The Board of Directors have pleasure in presenting their strategic report for the year ended 31 December 2022.
VetCT Specialists Ltd is a premier supplier of veterinary specialist consultancy to qualified veterinary professionals. We provide radiology reporting and other veterinary medicine specialist consultancy services to first-opinion veterinary practices and related veterinary education services.
The Group saw a 51% increase in revenue from the prior year. The Group’s revenue for the year was £20.2m (2021: £13.4m). Gross profit for the year was £7.3m (2021: £3.5m). Loss before tax for the year was £0.5m (2021: profit of £0.1m). The gross profit margin was 36% (2021: 26%).
The increase in revenue and gross profit reflect an increase in sales both in the UK (24% growth from £5.1m in 2021 to £6.3m in 2022) and the Rest of World (66% growth from £8.3m in 2021 to £13.8m in 2022) as the Group broadened its customer base.
The Group has expanded its provision of services year-on-year and cost of sales has increased by 32% from £9.8m in 2021 to £12.9m in 2022. Services are provided by specialists working as employees and contractors.
As the Group has seen significant year-on-year growth, it has invested significantly in people, systems, and processes to support growth in the current year and in future years, resulting in a 105% increase in administrative expenses from £3.7m in 2021 to £7.7m in 2022.
Other operating income fell by 82% to £55k (2021: £309k).
Interest payable and similar expenses increased by 64% to £45k (2021: £28k) as the Group made use of borrowing facilities to support the operating loss and balance sheet investment with a view to promoting growth in the current year and in future years.
During 2022, the Group invested £225k in the acquisition of tangible fixed assets to support growth (2021: £3k).
Working capital commitment increased as a result of company growth in 2022 from 2021. Trade debtors increased by £0.8m to £2.2m (2021: £1.4m) and prepayments increased by £0.2m to £0.4m (2021: £0.2m). Trade creditors increased by £0.4m to £0.9m (2021: £0.5m) and accruals and deferred income increased to £0.7m (2021: £0.5m).
The Group repaid £0.4m of long-term loans during 2022 bringing the balance of loans and overdrafts to £0.8m at 31 December 2022 (2021: £1.2m)
The net asset position of the Group is £2.2m (2021: £2.5m).
As a result of the operating loss, the investment in tangible fixed assets, the working capital increase, and the repayment of loans, the Group’s cash position declined from £1.6m at 31 December 2021 to £0.4m at 31 December 2022.
| 2022 £ | 2021 £ |
Turnover | 20,197,141 | 13,376,004 |
Gross profit margin | 36% | 26% |
Operating (loss)/profit | (433,880) | 103,516 |
The Group’s mission is to make the veterinary world a better place by delivering trusted veterinary knowledge, support and reassurance at the point of need. Our vision is to grow our impact on veterinary patients, pet owners and veterinary practitioners without compromising quality in any of the services we deliver. We will act at all times in accordance with our values:
Through teamwork we rise
Kindness is key
Curiosity unlocks our potential
We show up as our best selves
We do the right thing
We are proud to look after veterinarians all over the world and our services are developed with all parts of the veterinary ecosystem in mind: veterinary students, new graduates, veterinary nurses and technicians, interns, residents, primary care veterinarians, advanced practitioners, and specialists. The Group has seen in 2022 and expects in the near future to continue to see growth in all services it currently offers. The Group’s largest single focus for growth during 2022 and in the short-term future is expanding the volume and value of teleradiology services beyond the UK.
Matter of concern | Potential impact on the Group | Mitigating actions |
Competition in our markets | The Group operates in a competitive market environment and differentiation of our services is key to success. | Customer care is a top priority and the Group maintains strong relationships with customers. The Group provides value added services and maintains key customer relationships through close alignment of our services with client needs and multi-year contracts where appropriate. |
Cyber attack | The Group provides services to customers through its online platform, so there is a risk to business continuity from a cyber attack. | The Group undertakes standard monitoring and maintenance on its platform and related systems. Annual security audits including penetration testing are used to drive prioritisation of technical development to promote robustness of controls and monitoring. |
Specialist recruitment and retention | The Group’s services are provided by highly-trained, qualified specialists. Failure to recruit and retain specialists would result in delays or inability to maintain expected service levels. | The Group’s commitment to a culture of clinical excellence and values aligned to those of leading specialists allows us to maintain a strong relationship with specialists. The Group’s support for hybrid working with clinical roles alongside telemedicine work and our unique clinical support and mentoring structures create an attractive working environment in which specialists can do their best work while enjoying personal and professional development opportunities. |
Macro-economic headwinds | The veterinary industry is subject to macroeconomic headwinds from slow economic growth and rising interest rates in many of the Group’s key markets. While pet care is high on household priorities, there is a risk that pet owners will be unable to support the Group’s activities or those of our clients. | The Group’s customers are spread so that exposure to particular markets is limited. Marketing and customer onboarding is planned in advance and can be accelerated in the event of downturns in footfall from existing customers. Activities intended to promote longer-term growth can be deferred in the short term where revenues are affected. |
Cash flow | The Group is investing to promote rapid growth and to maximise its positive impacts on the veterinary industry. During the period under audit this has led the group to generate negative cash flows. | The Group has robust monitoring and financial control processes to ensure that its plans are sufficiently and appropriately financed. The Group has raised investment subsequent to the reporting date which in the opinion of the directors reinforces its ability to finance its business plan for the foreseeable future. |
On behalf of the board
The directors present their annual report together with the Group strategic report and financial statements of VetCT Specialists Ltd ('the company') and its subsidiaries (together 'the group') for the year ended 31 December 2022.
