The directors present their strategic report for the year ended 31 March 2023.
The principal activity of the company is the provision of managed workforce solutions and permanent placement services. The directors are not aware, at the date of this report of any likely major changes in the activity over the next year.
On the 31 March 2022, the Company purchased the trade and assets of Premiere Employment Group Limited, this accounts for the increased trading numbers in the current financial year.
The commercial impact of Covid-19 has largely subsided, albeit there still remain opportunities to support the government with vaccination and associated programmes; and the company continues to promote agile working for its employees.
Over the year, additional investment has been made into the IT infrastructure as the company harmonises systems across the wider ownership group.
The directors consider strategic, operational and financial risks and identify actions to mitigate those risks on a regular basis. The principal risks and uncertainties are detailed below:
Economic and competitive risk
Competitors in the general staffing market range from large multi-national organisations to small privately-owned businesses. All of the markets in which the company operates are continually subject to competition from both existing and new competitors. The costs of entry to the market can be relatively low, however, in certain specialist sectors, such as within the Public Sector, these costs can rise on the back of increased levels of compliance, and business investment required by local regulators and clients.
With inflation rising to 8.9% in the year to 31 March 2023, and interest rates rising at their fastest rate for many years, the company needs to remain agile and focused on managing the impact of these risks on all related stakeholders.
Commercial risk
The company benefits from close commercial relationships with key clients in both the public and private sectors. Within the private sector, the company is not dependent on any single key client. The public sector markets in which we operate are directly dependent on funding from local and national government organisations and these clients remain the largest customers in the business.
Technology risk
The company is reliant on a number of technology systems in providing its services to clients. These systems are located both in-house and in various data centres. The business continues to review and enhance its ability to cope with the loss of a technology system as a result of a significant event.
Regulatory risk
The staffing industry is governed by an increasing level of compliance. Additionally, clients require more complex levels of compliance in their contractual arrangements. The company takes its responsibilities seriously, is committed to meeting all of its regulatory responsibilities, which includes changes to national minimum wage legislation, and continues to develop its internal controls and processes with respect to legal and contractual obligations.
Financial risk
The company utilities various financial instruments including cash and other items, such as trade debtors and trade creditors that arise directly from its operations. The existence of these financial instruments exposes the company to a number of financial risks, which are described in more detail below.
The main risks arising from the company's financial instruments are market risk, interest rate risk, credit risk, and liquidity risk. The directors regularly review and agree policies for managing each of these risks and they are summaries below.
Market Risk
Market risk encompasses two types of risk, being interest rate and market price risk. Interest rates are increasing however with a low level of borrowing, movements in interest rates are not currently a significant risk to trading. Market price risks are constantly reviewed by management in each operation.
With the Brexit direction now known, some of the previous uncertainties within the labour markets have fallen away. Clearly, the picture remains fluid and the company must be alive to the risks around labour supply where currently it utilises a large proportion of workers from overseas. The business is actively engaging with customers on Brexit strategies to ensure customers secure the best resources.
Interest Rate Risk
The company finances its operations through a mixture of cash, creditors, and an invoice discounting facility. The exposure to interest rate fluctuations are largely limited to the movement in base rate in the UK, which is currently 5.25%. The financing has been modelled into the look forward assumptions.
Credit Risk
The company's principal financial assets are cash and trade debtors.
To manage credit risk the directors set credit limits for customers based on a combination of third party credit references and payment history. Credit limits are reviewed by the company's credit controllers on a regular basis in conjunction with debt ageing and collection history. The company expects that economic challenges will continue to negatively impact credit limits on certain types of customers with whom it trades, thus requiring a greater degree of focus to stay on top of cash collections to avoid build-up of trade debtors and possible bad debt.
Liquidity risk
The company manages liquidity risk by ensuring sufficient liquidity is available to meet the foreseeable cash need of the business. The facilities in place provide sufficient normal liquidity headroom, further substantial modelling has taken place to determine the impact on cash availability from the current economic scenarios. These scenarios have largely focussed on the impact of volume reductions. Liquidity risk is proactively managed using 13 week forecasts, thus providing time for compensatory actions to be taken, should forecasts need updating.
Financial
The financial performance of the company is measured using the following key performance indicators:
Cash collection is an important part of effective working capital management. The average debtor days at the period end were 38 days (2022: 43 days).
Sales for the year to March 2023 were £192m (2022: £111m) and delivered an operating profit before exceptional costs/income were £5.6m (2022: £3.6m).
The company had net current assets of £7.3m (2022: £9.9m) as at the balance sheet date.
Non-Financial
The company measures its non-financial performance as follows:
The securing of new business is a critical area if the business is to continue to grow and a number of new accounts were awarded from both new and existing customers. The company is a large employer and strives to ensure that a minimum of 99% of all employees are paid accurately and on time. During the year, the company achieved payroll accuracy exceeding 99.8%.
Despite the economic challenges the directors expect the general level of activity to increase over the forthcoming year. This is as a result of ongoing investment into key target markets, a heightened focus on delivering what the customer wants and through investment in new IT platforms.
The directors refer to the going concern accounting policy stated in the notes to the financial statements.
This report sets out how the Directors comply with the requirements of Section 172 of the Companies Act 2006 and how these requirements have impacted the Directors activities and decision making during the financial year ended 31 March 2023.
The Directors consider that they have acted in good faith to promote the success of the company on behalf of the stakeholders, in relation to matters set out in s172 of the Act. This has been achieved by working with the stakeholders to formulate long term plans and strategic imperatives, which are monitored and updated regularly. The stakeholders of the company include the employees, clients, suppliers and shareholders of the business.
On behalf of the board
The directors present their report with the financial statements of the company for the year ended 31 March 2023.
