Company registration number 02423405 (England and Wales)
SOUTHPAW COMMUNICATIONS LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
PAGES FOR FILING WITH REGISTRAR
SOUTHPAW COMMUNICATIONS LIMITED
CONTENTS
Page
Strategic report
1 - 3
Balance sheet
4
Notes to the financial statements
5 - 11
SOUTHPAW COMMUNICATIONS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The directors present the strategic report for the year ended 31 December 2023.
Principal risks and uncertainties
Southpaw has studied the possible risk of personnel transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) from both winning and losing client accounts and will apply the protocol produced by the advertising industry representative body, the Institute of Practitioners in Advertising (IPA) if required.
Advertising is a “people” industry and the recruitment and retention of talented personnel is a critical factor for business success. The Company will continue to manage and develop its recruitment, retention, training and reward policies in order to retain and develop the highest level of staff expertise and quality to service its client base and to develop and improve its creative product.
Taking note of the current uncertain global economic conditions, in part driven by Covid and the war in Ukraine, the directors have reviewed the Company’s exposure to financial and credit risks. They will remain vigilant to mitigate any risks that could influence the future performance of the Company.
Summary
The Company maintained its profit in 2023. The directors and senior management recognise the challenge for the Company in 2024 in the light of current economic and market conditions.
SOUTHPAW COMMUNICATIONS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Key performance indicators
Southpaw has monitored progress on its overall performance through consolidated monthly management accounts with reference to seven KPIs. 2023 performance and prior year data are set out below:
| | | Definition, method of calculation and analysis |
| | | Turnover is the total of all sales excluding VAT. 2023 overall turnover increased by £1.38m (43.1%) from 2022 reflecting strong net new business (i.e. income from new clients in 2023 less income from lost clients in 2022). |
| | | Gross profit is calculated by deducting third party costs from turnover. 2023 gross profit increased by £0.64m (27.35%) reflecting strong net new business. |
| | | Gross margin is the ratio of gross profit to turnover expressed as a percentage. 2023 gross margin decreased by 8.1% reflecting the changing character (in terms of level of associated cost of sales) in the client mix. |
| | | Operating profit is calculated by deducting all regular and fixed overhead costs including staff costs from gross profit. In 2023 the operating profit remained at £0.1m. |
| | | Operating margin is the ratio of operating profit to gross profit expressed as a percentage. 2023 operating margin increased by 0.8% as the Company’s profits improved. |
Staff costs before incentive and severance as % of gross profit | | | This ratio expresses total staff costs as a percentage of gross profit. The Company’s target percentage is 60-70% before bonus. The ratio in 2023 has improved by 10.4% compared to the previous year to be closer to the target. This improvement reflects greater gross profit productivity from employees. |
Return on capital employed (ROCE) | | | ROCE is the ratio of operating profit, before exceptional items, to total capital employed (i.e. total assets less current liabilities) expressed as a percentage. In 2023 the Company saw an improved ROCE of 3.9% (1.9% higher than the previous year). |
SOUTHPAW COMMUNICATIONS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Other information and explanations
Future Prospects
In 2024, the directors and senior management are focussing on building off the profit achieved in 2023. Improved operating performance will be achieved through a combination of growth in gross profit (from organic growth of ongoing clients as well as generating new gross profit from new clients) and enhanced productivity (as indicated by gross profit per employee and staff costs as a percentage of gross profit). The directors are looking to deliver a better than budget performance.
Investments will continue to be made in innovation and digital advancements in order to stay progressive and to help shape opportunities for our clients.
The directors and senior management will continue to review the Company’s structure, resources and costs across all departments in order to maximise efficiency, performance and profitability wherever possible.
D F Ham
Director
5 March 2024
SOUTHPAW COMMUNICATIONS LIMITED (REGISTERED NUMBER: 02423405)
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 4 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
4
1,942,301
1,776,333
Investments
5
14,000
14,000
1,956,301
1,790,333
Current assets
Stocks
12,038
30,331
Debtors
6
454,374
563,027
Cash at bank and in hand
1,438,140
1,002,052
1,904,552
1,595,410
Creditors: amounts falling due within one year
7
(961,583)
(749,505)
Net current assets
942,969
845,905
Total assets less current liabilities
2,899,270
2,636,238
Creditors: amounts falling due after more than one year
8
(570,000)
(570,000)
Net assets
2,329,270
2,066,238
Capital and reserves
Called up share capital
9
212,000
212,000
Revaluation reserve
948,290
784,290
Own shares
10
(1,982,000)
(1,982,000)
Profit and loss reserves
3,150,980
3,051,948
Total equity
2,329,270
2,066,238
The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true
These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements were approved by the board of directors and authorised for issue on 5 March 2024 and are signed on its behalf by:
D F Ham
Director
SOUTHPAW COMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
1
Accounting policies
Company information
Southpaw Communications Limited is a private company limited by shares incorporated in England and Wales. The registered office is The Warehouse, Hill Street, Tunbridge Wells, Kent, TN1 2BY.
1.1
Accounting convention
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 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
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 financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties. The principal accounting policies adopted are set out below.
The company has taken advantage of the exemption under section 399 of the Companies Act 2006 not to prepare consolidated accounts, on the basis that the group of which this is the parent qualifies as a small group. The financial statements present information about the company as an individual entity and not about its group.