The results for the year are set on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Kirk Rice were appointed as auditors to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
The Group has chosen in accordance with Section 414C(11) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 to set out within the group's Strategic Report the Company's Strategic Report Information Required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This includes information that would have been included in the business review and details of the principal risks and uncertainties.
The Group completed an investment which increased net cash by £5 million in August 2023 to support its ongoing growth plan which will support the Group throughout the period of twelve months from the date of signing these financial statements. On review of the business plan and projected scenarios, including the application of sensitivity analysis, the directors conclude that the Group will be able to meet its liabilities as they fall due for at least twelve months from the date of approval of these financial statements. The financial statements have therefore been prepared on the going concern basis.
Subsequent events
On 21 August 2023, the directors of VetCT Inc, a subsidiary entity consolidated in these financial statements, elected to pay a dividend of USD $25,595.60 per common share to all shareholders of common stock on record on 21 August 2023 (in total USD $2,559,560).
Also on 21 August 2023, the Company actioned a share capital reduction in order to create distributable reserves by reducing the share premium account by £270,000 and moving the amount to the profit and loss reserve.
On 23 August 2023, the Company received investment of £6.9 million to finance growth over a 3-year plan and to finance cash cancellation of share options held by certain employees as part of an £11.9 million investment made by PW Animal Health Ltd. The investment also included the acquisition of 92,759 shares from Victoria Johnson and 49,947 shares from Julien Labruyere by PW Animal Health Ltd.
Also on 23 August 2023, the Company elected to pay an interim dividend of £250,000 to the shareholders of the Company.
We have audited the financial statements of VetCT Specialists Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' 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:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
During the planning of our audit procedures, attention was drawn to the key areas which might involve non-compliance with laws and regulations or fraud. All members of the audit team considered the risks and how these could possibly manifest in practice. We also enquired of management whether they were aware of any instances of non-compliance with laws and regulations or had knowledge of any actual, suspected, or alleged fraud.
In particular, for a group that has not previously been audited, we had to consider the adequacy of the controls in place including management’s use of manual spreadsheets and reconciliations. We also considered, amongst other matters, management override of controls, recognition of income, and the maintenance of statutory records.
As detailed throughout this summary, the audit work carried out was designed in a way to identify any occurrences of fraud during the year. We are satisfied that the risk of management override of controls has been mitigated and that no manipulation has occurred in sales through incorrect or false revenue recognition or inappropriate journal entries.
At the completion stage of the audit, final review and oversight included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud. Following this, we are satisfied that there were no instances of fraud or irregularity.
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.
Other matters which we are required to address
Comparative information for the company is derived from the company's prior period financial statements which were not audited.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £1,385,641 (2021 - £442,863 loss).
VetCT Specialists Ltd (“the company”) is a private company, limited by shares, domiciled and incorporated in England and Wales. The registered office is Broers Building, 21 JJ Thomson Avenue, Cambridge, CB3 0FA.
The group consists of VetCT Specialists Ltd and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of income and retained earnings in these financial statements.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company VetCT Specialists Ltd together with all entities controlled by the parent company (its subsidiaries).
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.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair value at the acquisition date. The results of acquired operations are included in the Consolidated statement of income and retained earnings from the date on which control is obtained. They are deconsolidated from the date control ceases.
The Group completed a £5 million investment in August 2023 to support its ongoing growth plan which will support the Group throughout the period of twelve months from the date of signing these financial statements. On review of the business plan and projected scenarios, including the application of sensitivity analysis, the directors conclude that the Group will be able to meet its liabilities as they fall due for at least twelve months from the date of approval of these financial statements. The financial statements have therefore been prepared on the going concern basis.
