Kocho Group Limited
Registered number: 04308824
Annual Report and financial Statements
For the year ended 31 March 2023
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KOCHO GROUP LIMITED
COMPANY INFORMATION
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KOCHO GROUP LIMITED
CONTENTS
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Independent Auditor's Report
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Statement of Comprehensive Income
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Statement of Financial Position
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Statement of Changes in Equity
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Notes to the Financial Statements
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KOCHO GROUP LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2023
The directors present their report and the audited financial statements for Kocho Group Limited (“the Company”) for the year ended 31 March 2023 (“FY23”). In preparing this Strategic Report, the directors have complied with s414C of the Companies Act 2006.
The principal activity of the Company during the year was a provider of cloud transformation, cyber security, data analytics and managed services to midmarket Corporate and larger Enterprise clients.
Kocho Group Holdings Limited ("the Group") is the ultimate parent undertaking of Kocho Group Ltd and for which consolidated accounts have been prepared and a more comprehensive Strategic Report on the Group's past performance and future developments.
The results of Kocho Group Limited for the year show turnover of £14.7m (2022: turnover of £11.2m), gross loss of £3.3m (2022: gross profit of £2.1m) and a loss before taxation of £3.6m (2022: loss before tax of £2.3m). Kocho Group Limited has net liabilities of £6.2m (2022: net liabilities of £2.6m).
Despite the current year the Company has delivered strong organic growth in turnover of 31%. The turnover growth was driven by continued high demand for the Company’s services and supported by growth in the number of FTEs from an average of 235 (2022: 120).
Principal risks and uncertainties
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The management of the business and the execution of the Company's strategy are subject to several risks. The process of risk acceptance and management is addressed through a framework of policies, procedures and internal control. Compliance with regulation, legal and ethical standards is a high priority of the Group’s executive management team.
The key business risks and uncertainties affecting the Company are considered to relate to poor economic conditions, the associated risk of non payment by customers and the business’ reliance on its valuable strategic partnership with Microsoft. These risks are partly mitigated inherently by the essential nature of the services provided by the Company and the stability provided by long term customer contracts. In addition, the risks are further managed by strong account management, a robust commercial approval process for new contracts and renewals of existing contracts, combined with strong credit control and vetting procedures.
Liquidity risk is managed by closely monitoring the cash flow generation of the Kocho Group and cash headroom, and this is monitored by the directors on a regular basis. Trade debtors are managed in respect of credit and there is a policy to minimise any risk by assessing new clients’ credit risk and monitoring credit worthiness. At the balance sheet date, there was no significant considerations of credit risk. The Group’s finance facilities are held in Sterling and the Group does not enter into any hedging arrangements.
Financial key performance indicators
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The Company's main key performance indicator is gross profit, as the Company currently holds a large number of the Group's costs therefore at an entity level EBITDA (the Groups main KPI) would not be valuable. In the year ended 31 March 2023, the Company achieved gross loss of £3.3m (2022: gross profit of £2.1m).
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KOCHO GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
The Group is experiencing high demand for its services and rapid growth through the acceleration of digital transformation and increased adoption of cloud related and cyber security services by its current and target clients. The directors expect this growth in demand to continue in the foreseeable future and therefore anticipate strong growth in future years.
This report was approved by the board and signed on its behalf by:
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KOCHO GROUP LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2023
The directors present their report and the audited financial statements for the year ended 31 March 2023.
The principal activity of the Company continued to be that of provision of IT consultancy services.
The loss for the year, after taxation, amounted to £3,613,944 (2022: loss of £2,470,969).
The directors do not recommend the payment of a dividend for the year (2022: £nil).
The directors who served during the year and up to the date of this report were:
R Bradley (resigned 6 September 2023)
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R Best (resigned 22 May 2023)
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R Gentleman (appointed 6 September 2023, resigned 31 October 2023)
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Directors' responsibilities statement
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The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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KOCHO GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
The directors have considered the Company's ability to meet its liabilities as they fall due for the foreseeable future, in conjunction with the Company's ability to get support from its ultimate parent company.
