons (including directors) employed by the company during the period was:
The actual charge for the period can be reconciled to the expected credit for the period based on the profit or loss and the standard rate of tax as follows:
All assets of the company are secured by fixed and floating charges relating to a group bank loan facility.
Amounts owed by group undertakings are unsecured and interest is charged at 10% per annum. All amounts are due by 16 August 2029.
Details of the company's subsidiaries at 31 December 2022 are as follows:
Gamma Bidco Limited was incorporated by the company on 22 June 2022. Gamma Bidco Limited acquired Spa Worldwide Limited and its subsidiary GAT Hub SRL on 16 August 2022.
Amounts owed by group undertakings are unsecured and repayable on demand.
All assets of the company are secured by fixed and floating charges relating to a group bank loan facility.
Amounts owed to group undertakings are unsecured and repayable on demand.
Amounts owed to group undertakings are unsecured and interest is charged at 10% per annum. All amounts are due by 16 August 2029.
Called-up share capital represents the nominal value of shares that have been issued.
The company is part of an unlimited multilateral guarantee given to the group's bankers involving certain of its fellow group undertakings. At 31 December 2022 the maximum extent of this guarantee amounted to $4,550,868.
As at 31 December 2022 the company had further total guarantees, contingencies and commitments of $Nil.
FPE Capital LLP is the company's ultimate controlling party, a limited liability partnership whose registered office is 2nd Floor 7, Swallow Street, London, England, W1B 4DE
Gamma Topco Limited is the company's immediate parent company, whose registered address is 2nd Floor 90-92 Pentonville Road, London, England, N1 9HS.
The smallest and largest group of which Gamma Midco Limited is a member and for which group accounts are prepared is headed by Gamma Topco Limited, whose registered office is 2nd Floor 90-92 Pentonville Road, London, England, N1 9HS.