The Directors present the strategic report for the year ended 31 December 2023.
Turnover in 2023 was 23% higher compared to 2022. Gross Profit increased from 42% in 2022 to 51% in 2023. Overall financial results for the year improved during 2023 due primarily to a 23% increase in turnover, and a 49% increase in gross profit. Offsetting this, administrative expenses supporting higher turnover increased 5% and net finance costs increased 64% in connection with increased debt related to the payment of dividends in 2023 and 2022.
The Group continued to focus on strategic initiatives including developments in the chemical and industrial sectors, customers’ decarbonisation initiatives, pricing strategies, and capacity expansions to support growth. The Group continues to see strong momentum in demand from the renewables, particularly within carbon capture, and liquified natural gas sectors. Equipment sales were up 28% and aftermarket sales were up 20% in 2023 compared to 2022.
The Group's operations expose it to a variety of financial risks that include the effects of liquidity risk, commodity price risk, credit risk, interest rate risk and currency fluctuation risk. The Group has in place procedures that seek to limit the adverse effects of these risks.
The policies set by the Board of Directors are implemented by the Group's finance department which has a policy and procedures manual that sets out specific guidelines to manage risk and the circumstances where it would be appropriate to use financial instruments to manage these.
Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when due. The risk is managed centrally by the finance team. The Directors are satisfied that the Group is not subject to significant liquidity risk.
Commodity Price Risk
The Group is exposed to commodity price risk as a result of its operations. However, given the size of the Group's operations, the costs of managing exposure to commodity price risk exceed 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 price risk as it holds no listed or other equity 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 is reassessed annually by the finance team. Cash is placed with financial institutions who are deemed to be low risk.
Interest Rate Risk
Interest rate risk arises from balances due on our external borrowings which include a senior credit facility which bears interest at the Secured Overnight Financing Rate (“SOFR”) plus 4.35%. The Group directors continually review the Group’s exposure to interest rates and take appropriate action to ensure that the risk is appropriate in relation to the financial results of the Group.
Currency Fluctuation Risk
The Group is exposed to currency fluctuation risk as a result of its operations. The risk is managed centrally by the finance team and is monitored on a regular basis.
The results for the years are set out on page 11.
At the year end the Group’s net assets were $35.2m. Current assets exceeded current liabilities by $148.1m and the Group’s directors consider the period-end position of the Group is satisfactory.
Key performance indicators (KPI) for the period are list below.
KPI 2023 2022 Definition and method of calculations
Turnover $364m $295m
Growth in turnover (%) 23.4% 13.5% Year on year movement in turnover
from continuing operations, expressed
as a percentage
Operating profit 2.8% (13.4%) Ratio of operating profit to turnover
expressed as a percentage
Inventory turn (days) 108 94 Total inventory at year-end divided by
cost of sales and multiplied by 365
Debtor days 91 104 Trade debtors at year-end divided by
turnover and multiplied by 365
Section 172 of the Companies Act 2006 requires that the Directors act in a way that they consider to be in good faith, would be most likely to promote the success of the Group for the benefit of its shareholders and in doing so have regard to:
Our responsibility to act fairly between suppliers, customers and other stakeholders
Our interaction with stakeholders is predicated on respect for each relationship. The Group competes vigorously and fairly, working closely with stakeholders to maintain good relationships. The Directors acknowledge the need to act fairly between stakeholders.
Conducting transactions with high standards of business conduct
Building and maintaining our reputation and high standards of business conduct are essential to future success. We have been in business for decades and are proud to have many repeat customers based upon operating in an ethical manner. We maintain a Code of Ethics and a robust Anti-Bribery and Anti-Corruption Policy with which all employees are expected to comply. These policies are regularly reviewed and updated and all employees receive at least annual training relating to them.
Considering the impact of our operations on community and environment
The Group is keen to operate in a manner which strongly considers the impact of its operations on the community and the environment. Our facilities have programs for compliance with local quality and environmental standards. As noted above, we also work with customers to develop solutions for the changing environment and cleaner energy.
Understanding the consequences of long-term strategies
Being a recent undertaking with new management, planning and implementing a long-range plan has been in focus for the Group Directors.
Maintaining the interests of our employees
The success of our business depends on attracting, retaining and motivating talented employees. We consider and assess the implications of decisions on employees and the wider workforce, where relevant and feasible. Additionally, we seek to remain a responsible employer, including with respect to pay and benefits, health and safety issues, and the workplace environment.
The need to act fairly between all shareholders
In conjunction with the aforementioned philosophies and culture, we believe we operate in a manner that expresses fair treatment between all shareholders.
On behalf of the board
The Directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 11.
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
The research and development activities of the Group continue to be directed towards the development of new products and improving the performance and effectiveness of existing products.
The Group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the Group's performance.
During 2023 the Group recorded expense related to a share-based payment Equity Incentive Plan by an affiliate.
There are no significant subsequent events.
There are no significant future events.
HJS Accountants Limited were appointed as auditor to the Group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per employee, the recommended ratio for the sector.
We have completed an upgrade of the boilers and continued to replace all lighting with a more efficient LED solution.
We have audited the financial statements of Star UK Topco Limited (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2023 which comprise the Group profit and loss account, the Group statement of comprehensive income, the Group balance sheet, the Parent Company balance sheet, the Group statement of changes in equity, the Parent Company statement of changes in equity, the Group statement of cash flows, the Parent 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 by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Parent Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of UK and overseas regulatory principles. We also considered the laws and regulations which have a direct impact on the financial statements such as the Companies Act 2006.
We evaluated 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 management bias in accounting estimates and judgemental areas of the financial statements.
Audit procedures performed by the audit engagement team included:
Discussions with senior management, including consideration of known or suspected instances of non compliance with laws and regulation or instances of fraud;
Identifying and testing journal entries based on risk criteria;
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
Testing transactions entered into outside of the normal course of the Group's business;
Reviewing any potential litigation or claims against the entity which indicate any potential non compliance issues.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or though collusion.
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 $69,700,793 (2022 - $151,729,327 profit).
Star UK Topco Limited (“the Company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Suite 1, 7th Floor 50 Broadway, London, United Kingdom, SW1H 0BL.
The Group consists of Star UK Topco 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 US Dollars, which is the functional currency of the Group. Monetary amounts in these financial statements are rounded to the nearest thousand $.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated Group financial statements consist of the financial statements of the Parent Company Star UK Topco 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 31 December 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 ventures 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 Company's or Group's balance sheets 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 Company's or 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.
At the time of approving the financial statements, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
We enter into contracts with customers sometimes having multiple commitments of goods and services including any combination of designing, developing, manufacturing, modifying, installing and commissioning of flow management equipment and providing services and parts related to the performance of such products. We evaluate the commitments in our contracts with customers to determine if the commitments are both capable of being distinct and distinct in the context of the contract to identify performance obligations.
We recognise revenue when (or as) we satisfy a performance obligation by transferring control of the performance obligation to a customer. Control of a performance obligation may transfer to the customer either over time or at a point in time depending on an evaluation of the specific facts and circumstances for each contract, including the terms and conditions of the contract as agreed with the customer, as well as the nature of the products or services to be provided. Our larger contracts are typically completed within a six to eighteen-month period, while many other contracts, such as “short cycle” contracts, have a shorter time frame for revenue recognition.
Control transfers over time when the customer can direct the use of and obtain substantially all the benefits of our work as we perform. This typically occurs when products have no alternative use and we have a right to payment for performance completed to date, including a reasonable profit margin. Our contracts often include cancellation provisions that require the customer to reimburse us for costs incurred up to the date of cancellation, and some contracts also provide for reimbursement of profit upon cancellation in addition to costs incurred to date.
The Group's revenue is generated primarily from customer orders that involve designing, developing, manufacturing, modifying, installing and commissioning of advanced pumps and compressors, providing services and parts related to the performance of such products. Generally, contracts under which the Group provides goods or services with lead times under a year involve a single performance obligation. More complex contracts, which span over a period of time exceeding a year, typically have multiple performance obligations involving goods and services. Revenue is recognised as the Group satisfies performance obligations when services are performed or as the transfer of control of goods is made to a customer. Transfer of control is evaluated based on the customer's ability to direct the use of and obtain substantially all the benefits from a performance obligation. Revenue is recognised either over time or at a point in time, depending on the specific facts and circumstances for each contract, including the terms and conditions of the contract as agreed with the customer and the nature of the products or services to be provided. Projects generally require the customer to make advance cash payments as work progresses, which is recorded as a contract liability until the time when the related performance obligation and transfer of control is complete. In the event that revenue recognised under the POC method exceeds the billings to customers, a contract asset is recorded. The Group established an allowance for expected credit losses for recognised contract assets based on available evidence of a customer's financial condition and other economic information.
The Group recognises revenue over time as control transfers. This typically occurs when products have no alternative use and the Group has a right to payment for performance completed to date, including a profit margin. For revenue recognised over time, the Group primarily uses the % of completion (POC) method, with progress towards completion measured by applying an input measure based on costs incurred to date relative to total estimated costs at completion.
All other revenues are recognised at a point in time which is determined based on when control transfers to a customer. For revenue recognised at a point in time, the Group evaluates specific indicators such as title transfer, risk of loss transfer, customer acceptance and physical possession. Costs incurred on these projects is recorded as a contract asset until transfer of control is complete. Revenue recognised at a point time accounted for approximately 51% of total revenue for the year ended 31 December 2023, and 52% of total revenue during the year ended 31 December 2022.
The Group records freight charges billed to customers in net sales and the related shipping cost in cost of sales. The Group has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within accrued liabilities until remitted to the relevant government authority.
Under certain contracts, the Group provides guaranteed completion dates. Late delivery penalties, if expected to be incurred, result in a reduction of net sales related to the contract.
Incremental costs incurred to obtain a contract generally include sales commissions which are expensed as incurred due to materiality.
Research and development expenditure is written off against profits in the year in which it is incurred.
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 Company's 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 or Group holds a long-term interest and where the Company or Group 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.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the Group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the Company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the Parent Company financial statements, investments in associates are accounted for at cost less impairment.
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 Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The Group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the Group's 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, 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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 Group 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.
The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice.
The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.
Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.
The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
Stock-based compensation is measured at the grant date, based on the fair value of the award, and depending on the type of award granted. Time-based options are recognised as an expense under the straight-line attribution method over the requisite service period or performance-based options which are expensed upon the date that both a market and performance condition tied to an award is satisfied. We account for forfeitures as they occur.
See note 23 Share-based payment transactions for additional information.
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.
Transactions in currencies other than US Dollars 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.
Assets and liabilities of our foreign subsidiaries are translated to US dollars at exchange rates prevailing at the balance sheet date, while income and expenses are translated at average rates for each month. Translation gains and losses are reported as a component of accumulated other comprehensive loss.
Transaction and translation gains and losses arising from intercompany balances are reported as a component of accumulated other comprehensive loss when the underlying transaction stems from a debt designated as not due in the foreseeable future. Otherwise we recognise transaction gains and losses arising from intercompany transaction as a component of income.
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 critical judgements which have the most significant impact on the amounts recognised in the financial statements are as follows:
Provision is made where necessary for obsolete, slow moving and defective stocks. Management review the level of the provision based on the level and condition of stock items and their knowledge of the business.
As disclosed in note 20 the Group provides a 1 to 3 year warranty provision on its products. A provision for expected warranty claims is calculated based on prior experience of levels of warranty claims incurred and future expectations.
Management estimate the expected useful lives of the Group's fixed assets which in turn impacts on the amount of depreciation charged in the year.
In determining whether there are any factors that indicate that the Group's fixed assets and investments are impaired, COVID-19 has been considered in relation to whether any impairment has arisen.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:
In the opinion of the directors there are no estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
An analysis of the Group's turnover is as follows:
The average number of persons (including directors) employed by the Group and Company during the year was:
Their aggregate remuneration comprised:
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
Details of the Company's subsidiaries at 31 December 2023 are as follows:
The following subsidiaries have taken advantage of audit exemption under exemption under s479A of the Companies Act 2006:
Name of undertaking Company number
Star UK Holdco Limited 12377158
Star UK Midco Limited 12377228
Star UK Bidco Limited 12377278
For the period ended December 31, 2023, the Group made $8,421 (2022: $6,865) of principal payments. The Term Loan agreement requires quarterly principal payments of $1,726 until maturity at March 17, 2027.
Senior Secured Credit Facility
On March 17, 2020, subsidiaries of the Group, entered into a First Lien Credit and Guarantee Agreement with a syndicate of financial institutions, (and related agreements, collectively “Senior Credit Facility”, as amended) and borrowed an aggregate $535,000 under the term loan portion of the agreement (“Term Loan”) and secured a $100,000 revolving line-of credit (“Revolver”). In December 2023, the Senior Credit Facility was amended to increase the borrowed amount under the Term Loan portion of the agreement by an incremental $150,000, and extend the Revolver maturity date by two years. The increase in the borrowed amount was deemed to be a modification of the original terms and as such, debt issuance costs associated with the modification were capitalised. In addition, there are U.S. denominated secured ancillary lines of credit of $30,000 and euro-denominated secured ancillary lines of credit equivalent to approximately $13,231 as capacity for the issuance of performance guarantees and letters of credit at December 31, 2023.
On June 22, 2022, a subsidiary of the Group entered into a Second Lien Credit Agreement (and related agreements, collectively "Second Lien Credit Facility", together with the Senior Credit Facility "Credit Facilities") and borrowed an aggregate $105,000 which originally matured in March 2028. The Group repaid borrowings under the Second Lien Credit Facility and the facility was terminated in December 2023. In connection with the repayment and termination of the Second Lien Credit Facility, the Group wrote off $3,180 of debt issuance costs which is included in interest expense.
The borrowings under the Senior Credit Facility are secured in total by first priority pledges of shares of certain significant Group companies and first priority security interest over the intra-group receivables between certain subsidiaries in addition to the majority of assets of the Sundyne guarantors, as defined in the loan documents.
The Senior Credit Facility contains restrictions and covenants which require maintenance of certain ratios and restrictions on the Group’s ability to grant additional liens or security interests on the Group’s assets, make acquisitions, loans, advances or investments, pay dividends, prepay other indebtedness, sell or otherwise transfer assets, or enter into certain transactions with affiliates. Maintenance of ratios under the Senior Credit Facility are dependent upon utilisation of the Group’s Revolver. As of December 31, 2023 and 2022, there were no amounts drawn under the Revolver.
The Group may incur a prepayment penalty in the event of optional prepayment of amounts outstanding under the Term Loan and may be required to make prepayments based on excess cash flow or other limited circumstances as required under the Senior Credit Facility.
The Group recognised $71,080 and $42,613 of interest expense under the Credit Facilities during the years ended December 31, 2023 and 2022, respectively. The interest rate on the Term Loan as of December 31, 2023 is the Secured Overnight Financing Rate ("SOFR") plus 4.35%.
The Group is required to pay an unused credit availability fee under the Revolver of 0.375% per annum, and a letter of credit participation and fronting fees equal to 0.375% and 0.125% as of December 31, 2023, respectively. The interest rate on amounts drawn under the Revolver is based on SOFR plus a margin of 4% (subject to change based on the Group's leverage ratio, as defined in the agreement). As of December 31, 2023 and 2022, the Group had utilised approximately $18,009 and $19,700, respectively, of capacity by the issuance of performance-related guarantees and letters of credit under the Ancillary Facilities and the Group's unused capacity under the Ancillary Facilities was approximately $25,222 and $23,100.
Corporate legal matters
The Group has been named in litigation arising in the ordinary course of business. In the opinion of legal counsel and management, the Group has meritorious defenses against such claims and is covered by insurance and has reserves to cover self-insured retentions for any material adverse outcome in most claims. For claims for which insurance coverage may not be available, the Group has established reserves deemed adequate to cover possible adverse outcomes, and any related fees. As a result, these cases are not expected to have a significant negative impact on future results of operations or the financial condition of the Group.
Warranties
The provision for warranty claims is a provision for future product warranty costs arising in the normal course of business from prior year sales. The Group provides a 1-3 year warranty on its products and therefore the warranty provision is expected to be utilised over a 3 year period.
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon:
At December 31, 2023, the gross amount of net operating loss, foreign tax credits and disallowed interest carryover along with the expiration period by jurisdiction are as follows:
The Group assesses its unrecognised tax positions annually. There are no unrecognised tax benefits for the periods presented. As of December 31, 2023, tax years from 2019 forward remain subject to examination in the United Kingdom, United States, France, and other foreign jurisdictions where the Group has operations.
A defined contribution pension scheme is operated for all qualifying employees.
The Group sponsors various unfunded foreign defined benefit pension plans that cover certain employees. Our plans use a December 31 measurement date consistent with the fiscal year. Plan benefits comply with requirements in place at each business jurisdiction and are generally based on an employee’s years of service and compensation.
Assumed life expectations on retirement at age 65:
The amounts included in the balance sheet arising from obligations in respect of defined benefit plans are as follows:
Amounts recognised in the profit and loss account
Amounts taken to other comprehensive income
Movements in the present value of defined benefit obligations
The defined benefit obligations arise from plans which are unfunded or partly funded.
Movements in the fair value of plan assets
The actual return on plan assets was $25.
Fair value of plan assets at the reporting period end
Equity Incentive Plan – Stock options
The Group and Company are subsidiaries of Star Guernsey Topco Limited ("Star Guernsey"), a private limited company registered in Guernsey and an entity which has issued performance and time-vesting options to employees of the Group. Compensation expense related to these options is allocated to the Group based on the estimated fair value of the awards as of the grant date using an option pricing model. Stock-based compensation allocated to the Group for time-based options is recognised over the requisite service period using the straight-line method based on the grant date fair value of the award. Performance-based options are recognised as an expense based upon whether it is deemed probable that both a market and performance condition tied to an award is expected to be satisfied. Stock-based compensation allocated to the Group is reduced at the time forfeitures occur. There were 6,150 and 46,322 forfeitures during the years ended December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, adjustments were made to outstanding option prices in conjunction with distributions to shareholders. As a result, the exercise price of options outstanding at the distribution dates were reduced to prevent dilution of value with respect to those share options. The revision of the exercise price was not considered a modification of the original agreement.
As of December 31, 2023 and 2022, outstanding options for the purchase of Star Guernsey shares are 569,500 and 498,500 respectively. The weighted-average-remaining-contractual life of the options as of December 31, 2023 and 2022 is approximately 7 and 8 years, respectively. All options have been issued with an exercise price of $72 to $92.
All stock options granted have an expiration date of 10 years from the date of grant.
Stock price volatility is based on an average of historical volatility from comparable public companies that have sufficient trading history to cover the expected term to estimate the expected volatility. The expected term of the options granted were based, in part, on the median path of successful trials of the market condition derived from the Monte Carlo simulations and on the terms and conditions of the options. The risk-free interest rates utilised are based on the U.S. Treasury yield in effect at each grant date.
Time-Based Options
The time-based options granted generally vest and become exercisable ratably over five years of continued employment or service as defined in each grant agreement.
During the period, the Group recognised $913 (2022: $733) of non-cash compensation expense which was recognised within general and administrative expense for the time-based options.
As of December 31, 2023 and 2022, there is $2,300 and $2,600, respectively, of total unrecognised compensation costs related to unvested time-based options with the cost expected to be recognised ratably over a remaining weighted average period of 3 years.
Performance-Based Options
The performance-based options with a market condition vest and become exercisable upon the date that both the performance and market conditions are satisfied which are specifically disclosed in the Option Plan. The stock options are exercisable at prices determined in the Option Grant Agreement for each participant and issued with an exercise price that is equal to the value of the underlying share on the date of grant.
The time-based and performance options contain market conditions, which are required to be considered when calculating the grant date fair value. To reflect the substantive characteristics of the market condition option award, a Monte Carlo simulation valuation model was used to calculate the grant date fair value of all stock options granted. A Monte Carlo model simulates potential stock price scenarios over time and incorporates assumptions about volatility and exercise behavior for those various scenarios. The Group determines a fair value for each potential outcome. The grant date fair value of the award is the average of the fair values of each potential outcome.
Management recorded no compensation expense for the performance-based options with a market condition as the performance condition is not probable of being satisfied as of December 31, 2023 and 2022.
The Company has one class of ordinary shares which carry no right to fixed income. All shares rank equally for voting rights, dividend rights and for any distribution made on wind up of the Company.
At the reporting end date the Group and Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Group
The remuneration of key management personnel is as follows.
The Company and Group have taken advantage of the exemption available under FRS 102 paragraph 33.1a whereby it has not disclosed transactions with any wholly-owned subsidiary undertaking of the Group.
The Group recorded non-controlling interests for equity interests in consolidated subsidiaries that were not 100% owned by them or one of their wholly owned subsidiaries. Net income attributable to non-controlling interests are stated separately on the Group’s consolidated statement of operations and comprehensive income.