The Company has net current liabilities but is cash generative on an operating basis and the detailed forecasts prepared by the directors for the Group confirms that Kocho Group Holdings Limited is able to provide support as and when needed to allow Kocho Group Limited to pay its liabilities as they fall due for at least 12 months from the date of approval of these financial statements.
The Group has sufficient cash headroom to support its projected growth and, together with ongoing discussions with the Group's external backers to fund future growth, the directors are confident that obligations can be met as they fall due. Therefore, the financial statements have been prepared on a going concern basis.
Economic impact of global events
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UK businesses are currently facing many uncertainties such as the consequences of Brexit, Covid 19, environmental sustainability and geopolitical events such as the Russian invasion of Ukraine. These uncertainties have contributed to an environment where there exists a range of issues and risks, including inflation, rising interest rates, labour shortages, disrupted supply chains and new ways of working.
The directors have carried out an assessment of the potential impact of these uncertainties on the business, including the impact of mitigation measures, and have concluded that the greatest impact on the business is expected to be from the economic ripple effect on the global economy. The directors have taken account of these potential impacts in their going concern assessment.
The Company continues to work with its partners to minimise any impacts of these events and maximise the realisation of any opportunities they may provide to the business.
Qualifying third party indemnity provisions
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The directors benefit from a qualifying indemnity provision in the form permitted by the Section 234 of the Companies Act 2006 in respect of certain third party actions against directors. No claim or notice of claim in respect of these indemnities has been received in the year. The qualifying indemnity provision was in force throughout the financial period and up to the date of approval of the Directors' Report.
Matters covered in the Strategic Report
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As permitted by Paragraph 1A of Schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 certain matters which are required to be disclosed in the Directors' Report have been omitted as they are included in the Strategic Report on page 1. These matters relate to business review and principal risks and uncertainties.
Provision of information to auditor
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Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the directors are aware, there is no relevant audit information of which the Company's auditor is unaware; and
∙the directors have taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
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KOCHO GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
Post balance sheet events
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On 19 December 2023 entered into an agreement with Bgf Nominees Limited who holds a fixed and floating charge covering all the property or undertaking of the Company. The charge also contains a negative pledge.
On 19 December 2023 entered into an agreement with Desmond Lekerman who holds a fixed and floating charge covering all the property or undertaking of the Company. The charge also contains a negative pledge.
This report was approved by the board and signed on its behalf by:
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KOCHO GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KOCHO GROUP LIMITED
Opinion
We have audited the financial statements of Kocho Group Limited (the ‘Company’) for the year ended 31 March 2023 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
∙give a true and fair view of the state of the Company’s affairs as at 31 March 2023 and of its loss for the year then ended;
∙have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
∙have been prepared in accordance with the requirements of the Companies Act 2006.
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 Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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.
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KOCHO GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KOCHO GROUP LIMITED
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 the 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.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
∙the financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of directors' remuneration specified by law are not made; or
∙we have not received all the information and explanations we require for our audit.
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KOCHO GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KOCHO GROUP LIMITED
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities Statement set out on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors intend either to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
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.
Based on our understanding of the Company and its industry, we considered that non-compliance with the following laws and regulations might have a material effect on the financial statements: employment regulation, health and safety regulation and anti-money laundering regulation.
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:
∙Inquiring of management and, where appropriate, those charged with governance, as to whether the company is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations;
∙Inspecting correspondence, if any, with relevant licensing or regulatory authorities;
∙Communicating identified laws and regulations to the engagement team and remaining alert to any indications of non-compliance throughout our audit; and
∙Considering the risk of acts by the company which were contrary to applicable laws and regulations, including fraud.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as tax legislation, pension legislation, the Companies Act 2006.
