The Directors present the strategic report for the year ended 30 June 2023.
The Hutchison Group has a diverse range of products, services and operations, some complement each other whilst others are completely unrelated. The directors are satisfied the performance is in line with expectations and projections.
The company was incorporated on 29 June 2021 and on 29 December 2022, the company acquired the share capital of Hutchison Technologies Limited, Hutchison International Limited and Hutchison B.V. In accordance section 19 of FRS 102 - Business Combinations and Goodwill, merger accounting has been used as the basis of accounting for these acquisitions and accordingly the consolidated financial statements have been prepared and presented as though the merged group has always been in existence.
The results for the year of the group and the financial position of the company and the group are show in the annexed financial statements.
Principal risks and uncertainties
The core commercial activities of the group largely stopped at the start of the COVID-19 pandemic, however the group leveraged it’s medial products manufacturing and supply chain capability to supply the NHS, Department of Health and Social Care and the Care Sector during the Pandemic.
Post pandemic, the Ukraine war, inflation leading to a cost-of-living crisis, economic recession and higher interest rates has impacted on growth and recovery. However, we are now seeing positive signs of industry growth and investment in the various sectors in which we operate.
The demand for high volumes of In-Vitro Diagnostics products needed during the pandemic no longer exists and the company has returned to pre-pandemic operations. This has resulted in a decrease in year-on-year turnover to pre-pandemic levels in line with expectations.
The group is however experiencing steady growth and expects this will continue as business confidence returns in the sectors in which it operates.
Sales revenue in the year was £15.64m, a decrease on last year of £4.55m. The aforementioned reduction in pandemic supplies being the root cause. Therefore in light of economic conditions and uncertainty the sales revenue was in line with expectations.
The group has continued to develop new products and services and the business development investments are already providing a return on investment.
The group operates in the following areas:
Design, development, producing, installing and maintaining technology solutions throughout the UK and Mainland Europe. This includes, but is not limited to, telecoms, networks, access control, digital passes, audio, visual, feature and architectural lighting.
Design and manufacture of Smart Energy products primarily for the UK rollout of Smart Metering.
Electronic design support of medical devices.
Manufacturing and supply of drug delivery and medical training devices.
Software development of own brand software products such as Breezin and customer products.
Our clients have a choice, and we are proud they choose us. We cherish our long-standing client relationships, and our business is unwaveringly focused on delivering exceptional service to old and new customers.
Hutchison International has continually invested to retain ISO13485, ISO9001, ISO27001, ISO22301, ISO14001 and ISO45001 accreditation.
The business has continued to invest in several research and development programmes, particularly those relating to smart energy and digital NFC pass management products.The business has contracts to supply smart energy products to large UK energy retailers, and sales will increase in 2024 and 2025.
The medical devices sector was identified as a key area of diversification, and the business has secured contracts and orders to manufacture devices. There are numerous customer orders to fulfil in 2024 and we expect to see continued growth in future years.
The business continually diversifies and seeks new opportunities to deliver future planned growth.
Treasury operations and financial instruments
The group's operations expose it to various financial risks, including the effects of changes in debt, market prices, credit risk, liquidity risk, and interest risk. The group has a risk management programme that seeks to limit the adverse effects of its financial performance by monitoring levels of debt finance and related finance costs. The company does not use derivative financial instruments to manage interest rate costs, so no hedge accounting is applied.
Given the size of the company, the directors have not delegated the responsibility of managing financial risk management to a subcommittee. The group's finance department implements the policies set out by the directors.
Liquidity Risk
The group manages its cash and borrowing requirements to maximise interest income and minimise interest expense while ensuring sufficient liquid resources to meet the business's operating needs.
Interest Rate Risk
The group has interest-bearing assets and interest-bearing liabilities. Interest-bearing assets include cash balances that earn interest at a fixed rate. Interest-bearing liabilities include bank overdrafts and loan balances. The group has a policy of maintaining debt at a fixed rate to ensure certainty of future interest cash flows. The directors will revisit the appropriateness of this policy should the group's operations change in size or nature.
Foreign Currency Risk
The group is exposed to commodity foreign currency risk due to its operations. However, given the size of the group's operations, the cost of managing exposure to commodity price risk exceeds any potential benefits. The directors will revisit the appropriateness of this policy should the group's operations change in size or nature. The group has no exposure to equity securities risk as it holds no listed investments.
Credit Risk
The group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterparty is subject to a limit, which the directors and leadership team reassess on a regular basis.
