Company registration number 07139151 (England and Wales)
STARK CONNECT LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
STARK CONNECT LIMITED
COMPANY INFORMATION
Directors
Mr. J Stark
(Appointed 1 June 2022)
Mr. A Warren
(Appointed 1 June 2022)
Company number
07139151
Registered office
Sentinel House
10-12 Massets Road
Horley
Surrey
RH6 7DE
Auditor
Jack Ross Limited
Barnfield House
The Approach
Manchester
M3 7BX
STARK CONNECT LIMITED
CONTENTS
Page
Strategic report
1
Directors' report
2
Directors' responsibilities statement
3
Independent auditor's report
4 - 6
Profit and loss account
7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Notes to the financial statements
11 - 24
STARK CONNECT LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 31 MAY 2023
- 1 -
The directors present the strategic report for the period ended 31 May 2023.
Review of the business
On 1 June 2022, the Company was acquired by Stark Software International (Holdings) Limited. From this date, the 100% controlling parent of the Company was the Stark group. The acquisition of the Company by Stark strengthens the Company’s position with many common suppliers and with many services provided to and from Stark.
On 22 November 2022, the name of the Company was changed from WPD Smart Metering Limited to Stark Connect Limited.
Stark is the UK’s energy data services champion. We serve over 30,000 non-domestic customers across all sectors of the UK economy. We deliver significant value to energy suppliers, industrial and commercial companies, public sector organisations, and energy and procurement consultants and the construction industry.
In summary, Stark continues to be a pioneering innovator and customer champion. Given the rapid evolution of the energy system in the UK and worldwide, Stark is uniquely placed to capitalise on the data, analytics, metering and infrastructure needs of the market as we transition towards Net Zero.
Principal risks and uncertainties
The outlook for our trading environment remains favourable, with energy costs increasingly visible to organisations, a clear business case for the services we provide, and further legislation which creates demand for our services.
Key performance indicators
The key performance indicators (KPIs) were as follows:
2023 2022 Variance
Turnover £15,042k £12,328k +18.0%
EBITDA £1,672k £3,359k -50.2%
The Company's half-hourly and non half-hourly metering services are centred on the installation and maintenance of compliant meters with non half-hourly meters referred to as 'Advanced'. 'Smart' meters comply with the specification set out in the Smart Meter Programme, often referred to as 'SMETS2'.
Mr. J Stark
Director
21 February 2024
STARK CONNECT LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 MAY 2023
- 2 -
The directors present their annual report and financial statements for the period ended 31 May 2023.
Principal activities
The principal activity of the company continued to be the provision of:
The Company provides a national service to commercial customers and to electricity suppliers, and holds accreditation to operate HH and NHH metering systems.
Results and dividends
The results for the period are set out on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
Mr. J Stark
(Appointed 1 June 2022)
Mr. A Warren
(Appointed 1 June 2022)
Mr I Williams
(Resigned 1 June 2022)
Mr G Halladay
(Resigned 1 June 2022)
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
Mr. J Stark
Director
21 February 2024
STARK CONNECT LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE PERIOD ENDED 31 MAY 2023
- 3 -
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
STARK CONNECT LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF STARK CONNECT LIMITED
- 4 -
Opinion
We have audited the financial statements of Stark Connect Limited (the 'company') for the period ended 31 May 2023 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity 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).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 May 2023 and of its profit for the period then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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 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 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.
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 period for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
STARK CONNECT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF STARK CONNECT LIMITED
- 5 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its 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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
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.
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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to tax legislation, employment legislation, health and safety legislation and other legislation specific to the industry in which the group operates, such as Ofgem and the Balancing and Settlement Code. We have considered the extent to which non-compliance might have a material effect on the financial statements. We also have considered those law and regulations that have a direct impact on the preparation of the financial statements such as Companies Act 2006. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including risk of override of controls) and determined that the principal risks related to management judgement of when to recognise income and expenditure and the effect this would have on profit and loss.
STARK CONNECT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF STARK CONNECT LIMITED
- 6 -
Audit response to risks identified
- Enquiry of management, those charged with governance
- Enquiry of entity staff in tax and compliance functions to identify any instances of non-compliance with laws and regulations.
- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
- Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error as fraud may involve concealment.
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.
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.
Umar Memon FCA (Senior Statutory Auditor)
For and on behalf of Jack Ross Limited
Statutory Auditor
Barnfield House
The Approach
Manchester
M3 7BX
21 February 2024
STARK CONNECT LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 31 MAY 2023
- 7 -
Period
Year
ended
ended
31 May
31 March
2023
2022
as restated
Notes
£
£
Turnover
3
15,042,211
12,327,981
Cost of sales
(8,989,887)
(5,976,609)
Gross profit
6,052,324
6,351,372
Administrative expenses
(3,965,502)
(5,064,931)
Exceptional item
4
(1,473,487)
Operating profit
5
613,335
1,286,441
Interest receivable and similar income
7
476
996
Interest payable and similar expenses
8
(2,738)
Profit before taxation
613,811
1,284,699
Tax on profit
9
(566,331)
(15,715)
Profit for the financial period
47,480
1,268,984
The profit and loss account has been prepared on the basis that all operations are continuing operations.
