The directors present the strategic report for the year ended 30 June 2023.
ERC Equipoise Ltd (ERCE or the Group) is an employee-owned independent energy consultancy with global expertise in resources, carbon auditing, oil and gas analytics and subsurface evaluation, including storage and sequestration. The Group is one of the leading auditors of oil and gas reserves in Europe and offers a wide variety of services from independent reserves reports and expert witness testimonials to technical reservoir consulting including geophysical and geological modelling. The Group is based in London, Singapore, Kuala Lumpur, Perth and Canada and provides services to energy companies, government agencies and financial institutions throughout the world.
The Group turnover was £12,136,988 (2022 - £10,930,455) during the year. The Group returned a profit of £356,334 (2022 - £267,903 loss before taxation). Prior year's loss was due to the impact of COVID-19 which has now passed allowing the company to return to standard trading practices. During the year we restructured our Asia Pacific operations in order to reduce costs and co-locate our technical staff with our key clients in the cities of Kuala Lumpur, Malaysia and Perth, Australia. This positions the Group to grow a sustainable market share in the Asia Pacific Region.
It is the Group’s intention to build on its position as one of the market leaders in the provision of independent strategic, technical and commercial advice to the global energy sector by continuing investment in staff, facilities and through revenue growth.
During the period the Group has continued to invest in the energy transition via ERC Evolution. “Evolution” advises clients that are involved in the energy transition journey, from the decarbonization of petroleum production to investment in renewable energy sources. The Group’s pre-existing investment in the energy transition has allowed Evolution to become a market leader in the provision of independent advisory services for UK based Carbon Capture and Storage projects. This has resulted in faster than anticipated Revenue growth of the Evolution business through the year. The Group continues to invest in Evolution to further enhance its market leading position in the UK and respond to the increasing levels of international activity in the energy transition.
As at 30 June 2023, a provision for doubtful debt has been recognised in relation to two outstanding debtor balances. We have recognised this provision as there is sufficient doubt over the recoverability. One debtor owing £348,355 has become overdue during the year. This is due to a significant change in personnel responsible for the payment of this debt and the economic difficulties the customer is facing due to the political climate within the country. This debt has been fully provided for in the year. The other debtor owing £86,362 at 30 June 2023, has paid £22,220 post year end but has subsequently become overdue. This customer has been unable to pay due a cashflow shortage resulting in us becoming doubtful of the debt being recovered. We have recognised a provision for the full outstanding balance of £64,142 in the current year results.
The business faces a number of risks, which are reviewed on a regular basis by directors and management as part of their ongoing work. The risks considered by directors are those identified by management as principal risks to the business.
The group looks to reduce its exposure to these risks by servicing a variety of business streams through a multi- disciplinary approach across a number of different geographies and globally distributed operating bases.
Price risk
Recent global economic uncertainty, the energy transition and the war in Ukraine have introduced volatility into global energy prices. This volatility influences current and future demand for the Group’s services.
Credit risk
The Group’s financial assets are trade debtors and bank balances. The Group manages its debtors through regular review and follow-up of outstanding balances. The Group reviews its working capital requirements to ensure that credit risks can be adequately managed.
Foreign Exchange risk
The Group transacts predominately in GBP. The fluctuation of the GBP currency to the USD is not seen as a significant threat to the group.
The Group’s management use the following performance indicators to monitor performance:
• Turnover (£12,136,988) as shown on the consolidated profit and loss account;
• Profit before taxation (£356,334) as shown on the consolidated profit and loss account;
• Working capital, as shown on the company’s balance sheet.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2023.
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £162,925 relating to financial year ending 30 June 2021. The directors reserve the right to pay a dividend in respect of the financial year ending 30 June 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
During the year, the company purchased 1,400 Ordinary B shares from an employee and the shares were put back into the employee benefit trust. This occurred when the employee left the company. The total consideration paid was £12,600.
TC Group were appointed as auditor 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.
We have audited the financial statements of ERC Equipoise Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2023 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. 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
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and its management.
