Company registration number 12945789 (England and Wales)
Engage Topco Limited
Annual Report And Financial Statements
For The Year Ended 31 December 2022
ENGAGE TOPCO LIMITED
Engage Topco Limited
COMPANY INFORMATION
Director
Mr M Wilkinson
Secretary
Vistra Cosec Limited
Company number
12945789
Registered office
First Floor, Templeback
10 Temple Back
Bristol
BS1 6FL
Auditor
Azets Audit Services Limited
33 Park Place
Leeds
LS1 2RY
ENGAGE TOPCO LIMITED
Engage Topco Limited
CONTENTS
Page
Strategic report
1 - 2
Director's report
3 - 4
Director's responsibilities statement
5
Independent auditor's report
6 - 8
Group statement of comprehensive income
9 - 10
Group statement of financial position
11 - 12
Parent company statement of financial position
13
Group statement of changes in equity
14
Parent company statement of changes in equity
15
Group statement of cash flows
16 - 17
Notes to the statement of cash flows
18
Notes to the group financial statements
19 - 50
Notes to the parent company financial statements
52 - 53
ENGAGE TOPCO LIMITED
Engage Topco Limited
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -

The director presents the strategic report for the period ended 31 December 2022.

Review of the business

The aim and principal activity of the Haiilo group is to distribute business to business (B2B) software as a service (SaaS) products. The software products are cloud-based, highly scalable and aim to enhance customers’ employee communications. Haiilo sells its software products in a user-based subscription model to companies in a wide range of industries and sizes.

The director is satisfied with the financial results. In 2022, the group invested a large part of its sales revenue in research and development and thus in the further development of its software. Product improvements were made, new functionalities were developed, and the product offering was harmonized. The group plans to continue investing in research and development over the next few years to further improve the software and bring new features to the market.

Despite the challenging economic situation in central Europe (DACH region), which is the group’s largest market, the region was able to continue to recover in 2022 after the slump in 2020. Spendings in the software market continue to increase (e.g. in Germany by ca. 9%).

We assume that the trends of "remote work" and "digitization" will continue to manifest themselves in the coming years and that companies will increasingly deal with how they can improve internal communication with software solutions. In our estimation, the pandemic will cause these trends in companies to become even stronger.

As a software provider for internal communication, the group can benefit directly from the trends mentioned above and contribute to improving communication and increasing productivity within companies.

Principal risks and uncertainties

The parent company manages financial risks according to instructions provided by the director.

 

The group operates internationally, and it is, therefore, exposed to foreign exchange risk arising on the cash flow of sales and expenses, along with exchange differences arising on the consolidation of foreign subsidiaries and associated translation into Euros.

 

The group has credit and counterparty risks relating to its clients with whom it has accounts receivables and long contracts as well as financial counterparties.

 

The group’s customer base partly consists of small and medium sized enterprises whose operations may not be as stable as those of larger corporations with a potentially better credit rating. The company’s business is, nevertheless, based on a large number of customers and, therefore, the impact of a single customer on the group’s revenue is small.

 

The group’s balance sheet includes capitalised development expenses. The capitalised expenses are depreciated over the period in which the benefit of the cost is received. If a change occurs in the group’s operating environment, it is possible that the capitalised expenses may have to be impaired. However, no such changes are anticipated at the year end nor at the time of sign off.

Development and performance

The group primarily measures business success based on sales development, specifically recurring sales from subscription contracts.

ENGAGE TOPCO LIMITED
Engage Topco Limited
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Key performance indicators

The director considers that annual recurring revenue continues to be the key performance indicator for the group, along with gross profit and operating profit.

The group’s results for the year are in line with the expectation of the director and provide a solid base for future activities.

Annual recurring revenue grew strongly compared to the previous year. This was made possible in particular by a large number of growth investments, e.g. in the further development of the product, as well as marketing and sales. Despite the challenging economic environment Haiilo continues to see robust customer demand for the services offered.

Revenue in the period totalled €28,731k (2021: 18,006k) and the group generated a loss before tax of €49,340k (2021: 17,561k). Gross assets at the year end totalled €97,347k (2021: 139,242k).

Other information and explanations

The directors have no plans for further reorganisation or change in the near future and remain cautious but optimistic in light of the group’s position and macro-economic factors. There are no post balance sheet events relevant to the reading of the financial statements.

On behalf of the board

Mr M Wilkinson
Director
25 October 2023
ENGAGE TOPCO LIMITED
Engage Topco Limited
DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -

The director presents his annual report and financial statements for the 12 month period ended 31 December 2022. The comparative amounts presented in the financial statements (including the related notes) are not entirely comparable as prior period length was 15 months to 31 December 2021.

Principal activities

The principal activity of the group continued to be that of the provision of software services.

Results and dividends

The results for the period are set out on pages 9 to 10.

No ordinary dividends were paid. The director does not recommend payment of a dividend.

Director

The director who held office during the period and up to the date of signature of the financial statements was as follows:

Mr M Wilkinson
Post reporting date events

There are no post balance sheet events relevant to the reading of the financial statements.

Future developments

The director has no plans for further reorganisation or change in the near future and remain cautiously optimistic in light of the group’s position and macro-economic factors.

Auditor

In accordance with the company's articles, a resolution proposing that Azets Audit Services Limited be reappointed as auditor of the company and group will be put at a General Meeting.

Statement of disclosure to auditor

Each director in office at the date of approval of this annual report confirms that:

 

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

ENGAGE TOPCO LIMITED
Engage Topco Limited
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
Going Concern

As of 31 December 2022, the group had net liabilities of €986,258 (2021: net assets €46,804,625), net current liabilities increased to €8,037,245 (2021: €2,074,426) and cash and cash equivalents reduced to €5,447,569 (2021: €10,091,306). At 31 December 2022, the group was funded by a combination of bank loans with Barings and loans with the Private Equity Backer. There are covenants attached to the bank loans which have been met during the year and subsequent to the year end before the signing of these financial statements.

 

The directors have prepared a base case cash flow and forecasts extending to 31 December 2025 which indicate that the Company and Group will have sufficient funds to meet its liabilities as they fall due for that period. The base case projections assume synergies and cross-selling opportunities will start to be realised during FY23 which is evident from post year end financials and cash balances held as at the signing of these financial statements.

 

As such, the director has at the time of approving the financial statements, a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.

On behalf of the board
Mr M Wilkinson
Director
25 October 2023
ENGAGE TOPCO LIMITED
Engage Topco Limited
DIRECTOR'S RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 5 -

The director is responsible for preparing the annual report and the financial statements in accordance with applicable law and regulation.

 

Company law requires the director to prepare financial statements for each financial year. Under that law the director has prepared the group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law).

 

Under company law, the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the group and company and of the loss of the group for that period. In preparing the financial statements, the director is required to:

 

 

The director is responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The director is also responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006.

ENGAGE TOPCO LIMITED
Engage Topco Limited
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ENGAGE TOPCO LIMITED
- 6 -
Opinion

We have audited the financial statements of Engage Topco Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group statement of comprehensive income, the group and parent company statement of financial position, the group and parent company statement of changes in equity, the group statement of cash flows, and the group and parent company notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted International Financial Reporting Standards.

In our opinion:

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 group and parent 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.