The group has continued to invest in a new head office and warehouse storage facility. The warehouse is already fully operational, while the fit-out of the new head offices is expected to be completed in 2024. Once completed, all staff will transfer to the new facility.
Hutchison Technologies Ltd has invested in a new Service and Support management IT system and has strengthened the Service Department Management Team which has already improved service revenues and profitability.
The group branding, website URL and website have all been refreshed.
The fleet of Field Engineering vehicles has undergone a renewal program with all vehicles furnished with new equipment and improved stock levels. All vehicles in the fleet are ULEZ compliant and wherever feasible fully electric.
The group has released new smart energy products and developed others which will be launched imminently. The customers for this product line have seen large increases in contract call off orders and are working on new opportunities to sell into different markets which represents significant growth potential for the Group.
The medical products contract manufacturing division is undergoing a rebranding with a new website to be launched shortly under a new brand name of Moda Tech with a sub brand to follow later Moda Care. Through commercial partners, the company manufactures products for a number of Global Pharma and Drug Delivery Devices brands. The devices manufactured range from Intranasal Mucosal Atomisation Devices to Auto Injector Devices and Wearable Insulin Pumps.
The group has developed Breezin, a new cloud-based software platform for digital wallet NFC pass creation, management, fulfilment and access control. Following a successful launch event at Apple UK Head Office, the group has successfully onboarded two large customers and is building a team to manage the commercialisation of the platform.
The group is investing in a refresh of the Hutchison owned Evoson brand audio products and will be improving existing products and extending the product range. The intention is to establish additional sales channels and increase product sales of Evoson branded products.
The Chinese representative office has been changed to an incorporated Chinese company and the management team is being strengthened to facilitate growth as an independent entity.
The group continually looks at product lines outside its historical core business. It has diversified successfully into the manufacturing and sale of smart energy products, medical products, medical training devices, and NFC Digital Pass management. The group is expected to continue with extensive research and development investment to further develop these current product lines and other potential profitable product lines or opportunities as identified.
Key performance indicators include the monitoring of the operating and financial performance of the company by the management team. The KPIs as adopted by the group are as follows:-
|
| 2023 | 2022 |
|
| £000 | £000 |
| Turnover | 15,644 | 20,193 |
| Gross profit (%) | 35.84 | 38.57 |
| Operating profit/(loss) | 469 | 2,878 |
| Profit/(loss) before tax | 300 | 2,445 |
| Cash at bank and in hand, net of overdraft | 1,504 | 2,827 |
| Net assets | 7,639 | 7,329 |
| Debtor days | 22 | 36 |
| Creditor days | 14 | 20 |
|
| ===== | ===== |
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 11.
No ordinary dividends were paid. The Directors do not recommend payment of a further dividend.
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
Included within the strategic report is an indication of the principal risks and uncertainties including the risks associated with the market conditions, credit and counterparty risk, liquidity risk, and cash flow exchange risk. Also included is the methods adopted to manage these risks where applicable.
We have audited the financial statements of Hutchison Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, 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. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, are detailed below.
As part of our planning process:
We enquired of management the systems and controls the company has in place, the areas of the financial statements that are mostly susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. Management informed us that there were no instances of known, suspected or alleged fraud;
We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: Health and safety; the Data Protection Act 2018; employment law (including payroll and pension regulations); and compliance with the UK Companies Act;
We considered the incentives and opportunities that exist in the company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetrated, and tailored our risk assessment accordingly; and
Using our knowledge of the company, together with the discussions held with management at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations and fraud;
Reviewing management team meeting minutes;
Identifying and discussing key policies and procedures in place over data protection and health and safety;
Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to the carrying value of tangible and intangible fixed assets, and trade debtors, along with the estimation of accruals and deferred income; and
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
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.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £0 (2022 - £0 profit).
Hutchison Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is 15 Luna Place, Dundee Technology Park, Dundee, DD2 1TP.
The group consists of Hutchison Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The 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, modified to include the revaluation of freehold properties. The principal accounting policies adopted are set out below.
The parent company, Hutchison Limited, was incorporated on 29 June 2021. As part of a group reorganisation it acquired 100% of the share capital of Hutchison Technologies Limited, Hutchison International Limited and Hutchison B.V. on 29 December 2022. The Directors determined that in accordance with FRS102 section 19 - Business Combinations and Goodwill, merger accounting should be used as the basis for these acquisitions. Accordingly, the consolidated financial statements have been prepared and presented as though the merged group has always been in existence and the results for the year ended 30 June 2023 include in full the results of the operating subsidiaries before and after the group restructure.
