The director presents the strategic report for the year ended 31 December 2023.
Throughout 2023, Logical Holdings Group have remained committed to the objective of being an exemplar in terms of Corporate Social Responsibility. In October 2023, Scott Logic became a Certified B Corporation™, demonstrating that the company meets high standards of social and environmental impact. In parallel the approach of Marra to create and educate highly experienced fusion teams of experienced software developers with low-code app makers, seasoned delivery managers and creatives, has opened the technology sector in the Northeast up to a diverse and inclusive workforce.
At a group level the continued focus to drive efficiencies and synergies between the trading subsidiaries, is setting up a platform to enable faster and more diverse growth for the group in the longer term and restore the base to generate the growth and profitability levels and build an exciting future for all stakeholders.
2023 proved to be a challenging year, from a trading perspective, for the Logical Holdings Group, the impacts of the weakening macroeconomic environment recognised in the fourth quarter of 2022 persisted into 2023. Despite Scott Logic, the largest and most mature trading subsidiary of the Group not delivering the revenue growth initially hoped for, sales growth of 7% was achieved and pre-tax profits of £6.3m. A disappointing outcome compared to the previous results we’ve become accustomed to, but still strong and enabling investment into the future journey of the Group. |
Principal risks and uncertainties
Our principal risks and uncertainties across the group are: -
Talent Attraction and Retention
As a people-driven professional services business, the recruitment and retention of highly capable colleagues is essential to the future of the Group and is given the highest priority. We have continued to invest in our people capabilities.
Information Security
As a technology focussed, digitally enabled group, cyber and information security risk poses a specific threat. To address this there is an on-going program of reinforcement of our Info-Sec procedures.
Service Assurance
Across the Group specific risks surrounding delivery of both internal and client projects are managed through rigorous project acceptance, management and quality assurance procedures. The Group takes a proactive approach to management of client engagement risk, and the Senior Leadership teams across the trading subsidiaries’ review client risk regularly as an integral part of the management operating model.
Financial Risk
Credit risks are mitigated by partnering with creditworthy businesses and managing our portfolio mix across clients and sectors.
Foreign currency exposure risks arise on revenues and cash balances denominated in currencies other than sterling. Such balances are monitored on a regular basis and are not currently considered to be a material risk.
The Group is debt free and carries no interest rate risk.
Key activities during the year included ongoing evolution of the internal systems supporting the identification and monitoring of risks, controls and operations, the effectiveness of internal controls and further embedding of the Enterprise Risk Management Framework.
A group wide good corporate governance initiative continues to transform the way colleagues think and work so that all legal entities can thrive through guiding, supporting, and challenging the first line to ‘do the right thing’, through effective education, policies and technology enablers fit for an expanding Group of companies.
| 2023 | 2022 |
Revenue | £50.24m | £47.13m |
Pre tax profit | £6.36m | £8.28m |
Staff numbers | 534 | 454 |
The company is required to prepare a statement under Section 172 of the Companies Act 2006.
Under S172, the directors 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:
- the likely consequence of any decision in the long term
- the interests of the Company's employees
- the need to foster the Company's business relationships with suppliers, customers and others
- the impact of the Company's operations on the community and the environment
- the desirability of the Company maintaining a reputation for high standards of business conduct; and
- the need to act fairly as between members of the Company.
The accompanying Annual Report demonstrates clearly the Company’s operating context, employee considerations, employee engagement, partnership ethos and high standards.
We understand that it is important for us to engage with our stakeholders at all levels in order to gain a better understanding of what areas they are interested in or concerned about, and also how our decisions have impacted them. The Board is updated regularly on stakeholder engagement and this supports the Board in weighing up the likely consequences of any decision in the long term.
There may be some instances where conflicts arise between stakeholders groups. In these circumstances, the Board works to understand the needs and priorities of each stakeholder group. This should then ensure the needs of the stakeholders align with those of the Company, thus increasing the likelihood of the Company achieving longterm sustainable success.
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 12.
Ordinary dividends were paid amounting to £2,276,000. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
In accordance with the company's articles, a resolution proposing that Robson Laidler Accountants Limited be reappointed as auditor of the company will be put to general meeting.
Logical Holdings Limited is committed to creating sustainable prosperity and safeguarding the future of the natural environment. Through our largest trading subsidiary (initially), Scott Logic Limited, we aspire not only to mitigate the risk of rising emissions from our own fast-growing business, but also to demonstrate climate leadership amongst our peers, industry and clients by going beyond minimum requirements. We recognise that our global operations have an environmental impact and we are committed to monitoring and reducing our emissions year-on-year; to play our part in tackling the climate crisis. We are also aware of our reporting obligations under The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
In 2022 we aligned Scott Logic with the Paris Agreement goal of limiting global warming to 1.5°C compared to pre-industrial levels, with the intention to accelerate our progress towards net zero ahead of 2050. To achieve this, we are focusing both on how we run our business and how we contribute to wider climate action.
We believe that collective action to combat the climate crisis is vital and are taking proactive steps to lead and support the network of businesses committed to fighting the climate crisis. We are an active member of Tech Zero, a UN Race To Zero partner climate action group, and have committed to validated Science Based Targets. We will continue to work with our clients, suppliers, employees, neighbours and local communities to share best practice and help each other safeguard the future of the natural environment.