Material uncertainty related to going concern

We draw attention to note 1.5 to the financial statements which indicates the directors considerations over going concern. At the year end, the group had net liabilities of €986,258 (2021: net assets €46,804,625), net current liabilities increased to €8,037,245 (2021: €2,074,426) and cash and cash equivalents reduced to €5,447,569 (2021: €10,091,306). After the year end, the group's performance has been behind budget both from a revenue and profitability perspective, albeit the current cash position is in line with forecasts. Generally the group is slightly de-risked by the fact that the majority of revenue is secured via 12 month customer contracts however the group's forecasts budget for ambitious new customer growth and also existing customer upsell growth rates through to 2030. The budgets also take into account large synergies of combining the platforms acquired via recent acquistions, where the benefits were considered to crystalise after c18 months from acquisition date. The uncertainies in the going concern assessment therefore arise from these ambitious revenue growth rates and cost savings. If the group is not able to meet such growth rates and cost savings then this may jeopardise the cash target which is driven to ensure cash reserves are sufficient to repay borrowings by the repayment date in 2028. A large impairment was recognised against goodwill as at the year-end as a result of performance being below budgeted levels but secondly, as a result of a large increase in bank base rates which led to an increase in discount rates used.

 

As such, a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

 

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.

ENGAGE TOPCO LIMITED
Engage Topco Limited
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ENGAGE TOPCO LIMITED
- 7 -

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 director is 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:

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the director's report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of director

As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is 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 director either intends to liquidate the parent company or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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 and on the Financial Reporting Council’s website, to detect material

misstatements in respect of irregularities, including fraud.

ENGAGE TOPCO LIMITED
Engage Topco Limited
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ENGAGE TOPCO LIMITED
- 8 -
Extent to which the audit was considered capable of detecting 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:

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.

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 him 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.

Claire Needham (Senior Statutory Auditor)
For and on behalf of Azets Audit Services Limited
26 October 2023
Chartered Accountants
Statutory Auditor
33 Park Place
Leeds
LS1 2RY
ENGAGE TOPCO LIMITED
Engage Topco Limited
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
Year
Period
ended
ended
31 December
31 December
2022
2021
as restated
Notes
Revenue
4
28,217,349
17,485,419
Cost of sales
(2,324,718)
(1,940,407)
Gross profit
25,892,631
15,545,012
Other operating income
1,131,252
618,208
Administrative expenses
(72,220,743)
(31,475,700)
Operating loss
5
(45,196,860)
(15,312,480)
Investment revenues
9
153,562
70,681
Finance costs
10
(4,296,775)
(2,319,264)
Loss before taxation
(49,340,073)
(17,561,063)
Income tax expense
11
687,327
5,151,639
Loss for the period
(48,652,746)
(12,409,424)
Other comprehensive income:
Items that may be reclassified to profit or loss
Currency translation differences
88,818
-
0
Total items that may be reclassified to profit or loss
88,818
-
0
Total other comprehensive income for the year
88,818
-
0
Total comprehensive income for the year
(48,563,928)
(12,409,424)
ENGAGE TOPCO LIMITED
Engage Topco Limited
GROUP STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
31 December
31 December
2022
2021
as restated
Notes
- 10 -
Loss for the financial period is attributable to:
- Owners of the parent company
(25,973,852)
(7,820,408)
- Non-controlling interests
(22,678,894)
(4,589,016)
(48,652,746)
(12,409,424)
Total comprehensive expense for the period is attributable to:
- Owners of the parent company
(25,926,435)
(7,820,408)
- Non-controlling interests
(22,637,493)
(4,589,016)
(48,563,928)
(12,409,424)

The income statement has been prepared on the basis that all operations are continuing operations.

ENGAGE TOPCO LIMITED
Engage Topco Limited
GROUP STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2022
31 December 2022
- 11 -
2022
2021
Notes
Non-current assets
Goodwill
13
54,368,432
84,898,867
Intangible assets
13
25,089,377
30,875,759
Property, plant and equipment
14
5,981,855
6,733,130
Investments
15
275,950
748,475
85,715,614
123,256,231
Current assets
Trade and other receivables
17
6,183,643
5,894,171
Cash and cash equivalents
5,447,569
10,091,306
11,631,212
15,985,477
Current liabilities
Borrowings
19
64,360
57,754
Trade and other payables
22
5,350,554
5,667,448
Lease liabilities
23
680,786
668,747
Deferred revenue
26
13,572,757
11,665,954
19,668,457
18,059,903
Net current liabilities
(8,037,245)
(2,074,426)
Non-current liabilities
Borrowings
19
70,291,578
65,405,141
Lease liabilities
23
4,412,198
5,054,586
Deferred tax liabilities
24
1,120,345
1,709,480
Deferred revenue
26
139,725
360,309
Liability for share based payments
27
2,700,781
847,664
78,664,627
74,377,180
Net (liabilities)/assets
(986,258)
46,804,625
ENGAGE TOPCO LIMITED
Engage Topco Limited
GROUP STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT
31 DECEMBER 2022
31 December 2022
2022
2021
Notes
- 12 -
Equity
Called up share capital
28
4,462,145
4,462,145
Other reserve
29
1,149,091
376,046
Retained earnings
(5,784,757)
20,141,678
Equity attributable to owners of the parent company
(173,521)
24,979,869
Non-controlling interests
(812,737)
21,824,756
Total equity
(986,258)
46,804,625
The financial statements were approved and signed by the director and authorised for issue on 25 October 2023
Mr M Wilkinson
Director
ENGAGE TOPCO LIMITED
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 2022
- 13 -
2022
2021
Notes
Non-current assets
Investments
37
4,462,144
4,462,144
Current assets
Trade and other receivables
38
1
1
Net current assets
1
1
Total assets less current liabilities
4,462,145
4,462,145
Equity
Called up share capital
39
4,462,145
4,462,145

As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s profit for the year was €0 (2021 - €0 profit).