Turnover is recognised to the extent that it is probable that the economic benefits will flow to the Group and the turnover can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before turnover is recognised:
Rendering of services
Turnover from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
the amount of turnover can be measured reliably;
it is probable that the Group will receive the consideration due under the contract;
the stage of completion of the contract at the end of the reporting period can be measured reliably; and
the costs incurred and the costs to complete the contract can be measured reliably.
Interest Income
Interest income is recognised in the Consolidated statement of income and retained earnings using the effective interest method.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Investments in subsidiaries are measured at cost less accumulated impairment.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in the Consolidated statement of income and retained earnings when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of financial position. The assets of the plan are held separately from the Group in independently administered funds.
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.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the company as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Research and development costs
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Investment income includes the following:
The actual credit for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2022 are as follows:
The long-term loans are secured by a fixed and floating charge over all assets. The directors have provided the bank with a guarantee of £200,000.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 4.5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
At 31 December 2021, the company had issued 99,999 share options to employees. The share options are in relation to ordinary shares and are available for exercise at £0.50 - £0.67 per share. Under the scheme rules, the share options may only be exercised immediately prior to an Exit event.
At 31 December 2022, the company had issued 4,809,809 B share options to sub-contractors and employees under an Employee Share Option scheme that remained outstanding at the year end. The B share options are all in relation to B ordinary shares and are available for exercise at £0.01 - £0.02 per share. Under the scheme rules, the share options may only be exercised immediately prior to an Exit event, and are subject to continuing employment.
On 23 August 2023, after the end of the accounting period, 57,777 of the existing ordinary share options were cancelled.
The deemed cost of the share options has been estimated using the Black Scholes option pricing model and is not considered material to the financial statements and so no provision has been recognised in these financial statements.
Ordinary shares rank equally for voting purposes.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
On 21 August 2023, the directors of VetCT Inc, a subsidiary entity consolidated in these financial statements, elected to pay a dividend of USD $25,595.60 per common share to all shareholders of common stock on record on 21 August 2023 (in total USD $2,559,560).
Also on 21 August 2023, the Company actioned a share capital reduction in order to create distributable reserves by reducing the share premium account by £270,000 and moving the amount to the profit and loss reserve.
On 23 August 2023, the Company received investment of £6.9 million to finance growth over a 3-year plan and to finance cash cancellation of share options held by certain employees as part of an £11.9 million investment made by PW Animal Health Ltd. The investment also included the acquisition of 92,759 shares from Victoria Johnson and 49,947 shares from Julien Labruyere by PW Animal Health Ltd.
Also on 23 August 2023, the Company elected to pay an interim dividend of £250,000 to the shareholders of the Company.
The Company has taken advantage of the exemptions available and has not disclosed related party transactions with wholly-owned subsidiaries.
The Company has made sales of services to a subsidiary entity of £2,874,000 (2021: £1,117,912) during the year to 31 December 2022. At the balance sheet date, the Company was owed £205,961 by the same subsidiary (2021: £1,028,941 owed to the subsidiary).
During the year ending 31 December 2022, the Company provided loans to the directors of £3,448 (2021: £277,000). As at 31 December 2022, the Company was owed £1,055,033 (2021: £1,051,585) from the directors. The loans are interest free and repayable on demand.
The directors have provided the company with a personal guarantee of £200,000 over the outstanding bank loans in place at the year end.
A prior year adjustment has been recognised in order to correct a material misstatement in the comparative figures. The misstatement relates to the recognition of the 2021 research and development tax credit as well as the tax paid for the Company's tax liability under section 455 of the Corporation Tax Act 2010 relating to director loan accounts.
Initially, the research and development tax credit of £140,218 for the period ended 31 December 2021 had not been included in the financial statements. The adjustment is therefore recognising corporation tax income in the profit and loss account as well as a corresponding increase to the corporation tax debtor during the appropriate accounting period.
Additionally, the tax paid in relation to outstanding director loans was initially recognised as an expense through the profit and loss account when it was paid in the year ended 31 December 2021. Due to the nature of the tax, it should not be recognised as a cost to the company and it has therefore been adjusted to be correctly recognised as a non-current other debtor. The balance is repayable after the director loan accounts have been repaid.
Another prior year adjustment has been recognised in order to correct a material misstatement in the comparative figures. The misstatement relates to the tax paid for the Company's tax liability under section 455 of the Corporation Tax Act 2010 relating to director loan accounts.
The tax paid in relation to outstanding director loans was initially recognised as an expense through the profit and loss account when it was paid in the year ended 31 December 2020. Due to the nature of the tax, it should not be recognised as a cost to the company and it has therefore been adjusted to be correctly recognised as a non-current other debtor. As the error occurred in the accounting period preceding the comparative accounting period, the correction has been recognised through retained earnings rather than through the profit and loss account.