Registered number: 11769612
DIGITAL TOPCO LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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COMPANY INFORMATION
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M J Dunn (appointed 19 January 2024)
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CLA Evelyn Partners Limited
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Chartered Accountants & Statutory Auditor
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CONTENTS
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Directors' Responsibilities Statement
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Independent Auditor's Report
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Consolidated Statement of Comprehensive Income
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Consolidated Statement of Financial Position
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Company Statement of Financial Position
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Consolidated Statement of Changes in Equity
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Company Statement of Changes in Equity
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Consolidated Statement of Cash Flows
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Notes to the Financial Statements
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GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2023
The Directors present their report and the financial statements for the year ended 30 September 2023.
Principal acitivty and business review
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The principal activity of the Company is the holding company of Automated Systems Group Limited, whose principal activity is the sale and service of multi-function devices, photocopiers, printers and associated software.
During the year, the Group acquired indirect subsidiaries of Automated Systems Group Ltd Limited which were Copyrite Digital Systems Ltd and Sharples Group Limited. The combined group continues to provide solutions and support for the modern office workplace, being the supply of managed print and document solutions and is a market leader in the UK. The business supports a wide range of sectors and organisations, from sole traders to public sector organisations and from small to large multi national corporations.
Performance in the year was in line with expectations and revenue and EBITDA were both ahead of the previous year. The business continued its strategy of growing through acquisition and ensuring high customer retention through market leading customer service.
The business has continued to provide exceptional levels of customer service and the Directors have placed particular focus on cost control, cash generation and customer retention. The strength of the business across the customer base continues to deliver resilient revenue and margins.
The board will continue to drive profit growth going forward. Confidence in the business continues to be strong and the business has made the strategic acquisitions in the year of Sharples and Copyrite.
The business continues to enjoy the support of its funders and has received a credit approved offer to extend its banking facilities to September 2025.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Key performance indicators
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A key profitability measure used by the business and its major industry peers is an adjusted EBITDA metric. The business has seen an 8% growth in organic sales from £37.6m in 2022 to £40.6m in 2023 along with the impact of the acquisitions of Sharples and Copyrite in the year, turnover has increased to £44.6m and gross margin to £21m. During the year the Group has implemented new systems. Due to the systems upgrade, the acquisitions were not integrated as quickly as planned leading to a higher level of cost.
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Exceptional costs (see note 6)
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Other non- recurring costs
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The Group is exposed to a variety of risks which are continually assessed by management and the board.
The impact of the global recession and the subsequent recovery within the UK economy has differed by sector. The Group monitors customer performance and KPIs closely and the wide spread of 7,000 customers across diverse industries and geographies, with no major dependency, mean that these risks are significantly ameliorated.
Liquidity risk is monitored regularly and the Group remained positive in terms of cash generation throughout the year.
The Group’s principal suppliers are global manufacturers. The strength and longevity of partnership with the vendors has allowed the business to work in collaboration, ensuring supply chain issues have been minimised and customer service levels maintained. Further, because of supply chain issues the Group has expanded its refurbishment program both assisting its ESG agenda and bridging supply chain issues.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Environmental, social and governance (ESG)
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The Group is committed to continued investment in actions to support the ESG goals across the business.
The Group attempts to limit unnecessary energy usage wherever possible. The expansion into the 35,000 square foot Head Office facility in Ely enabled the business to consolidate several existing properties reducing the need for travel. As part of the office move 10 EV chargers were installed and 84% of the vehicle fleet has now transitioned to Hybrid or Electric vehicles.
The Head Office has been upgraded to LED lighting throughout, with main offices controlled by PIR sensors. The warehouse has installed both polystyrene and cardboard compactors ensuring that waste is repurposed. The business operates a certified cartridge recycling program with nothing going to landfill and has also expanded its recycling of parts and refurbishment of devices as part of an ongoing programme to reduce waste.