The financial statements were approved and signed by the director and authorised for issue on 25 October 2023
25 October 2023
Mr M Wilkinson
Director
Company Registration No. 12945789
ENGAGE TOPCO LIMITED
Engage Topco Limited
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 14 -
Share capital
Other reserve
Retained earnings
Total
Non-controlling interest
Total
Notes
As restated for the period ended 31 December 2021:
Balance at 13 October 2020
-
-
-
-
-
-
Balance at 13 October 2020
-
0
-
-
0
-
-
-
Period ended 31 December 2021:
Loss and total comprehensive income for the period
-
-
(7,820,408)
(7,820,408)
(4,589,016)
(12,409,424)
Transactions with owners in their capacity as owners:
Issue of share capital
28
4,462,145
-
-
4,462,145
-
4,462,145
Transfer to other reserves
29
-
105,808
-
0
105,808
-
105,808
Disposal of shares in subsidiary to non-controlling interest
-
-
27,962,086
27,962,086
26,413,772
54,375,858
Transfer to share-based payment reserve
29
-
270,238
-
270,238
-
270,238
Balance at 31 December 2021
4,462,145
376,046
20,141,678
24,979,869
21,824,756
46,804,625
Year ended 31 December 2022:
Loss for the year
-
-
(25,973,852)
(25,973,852)
(22,678,894)
(48,652,746)
Other comprehensive income:
Currency translation differences
-
-
47,417
47,417
41,401
88,818
Total comprehensive income for the year
-
-
(25,926,435)
(25,926,435)
(22,637,493)
(48,563,928)
Transactions with owners in their capacity as owners:
Transfer to share-based payment reserve
29
-
773,045
-
773,045
-
773,045
Balance at 31 December 2022
4,462,145
1,149,091
(5,784,757)
(173,521)
(812,737)
(986,258)
ENGAGE TOPCO LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 15 -
Share capital
Total
Notes
Balance at 13 October 2020
-
0
-
Period ended 31 December 2021:
Transactions with owners:
Issue of share capital
39
4,462,145
4,462,145
Balance at 31 December 2021
4,462,145
4,462,145
Year ended 31 December 2022:
Balance at 31 December 2022
4,462,145
4,462,145
ENGAGE TOPCO LIMITED
Engage Topco Limited
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 16 -
2022
2021
Notes
Operating activities
Loss before tax
(49,340,073)
(17,561,063)
Adjusted for non-cash items:
Depreciation charge
5
1,023,109
977,543
Amortisation of intangible assets
5
8,648,320
6,087,817
Share-based payment expense
27
2,626,162
1,223,710
Finance income
9
(153,562)
(70,681)
Finance charges
10
4,296,775
2,319,264
Impairment of intangibles
7
30,530,434
-
(2,368,835)
(7,023,410)
Increase/(decrease) in trade and other receivables
(289,471)
(2,541,779)
Increase/(decrease) in trade and other payables
1,367,332
3,786,152
Cash generated from operations
(1,290,974)
(5,779,037)
Income tax refunded
98,192
44,418
Net cash outflow from operating activities
(1,192,782)
(5,734,619)
Investing activities
Business combinations (net of cash received)
-
(41,036,799)
Purchase of intangible assets
13
(2,861,938)
(1,875,642)
Purchase of property, plant and equipment
14
(216,918)
(207,131)
Proceeds on disposal of property, plant and equipment
271
1,469
Repayment of debentures
-
(8,000,000)
Proceeds on disposal of investments
496,279
-
0
Interest received
153,562
70,681
Interest paid
-
(503,516)
Net cash used in investing activities
(2,428,744)
(51,550,938)
Financing activities
Proceeds from issue of shares
-
4,462,145
Proceeds from issue of shares in subsidiary to non-controlling interests
-
4,431,510
Proceeds from borrowings
-
19,000,106
Repayment of deferred consideration
(1,056,667)
-
Proceeds of new bank loans
2,500,000
45,000,000
Repayment of bank loans
19
(50,236)
(4,285,202)
Payment of lease liabilities
(685,489)
(655,992)
Interest paid
(1,729,819)
(575,704)
Net cash (used in)/generated from financing activities
(1,022,211)
67,376,863
Net (decrease)/increase in cash and cash equivalents
(4,643,737)
10,091,306
ENGAGE TOPCO LIMITED
Engage Topco Limited
GROUP STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2022
2021
Notes
- 17 -
Cash and cash equivalents at beginning of year
10,091,306
-
Effect of foreign exchange rates
-
-
Cash and cash equivalents at end of year
5,447,569
10,091,306
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTE TO THE STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 18 -
Changes in liabilities arising from borrowings
The table below details changes in the Group's liabilities arising from borrowing activities, including both cash and non-cash changes. Liabilities arising from borrowings are liabilities which were, or will be, classified in the Group's Consolidated Statement of Financial Position as borrowings.
Non-cash movements
At 31 December 2021
Financing cash flows
Issued as consideration
Acquired as part of business combination
New leases incepted
Non-cash interest charge
At 31 December 2022
Bank loans
45,682,511
719,966
-
-
-
3,358,601
49,761,078
Other loans
19,780,374
-
-
-
-
814,486
20,594,860
Loan notes
-
-
-
-
-
-
-
Leases
5,723,333
(685,489)
-
-
55,140
-
5,092,984
Deferred consideration
2,000,000
(1,056,667)
-
-
-
-
943,333
73,186,218
(1,022,190)
-
-
55,140
4,173,087
76,392,255
Non-cash movements
At 13 October 2020
Financing cash flows
Issued as consideration
Acquired as part of business combination
New leases incepted
Non-cash interest charge
At 31 December 2021
Bank loans
-
40,714,798
-
4,507,938
-
459,775
45,682,511
Other loans
-
19,000,106
-
-
-
780,268
19,780,374
Loan notes
-
(8,000,000)
8,000,000
-
-
-
-
Leases
-
(655,992)
-
6,364,650
14,675
-
5,723,333
Deferred consideration
-
-
2,000,000
-
-
-
2,000,000
-
51,058,912
10,000,000
10,872,588
14,675
1,240,043
73,186,218
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 19 -
1
Accounting policies
Company information

Engage Topco Limited is a private company limited by shares incorporated in England and Wales. The registered office is First Floor, Temple Back, Bristol, England, BS1 6FL. The company's principal activities and nature of its operations are disclosed in the director's report.

 

The Group consists of Engage Topco Limited and all of its subsidiaries.

1.1
Accounting convention

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, except as otherwise stated.

The financial statements are prepared in euros, which is the functional currency of the group. Monetary amounts in these financial statements are rounded to the nearest €1.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

1.2
Reporting period length

The length of the current reporting period is 12 months. The comparative amounts presented in the financial statements (including the related notes) are not entirely comparable as prior period length was 15 months to 31 December 2021.

 

1.3
Business combinations

The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.

The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date.

 

Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date.

1.4
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company Engage Topco 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 2022. 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.

Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 20 -

Investments in joint ventures and associates are carried in the group statement of financial position at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.

 

If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.

 

Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.

1.5
Going concern

As of 31 December 2022, ttruehe group had net liabilities of €986,258 (2021: net assets €46,804,625), net current liabilities increased to €8,037,245 (2021: €2,074,426) and cash and cash equivalents reduced to €5,447,569 (2021: €10,091,306). At 31 December 2022, the group was funded by a combination of bank loans with Barings and loans with the Private Equity Backer. There are covenants attached to the bank loans which have been met during the year and subsequent to the year end before the signing of these financial statements.

 

The Director have prepared a base case cash flow and forecasts extending to 31 December 2025 which indicate that the company and group will have sufficient funds to meet its liabilities as they fall due for that period. The base case projections assume synergies and cross-selling opportunities will start to be realised during FY23 which is evident from post year end financials and cash balances held as at the signing of these financial statements.

 

As such, the Director has at the time of approving the financial statements, a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the Director continues to adopt the going concern basis of accounting in preparing the financial statements.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 21 -
1.6
Revenue

Under IFRS 15, revenue is recognised either over time or at a point in time. The model uses a contract based five-step analysis of transactions to determine when, and how much revenue is recognised; this includes the matching of stand-alone process for services provided to the satisfaction of performance obligations.

 

All of the group’s revenue relates to the provision of a Software as a Service (SaaS) on their employee social intranet, communications and employee advocacy platform.

 

Provision of services

Revenue from contracts for the provision of services 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 calculated by reviewing the period in time in which the service contract runs. The service is typically by granting a customer with access to the Group's platform with varying additional modules and functionalities.

 

Agent relationship

The group also has a reseller constellation model whereby the group enters into a contractual arrangement with a reseller whom indirectly carries the risks and rewards of the revenue contract with the end customer. As such, revenue transacted with the reseller, rather than the end customer is recognised within revenue, to reflect that the group act as an agent in this relationship.