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £7,100,000. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company's policy is to settle terms of payment with suppliers when agreeing the terms of each transaction, ensuring that suppliers are made aware of the terms of payment and abide by the terms of payment.
The Directors and Management Team regularly review how they maintain positive relationships with all its stakeholders including suppliers, customers and others. They have built a reputation on high levels of customer service and uphold this through accreditations such as ISO 9001.
MHA were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting. Following a rebranding exercise on 15 May 2023 the trading name of the company's independent auditor changed from MHA MacIntyre Hudson to MHA.
During the past year, there has been a continued focus on corporate governance, with the board spending a large proportion of its time examining and strengthening our processes throughout the company. Ensuring that a solid governance framework is in place is key to maintaining trust and transparency and an important building block for future growth.
Please refer to the financial statements of the ultimate parent company for this information.
The Directors monitor and review strategic objectives against business plans on a regular basis. The Management Team support the Directors with the planning and execution of long-term plans and are experienced in the successful implementation of strategic business decisions.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Enquiry of management around actual and potential litigation and claims;
Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business, and reviewing accounting estimates for bias;
Reviewing minutes of meetings of those charged with governance;
Performing audit work over the recognition of revenue on deliveries of services occurring at the year end to provide assurance over cut-off;
Enquiry of management to identify any instances of known or suspected instances of fraud;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
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. The 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 is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the financial statements is located on the FRC’s website at: 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 member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 12 to 22 form part of these financial statements.
The notes on pages 12 to 22 form part of these financial statements.
The notes on pages 12 to 22 form part of these financial statements.
In the application of the company's accounting policies above, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and underlying 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 period.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Trade debtor balances are reviewed at each period end for recoverability and whether an impairment charge is necessary; a specific bad debt provision of £63,062 (2022: £155,338) has been provided at the reporting date.
The UK Recruitment Co. Ltd is a private company limited by shares, and incorporated in England and Wales under registered number 12449239. The registered office is 33 Soho Square, London, W1D 3QU, and the principal place of business is 1st Floor, Meridian House, Sandy Way, Grange Park, Northampton, NN4 5EJ.
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 £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Twenty20 Capital Bidco1 Limited Group these consolidated financial statements are available from its registered office, 33 Soho Square, London, W1D 3QU.
In order to consolidate and relaunch the business across the UK under one legal structure, on the 31 March 2022 the company purchased the trade and assets of fellow subsidiary Premiere Employment Group Limited. This included the transfer of all employees, customer contracts and creditors. Following the transfer the resulting inter-company balance was waived. The combined Recruitment Company footprint is now well placed to service customers right across the UK and to build out its Public and Commercial Sector offerings under one unified brand.
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, plus costs directly attributable to the business combination. 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.
Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.
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 credited or charged to profit or loss.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
Trade and other debtors
Trade and other debtors are recognised initially at transaction price less attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
Trade and other creditors
Trade and other creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade creditors.
In the year to March 2022, as part of a group organisation, the balance of an intercompany loan payable to Premiere Employment Group Limited, a fellow group subsidiary, was waived.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
In addition, the average number of persons on hire to clients was 7,949 (2022: 5,165). The associated costs were wages and salaries of £156,240,586 (2022: £85,650,180), social security costs of £10,946,297 (2022: £5,844,983) and pension costs of £1,936,051 (2022: £660,864).
The remuneration of the directors is borne by another company within the group of companies of which they are directors. The portion of this remuneration which related to the company is considered to be £nil (2022: £nil) in the current period.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The UK government has announced that from 1 April 2023 the rate of corporation tax will be 25% for companies with annual profits over £250,000. For companies with annual profits below £50,000 the rate will remain at 19%. Marginal relief provisions will be introduced so that, where a company's profits fall between the lower (£50,000) and upper (£250,000) limits, it will be able to claim an amount of marginal relief that bridges the gap between the lower and upper limits, providing a gradual increase in the corporation tax rate.
Amounts due from other group undertakings are unsecured, non-interest bearing, and repayable on demand.
Amounts due to other group undertakings are unsecured, non-interest bearing, and repayable on demand.
On the 2nd March 2020 Close Brothers Limited created a fixed charge and also a floating charge over all of the property and undertakings of the company; this charge contains a negative pledge.
On the 2nd March 2020 a shareholder created a fixed charge and also a floating charge over all of the property and undertakings of the company; this charge contains a negative pledge.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
In addition, pension costs relating to persons on hire to clients was £1,936,051 (2022: £660,864).
Contributions outstanding to the fund at the balance sheet date totaled £101,539 (2022: £36,060).
The company has one class of ordinary shares which carry no right to fixed income.
Profit and loss reserves includes all current and prior year retained profits and losses.
In the comparative period, on the 31st March 2022, The UK Recruitment Co. Ltd acquired the trade and assets of Premiere Employment Group Limited. The acquisition was accounted for under the merger method of accounting.
Total identifiable net assets at that date totalled £1,796,031. Total consideration paid totalled £1,796,031, which was settled via the intercompany accounts as noted under the exceptional items note.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The Company is not required to disclose transactions with other members of the group in which the company is a part on the basis that the entity is a wholly owned subsidiary of the parent of the group as stated in section 33 of FRS102.
The immediate parent undertaking at the balance sheet date was Twenty20 Midco 1 Limited and the ultimate parent undertaking was Twenty20 Capital Investments Limited, both companies are registered in England and Wales and their registered office is 33 Soho Square, London, 21D 3QU.
The parent company of the smallest group that includes the company and for which consolidated financial statements are prepared is Twenty20 Capital Bidco1 Limited. The parent company of the largest group that includes the company and for which consolidated financial statements are prepared is Twenty20 Capital Investments Limited. Copies of these financial statements can be obtained from the registered office at 33 Soho Square, London, W1D 3QU.