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Registered number: 08623416














SPARROWS CAPITAL LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

 
SPARROWS CAPITAL LIMITED
 
 
COMPANY INFORMATION


Directors
Y Haim 
R E Dickinson 
C E C Finn 
A J Durham (appointed 7 March 2023)




Registered number
08623416



Registered office
35-37 Ludgate Hill (Office 7)

London

EC4M 7JN




Independent auditors
Sopher + Co LLP
Chartered Accountants & Statutory Auditors

5 Elstree Gate

Elstree Way

Borehamwood

Hertfordshire

WD6 1JD





 
SPARROWS CAPITAL LIMITED
 

CONTENTS



Page
Strategic Report
 
1 - 4
Directors' Report
 
5 - 6
Independent Auditors' Report
 
7 - 10
Statement of Comprehensive Income
 
11
Statement of Financial Position
 
12
Statement of Changes in Equity
 
13
Statement of Cash Flows
 
14
Notes to the Financial Statements
 
15 - 25


 
SPARROWS CAPITAL LIMITED
 
 
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

Introduction
 
The Directors present the strategic report and audited financial statements for the year ended 31 December 2023.

Business review
 
The principal activity of Sparrows Capital Limited ("the Company") is the provision of investment advisory and management services. The Company is authorised and regulated by the Financial Conduct Authority with reference number 607414.
The Company, which invests on behalf of clients across multiple asset classes, follows an evidence based approach which focuses on strategic asset allocation and systematic rebalancing, and which excludes subjective interventions by way of stock picking and market timing. These characteristics significantly reduce investment risks for both clients and the Company.
This evidence based investment approach is underpinned by extensive academic research and echoes investment principles adopted by two of the largest institutional investment funds in the world, Norway’s Government Pension Fund Global and Japan’s Government Pension Investment Fund.
The Company continues to provide bespoke investment management solutions for family offices, high net worth individuals and quasi institutional clients.
Since February 2020, the Company has also provided a model portfolio service (MPS) to intermediated retail clients of financial planners and independent financial adviser (IFA) firms in the U.K., under the brand name SCore (Sparrows’ Core). The product is designed to deliver value through evidence based investing with a disruptive pricing model: it includes a cap on the Company’s fees, enhancing alignment of interest with clients and addressing the FCA’s call to the industry for demonstrable value for money. SCore significantly enhances accessibility to the Company’s services whilst also further diversifying its revenue streams.
In November 2023 the Company announced its collaboration with Just Group PLC to introduce an innovative product for clients in the decumulation market (i.e., clients who are at a stage when they often begin to liquidate pension assets and use them to pay for their retirement), augmenting SCore alongside a guaranteed income producing asset (Secure Lifetime Income). 

Performance
 
The Directors are pleased to report that the positive momentum the Company had been experiencing has continued during 2023. The Company’s Assets under Management and Advice grew by 24% while the numbers of clients grew by 36% over the year.
This momentum has been mainly driven by the Company’s advisory proposition. SCore has been warmly received by financial planners, IFAs and wealth managers, and development in 2023 has been positive. The number of direct clients and end consumers has grown by 58% and 51%, respectively. The Company has been named the fifth fastest growing MPS proposition in the U.K. in NextWealth’s annual market research report.
As a result of this success, the Company has seen a 6% year on year increase in income in 2023. Furthermore, the Company continues to record an exceptionally high client retention rate (well above 90%). 
The Company continues to liaise with platform providers, aiming to ensure its innovative capped fee offering is made available for advisers and their clients on as many platforms as possible. The Company made good progress towards this goal by virtue of the valuable support from FNZ IP Ventures LTD. The Directors believe this will help unlock future client relationships for the Company.

 
Page 1

 
SPARROWS CAPITAL LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

The Company continues to make headway towards profitability. To support this goal the company has offered its executive team, including its directors, a Pay for Equity swap scheme. The board wishes to express their gratitude to the members of staff who elected to participate in the scheme.
The Directors would also like to express their gratitude to the Company’s shareholders for their continued support in pursuing the Company’s ambitious plans. 

Principal risks and uncertainties
 
Risks and uncertainties continue to be assessed by the Company. The Company has procedures covering disaster recovery and health and safety to ensure internal risks are minimised. Appropriate resources are allocated to other business risks such as compliance with the regulations set out by the Financial Conduct Authority.
External threats, such as competition from other providers, are reviewed and monitored. 

Risk
Impact on Company
Assessment of change in risk year-on-year
Mitigation of Risk
Key client Risk
Loss of revenue and hence lower profitability.
Client retention remains strong.
Client relationships are monitored to ensure that clients are satisfied with the services provided.
Market Risk
Market downturn and volatility may cause loss and volatility of revenue.
Global markets volatility remains elevated due to Russia invasion of Ukraine and inflationary pressure continuing throughout 2023.
Following an evidence based approach reduces risk associated with attempts to position portfolios based on short term volatility and/or projections.
Financial Risk
Capital resources may not meet the needs of the business.
Shareholders committed and continuous support preserved in 2023. Further capital is expected to be raised in 2024.
The Board is committed to working with shareholders and potential investors to secure the long term future of the Company.
Counterparty Risk
Amounts due to the Company from clients or clients' agents may not be received fully or promptly.
No material changes. Accounts receivable balance remains low.
Receipts are continuously montiored, and timely reminders are sent out when necessary.


Page 2

 
SPARROWS CAPITAL LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Financial key performance indicators
 
During the year, the Company made an operating loss of £1,440,708 (2022: £1,349,226). The Company continues the process of establishing itself within the marketplace, and saw an increase in revenue in the year as shown in the table below:




2023
2022








£'000
£'000
Performance measure









Fee income


578
547





Operating loss


1,441
1,349





Year-end headcount


16
14


Other information and explanations
 
The Company is committed to prompt payment of suppliers and always maintains adequate cash reserves to cover its supplier balances. 
The Company believes the way it behaves and interacts with its stakeholders is essential to the business' success and development. For example, the Company supports members of staff during extended absence periods (due to illness) and extends compensation well beyond its contractual obligations. To this end, corporate and social responsibility is reviewed, and the policies of the Company changed, when considered beneficial. 

Page 3

 
SPARROWS CAPITAL LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Directors' statement of compliance with duty to promote the success of the Company
 
The Directors of the Company are aware of the requirement for them to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of all shareholders.
In considering this, some of the steps taken out of concern for our shareholders, customers and employees (all of whom we regard as our "key stakeholders") and our colleagues in the business community and wider society, are as follows:
Shareholders
The Directors have regular contact with the shareholders in order to maximise the long-term prospects of the Company and the opportunities for a return on their investment, always having proper regard to the interests of our key stakeholders.
Customers
The Company's customer base ranges from large institutional clients and professional clients to retail clients, mostly via IFAs and financial planners (who are per se professional clients).
The Company does not hold Client Money or Assets. It ensures clients’ portfolios can be served in accordance with their risk profile.
The Directors ensure the highest compliance standards. The Company is required to adhere to the sections of the Financial Conduct Authority’s Conduct of Business Sourcebook (“COBS”) relevant to its business model. The essence of COBS is that companies must always act in the ‘Client’s Best Interests’. From promoting its services to the end of the relationship, COBS sets out how the Directors expect all members of staff to behave on each step of customer engagement.
Employees
The Company considers its members of staff as fundamental to achieving its goals. The Company aims to be a responsible employer and to treat all members of staff fairly. The health, safety and wellbeing of its staff is an important consideration in the way the Company does business.
Suppliers
The Company values highly its relationship with the other organisations that make the business of the company possible and is committed to treating them fairly and honestly.
Community and the environment
The Company actively seeks to minimise its carbon emissions. The Directors believe that an important contribution to this effort has been achieved by allowing members of staff to work from home. The Directors also encourage attendance at industry networking events to build and enhance strong relationships within the wealth management community.


This report was approved by the board on 22 April 2024 and signed on its behalf.



Y Haim
Director

Page 4

 
SPARROWS CAPITAL LIMITED
 
 
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

The directors present their report and the financial statements for the year ended 31 December 2023.

Directors' responsibilities statement

The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
 
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

 In preparing these financial statements, the directors are required to:


select suitable accounting policies for the Company's financial statements and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Principal activity

The principal activity of the Company is the provision of investment advisory and management services.

Results and dividends

The loss for the year, after taxation, amounted to £1,432,776 (2022 - £1,349,226).

No dividends were declared or paid in the current and previous year.

Directors

The directors who served during the year were:

Y Haim 
R E Dickinson 
C E C Finn 
A J Durham (appointed 7 March 2023)
S A Fogel (resigned 23 May 2023)

Page 5

 
SPARROWS CAPITAL LIMITED
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Future developments

The Directors are pleased to report that as the Company's growth persists, it continues to acquire interest from reputable firms operating in its marketplace who are exploring investing in the Company. FNZ IP Ventures LTD, which acquired a stake in the business in October 2022, have increased their stake in the business in 2023. The Board will continue to consider all offers and ensure the interests of all of the Company's stakeholders are considered in making any recommendations to shareholders. The Company expects to continue to increase the number of clients it services over the coming year. It is anticipated that as the assets under management increase, so will the Company's revenue.

Disclosure of information to auditors

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's auditors are 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's auditors are aware of that information.

Post balance sheet events

There have been no significant events affecting the Company since the year end.

Auditors

The auditorsSopher + Co LLPwill be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

This report was approved by the board on 22 April 2024 and signed on its behalf.
 





Y Haim
Director

Page 6

 
SPARROWS CAPITAL LIMITED
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SPARROWS CAPITAL LIMITED
 

Opinion


We have audited the financial statements of Sparrows Capital Limited (the 'Company') for the year ended 31 December 2023, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes, including a summary of significant accounting policiesThe 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).


In our opinion the financial statements:


give a true and fair view of the state of the Company's affairs as at 31 December 2023 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.


Basis for opinion


We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.


Conclusions relating to going concern


In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.


Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.


Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.


Page 7

 
SPARROWS CAPITAL LIMITED
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SPARROWS CAPITAL LIMITED (CONTINUED)

Other information


The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our Auditors' Report thereon. 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.


In connection with our audit of the financial statementsour 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.


Opinion on other matters prescribed by the Companies Act 2006
 

In our opinion, based on the work undertaken in the course of the audit:


the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.


Matters on which we are required to report by exception
 

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.


We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:


adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.


Responsibilities of directors
 

As explained more fully in the Directors' Responsibilities Statement set out on page 5, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.


In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.


Page 8

 
SPARROWS CAPITAL LIMITED
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SPARROWS CAPITAL LIMITED (CONTINUED)

Auditors' 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 Auditors' 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:

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
 
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations; 
we identified the laws and regulations applicable to the Company through discussions with directors and other management, and from our commercial knowledge and experience of the financial sector; 
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the Company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and 
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. 

We assessed the susceptibility of the Company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: 
 
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations

To address the risk of fraud through management bias and override of controls, we: 
 
performed analytical procedures to identify any unusual or unexpected relationships; 
tested journal entries to identify unusual transactions; 
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and 
investigated the rationale behind significant or unusual transactions. 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: 
 
agreeing financial statement disclosures to underlying supporting documentation; 
reading the minutes of meetings of those charged with governance; 
enquiring of management as to actual and potential litigation and claims.
 

 
Page 9

 
SPARROWS CAPITAL LIMITED
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SPARROWS CAPITAL LIMITED (CONTINUED)

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. 
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.


A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' 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 2006Our 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 Auditors' 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.





Sean Brennan FCCA (Senior Statutory Auditor)
  
for and on behalf of
Sopher + Co LLP
 
Chartered Accountants
Statutory Auditors
  
5 Elstree Gate
Elstree Way
Borehamwood
Hertfordshire
WD6 1JD

22 April 2024
Page 10

 
SPARROWS CAPITAL LIMITED
 
 
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
Note
£
£

  

Turnover
 4 
577,814
546,834

Administrative expenses
  
(2,018,522)
(1,896,073)

Operating loss
 5 
(1,440,708)
(1,349,239)

Interest receivable and similar income
  
7,932
13

Loss for the financial year
  
(1,432,776)
(1,349,226)

The notes on pages 15 to 25 form part of these financial statements.

Page 11

 
SPARROWS CAPITAL LIMITED
REGISTERED NUMBER:08623416

STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023

2023
2022
Note
£
£

Fixed assets
  

Tangible assets
 10 
7,085
7,446

  
7,085
7,446

Current assets
  

Debtors: amounts falling due within one year
 11 
2,051,313
557,253

Cash at bank and in hand
 12 
330,234
864,497

Current liabilities
  
2,381,547
1,421,750

Creditors: amounts falling due within one year
 13 
(77,255)
(85,084)

Net current assets
  
 
 
2,304,292
 
 
1,336,666

  

Net assets
  
2,311,377
1,344,112


Capital and reserves
  

Called up share capital 
  
4,185,587
4,128,566

Share premium account
  
9,631,274
7,288,254

Profit and loss account
  
(11,505,484)
(10,072,708)

  
2,311,377
1,344,112


The financial statements were approved and authorised for issue by the board and were signed on its behalf on 22 April 2024.




Y Haim
Director

The notes on pages 15 to 25 form part of these financial statements.

Page 12

 
SPARROWS CAPITAL LIMITED
 

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023


Called up share capital
Share premium account
Profit and loss account
Total equity

£
£
£
£

At 1 January 2023
4,128,566
7,288,254
(10,072,708)
1,344,112



Loss for the year
-
-
(1,432,776)
(1,432,776)

Shares issued during the year
57,021
2,343,020
-
2,400,041


At 31 December 2023
4,185,587
9,631,274
(11,505,484)
2,311,377



STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022


Called up share capital
Share premium account
Profit and loss account
Total equity

£
£
£
£

At 1 January 2022
4,081,084
5,328,572
(8,723,482)
686,174



Loss for the year
-
-
(1,349,226)
(1,349,226)

Shares issued during the year
47,482
1,959,682
-
2,007,164


At 31 December 2022
4,128,566
7,288,254
(10,072,708)
1,344,112


The notes on pages 15 to 25 form part of these financial statements.

Page 13

 
SPARROWS CAPITAL LIMITED
 

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
£
£

Cash flows from operating activities

Loss for the financial year
(1,432,776)
(1,349,226)

Adjustments for:

Depreciation of tangible assets
3,041
2,684

(Increase) in debtors
(1,494,060)
(405,167)

(Decrease)/increase in creditors
(7,829)
26,978

Net cash generated from operating activities

(2,931,624)
(1,724,731)


Cash flows from investing activities

Purchase of tangible fixed assets
(2,680)
(2,222)

Net cash from investing activities

(2,680)
(2,222)

Cash flows from financing activities

Issue of ordinary shares
2,400,041
2,007,164

Net cash used in financing activities
2,400,041
2,007,164

Net (decrease)/increase in cash and cash equivalents
(534,263)
280,211

Cash and cash equivalents at beginning of year
864,497
584,286

Cash and cash equivalents at the end of year
330,234
864,497


Cash and cash equivalents at the end of year comprise:

Cash at bank and in hand
330,234
864,497

330,234
864,497


The notes on pages 15 to 25 form part of these financial statements.

Page 14

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1.


General information

 Sparrows Capital Limited is a Company limited by shares incorporated in England and Wales.
The Company is regulated and authorised by the Financial Conduct Authority (FCA) and provides investment advisory and management services.
Its registered office is 35-37 Ludgate Hill (Office 7), London, EC4M 7JN.
The financial statements are presented in £ Sterling, which is the functional currency of the Company.

2.Accounting policies

 
2.1

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).

The following principal accounting policies have been applied:

 
2.2

Going concern

The financial statements have been prepared on the going concern basis, which assumes that the Company will continue to trade for the foreseeable future, being a period of at least twelve months from the date of approval of these financial statements, and will be able to meet its debts as they fall due.
The directors are confident that the firm was and continues to be well-prepared to ensure that all its workforce can fully function while continuing to provide a high-quality service to clients.

 
2.3

Foreign currency translation

Functional and presentation currency

The Company's functional and presentational currency is £ Sterling.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Page 15

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.4

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue 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:

Rendering of services

Revenue 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 Company will receive the consideration due under the contract;
the stage of completion of the contract at the end of the reporting period can be measured reliably; and
the costs incurred and the costs to complete the contract can be measured reliably.

 
2.5

Interest income

Interest income is recognised in profit or loss using the effective interest method.

 
2.6

Pensions

Defined contribution pension plan

The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.

The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Company in independently administered funds.

Page 16

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.7

Share-based payments

Where share options are awarded to employees (including directors), the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than employees, profit or loss is charged with fair value of goods and services received.

 
2.8

Tangible fixed assets

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:

Office equipment
-
20%

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.

 
2.9

Financial instruments

The Company only enters into transactions that result in basic financial instruments such as trade and other debtors, trade and other creditors and cash at bank and in hand.
Trade debtors and other debtors are recognised initially at the transaction price less attributable transaction costs. Trade creditors and other creditors are recognised initially at transaction price plus attributable transaction costs. Subsequently they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade and other debtors.
Interest bearing borrowings, such bank loans, classified as basic financial instruments are
Page 17

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)


2.9
Financial instruments (continued)

recognised initially at the present value of future payments discounted at a market rate of interest. Thereafter they are stated at amortised cost using the effective interest method.
Cash and cash equivalents comprise cash balances and call deposits.


3.


Judgments in applying accounting policies and key sources of estimation uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
There are no judgements, key accounting estimates and assumptions that have been made in the process of applying the above accounting policies.


4.


Turnover

The whole of the turnover is attributable to the provision of investment advisory services.

Analysis of turnover by country of destination:

2023
2022
£
£

United Kingdom
321,380
245,314

Rest of the world
256,433
301,520

577,813
546,834



5.


Operating loss

The operating loss is stated after charging:

2023
2022
£
£

Depreciation of tangible fixed assets
3,041
2,684

Exchange differences
541
(1,131)

Defined contribution pension cost
31,274
28,729

Page 18

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

6.


Auditors' remuneration

During the year, the Company obtained the following services from the Company's auditors and their associates:


2023
2022
£
£

Fees payable to the Company's auditors and their associates for the audit of the Company's financial statements
8,750
9,500

Fees payable to the Company's auditors and their associates in respect of:

Audit-related assurance services
-
1,500

Taxation compliance services
-
2,500

All taxation advisory services not included above
-
7,500

7.


Employees

Staff costs, including directors' remuneration, were as follows:


2023
2022
£
£

Wages and salaries
878,105
813,028

Social security costs
106,207
97,742

Cost of defined contribution scheme
31,274
28,729

1,015,586
939,499


The average monthly number of employees, including the directors, during the year was as follows:


        2023
        2022
            No.
            No.







Directors
4
4



Investment management
8
6

12
10

Page 19

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

8.


Directors' remuneration

2023
2022
£
£

Directors' emoluments
409,131
409,042

Company contributions to defined contribution pension schemes
14,541
14,850

423,672
423,892


During the year retirement benefits were accruing to 1 director (2022 - 1) in respect of defined contribution pension schemes.

The highest paid director received remuneration of £305,602 (2022 - £297,000).

The value of the Company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £14,541 (2022 - £14,850).


9.


Taxation


2023
2022
£
£



Total current tax
-
-

Deferred tax

Total deferred tax
-
-


Tax on loss
-
-
Page 20

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
 
9.Taxation (continued)


Factors affecting tax charge for the year

The tax assessed for the year is higher than (2022 - higher than) the standard rate of corporation tax in the UK of 19% (2022 - 19%). The differences are explained below:

2023
2022
£
£


Loss on ordinary activities before tax
(1,432,776)
(1,349,226)


Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2022 - 19%)
(272,227)
(256,353)

Effects of:


Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
168
(8,342)

Unrelieved tax losses carried forward
272,059
264,695

Total tax charge for the year
-
-


Factors that may affect future tax charges

The Company has tax losses carried forward of £11,395,514 (2022: £9,963,624). A deferred tax asset has not been recognised in these financial statements, as a pattern of sustainable profits has not yet been established. 
As of 1st April 2023, the main rate of corporation tax increased to 25% from the previous rate of 19% for companies with taxable profits in excess of £250,000. Until the company has taxable profits of this level, the rate of tax considered will remain at 19% or the applicable marginal rate.

Page 21

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

10.


Tangible fixed assets





Office equipment

£



Cost or valuation


At 1 January 2023
15,129


Additions
2,680



At 31 December 2023

17,809



Depreciation


At 1 January 2023
7,683


Charge for the year on owned assets
3,041



At 31 December 2023

10,724



Net book value



At 31 December 2023
7,085



At 31 December 2022
7,446


11.


Debtors

2023
2022
£
£


Trade debtors
104,713
96,143

Other debtors
1,898,060
420,581

Prepayments and accrued income
48,540
40,529

2,051,313
557,253



12.


Cash and cash equivalents

2023
2022
£
£

Cash at bank and in hand
330,234
864,497

330,234
864,497


Page 22

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

13.


Creditors: Amounts falling due within one year

2023
2022
£
£

Trade creditors
17,046
20,051

Other taxation and social security
29,953
34,012

Other creditors
3,576
2,670

Accruals and deferred income
26,680
28,351

77,255
85,084



14.


Share capital

2023
2022
£
£
Allotted, called up and fully paid



285,480 (2022 - 228,500) A Ordinary shares of £1.00 each
285,480
228,500
3,900,000 (2022 - 3,900,000) B Preference shares of £1.00 each
3,900,000
3,900,000
10,735 (2022 - 6,600) C Non-voting shares of £0.01 each
107
66

4,185,587

4,128,566


During the year, the Company issued 56,980 A Ordinary shares of £1 each for total consideration of £2,400,000, and 4,135 C Non-voting shares of £0.01 each for total consideration of £41.
The A Ordinary shares have voting rights and are entitled to dividends.
The B Preference shares are redeemable at the consent of the Company, carry no voting rights and holders shall receive distributions up to an aggregate maximum of 1.2 times the aggregate nominal value of the B Preference shares. This dividend entitlement is a cumulative cap throughout the life of the company and not an annual payment or entitlement.
The C Non-voting shares carry no voting rights but have attached to them full dividend and capital contribution (including on winding up) rights as A Ordinary shares; they do not confer any rights of redemption.


15.


Reserves

Share premium account

Share premium account includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

Profit and loss account

Profit and loss account includes all current and prior period retained profits and losses.

Page 23

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

16.


Share-based payments

The Company operates an EMI share option scheme for employees of the Company. Options are exercisable at a price determined by the Board and at a minimum of the price agreed with HMRC prior to the date of grant. The options vest upon a schedule of between 1 month and up to three years.
The share option scheme also provides for the issue of non-EMI options to employees where they do not qualify for EMI options or to non-employee consultants. For any non-EMI options granted under the share option scheme, the exercise price is set at a price determined by the Board. 
The Company had 9,071 options outstanding as at 31st December 2023 (2022: 8,200) with a weighted average exercise price of £0.01 (2022: £0.01). In the reporting period to 31 December 2023, 4,971 share options were granted (2022: nil), and 4,100 options were exercised (2022:nil).
The directors have considered the fair value of the options granted in the reporting period, and have deemed their value to be immaterial to be provided in these financial statements.


17.


Pension commitments

The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund.
Contributions payable during the year totalled £31,274 (2022: £28,729).
Contributions totaling £3,576 (2022: £2,670) were payable to the fund at the reporting date and are included in creditors.


18.


Commitments under operating leases

The Company had no commitments under non-cancellable operating leases at the reporting date.


19.


Related party transactions

Transactions with participators during the year and balances outstanding at the year-end were as follows:


2023
2022
£
£

Other debtors
1,875,000
400,000
Trade debtors
46,984
50,158
Turnover
227,374
199,298
2,149,358
649,456

There are no key management personnel other than the Directors. Transactions with key management personnel are disclosed in Note 8.

Page 24

 
SPARROWS CAPITAL LIMITED
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

20.


Controlling party

The Eliashar family shareholders are considered to be the ultimate controlling party by virtue of their ability to act in concert over their controlling shareholding in the company.

 
Page 25