 

Recognition of contract assets and liabilities

The standard requires both contract assets and liabilities to be recognised. IFRS 15 requires that when an entity has an unconditional right to consideration then at this point the contract asset would become a trade receivable regardless of whether an invoice has been issued. However, the group does not consider the right to be unconditional until the point of raising the invoice at which point the fee amount has been agreed and confirmed with the customer. Therefore, these unbilled amounts are recognised as contract assets as opposed to trade receivables. The group has also recognised a contract liability under the standard that represents the amount of income that has been invoiced in advance.

The group recognises revenue from the following major sources:

 

The nature, timing of satisfaction of performance obligations and significant payment terms of the group's major sources of revenue are as follows:

 

Haiilo Home, Haiilo Share and Haiilo Insights

These three classes of revenue relate to the three software platforms developed by the group. All three revenue streams have consistent characteristics. The performance obligations are satisfied across the period in which the service contract with the customer runs.

 

 

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 22 -
1.7
Goodwill

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less impairment losses.

 

The gain on a bargain purchase is recognised in profit or loss in the period of the acquisition.

 

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not subsequently reversed.

1.8
Intangible assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

 

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following basis:

 

Capitalised development costs are not subject to amortisation until they are brought into use by the group.

1.9
Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following basis:

Leasehold land and buildings
Straight line over 10 years
Fixtures and fittings
Straight line over 5-10 years
Right of Use
Straight line over the life of the lease

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 income statement.

Right of use assets relate to properties and motor vehicles held under lease agreements by the group and accounted for in accordance with IFRS 16.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 23 -
1.10
Impairment of tangible and intangible assets

At each reporting 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 group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

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.

 

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.

1.11
Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.12
Financial assets

Financial assets are recognised in the group's statement of financial position when the group becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.

 

At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.

Financial assets at fair value through profit or loss

When any of the above-mentioned conditions for classification of financial assets is not met, a financial asset is classified as measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognized initially at fair value and any transaction costs are recognised in profit or loss when incurred. A gain or loss on a financial asset measured at fair value through profit or loss is recognised in profit or loss, and is included within finance income or finance costs in the statement of income for the reporting period in which it arises.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 24 -
Financial assets held at amortised cost

Financial instruments are classified as financial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash flows, and the contractual cash flows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment where necessary.

Impairment of financial assets

Financial assets carried at amortised cost and FVOCI are assessed for indicators of impairment at each reporting end date.

 

The expected credit losses associated with these assets are estimated on a forward-looking basis. A broad range of information is considered when assessing credit risk and measuring expected credit losses, including past events, current conditions, and reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

 

For trade receivables, the simplified approach permitted by IFRS 9 is applied, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

1.13
Financial liabilities

The group recognises financial debt when the group becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.

Other financial liabilities

Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Derecognition of financial liabilities

Financial liabilities are derecognised when, and only when, the group’s obligations are discharged, cancelled, or they expire.

1.14
Equity instruments

Equity instruments issued by the parent company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer payable at the discretion of the company.

1.15
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 25 -
Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement 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

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary 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 income statement, 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 when the group has 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.

1.16
Employee benefits

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 inventories or non-current 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 group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.17
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.18
Share-based payments

For cash-settled share-based payments, a liability is recognised for the goods and services acquired, measured initially at the fair value of the liability. At the balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for period.

Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 26 -

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.

 

Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

As explained further in notes 27 and 29 a portion of the cash settled share-based payment scheme is accounted for as an equity settled scheme due to the obligation to settle the cash payments falling outside of the group headed by Engage Topco Limited.

1.19
Leases

At inception, the group assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the group is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the group's estimate of the amount expected to be payable under a residual value guarantee; or the group's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 27 -

When the group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately, classifying the sub-lease with reference to the right-of-use asset arising from the head lease instead of the underlying asset. All the subleases within the group are classified as operating leases.

 

1.20
Foreign exchange

Transactions in currencies other than euros 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.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 28 -
2
Adoption of new and revised standards and changes in accounting policies

In the current year, the following new and revised standards and interpretations have been adopted by the group and have no effect on the current period or a prior period or may have an effect on future periods:

 

Standards which are in issue but not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations, which have not yet been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU nor the United Kingdom):

IAS 1
Presentation of Financial Statements (Amendmends): Classification of liabilities as current or non-current - Effective 1 January 2024.
IAS 1 and IFRS Practice Statement 2
Disclosure of Accounting Policies - Effective 1 January 2023
IAS 8
Definition of an Accounting Estimates (Amendmends) - Effective 1 January 2023
IAS 12
Deferred Tax related to Assets and Liabilities arising from a single transaction (Amendmends) - Effective 1 January 2023
IFRS 16
Lease Liability in a Sale and Leaseback (Amendmends)- Effective 1 January 2024.
IFRS 17 and IFRS 4
Insurance Contracts and subsequent withdrawal of Insurance Contracts - Effective 1 January 2023.
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 29 -
3
Critical accounting estimates and judgements

In the application of the company’s accounting policies, the director is 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, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.

Critical judgements
Consolidation of subsidiary entities

In preparing these consolidated financial statements management have utilised their judgement to assess whether they exercise control over the group headed by Haiilo holdings limited. In arriving at their decision they have considered the allocation of voting rights in the company as well as the rights to distribution of excess profits. As the holder of more than 50% of the voting rights and rights to excess profits in the group management have assessed that Engage Topco Limited does exercise control over the group.

Recognition of deferred tax asset

The recognition of a deferred tax asset in relation to the accumulated tax losses across the group was an area in which management had to utilise their judgement. When considering the losses in Haiilo OY and its subsidiaries management considered the fact that the Finnish tax authority had to grant permission for the company to carry forward its accumulated losses upon the change in ownership. As permission was not granted as at the year end these losses have not been recognised. Management also had to assess whether the entities in Germany would generate sufficient taxable profits in the future in which to offset the accumulated tax losses.

Key sources of estimation uncertainty
Share-based payments

The determination of the fair value of the cash settled scheme at the year end has been made with reference to the Black-Scholes model with the inputs set out in note 27.

Valuation of acquired intangible assets

In assessing the fair value of the intangible assets acquired in the three acquisitions, the management estimated the future cash inflows and cost savings associated with each class of intangible asset acquired. These are amortised over their estimated useful lives for development costs, brand, customer list and order list in accordance with IAS 38 – Intangible Assets. In estimating useful lives, an assessment of the future expected sales, which is based on the ongoing interest shown by potential customers for the proposed products is made. Judgement has to be used to determine the technical and commercial feasibility of development costs associated with the proposed Haiilo applications.

 

It is a requirement under IAS 36 – Impairment of assets to carry out an annual impairment review on goodwill and to carry out an impairment review on all other intangbile assets whenever an indicator of impairment arises. In doing so, we calculated the recoverable amounts of the three Cash Generating Units (CGUs) and compared to the carrying amounts. Calculating these values involve estimation of expected future growth rates, discount factors, future earnings and cashflows with a significant level of uncertainty and judgement being used to determine whether an impairment is required. During the period the group intangible assets had a combined value of €79,457k (2021: €115,774k) and an impairment of €30,530k was recognised during the period (2021 - €nil), see note 13 for further information.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 30 -
4
Revenue

An analysis of the group's revenue is as follows:

2022
2021
As restated
Revenue analysed recurring vs non-recurring
Recurring revenue
27,784,000
16,851,000
Non-recurring revenue
433,349
634,419
28,217,349
17,485,419
2022
2021
As restated
Revenue analysed by geographical market
Europe
23,005,262
16,677,267
UK
1,108,462
278,175
Rest of the World
4,103,625
529,977
28,217,349
17,485,419
2022
2021
As restated
Other income
Other operating income
109,393
97,208
Rental income received from operating leases
1,021,859
521,000

During the year there were two customers who accounted for 7% (2021: 10% -12%) of overall group revenue.