1.2
Going concern
Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Turnover
Turnover is measured at the fair value of the consideration received or receivable and represents the amount receivable for goods supplied or services rendered, net of returns, discounts and rebates allowed by the Company and value added tax. The Company recognises revenue when (a) the Company retains no continuing involvement or control over the goods or services; (b) the amount of revenue can be measured reliably; (c) it is probable that future economic benefits will flow to the entity and (d) when the specific criteria relating to the Company’s sale of services have been met as described below:
The Company sells marketing communications services. Media commissions are recognised when the related advertisement or commercial appears before the public. Fees are recognised by reference to the stage of completion of the project.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
SOUTHPAW COMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 6 -
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 bases:
Freehold land and buildings
the property value is reviewed annually for impairment
Fixtures and fittings
straight line over three years
Computers
straight line over useful life (currently three to seven years)
Motor vehicles
50% reducing balance
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.
1.5
Fixed asset 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 company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
1.6
Stocks
Work in progress is stated at cost less provision for future anticipated losses.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.7
Equity instruments
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.
1.8
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
SOUTHPAW COMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 7 -
1.9
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 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.
1.10
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Critical judgements
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Deferred tax assets
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Fee revenue
Fee revenue is recognised based on the estimated percentage of completion of contract.
Impairment of debtors
The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtor, the aging profile of debtors and historical experience.
SOUTHPAW COMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
3
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Total
35
35
4
Tangible fixed assets
Freehold land and buildings
Fixtures and fittings
Computers
Motor vehicles
Total
£
£
£
£
£
Cost or valuation
At 1 January 2023
1,736,000
43,670
59,627
16,931
1,856,228
Additions
3,530
19,918
23,448
Revaluation
164,000
164,000
At 31 December 2023
1,900,000
47,200
79,545
16,931
2,043,676
Depreciation and impairment
At 1 January 2023
43,670
19,294
16,931
79,895
Depreciation charged in the year
558
20,922
21,480
At 31 December 2023
44,228
40,216
16,931
101,375
Carrying amount
At 31 December 2023
1,900,000
2,972
39,329
1,942,301
At 31 December 2022
1,736,000
40,333
1,776,333
The net book value of land and buildings (£1,900,000 at 1 January 2023 and 31 December 2023) is wholly freehold.
The freehold property is valued by independent valuers at a regular frequency not longer than every five years.
The Company’s freehold property was last revalued as at 26 June 2023 by Mr C J Dawson FCIOB FASI FFPWS MRICS and Mrs J Buttery MRICS MCIOB MASI of Dawson and Associates (an external valuation) at a market value of £1,900,000 on a current use basis. The directors are not aware of any material change in valuation as at 31 December 2023.
The historic cost of the property was £1,255,000. Land is not depreciated. The cumulative depreciation based on historic cost, previously charged to the income statement, would have been £742,296 (2022: £678,000).
SOUTHPAW COMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 9 -
5
Fixed asset investments
2023
2022
£
£
Shares in group undertakings and participating interests
14,000
14,000
6
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
274,512
348,967
Amounts owed by group undertakings
11,177
6,336
Other debtors
168,685
207,724
454,374
563,027
7
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
129,806
219,024
Amounts owed to group undertakings
10,000
10,000
Taxation and social security
203,258
152,690
Other creditors
618,519
367,791
961,583
749,505
8
Creditors: amounts falling due after more than one year
2023
2022
£
£
Other creditors
570,000
570,000
9
Called up share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
148,400
148,400
148,400
148,400
Ordinary non-voting shares of £1 each
63,600
63,600
63,600
63,600
212,000
212,000
212,000
212,000
SOUTHPAW COMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
9
Called up share capital
(Continued)
- 10 -
2023
2022
2023
2022
Preference share capital
Number
Number
£
£
Issued and fully paid
Preference shares of £1 each
570,000
570,000
570,000
570,000
Preference shares classified as liabilities
570,000
570,000
Of the 212,000 issued shares in shareholders' funds, 148,400 (70%) are ordinary shares and 63,600 (30%) are ordinary non-voting shares. The non-voting shares rank pari-passu with the ordinary shares except they have forfeited their right to receive dividends and cast votes.
10
Own shares reserve
The own share reserve comprises the costs of shares in the company held by the EBT, to the extent that they have not become realised losses. When they become realised losses, they are transferred to retained earnings. At 31 December 2023 the EBT held 63,600 shares (2022: 63,600). The EBT shares are held for the purpose of staff incentive schemes although none are currently under option to employees.
11
Audit report information
As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:
The auditor's report was unqualified.
Senior Statutory Auditor:
Stephen Hale
Statutory Auditor:
Perrys Audit Limited
12
Financial commitments, guarantees and contingent liabilities
The company has entered into a cross guarantee arrangement with the company's bankers whereby certain liabilities to the bank are guaranteed by the group companies. The liabilities of the group as a whole under the cross guarantee are secured by way of a fixed and floating charge over the assets of the companies who are party to the guarantee.
SOUTHPAW COMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
13
Operating lease commitments
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, as follows:
2023
2022
£
£
4,490
5,592
14
Related party transactions
During the year, the company recharged costs of £17,610 (2022: £44,681) to a group company. As at the balance sheet date, the company was owed £11,177 (2022: £6,336) in respect of these costs.
During the year, the company invoiced a related party a total of £15,243.
As at the balance sheet date, the company owed £128,250 (2022: £114,00) to a group company relating to accrued interest on the preference shares.
15
Parent company
The ultimate parent company is Hakuhodo Holdings DY Inc, a company registered in Japan.
The largest group in which the results of the company are consolidated is that headed by Hakuhodo Holdings DY Holdings Inc., 5-3-1 Akasaka, Minato-ku, Tokyo, 107-6320, Japan. The smallest group in which they are consolidated is that headed by Hakuhodo Inc., 5-3-1 Akasaka, Minato-ku, Tokyo, 107-6320, Japan. Only the consolidated financial statements of Hakuhodo DY Holdings Inc. are available to the public and may be obtained from their website or from 5-3-1 Akasaka, Minato-ku, Tokyo, 107-6320.
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