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KOCHO GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KOCHO GROUP LIMITED
In addition, we evaluated the directors' and management’s incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of override of controls, and determined that the principal risks were related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in relation to, revenue recognition (which we pinpointed to the cut-off assertion), and significant one-off or unusual transactions.
Our audit procedures in relation to fraud included but were not limited to:
∙Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud;
∙Gaining an understanding of the internal controls established to mitigate risks related to fraud;
∙Discussing amongst the engagement team the risks of fraud; and
∙Addressing the risks of fraud through management override of controls by performing journal entry testing.
There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of the audit 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.
Sameena Fonseca (Senior statutory auditor)
for and on behalf of Forvis Mazars LLP
Chartered Accountants and Statutory Auditor
30 Old Bailey
London
EC4M 7AU
Date: 21/08/2024
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KOCHO GROUP LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
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Interest payable and similar expenses
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Loss for the financial year
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Other comprehensive income
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Total comprehensive expense for the year
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The Statement of Comprehensive Income is prepared on the basis that all operations are continuing operations.
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The notes on pages 13 to 32 form part of these financial statements.
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KOCHO GROUP LIMITED
REGISTERED NUMBER: 04308824
STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 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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Creditors: amounts falling due after more than one year
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Provisions for liabilities
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Capital redemption reserve
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The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 13 to 32 form part of these financial statements.
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KOCHO GROUP LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
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Capital contribution reserve
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Comprehensive income for the year
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Other comprehensive income for the year
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Total comprehensive income for the year
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Comprehensive income for the year
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Other comprehensive income for the year
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Total comprehensive income for the year
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The notes on pages 13 to 32 form part of these financial statements.
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
Kocho Group Limited is a private company limited by shares, incorporated and registered in England and Wales. The Company's registered number is 04308824. The address of the registered office of the Company is Waverley House 4th Floor, 7-12 Noel Street, London, Westminster, England, W1F 8GQ.
The principal activity of the Company during the year continued to be that of provision of IT consultancy services.
2.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 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 3).
The financial statements have been presented in Pounds Sterling and are rounded to the nearest pound as this is the currency of the primary economic environment in which the Company operates.
The following principal accounting policies have been applied:
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Financial Reporting Standard 102 - reduced disclosure exemptions
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The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 26 Share-based Payment paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Kocho Group Holdings Limited as at 31 March 2023 and these financial statements may be obtained from Companies House.
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
2.Accounting policies (continued)
The directors have considered the Company's ability to meet its liabilities as they fall due for the foreseeable future, in conjunction with the Company's ability to get support from its ultimate parent company.
The Company has net current liabilities but is cash generative on an operating basis and the detailed forecasts prepared by the directors for the Group confirms that Kocho Group Holdings Limited is able to provide support as and when needed to allow Kocho Group Limited to pay its liabilities as they fall due for at least 12 months from the date of approval of these financial statements.
The Group has sufficient cash headroom to support its projected growth and, together with ongoing discussions with the Group's external backers to fund future growth, the directors are confident that obligations can be met as they fall due. Therefore, the financial statements have been prepared on a going concern basis.
Turnover represents amounts receivable for goods and services net of VAT and trade discounts.
Consultancy income is recognised in the period the work is performed if provided on a time and materials basis.
Income in respect of hardware and software resale is recognised on the date of delivery.
Annual contract income is recognised on a straight line basis, over the term of the contract, except for new IT support contracts when further income is recognised to reflect the additional work required at inception.
Turnover 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 delivery of the goods) , the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Turnover 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.
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
2.Accounting policies (continued)
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 the Statement of Comprehensive Income so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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Research and development expenditure
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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.
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentation 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 the Statement of Comprehensive Income except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of Comprehensive Income within 'finance income or costs'. All other foreign exchange gains and losses are presented in the Statement of Comprehensive Income within 'administrative expenses'.
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Interest payable and similar expenses
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Interest payable and similar expenses are charged to the Statement of Comprehensive Income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
2.Accounting policies (continued)
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 the Statement of Comprehensive Income when they fall due. Amounts not paid are shown in other creditors as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Company in independently administered funds.
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.
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Current and deferred taxation
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The tax expense for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the reporting date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
2.Accounting policies (continued)
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Amortisation is included within 'administrative expenses' in the Statement of Comprehensive Income.
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.
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
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.
Depreciation is provided on the following basis:
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Land and buildings Leasehold
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Over term of lease to break date of 5 years
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25% to 33.33% straight line
|
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 the Statement of Comprehensive Income.
Depreciation is included within 'administrative expenses' in the Statement of Comprehensive Income.
- 17 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
2.Accounting policies (continued)
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Impairment of fixed assets
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At each reporting period end date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Investments in subsidiaries are measured at cost less accumulated impairment.
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Debtors: Amounts falling due within one year
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Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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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 equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
- 18 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
2.Accounting policies (continued)
The Company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the Company's Statement of Financial Position when the Company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset , with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Company.
- 19 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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Judgements in applying accounting policies and key sources of estimation uncertainty
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In applying the Company’s accounting policies, the directors are required to make judgements, estimates and assumptions in determining the carrying amounts of assets and liabilities. The directors’ judgements, estimates and assumptions are based on the best and most reliable evidence available at the time when the decisions are made, and are based on historical experience and other factors that are considered to be applicable. Due to the inherent subjectivity involved in making such judgements, estimates and assumptions, the actual results and outcomes may differ.
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, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
3.1 Critical judgements in applying the Company's accounting policies
The directors do not consider there to be any critical judgements made in the process of applying the Company’s accounting policies.
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(ii) Recoverability of debtors
The Company establishes a provision for debtors that are estimated not to be recoverable. When assessing recoverability the directors have considered factors such as the aging of the debtors, past experience of recoverability, and the credit profile of individual or groups of customers.
- 20 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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An analysis of turnover by class of business is as follows:
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Analysis of turnover by country of destination:
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Other operating income relates to staff costs that are recharged by the Company to NetConsult Ltd, ThirdSpace Ltd and MMRIT Limited.
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- 21 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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The operating loss is stated after charging:
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Amortisation of intangible assets
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Depreciation of tangible fixed assets
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Other operating lease rentals
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Impairment of trade receivables
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Audit fees attributable to the company were borne by another group entity, Kocho Holdings Limited, and not recharged in the current or prior year.
The Company has taken advantage of the exemption not to disclose amounts paid for non-audit services as these are disclosed in the consolidated accounts of the parent Company.
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Staff costs, including directors' remuneration, were as follows:
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Cost of defined contribution scheme
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Included in staff costs are costs that are recharged by the Company to NetConsult Ltd, ThirdSpace Ltd and MMRIT Limited.
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The average monthly number of employees, including directors, during the year was 235 (2022: 120).
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- 22 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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Company contributions to defined contribution pension schemes
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During the year retirement benefits were accruing to no directors (2022: nil) in respect of defined contribution pension schemes.
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The highest paid director received remuneration of £180,250 (2022: £218,292).
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The value of the Company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £nil (2022: £4,525).
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The directors are considered to be the only key management personnel of the Company.
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Interest payable and similar expenses
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Finance leases and hire purchase interest payable
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- 23 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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Origination and reversal of timing differences
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Adjustments in respect of previous periods
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Factors affecting tax charge for the year
|
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The tax assessed for the year is higher than (2022: higher than) the standard rate of corporation tax in the UK of19% (2022:19%). The differences are explained below:
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Loss before tax multiplied by standard rate of corporation tax in the UK of 19% (2022: 19%)
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Expenses not deductible for tax purposes
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Adjustments to tax charge in respect of prior periods
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Deferred tax not recognised
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Total tax charge for the year
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- 24 -
|
KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
11.Taxation (continued)
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Factors that may affect future tax charges
|
The UK Government announced in the 2021 budget that from 1 April 2023, the rate of corporation tax in the United Kingdom will increase from 19% to 25%. Companies with profits of £50,000 or less will continue to be taxed at 19%, which is a new small profits rate. Where taxable profits are between £50,000 and £250,000, the higher 25% rate will apply but with a marginal relief applying as profits increase.
- 25 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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Land and buildings Leasehold
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The net book value of land and buildings may be further analysed as follows:
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The net book value of other tangible fixed assets includes £53,974 (2022: £131,076) in respect of assets held under finance leases or hire purchase contracts. The depreciation charge in respect of such assets amounted to £77,102 (2022: £72,313) for the year.
- 26 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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Investments in subsidiary companies
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The following were subsidiary undertakings of the Company:
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The Internet Group Limited
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4th Floor Waverley House 7 - 12 Noel Street, Westminster, London, England, W1F 8GQ
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Internet Adventure Limited
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4th Floor Waverley House 7 - 12 Noel Street, Westminster, London, England, W1F 8GQ
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- 27 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
Debtors: Amounts falling due within one year
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Amounts owed by group undertakings
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Prepayments and accrued income
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Deferred tax asset (note 20)
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Trade debtors are stated after provisions of £97,453 (2022: £85,180).
Amounts owed by group undertakings includes loans which are unsecured, interest-free and have no fixed repayment date.
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Cash and cash equivalents
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- 28 -
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KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
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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Obligations under finance lease and hire purchase contracts
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Accruals and deferred income
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Santander UK plc holds two fixed and floating charges covering all the property or undertaking of the Company. The charges also contains a negative pledge.
Amounts owed to group undertakings includes loans which are unsecured, interest-free and have no fixed repayment date.
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Creditors: Amounts falling due after more than one year
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Net obligations under finance leases and hire purchase contracts
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Hire purchase and finance leases
|
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Minimum lease payments under hire purchase fall due as follows:
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- 29 -
|
KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
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Charged to the Statement of Comprehensive Income
|
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The deferred taxation balance is made up as follows:
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Accelerated capital allowances
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Tax losses carried forward
|
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Allotted, called up and fully paid
|
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400 (2022: 400) Ordinary shares of £1 each
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The ordinary shares entitle each holder to one voting right and no right to fixed income.
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- 30 -
|
KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
Share premium account
This reserve represents the amount above the nominal value received for issued share capital, less transaction costs.
Capital contribution reserve
This reserve represents the share options granted by the group company for free in respect of services provided by employees of Kocho Group Limited.
Profit and loss account
This reserve represents the cumulative profits and losses of the Company.
The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £375,564 (2022: £99,231). Contributions totalling £98,173 (2022: £24,386) were payable to the fund at the reporting date and included in other creditors.
|
Commitments under operating leases
|
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At 31 March 2023 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Related party transactions
|
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The Company is a wholly owned member of Kocho Group Holdings Limited and as such has taken advantage of the exemption permitted by section 33 Related party disclosure, not to provide disclosures of transactions entered into with other wholly owned members of the group.
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- 31 -
|
KOCHO GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
|
Post balance sheet events
|
From 19 December 2023 Bgf Nominees Limited holds a fixed and floating charge covering all the property or undertaking of the Company. The charge also contains a negative pledge.
From 19 December 2023 Desmond Lekerman holds a fixed and floating charge covering all the property or undertaking of the Company. The charge also contains a negative pledge.
The immediate parent company is Kocho Holdings Limited, a company incorporated and registered in England and Wales.
The ultimate parent company is Kocho Group Holdings Limited, a company incorporated in England and Wales. Its registered office address is Waverley House 4th Floor, 7-12 Noel Street, London, Westminster, United Kingdom, W1F 8GQ.
The smallest and largest group into which the Company's financial statements are consolidated is Kocho Group Holdings Limited. Copies of the group financial statements for the ultimate parent undertaking may be obtained from Companies House.
- 32 -
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