 

Further information on contract liabilities included in note 26.

 

For an extended description of the nature and timing of the satisfaction of performance obligations in contracts with customers including the company’s accounting policies and assessments regarding the timing of and method adopted for revenue recognition transaction price and variability, payment terms and significant judgements when applying IFRS 15, see accounting policies note 1.6.

5
Operating loss
2022
2021
Operating loss for the year is stated after charging/(crediting):
Depreciation of property, plant and equipment
1,023,109
977,543
Amortisation of intangible assets (included within administrative expenses)
8,648,320
6,087,817
Impairment loss
30,530,434
-
0
Share-based payments
2,626,162
1,223,710
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 31 -
6
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
For audit services
Audit of the financial statements of the group and company
35,000
81,675
Audit of the financial statements of the company's subsidiaries
15,000
-
50,000
81,675
7
Employees

The average monthly number of persons (including directors) employed by the group during the period was:

2022
2021
Number
Number
Director
1
1
Account Management
38
43
Marketing
19
19
Support
23
32
Product/IT
88
88
Management
8
7
Sales
58
39
Total
235
229

Their aggregate remuneration comprised:

2022
2021
Wages and salaries
15,644,393
8,462,225
Social security costs
2,719,055
2,039,235
Pension costs
461,622
113,276
Share-based payment costs
2,626,162
1,223,710
19,598,115
11,838,446

Pension expenses relating to certain subsidiaries are included within social security costs as this is the usual form of pension provision in the countries where those subsidiaries are located.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 32 -
8
Director's remuneration

The Director received no remuneration nor benefits during the current year and prior period.

9
Investment income
2022
2021
Interest income
Financial instruments measured at amortised cost:
Bank deposits
153,562
70,681
10
Finance costs
2022
2021
Interest on bank overdrafts and loans
3,331,782
864,880
Interest on lease liabilities
150,507
170,600
Other interest payable
814,486
1,283,784
Total interest expense
4,296,775
2,319,264
11
Income tax expense
2022
2021
Current tax
Foreign taxes and reliefs
(98,192)
(44,418)
(98,192)
(44,418)
Deferred tax
Origination and reversal of temporary differences
(589,135)
(5,107,221)
Total tax (credit)
(687,327)
(5,151,639)
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
11
Income tax expense
(Continued)
- 33 -

The charge for the period can be reconciled to the loss per the income statement as follows:

2022
2021
Loss before taxation
(49,340,073)
(17,561,063)
Expected tax credit based on a corporation tax rate of 19.00% (2021: 19.00%)
(9,374,614)
(3,336,602)
Effect of expenses not deductible in determining taxable profit
9,857,295
68,189
Utilisation of tax losses not previously recognised
(99,663)
(250,371)
Unutilised tax losses carried forward
4,485,168
35,256
Research and development tax credit
-
(50,100)
Share based payment charge
847,594
364,142
Effect of overseas tax rates
(6,417,858)
(2,321,409)
Capitalised development costs
(252,384)
191,282
Provisions
-
5,654
Other differences
267,135
142,320
Taxation credit for the year
(687,327)
(5,151,639)

The group has a substantial business and employment presence in many countries around the world. The impact of differences in overseas taxation rates arose from losses being generated in countries with tax rates higher than the UK statutory rate, the most significant of which in 2022 were Germany, Finland, and France.

12
Impairments

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

2022
2021
In respect of:
Goodwill
30,530,434
-
0
Recognised in:
Administrative expenses
30,530,434
-
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 34 -
13
Intangible assets
Goodwill
Brand
Development costs
Customer list
Order list
Total
Cost
Business combination
84,898,867
2,871,186
11,941,815
10,242,964
10,031,969
119,986,801
Additions - internally generated
-
-
1,335,332
-
-
1,335,332
Additions - purchased
-
-
540,310
-
-
540,310
At 13 October 2020
84,898,867
2,871,186
13,817,457
10,242,964
10,031,969
121,862,443
Additions - internally generated
-
0
-
0
2,861,938
-
0
-
0
2,861,938
At 31 December 2022
84,898,866
2,871,186
16,679,395
10,242,964
10,031,969
124,724,380
Amortisation and impairment
Charge for the year
-
0
366,624
1,384,800
608,733
3,727,660
6,087,817
At 13 October 2020
-
0
366,624
1,384,800
608,733
3,727,660
6,087,817
Charge for the year
-
0
574,237
1,967,161
1,278,323
4,828,599
8,648,320
Impairment loss
30,530,434
-
0
-
0
-
-
30,530,434
At 31 December 2022
30,530,434
940,861
3,351,961
1,887,056
8,556,259
45,266,571
Carrying amount
At 31 December 2022
54,368,432
1,930,325
13,327,434
8,355,908
1,475,710
79,457,809
At 31 December 2021
84,898,867
2,504,562
12,432,657
9,634,231
6,304,309
115,774,626

More information on impairment movements in the year is given in note 12.

Impairment tests for cash generating units

Goodwill is tested annually for impairment. It is allocated to cash generating units as follows:

2022
2021
Haiilo GmbH
35,588,766
35,588,766
Haiilo SAS
1,618,347
6,318,311
Haiilo OY
17,161,319
42,991,790
54,368,432
84,898,867
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
13
Intangible assets
(Continued)
- 35 -

The group tests intangible assets for impairment annually. For 2022, the group cashflows are all deemed to come from three cash generating units ("CGU"); being the Haiilo GmbH, Haiilo SAS and Haiilo Oy separate divisions. The goodwill represents the expected growth potential of the software trade when combined with the additional investment that the group is able to provide it with, as well as expected synergies, cross-selling opportunities, and cost-saving measures from being a larger Group.

 

Assets are assessed for impairment by comparing the carrying value of the CGU with the value-in-use, which is determined by calculating the net present value ("NPV") of future cashflows arising from the CGU.

 

The NPV of future cash flows is based on budgets and forecasts for the next 8 years to 2030 for all CGUs. Growth rates have been applied based on historic trends and taking into account planned synergies. A long term growth rate of 2% has been used based on market expectations and the German governments' inflation target. Discount rates of 11%, 14% and 17% for the three CGU's have been used respectively based on the Group's estimated costs of capital, and varied based on the risk profile of the underlying assets.

 

Sensitivity analysis has been undertaken against the original impairment review. Variations include:

a) Reduced the rate of expected annual growth by 50%,

b) Reduced long term growth rate (on terminal value) to 0%

c) The discount rate used was increased by 5% for all years

 

Given the expected negative free cashflows for Haiilo OY and Haiilo SAS until at least 2026, this results in recoverable amounts being significantly lower compared to the carrying values of the CGUs. When sensitivities are applied to the cash flows there is therefore a further indication of an impairment which, in the worst case scenario being case c, results to an additional impairment across the two impaired CGUs amounting to €42,760k.

 

It is concluded that impairment of intangible assets is required at the period end. As such an impairment charge of €30,530k has been recognised as at the year end.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 36 -
14
Property, plant and equipment
Leasehold land and buildings
Fixtures and fittings
Right of Use
Total
Cost
At 13 October 2020
-
0
-
0
-
0
-
Additions
-
0
207,131
14,675
221,806
Business combinations
261,019
864,667
6,364,650
7,490,336
Disposals
-
0
(55,140)
-
0
(55,140)
At 31 December 2021
261,019
1,016,658
6,379,325
7,657,002
Additions
-
0
216,918
55,187
272,105
Disposals
-
0
(8,740)
-
0
(8,740)
At 31 December 2022
261,019
1,224,836
6,434,512
7,920,367
Accumulated depreciation and impairment
At 13 October 2020
-
0
-
0
-
0
-
0
Charge for the year
33,117
211,260
733,166
977,543
Eliminated on disposal
-
0
(53,671)
-
0
(53,671)
At 31 December 2021
33,117
157,589
733,166
923,872
Charge for the period
33,112
245,229
744,768
1,023,109
Eliminated on disposal
-
0
(8,469)
-
0
(8,469)
At 31 December 2022
66,229
394,349
1,477,934
1,938,512
Carrying amount
At 31 December 2022
194,790
830,487
4,956,578
5,981,855
At 31 December 2021
227,902
859,069
5,646,159
6,733,130
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 37 -
15
Investments
Current
Non-current
2022
2021
2022
2021
Listed investments
-
0
-
0
275,950
748,475
Movements in non-current investments
2022
2021
Cost or valuation
At start of period
748,475
-
Additions
-
748,475
Valuation changes
23,754
-
Disposals
(496,279)
-
At end of period
275,950
748,475
Carrying amount
At 31 December 2022 & 31 December 2021
275,950
748,475
16
Subsidiaries

Details of the company's subsidiaries at 31 December 2022 are as follows:

Name of undertaking
Address
Class of
% Held
shares held
Direct
Indirect
COYO Holding GmbH
Germany (1)
Ordinary
53.39
-
Haiilo Uprising GmbH
Germany (1)
Ordinary
0
53.39
Haiilo GmbH
Germany (1)
Ordinary
0
53.39
Haiilo SAS
France (2)
Ordinary
0
53.39
Haiilo OY
Finland (3)
Ordinary
0
53.39
Haiilo Limited
England and Wales (4)
Ordinary
0
53.39
Haiilo Inc
USA (5)
Ordinary
0
53.39

Registered office addresses:

1
Gasstr. 6a, Hamburg, Germany, 22761
2
17 Av. de l'Opéra, Paris, France, 75001
3
Kalevankatu 20, Helsinki, Finland, 00100
4
Darvells Farm Dunt Avenue, Hurst, Reading, United Kingdom, RG10 0SY
5
2800 Battery Avenue SE, Suite 100, Atlanta, Georgia 30339, The United States of America
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 38 -
17
Trade and other receivables
2022
2021
Trade receivables
4,324,066
4,828,699
Provision for bad and doubtful debts
(600)
(600)
4,323,466
4,828,099
Other receivables
1,166,398
541,943
Prepayments
693,779
524,129
6,183,643
5,894,171
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 39 -
18
Trade receivables - credit risk
Fair value of trade receivables

The director considers that the carrying amount of trade and other receivables is approximately equal to their fair value.

Expected credit loss assessment
Balance
Expected loss rate
Loss allowance
Trade receivables
%
2022
Current
3,533,172
0.012
429
1 - 30 days overdue
496,748
0.012
60
31 - 60 days overdue
82,775
0.012
10
61 - 90 days overdue
29,297
0.012
4
More than 90 days overdue
181,474
0.053
97
4,323,466
600
Balance
Expected loss rate
Loss allowance
Trade receivables
%
2021
Current
4,191,533
0.012
509
1 - 30 days overdue
489,455
0.012
65
31 - 60 days overdue
118,402
0.012
20
More than 90 days overdue
28,709
0.012
6
4,828,099
600

Primary exposure to credit risk arises from the potential for non-payment from customers. The group has a strong focus on winning contracts from reputable customers. Commercial terms imposed to all customers dictate that the total sum for the services provided by Engage Topco is prepaid at the start of the contract. Contracts are carefully monitored throughout to ensure the risk of non-payment is minimised.

 

In addition to the above, a bad debt amounting to €44,430 has been recognised in the year in relation to a customer debt considered irrecoverable. No other changes expected for credit loss allowances.

No significant receivable balances are impaired at the reporting end date.

Movement in the allowances for doubtful debts
2022
2021
Balance at 1 January 2022
600
-
Additional allowance recognised
-
600
Balance at 31 December 2022
600
600
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 40 -
19
Borrowings
Current
Non-current
2022
2021
2022
2021
Borrowings held at amortised cost:
Bank loans
64,360
57,754
49,696,718
45,624,767
Loans from related parties
-
-
20,594,860
19,780,374
64,360
57,754
70,291,578
65,405,141
2022
2021
Secured borrowings included above:
Bank loans
49,588,586
45,428,750

The loan between Haiilo Uprising GmbH and Barings, recognised within bank loans, is secured on the company's assets and shares. The interest on the loan is calculated at EURIBOR + 6.5% per annum and is repayable in 2028, which is 7 years from drawdown. During the year, a further draw down of € 2,500,000 capex facility was made. This also carries interest at EURIBOR + 6.5% and is due for repayment in 2028.

 

A loan between Haiilo Holdings GmbH and Marlin-Coyo Aggregator L.P, recognised within loans from related parties, is not secured due to the two entities being related parties. The loan accrues interest of 4% per annum and is repayable in full in 2030, which is 10 years from drawdown.

20
Liquidity risk

The following table details the remaining contractual maturity for the group's financial liabilities with agreed repayment periods. The contractual maturity is based on the earliest date on which the group may be required to pay.

Demand and less than 3 months
From 3 to 12 months
From 12 months to 2 years
From 2 to 5 years
More than 5 years
Total
Finanical assets
Trade and other receivables
5,489,864
-
-
-
-
5,489,864
Cash and cash equivalents
5,447,569
-
-
-
-
5,447,569
As at 31 December 2022
10,937,433
-
-
-
-
10,937,433
Trade and other receivables
5,370,042
-
-
-
-
5,370,042
Cash and cash equivalents
10,091,306
-
-
-
-
10,091,306
As at 31 December 2021
15,461,348
-
-
-
-
15,461,348
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
20
Liquidity risk
(Continued)
- 41 -
Financial liabilities
Trade and other payables
4,407,221
-
-
-
-
4,407,221
Bank loans
15,358
49,002
49,145
58,987
49,588,586
49,761,078
Other loans
-
-
-
-
20,594,860
20,594,860
Lease liabilities
200,969
602,908
886,824
2,143,103
1,792,126
5,625,930
Deferred consideration
-
943,333
-
-
-
943,333
As at 31 December 2022
4,623,548
1,595,243
935,969
2,202,090
71,975,572
81,332,422
Trade and other payables
4,667,448
-
-
-
-
4,667,448
Bank loans
14,323
42,970
64,360
78,132
45,482,736
45,682,521
Other loans
-
-
-
-
19,780,374
19,780,374
Lease liabilities
204,613
613,839
652,240
2,404,171
2,532,839
6,407,702
Deferred consideration
-
1,000,000
1,000,000
-
-
2,000,000
As at 31 December 2021
4,886,384
1,656,809
1,716,600
2,482,303
67,795,949
78,538,045
Liquidity gap
As at 31 December 2022
6,313,885
(1,595,243)
(935,969)
(2,202,090)
(71,975,572)
(70,394,989)
As at 31 December 2021
10,574,964
(1,656,809)
(1,716,600)
(2,482,303)
(67,795,949)
(63,076,697)

The challenging economic environment also impacted companies in Haiilo’s sales markets in 2022. This is expected to continue in 2023 and lead to budget cuts or insolvencies at particularly affected companies. The strong diversification of customers from a wide range of industries and geographies reduces the risk for the group. The market for internal communications is expected to continue to grow. Competitive landscape was more challenging in 2022. Competition is expected to further increase Haiilo's sales markets.