Our approach was as follows:
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the directors and other management (as required by auditing standards), and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations;
We considered the legal and regulatory frameworks directly applicable to the financial statements reporting framework (FRS 102 and the Companies Act 2006) and the relevant tax compliance regulations in the UK;
We considered the nature of the industry, the control environment and business performance, including the key drivers for management’s remuneration;
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit;
We considered the procedures and controls that the company and the wider group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes and controls.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included: testing manual journals; reviewing the financial statement disclosures and testing to supporting documentation; performing analytical procedures; and enquiring of management,and were designed to provide reasonable assurance that the financial statements were free from fraud or error.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https:// www.frc.org.uk/Our-Work/Audit/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for- auditors/Auditors-responsibilities-for-audit/Description-of-auditors-responsibilities-for-audit.aspx. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to 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 income statement and related notes. The company’s profit for the year was £347,828 (2022 - £1,405,303 profit).
ERC Equipoise Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Eastbourne House, 2 Saxbys Lane, Lingfield, Surrey, RH7 6DN.
The group consists of ERC Equipoise Limited and all of its subsidiaries as listed in note 16 to these accounts.
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.
The 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 for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
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 consolidated group financial statements consist of the financial statements of the parent company ERC Equipoise Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in associates.
All financial statements are made up to 30 June 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities other than subsidiary undertakings, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group statement of financial position at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the directors have a reasonable expectation that the group 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.
Revenue 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.
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.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the outcome can be estimated reliably. Revenue is calculated as a proportion of total contract value, based on the stage of completion.
Amounts recoverable on contracts, which are included in debtors, are stated at the net sales value of the work done after provision for contingencies and anticipated future losses on contracts, less amounts received as progress payments on account. Excess payments on account are included in creditors as payments on account.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
At each reporting period end date, the group reviews the carrying amounts of its tangible 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.
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.
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 statement of financial position when the group becomes party to the contractual provisions of the instrument.
Basic financial assets, which include trade and other receivables 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.
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 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 trade and other payables, 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 payables 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 payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
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 income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax 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 income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset 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 non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Contributions to employees' personal pension schemes are charged to the profit and loss account in the year to which they relate.
For cash-settled share-based payments, a liability is recognised for the goods and services acquired, measured initially at the fair value of the liability. At the balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
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 option pricing 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.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
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 statement of financial position 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.
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 leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Intermediate payment arrangements
Shares held by the ERC Equipoise Employee Benefit Trust are classified as an 'Other reserve' within capital and reserves and recognised at cost. Consideration received for the sale of such shares is also recognised in equity with any difference between the proceeds from sale and the original cost taken to the profit and loss reserve. No gain or loss is recognised on the purchase, sale issue or cancellation of equity shares.
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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The share option pricing model used is for the fair value of the options to be 20% of the exercise price.
As at 30 June 2023, a provision for doubtful debt has been recognised in relation to two outstanding debtor balances. We have recognised this provision as there is sufficient doubt over the recoverability. One debtor owing £348,355 has become overdue during the year. This is due to a significant change in personnel responsible for the payment of this debt and the economic difficulties the customer is facing due to the political climate within the country. This debt has been fully provided for in the year. The other debtor owing £86,362 at 30 June 2023, has paid £22,220 post year end but has subsequently become overdue. This customer has been unable to pay due a cashflow shortage resulting in us becoming doubtful of the debt being recovered. We have recognised a provision for the full outstanding balance of £64,142 in the current year results.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2022 - 1).
The actual (credit)/charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 30 June 2023 are as follows:
Other than where indicated as dormant, all companies in the group provide services consistent with the principal activities of the group.
ERC Equipoise Pte. Ltd. holds a 49% interest in ERCE Malaysia Sdn. Bhd., a company registered in Malaysia and has a principal activity of oil and gas consultancy. The remaining 51% shareholding is held by a local trust in the name of Rusli Jusoh, to meet ownership requirements in Malaysia, however in substance the company has exclusive control over the strategic and operating decisions of ERCE Malaysia Sdn. Bhd. and the benefits of the returns generated by ERCE Malaysia Sdn. Bhd. Accordingly, ERCE Malaysia Sdn. Bhd. has been consolidated within these financial statements as if it were a wholly owned subsidiary, with no minority interest recognised.
Included in the trade receivables balance is an amount of £235,118 (2022 - £479,726) which is receivable from a single customer and is more than 360 days past due. An amount of £236,753 was received from this single customer in the year ended 30 June 2023. Management has determined that the amount is recoverable because there was a history of repayments from the customer to the Company, and the customer has been in communication with management during and after the reporting period regarding the settlement of the outstanding receivable. Management has also placed reliance on the customer being a state-owned company and that the risks of default and/or any amounts not recoverable are highly improbable despite the outstanding balance having aged more than 360 days. No provision for bad debt has been made with respect to the balance outstanding from this customer.
Included in amounts owed by group undertakings to the company are amounts owed to the parent company by group subsidiaries where there is no formal loan agreement in place. The Directors have reviewed the intercompany debts owed to the parent. It is the Directors opinion is that as funds become available these debts are to be reduced via available free cash. Current cash flow forecasts show some or part of the current intercompany debts will remain by the end of the next financial period. This is due to smaller group entities having less consistent revenue streams, consequently intercompany debt will fluctuate from time to time as part of a larger industry business cycle and the fact that most of the intercompany debt comes from group businesses in their start-up phase. The directors foresee that any remaining intercompany debt balance will be recoverable in the longer term.
ERC Equipoise Ltd entered into a fixed deposit agreement with the bank for £500,000 that matures on 14 February 2024.
The UK parent company applied to Bank of Scotland PLC for a coronavirus business interruption loan of £1.1 million. The loan was received on 21 July 2020 and has a term of 6 years. Monthly repayments have been made starting in August 2021. A fixed and floating charge over all the property and undertaking of the company is registered at Companies House in favour of Bank of Scotland PLC for the loan.
Finance lease payments represented rentals payable by the company or group for certain items of plant and machinery. Leases included purchase options at the end of the lease period, and no restrictions were placed on the use of the assets. The average lease term was 3 years. All leases were 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:
The group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The entity operates a share option scheme to incentivise senior employees, which enables employees to acquire shares held by the ERC Equipoise Limited Employment Benefit Trust. The exercise price of the options is set to the estimated market price of the shares at grant.
2,478 options outstanding at 30 June 2022 had an exercise price of £11.23 and were exercisable based on performance related conditions.
All share classes rank equally in respect of rights to capital and income.
21,215 of the Ordinary B shares are held in an employee benefit trust controlled by the entity (2022 - 23,327).
During the year, the company purchased 1,400 Ordinary B shares from an employee and the shares were put back into the employee benefit trust. This occurred when the employee left the company. The total consideration paid was £12,600.
In the year to June 2012, ERC Energy was acquired and merged with Equipoise into ERC Equipoise Limited. Goodwill on acquisition was calculated and amortised over a useful life of 5 years. The difference between the fair value of the assets acquired and the price paid is represented by the merger reserve account upon consolidation of ERC Energy Resource Consultants Limited.
The capital redemption reserve was created in May 2019 when the company bought back and cancelled shares from an employee who was retiring.
The own shares reserve comprises the cost of shares held in an employee benefit trust. The employee benefit trust is used to purchase shares from employees when they leave or retire from the company. The shares in the employee benefit trust are used when employees exercise EMI options.
The share option reserve comprises the accumulated share-based payment expenses on unexpired EMI options granted to employees.
ERC Equipoise Limited holds two guarantees with Lloyd's bank as at 30 June 2023. One guarantee for £118,587 is not 100% cash backed and the other guarantee for US$196,491 is 100% cash backed. No provisions are recognised in relation to these guarantees as it is not probable that a future sacrifice of economic benefits will be required.
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:
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
Dividends totalling £43,390 (2022 - £0) were paid in the year in respect of shares held by the company's directors.