STARK CONNECT LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 MAY 2023
- 8 -
Period
Year
ended
ended
31 May
31 March
2023
2022
as restated
£
£
Profit for the period
47,480
1,268,984
Other comprehensive income
-
-
Total comprehensive income for the period
47,480
1,268,984
STARK CONNECT LIMITED
BALANCE SHEET
- 9 -
31 May 2023
31 March 2022
as restated
Notes
£
£
£
£
Fixed assets
Intangible assets
11
148,705
291,269
Tangible assets
12
6,746,060
5,703,002
6,894,765
5,994,271
Current assets
Stocks
13
1,470,323
1,057,506
Debtors
14
6,163,025
4,585,344
Cash at bank and in hand
1,111,102
8,744,450
5,642,850
Creditors: amounts falling due within one year
15
(8,036,350)
(4,081,736)
Net current assets
708,100
1,561,114
Net assets
7,602,865
7,555,385
Capital and reserves
Called up share capital
18
5,000,001
5,000,001
Share premium account
2,500,000
2,500,000
Profit and loss reserves
102,864
55,384
Total equity
7,602,865
7,555,385
The financial statements were approved by the board of directors and authorised for issue on 21 February 2024 and are signed on its behalf by:
Mr. J Stark
Director
Company Registration No. 07139151
STARK CONNECT LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 MAY 2023
- 10 -
Share capital
Share premium account
Profit and loss reserves
Total
Notes
£
£
£
£
As restated for the period ended 31 March 2022:
Balance at 1 April 2021
5,000,001
2,500,000
3,388,529
10,888,530
Effect of transition to FRS 102
(2,637,597)
(2,637,597)
Prior Period Restatement
-
(93,025)
(93,025)
As restated
5,000,001
2,500,000
657,907
8,157,908
Year ended 31 March 2022:
Profit and total comprehensive income for the year
-
-
1,268,984
1,268,984
Dividends
10
-
-
(1,871,507)
(1,871,507)
Balance at 31 March 2022
5,000,001
2,500,000
55,384
7,555,385
Period ended 31 May 2023:
Profit and total comprehensive income for the period
-
-
47,480
47,480
Balance at 31 May 2023
5,000,001
2,500,000
102,864
7,602,865
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MAY 2023
- 11 -
1
Accounting policies
Company information
Stark Connect Limited is a private company limited by shares incorporated in England and Wales. The registered office is Sentinel House, 10-12 Massets Road, Horley, Surrey, RH6 7DE.
With effect from 24 November 2022, the name of the Company was changed from WPD Smart Metering Limited to Stark Connect Limited.
1.1
Reporting period
These financial statements have been prepared for a 14-month period ending 31 May 2023. The current accounting period was extended to align with the year-end date of the parent entity. As such the comparative amounts presented in the financial statements are not entirely comparable.
1.2
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.
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.
These financial statements for the period ended 31 May 2023 are the first financial statements of Stark Connect Limited prepared in accordance with FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland. The date of transition to FRS 102 was 1 April 2022. An explanation of how transition to FRS 102 has affected the reported financial position and financial performance is given in note 20.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Stark Software International (Holdings) Limited. These consolidated financial statements are available from its registered office.
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 12 -
1.3
Change in accounting estimate
The company has changed its accounting estimate in relation to depreciation of its metering assets. The expected useful life of such assets has been reassessed from 5 years to 10 years. This depreciation policy aligns with the Stark group and reflects ongoing billing. This has effected the current period and will have an effect on future periods by reducing the depreciation charged for meter assets and subsequent accumulated depreciation.
1.4
Prior period error
A prior period error was identified relating to the previous calculation of deferred income. The closing deferred income balance at 31 March 2022 has been corrected by increasing the comparative figure by £93,025. The comparative turnover figure has been correcting by reducing the balance by this amount.
1.5
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.
1.6
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Turnover primarily consists of revenue from activities relating to rental, installation and sale of smart meters.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Turnover arising from meter installation is recognised on completion of the installation.
Revenue from contracts for the provision of professional 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 comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
Rental income arising from smart meters is accounted for on a straight line basis over the term of the contract.
1.7
Intangible fixed 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.
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 13 -
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 bases:
Computer Software
10 years straight line
1.8
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.