 

The group generates cash through its operations and aims to manage liquidity by ensuring it will always have sufficient financing facilities to meet its liabilities when due under both normal and stress conditions. Cash flow is carefully monitored on a weekly basis to ensure any liquidity risk is minimized and cash balances are maintained at a level to meet both short and long term obligations.

 

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 42 -
21
Market risk
Market risk management
Foreign exchange risk

The carrying amounts of the group's foreign currency denominated monetary assets and liabilities at the reporting date are as follows:

Assets
GBP
USD
2022
2022
Trade and other debtors
44,866
129,776
Cash and cash equivalents
85,547
1,694,492
Trade and other creditors
(285,829)
(2,428)
Deferred revenue
(345,622)
(1,256,017)
(501,037)
565,822
Assets
GBP
USD
SEK
2021
2021
2021
Trade and other debtors
34,921
701,096
-
Cash and cash equivalents
404,044
1,198,886
16,731
Trade and other creditors
(255,726)
(132,761)
-
Deferred revenue
(431,733)
(1,104,811)
-
-
-
-
(248,494)
662,410
16,731

Many of the group revenues originate and are denominated in foreign currencies and therefore the group carries an inherent risk in reported profits given that its functional and presentational currency is Euro. The foreign exchange risk is mainly dependent on the movement in the Euro to Sterling and the Euro to US Dollar exchange rates.

 

The group actively seeks to manage a natural hedge to its foreign exchange exposure by maintaining bank accounts in different currencies. Customers in general pay their invoices to the respective accounts in their currency. Local costs in the respective currency can then be settled with those payments.

 

This reduces the group's exposure to losses being materialised through adverse foreign exchange movements. The group's revenues and costs are not subject to formal hedge accounting and therefore retain inherent risk from currency fluctuations.

 

The volatility in foreign exchange rates bares an impact on the reported numbers given that the group entities generally invoice in their respective functional currency and therefore there is only a reported currency risk.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
21
Market risk
(Continued)
- 43 -
Interest rate risk

The carrying amounts of financial liabilities which expose the group to cash flow interest rate risk are as follows:

2022
2021
Variable rate bank loans
49,588,586
45,428,750

The group has one loan with Barings Bank which is subject to interest at EURIBOR+6.5%. Had the EURIBOR increased by 5% during the period then additional interest of € 1,764,650 (2021: €410,400) would have been incurred.

22
Trade and other payables
Current
Non-current
2022
2021
2022
2021
Trade payables
1,593,021
1,869,538
-
0
-
0
Accruals
1,582,453
1,619,610
-
0
-
0
Deferred consideration
943,333
1,000,000
-
1,000,000
Other payables
1,231,747
1,178,300
-
0
-
0
5,350,554
5,667,448
-
1,000,000

Deferred consideration relates to consideration due as part of the Haiilo SAS acquisition. An amount of €943k remaining is due for payment in June 2023.

23
Lease liabilities
2022
2021
Maturity analysis
Within one year
803,877
818,452
In two to five years
3,029,928
3,056,411
In over five years
1,792,125
2,532,839
Total undiscounted liabilities
5,625,930
6,407,702
Future finance charges and other adjustments
(532,946)
(684,369)
Lease liabilities in the financial statements
5,092,984
5,723,333
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
23
Lease liabilities
(Continued)
- 44 -

Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

2022
2021
Current liabilities
680,786
668,747
Non-current liabilities
4,412,198
5,054,586
5,092,984
5,723,333
2022
2021
Amounts recognised in profit or loss include the following:
Interest on lease liabilities
150,507
170,600
Other leasing information is included in note 31.
24
Deferred taxation
2022
2021
Deferred tax liabilities
5,114,622
7,361,188
Deferred tax assets
(3,994,277)
(5,651,708)
1,120,345
1,709,480

The following are the major deferred tax liabilities and assets recognised by the group and movements thereon during the current and prior reporting period.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
24
Deferred taxation
(Continued)
- 45 -
IFRS 16 leases
Tax losses
Intangible assets
Share based payments
Total
Balance at 13 October 2020
-
-
-
-
-
0
Deferred tax movements in prior year
Charge/(credit) to profit or loss
(24,908)
(3,275,312)
(1,776,191)
(30,810)
(5,107,221)
Acquired as part of business combinations
-
(2,320,678)
9,137,379
-
6,816,701
(Asset)/ Liability at 1 January 2022
(24,908)
(5,595,990)
7,361,188
(30,810)
1,709,480
Deferred tax movements in current year
Charge/(credit) to profit or loss
47,308
1,632,523
(2,268,966)
-
(589,135)
(Asset)/ Liability at 31 December 2022
22,400
(3,963,467)
5,092,222
(30,810)
1,120,345

Deferred tax assets are all expected to unwind more than 12 months from the year end.

The group has unrecognised losses totalling €21,044,157 which would result in an additional deferred tax asset of €5,965,941 when measured at the future tax rates for each of the jurisdictions where the losses have been incurred.

 

Included within unrecognised tax losses are losses of €3,431,858 generated within Haiilo Oy. The losses expire ten years after the financial year in which the losses have been generated. Therefore all accumulated losses will expire by 2031.

Deferred tax balances arising in Germany are carried at 32.28% being the combined taxation rates for Corporate Income Tax and Trade Tax.

 

Deferred tax balances arising in Finland and France are carried at 20% and 25% respectively, being the future tax rate for Corporate Income Tax.

25
Retirement benefit schemes
2022
2021
Defined contribution schemes
Charge to profit or loss in respect of defined contribution schemes
461,622
113,276

The group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 46 -
26
Contract balances
2022
2021
Contract liabilities
13,712,482
12,026,263

Deferred revenues are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

2022
2021
Current liabilities
13,572,757
11,665,954
Non-current liabilities
139,725
360,309
13,712,482
12,026,263
2022
2021
Balance at start of period
12,026,263
-
Acquired through business combination
-
9,263,507
Additions
31,452,025
10,264,489
Income recognised in the period
(29,765,806)
(7,501,733)
13,712,482
12,026,263
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 47 -
27
Share-based payments

In the period to 31 December 2021, the group issued two separate share-based payment schemes to certain key employees. The schemes relate to a virtual share option plan ("VSOP") whereby the holders will receive a cash payment upon a successful sale of the business for an amount above a defined threshold value. At their respective grant dates both schemes were considered to be a cash settled share-based payment arrangement. One of the schemes was subsequently modified last year which changed an element of the scheme to an equity-settled scheme.

 

In the current period the group has issued four new tranches to employees under the same VSOP scheme which was implimented in the prior period. All tranches carry identical terms. The inputs to the valuation are summarised below.

Number of share options
Average exercise price
2022
2021
2022
2021
Outstanding at 1 January 2022
3,207
-
0
-
0
-
0
Granted in the period
3,726
5,915
-
0
-
0
Forfeited in the period
(319)
(499)
-
0
-
0
Cancelled in the period
-
(2,209)
-
0
-
0
Outstanding at 31 December 2022
6,614
3,207
-
0
-
0
Exercisable at 31 December 2022
-
0
-
0
-
0
-
0
Options granted during the period

Options granted in the period are set out below. Their fair values were measured using the Black-Scholes model.

2022
2021
Grant date/ Valuation date
31 December 2022
23 September 2021
28 December 2020
Weighted average fair value
239.47
546.73
837.32
Inputs for model:
- Weighted average share price
1,285.42
1,984.12
1,984.12
- Weighted average exercise price
3,583.55
3,583.55
1,929.17
- Expected volatility
57.54%
50.99%
50.99%
- Expected life
3.75
4.83
4.25
- Risk free rate
3.0%
1.0%
1.0%
- Expected dividends yields
0.0%
0.0%
0.0%
Modification

During the prior year the VSOP granted on 28 December 2020 was subsequently cancelled on 23 September 2021. This cancelation is considered to be a modification under IFRS 2. As compensation the Group issued the former recipients new options in the VSOP issued on 23 September 2021 as well as a guarantee whereby the existing shareholders of Haiilo Holdings GmbH would settle the shortfall between the original threshold amount and the new threshold amount under the two schemes.

 

This modification results in the cash based liability being adjusted to fair value as at the cancellation date with a portion being transferred to an other reserve within equity. Only a portion of the liability is transferred as this reflects the element which is to be settled outside of the Engage Topco Limited group. For more information see note 29.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
27
Share-based payments
(Continued)
- 48 -
2022
2021
Liabilities
Liabilities arising from share-based payment transactions
2,700,781
847,664
Expenses
Related to cash settled share based payments recognised as a liability
1,853,117
1,117,902
Related to equtiy settled share based payments recognised in equity
773,045
105,808
28
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
Issued and fully paid
Ordinary shares of £1 each
4,089,335
4,089,335
4,462,145
4,462,145

During the prior period, a total number of 4,089,335 Ordinary £1 shares were issued at par.

 

The par value of £4,089,335 translates to €4,462,145 using the historic exchange rate at the date the shares were issued.

29
Other reserve
2022
Balance at 13 October 2020
-
Transfer from share-based payment liability
270,238
Equity settled share-based payment charge
105,808
Balance at 31 December 2021
376,046
Equity settled share-based payment charge
773,045
Balance at 31 December 2022
1,149,091

During the prior period a cash settled share-based payment scheme was modified into an equity settled share-based payment scheme. As a result of this modification a transfer into equity of €270,238 has been recognised on the modification date. For further details see note 27.

 

This reserve relates to a cash settled share-based payment scheme within Coyo Holding GmbH, which is to be contractually settled by the non-controlling shareholders of the group. Given that the cash settlement is an obligation which falls outside of the Group this constitutes an equity instrument.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 49 -
30
Capital risk management

The objectives of the group when managing capital are:

 

The group is constantly monitoring the capital structure of the group in order to reduce net debt and achieve an optimal capital structure to maximise returns to shareholders.

 

The group is not subject to any externally imposed capital requirements.

31
Other leasing information
Lessee

Amounts recognised in profit or loss as an expense during the period in respect of lease arrangements are as follows:

2022
2021
Expense relating to short-term leases
397,300
74,743
Expense relating to leases of low-value assets
18,334
26,569

Set out below are the future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of lease liabilities:

2022
2021
Land and buildings
Within one year
222,463
40,943
2022
2021
Operating leases apart from land and buildings
Within one year
24,142
45,901
Between two and five years
2,735
26,877
26,877
72,778
Lessor

During the year, the group entered into a non cancellable lease agreement for an entire third floor of their Hamburg office running to 30 April 2025. As the terms of the sublease are different from that on the headlease, this has been treated as an operating lease in accordance with IFRS 16 - Leases.

ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
31
Other leasing information
(Continued)
- 50 -

At the reporting end date the group had contracted with tenants for the following minimum lease payments:

2022
2021
Within one year
230,455
-
One to two years
307,273
-
Total undiscounted lease payments receivable
537,728
-
Information relating to lease liabilities is included in note 23.
32
Related party transactions
Remuneration of key management personnel

The remuneration of key management personnel, including directors, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

2022
2021
Short-term employee benefits
1,822,117
1,101,165
Share-based payments
2,328,746
1,006,511
4,150,863
2,107,676
33
Controlling party

The immediate and ultimate holding company is Marlin-Coyo-Aggregator L.P, which has a registered office of Ugland House, Grand Cayman, Cayman Islands, KY1-1104.    

34
Prior period adjustment
Changes to the income statement
Period ended 31 December 2021
Previously reported
Adjustment
As restated
Revenue
18,006,419
(521,000)
17,485,419
Other operating income
97,208
521,000
618,208
Loss for the financial period
(12,409,424)
-
(12,409,424)
ENGAGE TOPCO LIMITED
Engage Topco Limited
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
34
Prior period adjustment
(Continued)
- 51 -
Notes to reconciliation
(i) Operating lease rental income

In the prior period management have reclassified income from subletting floors of the Hamburg office from revenues to other operating income as the income does not form part of the main trade of the group.

ENGAGE TOPCO LIMITED
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 52 -
35
Accounting policies
Company information

Engage Topco Limited is a private company limited by shares incorporated in England and Wales. The registered office is First Floor, Templeback, 10 Temple Back, Bristol, BS1 6FL. The company's principal activities and nature of its operations are disclosed in the director's report.

35.1
Accounting convention

The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards.

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 €1.

The company applies accounting policies consistent with those applied by the group. To the extent that an accounting policy is relevant to both group and parent company financial statements, please refer to the group financial statements for disclosure of the relevant accounting policy.

As permitted by FRS 101, the company has taken advantage of the following disclosure exemptions from the requirements of IFRS:

35.2
Going concern

As of 31 December 2022 the group had net liabilities of €993,912 (2021: net assets €46,804,625). Net current liabilities in the year increased to €8,037,245 (2021: €2,074,426). Cash and cash equivalents for the year reduced to €5,447,569 (2021: €10,091,306). At 31 December 2022, the group was funded by a combination of bank loans with Barings and loans with the Private Equity Backer. There are covenants attached to the bank loans which have been met at the year end.

 

The Director have prepared a base case cash flow and forecasts extending to 31 December 2025 which indicate that the company and group will have sufficient funds to meet its liabilities as they fall due for that period. The base case projections assume synergies and cross-selling opportunities will start to be realised during FY23 which is evident from post year end financials and cash balances held as at the signing of these financial statements.

 

As such, the Director has at the time of approving the financial statements, a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the Director continues to adopt the going concern basis of accounting in preparing the financial statements.

35.3
Non-current investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. 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.
A subsidiary is an entity controlled by the parent company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
ENGAGE TOPCO LIMITED
NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 53 -
36
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2022
2021
Number
Number
Director
1
1
37
Investments
Current
Non-current
2022
2021
2022
2021
Investments in subsidiaries
-
0
-
0
4,462,144
4,462,144
Investment in subsidiary undertakings

Details of the company's principal operating subsidiaries are included in note 16.

Movements in non-current investments
Shares in subsidiaries
Cost or valuation
At 1 January 2022 & 31 December 2022
4,462,144
Carrying amount
At 31 December 2022
4,462,144
At 31 December 2021
4,462,144
38
Trade and other receivables
2022
2021
Other receivables
1
1
39
Share capital
Refer to note 28 of the group financial statements.
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