The Group partners with PrintRelief, the global program supporting environmental reforestation, working with customers to plant over 36,000 trees. ASL is the only UK partner to achieve Platinum partner status. Increased investment in remote monitoring solutions and automated delivery service provides for reduced machine downtime, engineering travel and toner wastage.
The business works actively with the apprentice levy and has been able to support in excess of 30 apprenticeships to date. Employees are encouraged to participate in using Volunteering & Charity leave as offered in the company policy and many have taken part in charitable events within the community. Staff have nominated East Anglian Air Ambulance as its charity of the year.
Following the annual external audit ISO 9001 and ISO 14001 and Cyber Essential PLUS accreditations have been maintained and are working towards ISO 27001.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Section 172 of The Companies Act 2006 states that a director of a Company must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
a. The likely consequences of any decision in the long term;
b. The interests of the Company’s employees;
c. The need to foster the Company’s business relationships with suppliers, customers and others;
d. The impact of the Company’s operations on the community and the environment;
e. The desirability of the Company maintaining a reputation for high standards of business conduct; and
f. The need to act fairly as between members of the company.
The following summarises how the Company’s Board fulfils its duties under Section 172:
Decision Making:
The board considers all stakeholders in its decision making and oversees the management of the Company’s business working to ensure it operates to the high standards of business conduct. The Board fully ensures the potential impacts of the decisions it makes on stakeholders, the environment and the communities in which we operate. Where appropriate it seeks professional advice, include legal advice.
Employee Engagement:
The Company’s employees are crucial to the success of the business. We aim to be a responsible employer in our approach to the pay and benefits of employees. The health, safety and wellbeing of our employees is one of the primary considerations in the way we do business and we operate market leading employee engagement technology
Business Relationships:
The directors ensure that the Company engages regularly with its suppliers and customers and aims to develop long term relationships that underpin successful trading for all.
Community and Environment:
The Company is committed to minimising its impact on the environment and has implemented a Carbon Reduction Plan with 14 separate projects being overseen by the Company’s ESG Steering Group. These include the implementation of recycling and waste management plan, the use of cardboard and polystyrene compactors, the use of LED lighting and a fleet of vehicles that are 84% hybrid or electric.
Culture and Values:
The board ensures that the company operates a high performance culture that puts customers at its core and that high levels of service are delivered to customers. The employee engagement platform facilitates communication of these values and company wide recognition of success.
Streamlined Energy & Carbon Reporting (SECR)
ASL are committed to achieving Net Zero emissions by 2030 by embedding Social and Environmental initiatives into our future business strategy to create a positive impact and ongoing commitment to do better by individuals, communities, and the planet. Total emissions for the reporting year 2023 was 536,000kg, which equates to 13,193kg/£1mil turnover. Comparative data for 2022 is not provided as the disclosures were not a requirement in that year.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2023
This report was approved by the board and signed on its behalf.
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D G Forsyth
Director
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DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2023
The Directors present their report and the financial statements for the year ended 30 September 2023.
The loss for the year, after taxation, amounted to £6,818k (2022 - loss £4,639k).
No dividends have been paid or proposed in the year (2022 - £Nil).
The Directors who served during the year were:
P B Derry (resigned 8 March 2023)
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M Ramzan (resigned 19 January 2024)
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The Group aim to continue to grow both turnover and EBITDA. The strategy is a combination of organic and acquisition growth.
Financial risk management objectives and policies
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The Group uses various sources of financing, these include bank balances and overdraft facilities, other loans, finance lease and hire purchase arrangements and various items such as trade debtors and creditors that arise directly from its operations.
The main risks that arise from the Group's financial instruments are liquidity risk, interest rate risk and credit risk.
Liquidity risk
The Group needs to manage its financial risk by ensuring it maintains sufficient liquidity available to meet future needs and short-term flexibility.
Interest rate risk
The Group finances its business through borrowings of which £34,790k net of arrangement fees is fixed (management loans in Digital Topco Limited and Primary loans in Digital Bidco Limited) and £34,165k net of arrangement fees is variable (Bank loans in Digital Topco Limited and Digital Bidco Limited). The Group has a small proportion of its total debt (£1m) through an overdraft facility which is subject to interest rate fluctuations.
Credit risk
The principal credit risk lies with trade debtors. This credit risk is managed by setting customer limits based on a combination of payment history and third-party references. These limits are reviewed on a regular basis in conjunction with debt ageing and collection history.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Qualifying third party indemnity provisions
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Qualifying third-party indemnity provision is in place for the benefit of all Directors of the Group.
Disclosure 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 Director is aware, there is no relevant audit information of which the Company and the Group's auditor is unaware, and
∙the Director has 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 and the Group's auditor is aware of that information.
Post balance sheet events
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There have been no significant events affecting the Group since the year end other than the approved loan extension offer described in note 2.3.
The auditor, CLA Evelyn Partners Limited, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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D G Forsyth
Director
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DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2023
The Directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated 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 the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent; and
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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 the Group 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DIGITAL TOPCO LIMITED
Opinion
We have audited the financial statements of Digital Topco Limited (the 'Parent Company') and its subsidiaries (the 'Group) for the year ended 30 September 2023 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statement of Financial Position, the Consolidated and Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, and the 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 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 Group's and the Parent Company's affairs as at 30 September 2023 and of the Group's 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 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 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.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DIGITAL TOPCO LIMITED (CONTINUED)
Other information
The other information comprises the information included in the Annual Report and Financial Statements, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report and Financial Statements. 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.
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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 Group 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 Group Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
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Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors’ Report.
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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.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 8, 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 Group and 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 Group or Parent Company or to cease operations, or have no realistic alternative but to do so.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DIGITAL TOPCO LIMITED (CONTINUED)
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.
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:
We obtained a general understanding of the Group’s legal and regulatory framework through enquiry of
management concerning: their understanding of relevant laws and regulations; the Group’s policies and
procedures regarding compliance; and how they identify, evaluate and account for litigation claims. We also
drew on our existing understanding of the Group’s industry and regulation. We also discussed this area in relation to significant subsidiaries with group management.
We understand that the Group complies with the framework through:
∙Outsourcing accounts preparation and tax compliance to external experts.
In the context of the audit, we considered those laws and regulations: which determine the form and content of the financial statements; which are central to the Group’s ability to conduct its business; and where failure to comply could result in material penalties. We identified the following laws and regulations as being of significance in the context of the Group:
∙The Companies Act 2006 and UK accounting standards in respect of the preparation and presentation
of the financial statements.
The senior statutory auditor led a discussion with senior members of the engagement team regarding the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur. The areas identified in this discussion were:
∙Manipulation of results by misstating turnover relating to machine sales, particularly year end cut off.
∙Manipulation of results by management override of controls
The procedures we carried out to gain evidence in the above areas included:
∙Reviewing a sample of journals, based on risk criteria, to confirm they had a proper business purpose.
∙Challenging management regarding the assumptions used in key estimates.
∙Substantive work on revenue cut off.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DIGITAL TOPCO LIMITED (CONTINUED)
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Benjamin Stapleton (Senior Statutory Auditor)
for and on behalf of
CLA Evelyn Partners Limited
Chartered Accountants
Statutory Auditor
14th Floor
103 Colmore Row
Birmingham
B3 3AG
28 August 2024
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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Administration expenses excluding exceptional items
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Depreciation and amortisation
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Exceptional administration expenses
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Total administrative expenses
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Interest receivable and similar income
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Interest payable and similar expenses
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Loss for the financial year
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The notes on pages 22 to 46 form part of these financial statements.
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DIGITAL TOPCO LIMITED
REGISTERED NUMBER:11769612
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 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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DIGITAL TOPCO LIMITED
REGISTERED NUMBER:11769612
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 30 SEPTEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
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D G Forsyth
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The notes on pages 22 to 46 form part of these financial statements.
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DIGITAL TOPCO LIMITED
REGISTERED NUMBER:11769612
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2023
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Debtors: amounts falling due after more than one year
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Debtors: 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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Profit and loss account brought forward
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Profit and loss account carried forward
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DIGITAL TOPCO LIMITED
REGISTERED NUMBER:11769612
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COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 30 SEPTEMBER 2023
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The loss after tax of the Company for the year was £714k (2022 - £674k).
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
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D G Forsyth
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The notes on pages 22 to 46 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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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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Total comprehensive income for the year
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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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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Total comprehensive income for the year
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Cash flows from operating activities
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Loss for the financial year
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Amortisation of intangible assets
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Depreciation of tangible assets
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Loss on disposal of tangible assets
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Increase/(decrease) in creditors
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Net cash generated from operating activities
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Cash flows from investing activities
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Purchase of intangible fixed assets
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Purchase of tangible fixed assets
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Sale of tangible fixed assets
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Cash paid on acquisition of subsidiaries
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Net cash used in investing activities
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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Cash flows from financing activities
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Repayment of finance leases
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Interest paid on finance leases
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Net cash from/(used in) financing activities
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Net (decrease) in cash and cash equivalents
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Cash and cash equivalents at beginning of year
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Cash acquired on acquisitions
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Cash and cash equivalents at the end of year
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Cash and cash equivalents at the end of year comprise:
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Cash at bank and overdrafts
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Digital Topco Limited is a private company, limited by shares, domiciled and incorporated in England and Wales (registered number: 11769612). The registered office address is 27 Old Gloucester Street, London, United Kingdom, WC1N 3AX.
The Group and Parent Company's functional and presentational currency is GBP.
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 Group management to exercise judgement in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
Parent Company disclosure exemptions
In preparing the separate financial statements of the Parent Company, advantage has been taken of the following disclosure exemptions available in FRS 102:
∙Only one reconciliation of the number of shares outstanding at the beginning and end of the year has been presented as the reconciliation for the Company and the Parent Company would be identical; and
∙No Statement of Cash Flows has been presented for the Parent Company.
∙No disclosures have been given for the aggregate remuneration of the key management personnel of the Parent Company as their remuneration is included in the totals for the Company as a whole.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
2.Accounting policies (continued)
The Group made a loss after tax for the period of £6,818k (2022 - £4,639k) and had net liabilities of £26,024k (2022 - £19,206k) at 30 September 2023.
The Directors have made an assessment in preparing these financial statements as to whether the Group and Company remain a going concern.
The Group trades at a healthy EBITDA level which the directors consider a key performance indicator. The Group continues to have the backing of its shareholders and major stakeholders. Subsequent to the year end, the Group has received an approved offer from its bankers to extend its loan facilities until September 2025.
On the basis of the above, the directors have produced cash flow forecasts, which demonstrate that there are sufficient cash resources available to the Group to ensure they can meet their financial obligations as they fall due and meet all revised banking covenants for the foreseeable future, this being the period covering at least twelve months from the date of approval of these financial statement. For these reasons, they continue to adopt the going concern basis in preparing these financial statements.
Turnover is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Sale of goods
Turnover from the sale of goods is recognised when all of the following conditions are satisfied:
∙the Group has transferred the significant risks and rewards of ownership to the buyer;
∙the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
∙the amount of revenue can be measured reliably;
∙it is probable that the Group will receive the consideration due under the transaction; and
∙the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Turnover from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of revenue can be measured reliably;
∙it is probable that the Group will receive the consideration due under the contract;
∙the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙the costs incurred and the costs to complete the contract can be measured reliably.
Turnover on maintenance services is recognised based on the volume of print usage by the
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
2.Accounting policies (continued)
customer and is recognised over the period that the usage has occurred.
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Operating leases: the Group as lessor
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Rental income from operating leases is credited to profit or loss on a straight-line basis over the lease term.
Amounts paid and payable as an incentive to sign an operating lease are recognised as a reduction to income over the lease term on a straight-line basis, unless another systematic basis is representative of the time pattern over which the lessor's benefit from the leased asset is diminished.
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Operating leases: the Group as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Interest income is recognised in profit or loss using the effective interest method.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Exceptional costs are those costs, that are one off in nature, that are associated with restructuring the business, to enable growth, through both acquisition and organically. These costs include any costs to restructure the business as a result of the growth achieved.
Goodwill
Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer’s interest in the fair value of the Group's share of its identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is amortised on a straight-line basis to the profit or loss over its useful economic life.
Other intangible assets
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.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
2.Accounting policies (continued)
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Intangible assets (continued)
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life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Goodwill on strategic acquisitions - 10 years
Goodwill on tactical acquisitions - 5 years
Internally developed software costs
In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure on research shall be recognised as an expense when it is incurred. Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight line basis over their useful economic lives, which range from 3 to 6 years.
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
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Over the life of the lease
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Equipment held for leasing
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The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Investments in subsidiaries are measured at cost less accumulated impairment.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
2.Accounting policies (continued)
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a weighted average basis.
At each Consolidated Statement of Financial Position date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
Toner in the field is the value of the unutilised stock which has been supplied to customers and is held on site for future consumption. Toner is valued at the latest purchase price of toner supplied to customers.
A liability is recognised to the extent of any unused holiday pay entitlement which is accrued at the Consolidated Statement of Financial Position date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday entitlement so accrued at the Consolidated Statement of Financial Position date.
Defined contribution pension plan
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Group in independently administered funds.
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Provisions for liabilities
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Provisions are made where an event has taken place that gives the Group a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the Statement of Financial Position date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
2.Accounting policies (continued)
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Financial instruments (continued)
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Trade and other debtors and creditors are classified as basic financial instruments and measured at initial recognition at transaction price. Debtors and creditors are subsequently measured at amortised cost using the effective interest rate method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due.
Cash and cash equivalents are classified as basic financial instruments and comprise cash in hand and at bank, short-term bank deposits with an original maturity of three months or less and bank overdrafts which are an integral part of the Group’s cash management.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Interest bearing bank loans, overdrafts and other loans which meet the criteria to be classified as basic financial instruments are initially recorded at the present value of cash payable to the bank, which is ordinarily equal to the proceeds received net of direct issue costs. These liabilities are subsequently measured at amortised cost, using the effective interest rate method.
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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 profit or loss 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 and the Group operate and generate income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of Financial Position 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;
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and
∙Where they relate to timing differences in respect of interests in subsidiaries, associates, branches and joint ventures and the Group can control the reversal of the timing differences and such reversal is not considered probable in the foreseeable future.
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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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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Judgements in applying accounting policies and key sources of estimation uncertainty
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In the application of the Group's accounting policies, management 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 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.
The Directors consider that the following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:
Intangible fixed assets
Intangible fixed assets consist mainly of goodwill arising on business combinations.
Key estimates and judgements are applied in establishing the useful lives of intangibles. Management concluded that there are no separately identifiable intangible assets on acquisitions. It was further concluded that goodwill arising from acquisitions has a useful life of either 5 years for tactical acquisition or 10 years for strategic acquisitions. This being based upon previous experience and future expectations of the market.
Toner in field valuation
Toner in the field is the value of the unutilised stock which has been supplied to customers and is held on site for future consumption. The value of toner per machine is an estimate, based on historical patterns of customer usage, and involves an element of judgement.
Revenue installation
Revenue recognised requires judgement relating to installation fees, where no margin is recognised above the estimated costs of installation.
Impairment of external debtor balances
The recoverability of amounts owed by customers is considered on an ongoing basis by the Directors. Appropriate provision is made whenever events or circumstances indicate that the related balance may not be recoverable.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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An analysis of turnover by class of business is as follows:
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Service and support sales
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All turnover arose within the United Kingdom.
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The exceptional items relating to non-recurring legal and professional fees and settlement costs in respect of acquisition transactions, redundancies and internal restructuring costs.
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The operating (loss)/profit is stated after charging:
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Depreciation of tangible assets
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Other operating lease rentals
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Loss/(Profit) on sale of fixed assets
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Fees payable to the Group's auditor and its subsidiaries for the audit of the Group's annual financial statements
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Taxation compliance services
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Preparation of financial statements
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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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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The average monthly number of employees, including the Directors, during the year was as follows:
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The Company has no employees other than the Directors who receive no remuneration directly from the Company.
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Company contributions to defined contribution pension schemes
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Compensation for loss of office
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During the year retirement benefits were accruing to 4 Directors (2022 - 4) in respect of defined contribution pension schemes.
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The highest paid Director received remuneration of £175k (2022 - £226k).
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The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £55k (2022 - £40k).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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Interest payable and similar expenses
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Other loan interest payable
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Finance leases and hire purchase contracts
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Current tax on profits for the year
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Adjustments in respect of previous periods
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Taxation on profit on ordinary activities
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
11.Taxation (continued)
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Factors affecting tax charge/(credit) 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 of22% (2022 -19%). The differences are explained below:
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Loss on ordinary activities before tax
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Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 22% (2022 - 19%)
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Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
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Non-tax deductible amortisation of goodwill and impairment
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Capital allowances for year in excess of depreciation
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Adjustments to tax charge in respect of prior periods
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Remeasurement of deferred tax charge in respect of previous periods
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Movement in deferred tax not recognised
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Other timing differences leading to an increase (decrease) in taxation
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Total tax charge for the year
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Factors that may affect future tax charges
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Finance Act 2021 included legislation to increase the main rate of corporation tax from 19% to 25% from 1 April 2023. The full anticipated effect of these changes is reflected in the above deferred tax balances.
At the year end, a subsidiary company in the Group had historic taxable losses of £4,335k (2022: £4,335k) for which no deferred tax asset had been recognised due to the uncertainty around the timing of future profits in that entity.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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Equipment held for leasing
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Acquisition of subsidiary
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
13.Tangible fixed assets (continued)
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The net book value of land and buildings may be further analysed as follows:
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The assets above are pledged as security for the Group's bank loans.
The net book value of assets held under finance leases or hire purchase contracts, included above is £Nil (2022 - £170k).
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Investments in subsidiary companies
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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The following were subsidiary undertakings of the Company:
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ASL Technology Holdings Ltd.*
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Automated Systems Group Limited*
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Sales and servicing of photocopiers and other office equipment
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Copyright Digital Systems Limited*
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Sales and servicing of photocopiers and other office equipment
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Sales and servicing of photocopiers and other office equipment
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*Subsidiaries are indirectly held.
During the year the Group acquired Copyright Digital Systems Limited and Sharples Group Limited.
Sharples Group Limited was acquired on 2 February 2023.
Copyright Digital Systems Limited was acquired on 17 March 2023.
The registered office address for all the direct and indirect subsidiary undertaking is 27 Old Gloucester Street, London, United Kingdom, WC1N 3AX.
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Finished goods and goods for resale
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The difference between purchase price or production cost of stocks and their replacement cost is not material.
An impairment reversal of £31k (2022 - £19k loss) was recognised in administrative expenses against stock during the year due to slow moving and obsolete stock.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
|
Due after more than one year
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Amounts owed by group undertakings
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Prepayments and accrued income
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During the year, a formal agreement was put in place in respect of Amounts owed by group undertakings, with the amount being due in October 2024.
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Cash and cash equivalents
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
|
Creditors: Amounts falling due within one year
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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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The obligations under finance leases and hire purchase contracts are secured over the assets concerned.
|
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
|
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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Amounts owed to group undertakings
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During the year, a formal agreement was put in place in respect of amounts owed by group undertakings, with the amount being due in October 2024.
|
Bank loans
The bank loan attracts interest at a rate of between 3-4% plus LIBOR and is secured by a fixed and floating charge on the assets of the Company.
Shareholder loans
Shareholder loans comprise the following:
Secured loan stock of £28,691k (2022 - £26,322k) owed to funds managed by Primary Capital. This loan stock is subject to an interest rate of 10% per annum and is repayable in December 2025.
Secured loan stock of £6,099k (2022 - £5,545k) owed to the Company’s Directors and Shareholders. This loan stock is subject to an interest rate of 10% per annum and is repayable in December 2025.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
|
|
|
Analysis of the maturity of loans is given below:
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Amounts falling due within one year
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Amounts falling due 2-5 years
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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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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
|
|
Allotted, called up and fully paid
|
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658,261 (2022 - 658,261) Ordinary A shares of £0.01 each
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141,739 (2022 - 141,739) Ordinary B shares of £0.01 each
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200,000 (2022 - 200,000) Ordinary C shares of £0.01 each
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100 (2022 - 100) Deferred shares of £0.01 each
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The ordinary A, ordinary B and ordinary C shares entitle the holders to one vote per holder and the shares have attached to them the right to receive a dividend, and no restrictions on the repayment of the capital. The deferred shares do not confer any voting rights or the right to receive a dividend and have no restrictions on the repayment of capital.
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Share premium account
The share premium account is used to record the aggregate amount or value of premiums paid when the Company's shares are issued at an amount in excess of nominal value.
Profit and loss account
This reserve relates to the cumulative retained earnings less amounts distributed to shareholders.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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Balances acquired through acquisitions
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
On 17 March 2023, the Company acquired the entire share capital of Copyright Digital Systems Limited for total consideration of £7,674k. Since the year end the trade and assets were hived up into Automated Systems Group Ltd.
The book value and fair value of the assets and liabilities acquired were as follows:
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Acquisition of Copyright Digital Systems Limited
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Recognised amounts of identifiable assets acquired and liabilities assumed
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Creditors: due within one year
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Total Identifiable net assets
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Total purchase consideration
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
26.Business combinations (continued)
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Total purchase consideration
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Acquisition of Sharples Group Limited
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On 3rd February 2023, the Company acquired the entire share capital of Sharples Group Limited for total consideration of £4,213k. The trade and assets were immediately hived up into the Company.
The book value and fair value of the assets and liabilities acquired were as follows:
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Recognised amounts of identifiable assets acquired and liabilities assumed
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Total Identifiable net assets
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Total purchase consideration
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
26.Business combinations (continued)
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Total purchase consideration
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The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £424k (2022 - £311k). Contributions totalling £44k (2022 - £32k) were payable to the fund at the reporting date and are included in creditors.
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Commitments under operating leases
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At 30 September 2023 the Group and 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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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
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Related party transactions
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The Company has taken advantage of the exemption in FRS 102 Section 33.1A to not disclose transactions with wholly owned group entities.
Included in the Group ‘Other loans’ balance in Note 20 is £28,971k (2022 - £26,304k) owed to Primary Capital, the ultimate parent company of Digital Topco Limited. Interest of £2,650k (2022 - £2,355k) accrued during the financial year in relation to this balance.
Included in the Company ‘Other loans’ balance in Note 20 is £1,373k (2022 - £3,403k) secured loan stock owed to Directors of the Group. Interest of £233k (2022 - £308k) accrued during the financial year in relation to these balances.
Additionally, £113k (2022 - £109k) fees were payable to service companies in respect of Directors’ services for the financial year.
Key management personnel are considered to be the directors and disclosed in note 9.
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Primary Capital IV (Nominees) Limited is considered to be the Company's ultimate parent entity.
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