The consolidated group financial statements consist of the financial statements of the parent company Hutchison Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and 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 in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, 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 balance sheet 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.
The financial statements have been prepared on a going concern basis. The directors have considered relevant information, including the financial projections, forecast future cash flows and the impact of subsequent events and contingent liabilities in making their assessment. The directors have performed a robust analysis of forecast future cash flows taking into account the potential impact on the business of possible future scenarios arising from rising input costs and the wider economic conditions the group is exposed to. This analysis also considers the effectiveness of available measures to assist in mitigating the impact.
Based on these assessments and having regard to the resources available to the group, the directors have concluded that there is no material uncertainty and that they can continue to adopt the going concern basis in preparing the annual report and financial statements.
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.
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 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.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
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.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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.
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.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors and bank loans, 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.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
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.
Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness.
Changes to estimates can result in significant variations in the amounts charged to the income statement in specific periods.
In arriving at the valuation of stock it may be necessary for management to make an assessment over the carrying value of stock items and where applicable apply a provision to amend this carrying value to a more accurate level. These provisions are arrived at using management's knowledge and understanding of the business and the industry in which it operates and focuses on potentially obsolete or old items for which the full value may no longer be recoverable.
During the course of the year and during the year end process management are required to determine whether any debts should be regarded as bad debts. This process is based on their knowledge of the business coupled with post year end information identifying debts not recovered relating to the previous financial period.
Management estimate requirements for accruals using post year end information and information available from detailed budgets. This identifies costs and income that are expected to be incurred or received for goods services provided by and to other parties. Accruals are only released when there is a reasonable expectation that these costs will not be invoiced in the future.
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 2 (2022 - 2).
Directors and Key Management Personnel are considered to be the same individuals. As such no additional disclosures have been made in the related party disclosures at note 30.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
On 3 March 2021, the UK Budget 2021 announcements included measures to support economic recovery as a result of the COVID-19 pandemic. These included an increase to the UK’s main corporation tax rate to 25%, which became effective from 1 April 2023. The 25% rate was granted Royal Assent on 10 June 2021 and so was substantively enacted at the balance sheet date. As a result the closing deferred tax balances as at 30 June 2023 are recognised at 25% (2022 - 25%) and the corporation tax rate effective in the period has been apportioned between the previous rate of 19% and the new rate of 25% at 20.5% (2022 - 19%).
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
More information on impairment movements in the year is given in note 11.
Certain land and buildings were revalued at October 2001 by D.M.Hall Chartered Surveyors. The directors consider that there have been no significant changes at 30 June 2023.
The following assets are carried at valuation. If the assets were measured using the cost model, the carrying amounts would be as follows:
Details of the company's subsidiaries at 30 June 2023 are as follows:
The bank overdraft is secured by a bond and floating charge over the assets of the company, together with a standard security over the property at 1 Harrison Road, Dundee, DD2 3SN, in favour of The Royal Bank of Scotland plc.
A bank loans amounting to £1,000,000 was drawn during 2020 and is repayable in monthly instalments, attracts interest at 4.0% above bank base rate and is due to be repaid by May 2026. At the year end £583,334 (2022 - £783,334) was due to be repaid.
A loan amounting to £347,730 was drawn down during 2022 and is repayable in quarterly instalments, and is due to be repaid by September 2027. At the year end £274,270 (2022 - nil) was due to be repaid.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Grants totalling £250,000 were received between 2018 and 2022 in relation to the development of the companies new headquarters at Luna Place, Dundee. This grant will be released in line with depreciation on the premises once it has been completed and is in use.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Each ordinary share carries one vote and ranks equally with all other shares.
This reserve represents the value at which the land and buildings assets are held after revaluation over the cost of the assets.
This reserve records the retained earnings and accumulated losses.
In 2012 a subsidiary company, Hutchison Technologies Limited, entered a tax planning arrangement provided by previous tax advisors. Subsequent to the 2023-year end and following wider challenges by HMRC of this tax planning arrangement, Hutchison Technologies Limited approached HMRC to understand the groups potential tax exposure were HMRC’s challenges substantiated. The provisional figure received from HMRC amounts to £1,750,000. The details supporting this HMRC figure have yet to be provided and verified and the assessments made by HMRC are still open to challenge through appropriate tax tribunal. With no certainty as to timing or outcome of these proceedings the Directors deem it inappropriate at this stage to recognise a provision for these amounts.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date: