Registered number: 10797543 (England and Wales)
MAGNOLIA SOFTWARE UK LIMITED
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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MAGNOLIA SOFTWARE UK LIMITED
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COMPANY INFORMATION
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ZEDRA Corporate Reporting Services (UK) Limited
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MAGNOLIA SOFTWARE UK LIMITED
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CONTENTS
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Statement of Changes in Equity
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Notes to the Financial Statements
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MAGNOLIA SOFTWARE UK LIMITED
REGISTERED NUMBER:10797543
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BALANCE SHEET
AS AT 31 DECEMBER 2023
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Page 1
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MAGNOLIA SOFTWARE UK LIMITED
REGISTERED NUMBER:10797543
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BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2023
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Capital contribution reserve
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The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime and in accordance with the provisions of FRS 102 Section 1A - small entities.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of comprehensive income in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 4 to 10 form part of these financial statements.
Page 2
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MAGNOLIA SOFTWARE UK LIMITED
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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Capital contribution reserve
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Comprehensive income for the year
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Comprehensive income for the year
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Page 3
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MAGNOLIA SOFTWARE UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 2).
The following principal accounting policies have been applied:
At the balance sheet date, Magnolia Software UK Limited is in a net liability position of £2,991,094. This is primarily the result of an intercompany loan balance repayable to the parent company, Magnolia International Ltd.
The Company continues to be loss making and at present does not have sufficient capital to repay this loan, as a result, the Company has received written confirmation from its parent company that it will continue to provide financial support for a period of at least 12 months from the date of signing these financial statements. Furthermore, the directors have assessed the ability of Magnolia International Ltd to provide this support based on their cash flow forecasts and have concluded that the parent will have sufficient working capital to provide the necessary support. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements.
Turnover is recognised to the extent that it is probable that the economic benefits will flow to the Company and the turnover can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before turnover is recognised:
Rendering of services
Turnover from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of turnover can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract;
∙the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙the costs incurred and the costs to complete the contract can be measured reliably.
Costs incurred in the performance of global sales contracts are recharged to the parent company. This is recognised as other operating income.
Page 4
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MAGNOLIA SOFTWARE UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1.Accounting policies (continued)
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Interest income is recognised in profit or loss using the effective interest method.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance Sheet. The assets of the plan are held separately from the Company in independently administered funds.
Page 5
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MAGNOLIA SOFTWARE UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1.Accounting policies (continued)
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Short term debtors are measured at transaction price.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash held on deposit by service providers is included within bank and cash balances, as these amounts are highly liquid and repayable without penalty on notice of not more than 24 hours.
Page 6
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MAGNOLIA SOFTWARE UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1.Accounting policies (continued)
Short term creditors are measured at the transaction price. Amounts owed to group undertakings are in relation to intercompany loans. No interest is charged on the loans, which are repayable on demand.
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Judgements in applying accounting policies and key sources of estimation uncertainty
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The preparation of financial statements requires management to make judgements, estimates and assumptions that may affect the presentation of information. Estimates and associated assumptions can be based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form a basis for making the judgements about the carrying value of assets and liabilities that are not readily apparent from other sources.
Share based payment
Certain employees of the Company participate in the parent company's Employee Stock Option Plan. FRS 102, requires that equity settled share based payments are accounted for at their fair value at the date of grant. Management used their judgement to determine the appropriate fair value at the date of grant. This involved assessing the Group's share price by reference to an EBITDA multiple of 12 and applying a lack of marketability discount of 44%. These are significant assumptions which have the ability to cause material misstatement in these financial statements.
The auditors' report on the financial statements for the year ended 31 December 2023 was unqualified.
The audit report was signed on 15 April 2024 by Edward Wallis ACA (Senior Statutory Auditor) on behalf of ZEDRA Corporate Reporting Services (UK) Limited.
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The average monthly number of employees during the year was 17 (2022 - 15).
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Page 7
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MAGNOLIA SOFTWARE UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Charge for the year on owned assets
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Page 8
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MAGNOLIA SOFTWARE UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Prepayments and accrued income
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Creditors: Amounts falling due within one year
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Amounts owed to group undertakings
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Other taxation and social security
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Accruals and deferred income
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Allotted, called up and fully paid
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1,000 (2022 - 1,000) Ordinary shares of £1.00 each
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Capital contribution reserve
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Certain employees of the Company along with other group employees have been granted options over the shares in the Company's parent. The options are granted at a determined fair value and 25% of the options are exercisable one year after the date of grant, vesting continues monthly thereafter for a further three years.
An expense equivalent to the fair value of the share options granted is recognised evenly over the vesting period with a corresponding amount being recognised in the capital contribution reserve.
Page 9
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MAGNOLIA SOFTWARE UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Commitments under operating leases
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At 31 December 2023 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Magnolia International Ltd is the parent company of the smallest group for which consolidated financial statements are drawn up of which the Company is a member. The registered office of the parent company is 2 Oslo-Strasse, Munchenstein, Switzerland, 4142.
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Post balance sheet events
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In January 2024, the decision was made by senior management to restructure the UK business so that the UK sales region was integrated into the wider EMEA region. As a result, the Company entered into post settlement proceedings with employees and agreed to pay compensation payments totalling £41,250. This is a non-adjusting post balance sheet event.
There were no adjusting or other non-adjusting events occurring between the end of the reporting period and the date these financial statements were approved.
Page 10
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