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:
Plant and equipment
10 years straight line
Fixtures and fittings
3 - 5 years straight line
Motor vehicles
3 years straight line
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.
1.9
Impairment of fixed assets
At each reporting period end date, the company 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.
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.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. 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.
1.10
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 14 -
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.
1.11
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and 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 instruments
The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
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
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.
Impairment of financial assets
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.
Derecognition of financial assets
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.
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 15 -
Classification of financial liabilities
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
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.
Other financial liabilities
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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.13
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.
1.14
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
1
Accounting policies
(Continued)
- 16 -
Deferred tax
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 when the company 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.
1.15
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.
1.16
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.17
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.
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.
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
- 17 -
3
Turnover and other revenue
Turnover represents the continuing activities of the rental and installation of smart meters and other turnover including the sale of smart meters. The Company operates wholly in the United Kingdom.
2023
2022
£
£
Turnover analysed by class of business
Rental
12,622,331
7,921,116
Installation and Agency
2,385,575
3,763,465
Other
34,305
643,400
15,042,211
12,327,981
2023
2022
£
£
Other revenue
Interest income
476
996
4
Exceptional item
2023
2022
£
£
Expenditure
Impairment of fixed assets
1,473,487
-
At the point of acquisition of Stark Connect Limited (formerly WPD Smart Metering Limited) by the Stark group, it was identified that the approach to capitalising meter tangible fixed assets was different to that of National Grid. The capitalisation of overheads by National Grid was not consistent with Stark estimates used to assign overhead costs to meter assets. Previous ownership used a larger pool of overhead cost lines relative to those used by Stark. An exceptional impairment cost has been recognised in the period to align the NBV of such capitalised costs with the Stark group policy.
5
Operating profit
2023
2022
Operating profit for the period is stated after charging:
£
£
Fees payable to the company's auditor for the audit of the company's financial statements
9,000
8,503
Depreciation of owned tangible fixed assets
840,849
2,014,720
Impairment of owned tangible fixed assets
1,473,487
Amortisation of intangible assets
217,612
58,000
Operating lease charges
119,045
50,000
The amortisation of intangible assets is included within cost of sales.
The impairment charge has been disclosed as an exceptional item.
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
- 18 -
6
Employees
The average monthly number of persons (including directors) employed by the company during the period was:
2023
2022
Number
Number
Business support
27
21
Commercial
4
4
Operational
42
33
Total
73
58
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
2,321,962
1,873,588
Social security costs
237,090
Pension costs
254,374
2,813,426
1,873,588
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
476
Interest receivable from group companies
996
Total income
476
996
8
Interest payable and similar expenses
2023
2022
£
£
Other interest
2,738
9
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
244,689
Adjustments in respect of prior periods
(75,897)
Total current tax
(75,897)
244,689
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
9
Taxation
2023
2022
£
£
(Continued)
- 19 -
Deferred tax
Origination and reversal of timing differences
642,228
(228,974)
Total tax charge
566,331
15,715
The corporation tax rate changed to 25% from 19% effective from 1st April 2023, averaging to approximately 20%
The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:
2023
2022
£
£
Profit before taxation
613,811
1,284,699
Expected tax charge based on the standard rate of corporation tax in the UK of 20.00% (2022: 19.00%)
122,762
244,093
Adjustments in respect of prior years
(10,055)
Group relief
450,120
Permanent capital allowances in excess of depreciation
(162,208)
Depreciation
840,849
Capital allowances
(1,017,931)
Deferred tax movements
642,228
(228,974)
Other
(309,489)
10,651
Taxation charge for the period
566,331
15,715
10
Dividends
2023
2022
£
£
Final paid
1,871,507
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
- 20 -
11
Intangible fixed assets
Computer Software
£
Cost
At 1 April 2022
502,269
Additions
181,048
Transfers
(135,000)
At 31 May 2023
548,317
Amortisation and impairment
At 1 April 2022
211,000
Amortisation charged for the period
217,612
Transfers
(29,000)
At 31 May 2023
399,612
Carrying amount
At 31 May 2023
148,705
At 31 March 2022
291,269
More information on impairment movements in the period is given in note .
12
Tangible fixed assets
Plant and equipment
Fixtures and fittings
Motor vehicles
Total
£
£
£
£
Cost
At 1 April 2022
11,004,000
115,000
543,103
11,662,103
Additions
2,898,023
335,791
17,580
3,251,394
Disposals
(128,211)
(128,211)
Transfers
135,000
135,000
At 31 May 2023
13,902,023
585,791
432,472
14,920,286
Depreciation and impairment
At 1 April 2022
5,418,000
80,000
461,101
5,959,101
Depreciation charged in the period
752,343
22,799
65,707
840,849
Impairment losses
1,473,487
1,473,487
Eliminated in respect of disposals
(128,211)
(128,211)
Transfers
29,000
29,000
At 31 May 2023
7,643,830
131,799
398,597
8,174,226
Carrying amount
At 31 May 2023
6,258,193
453,992
33,875
6,746,060
At 31 March 2022
5,586,000
35,000
82,002
5,703,002
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
12
Tangible fixed assets
(Continued)
- 21 -
More information on impairment movements in the period is given in note .
Assets comprise of mainly meters, tools and equipment. The Company rents meters to its customers. These assets are often re-used by the Company upon cessation of the initial rental period.
13
Stocks
2023
2022
£
£
Meters and modems
1,470,323
1,057,506
14
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
3,714,202
1,356,843
Corporation tax recoverable
75,897
Amounts owed by group undertakings
816,872
Prepayments and accrued income
2,099,300
1,495,775
5,889,399
3,669,490
2023
2022
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 16)
273,626
915,854
Total debtors
6,163,025
4,585,344
15
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
1,801,142
217,654
Amounts owed to group undertakings
410,000
Corporation tax
140,744
Other taxation and social security
274,408
363,516
Other creditors
59,079
573,561
Accruals and deferred income
5,491,721
2,786,261
8,036,350
4,081,736
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
- 22 -
16
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Assets
Assets
2023
2022
Balances:
£
£
Accelerated capital allowances
273,626
915,854
2023
Movements in the period:
£
Asset at 1 April 2022
(915,854)
Charge to profit or loss
642,228
Asset at 31 May 2023
(273,626)
A deferred tax asset has been recognised as it is probable, based on the company's trading history and forecast long term business plan, that the company will earn sufficient taxable profits in future periods against which the capital allowances may be deducted.
17
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
254,374
-
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.
18
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
5,000,001
5,000,001
5,000,001
5,000,001
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
- 23 -
19
Operating lease commitments
Lessee
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:
2023
2022
£
£
Within one year
67,924
Between two and five years
445,134
513,058
20
Reconciliations on adoption of FRS 102
Goodwill is being restated in FY22 financial statements due to a change in account policy.
Previous Policy: National Grid et al used IFRS as the basis of their accounting and historically have said that it was “true and fair” to override the Companies Act and FRS 102. Hence, the goodwill (acquired in 2010) was never amortised or impaired.
Revised Policy: Under FRS 102 and Stark Group policies goodwill is amortise dover a default period of 10 years. This policy is now being applied to SCL as part of the Stark Group. Therefore, a retrospective action needs to take place to restate the prior period financial statements as this goodwill should have been fully written down in 2020. I have also assumed that due to the move from National Grid to Stark the asset as in effect been disposed of as it was originally created due to business combinations of the National Grid/WPD group.
Reconciliation of equity
1 April
31 March
2021
2022
Notes
£
£
Equity as reported under previous UK GAAP
10,795,505
10,286,007
Adjustments to prior period (note 21)
(93,025)
(93,025)
As restated
10,702,480
10,192,982
Adjustments arising from transition to FRS 102:
Goodwill
(2,637,597)
(2,637,597)
Equity reported under FRS 102
8,064,883
7,555,385
Reconciliation of profit for the financial period
2022
£
Profit as reported under previous UK GAAP and under FRS 102
1,362,009
Adjustments to prior period (note 21)
(93,025)
As restated
1,268,984
STARK CONNECT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MAY 2023
20
Reconciliations on adoption of FRS 102
(Continued)
- 24 -
Notes to reconciliations on adoption of FRS 102
21
Prior period adjustment
Changes to the balance sheet
Balances as restated before FRS 102 transition adjustments:
As previously reported
Adjustment at 1 Apr 2021
Adjustment at 31 Mar 2022
As restated at 31 Mar 2022
£
£
£
£
Creditors due within one year
Deferred income
-
(93,025)
-
(93,025)
Capital and reserves
Profit and loss reserves
2,786,006
(93,025)
-
2,692,981
Changes to the profit and loss account
Balances as restated before FRS 102 transition adjustments:
As previously reported
Adjustment
As restated
Period ended 31 March 2022
£
£
£
Turnover
12,421,006
(93,025)
12,327,981
Profit for the financial period
1,362,009
(93,025)
1,268,984
Reconciliation of changes in equity
1 April
31 March
2021
2022
£
£
Adjustments to prior period
Deferred Income
(93,025)
(93,025)
Equity as previously reported
10,795,505
10,286,007
Equity as adjusted before transition adjustments
10,702,480
10,192,982
Analysis of the effect upon equity
Profit and loss reserves
(93,025)
(93,025)
Reconciliation of changes in profit for the previous financial period
2022
£
Adjustments to prior period
Deferred Income
(93,025)
Profit as previously reported
1,362,009
Profit as adjusted before transition adjustments
1,268,984
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