We have committed to:
2025: 100% renewable or low-carbon energy procured across the business
2025: Engage with the top 50% of our supply chain (spend- based) to provide carbon impact measurement
2026: 90% reduction of scope 1 and 2 baseline emissions
2027: Engage with the top 75% of our supply chain (spend- based) to provide carbon impact measurement
2028: Achieve Carbon Neutrality
2030: 50% reduction of all baseline emissions
2040: Achieve Net Zero
In 2022, we published these commitments publicly on Scott Logic’s website.
2023 Performance
The following high level observations can be made about our environmental impact in 2023 compared to previous years:
Our total absolute emissions across the business reduced well ahead of our modelled 2023 reduction requirements to achieve our short- and long-term net zero targets, in part due to constraint of headcount and operational growth of the business relative to plan. Correspondingly, the per employee intensity ratio reduced significantly.
Our Scope 2 emissions increased significantly despite reduced energy usage, primarily due to drastically improved methodology accuracy in relation to our Newcastle headquarters premises.
We saw significantly increased emissions related to business travel. This is largely attributable to a significant number of international flights (and associated accommodation) to attend conferences in support of individuals’ learning and professional development. These kinds of opportunities have been all but non-existent over the last few years due to COVID-19 related restrictions and behaviours.
In-line with Scott Logic’s constrained growth through 2023, expenditure on Purchased Goods & Services was constrained, thereby not incurring comparable associated emissions to previous years. Furthermore, where significant office fit out works had occurred in previous years, there was none such in 2023, meaning no associated emissions under Capital Goods.
Energy Efficiency Initiatives
In the period covered by the report Scott Logic has undertaken the following emissions and energy reduction initiatives:
Improved emissions measurement accuracy in key areas of Scope 2 and Scope 3 emissions, particularly relating to IT hardware and cloud services, enabling us to better shape and drive incremental improvements.
Revised our device refresh policy such that laptops are considered up-to-date for longer, thereby significantly reducing the purchase rate of new devices and the associated embodied carbon.
We have established a preferable purchasing policy that, amongst other things, gives preference to suppliers that have demonstrated commitment to environmental sustainability, and requires the consideration of energy efficiency and carbon footprints of products and services (with preference given to those that are designed to minimise energy use and emissions).
Methodology
The methodology used to calculate the GHG emissions is in accordance with the requirements of the following standards:
World Resources Institute (WRI) Greenhouse Gas (GHG) Protocol (revised version)
Defra’s Environmental Reporting Guidelines: Including Streamlined Energy and Carbon Reporting requirements (March 2019).
UK office emissions have been calculated using the Defra 2023 – June 2023 revised issue of the conversion factor repository.
Following an operational control approach to defining our organisational boundary, our calculated GHG emissions from business activities fall within the reporting period of 1st January 2023 to 31st December 2023.
Emissions and Energy Usage
| Emissions Source | Baseline (2021) | 2022 | 2023 |
Scope 1 | Natural gas | 13 | 0 | 0 |
Company and leased cars | 4 | 0 | 0 | |
Total Scope 1 | 17 | 0 | 0 | |
Scope 2 | Heating | 28 | 25 | 50 |
Electricity | 4 | 18 | ||
Total Scope 2 (Market Based) | 28 | 29 | 68 | |
Scope 3 | Purchased goods and services | 974 | 801 | 645 |
Capital goods | 318 | 324 | 0 | |
Fuel and energy related activities | 0 | 0 | 0 | |
Upstream transportation and distribution | 0 | 0 | 0 | |
Waste generated in operations | < 1 | 7 | 9 | |
Business travel | 14 | 43 | 149 | |
Employee commuting | 163 | 147 | 131 | |
Upstream leased assets | 0 | 0 | 0 | |
Downstream emissions | 0 | 0 | 0 | |
Other | 23 | - | - | |
Total Scope 3 | 1,492 | 1,322 | 934 | |
Total (Market Based) | 1,519 | 1,351 | 1002 | |
Total Energy Usage (kWh) | 288,042 | 352,159 | 227,239 |
Normaliser | tCO2e per FTE | 3.8 | 2.8 | 1.9 |
Total charitable donations made during the year amounted to £329,094 (2022: £52,780). These donations were made to a number of local charities and other institutions.
During 2023, we engaged the services of a charity consultant to support in the initial drafting of a Charitable Charter. The objective of which is set out below.
“If Logical Holdings is able to support the right causes in the right ways — if they get the why, the how and the what right — they can set in motion a virtuous cycle.
By focusing on the contextual conditions most important to their industry and strategies, Logical Holdings can ensure that their corporate capabilities will be particularly well suited to helping the charitable organisations they support. This will create greater value and social impact than would be possible with funds alone.
By enhancing the value produced by philanthropic efforts in their related field of technology, Logical Holdings can gain a greater improvement in their competitive context. Logical Holdings, its subsidiary companies and the causes they support, can all reap important benefits.”
Initial philanthropic activities under the charter, will commence in 2024 and will be focussed on the support of Altitude Foundation. We will offer (and quantify) both financial and in-kind support. This will enable us to test the fidelity of the overall approach by closely managing the delivery of in-kind activities, the flow of information between entities and gain an initial understanding of the potential return on investment in terms of the social and business value created.
We have audited the financial statements of Logical Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The director is responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the director's report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the parent company or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group, we identified that there were no principal risks of non-compliance with laws and regulations central to the company's operations as it does not have to report to a regulatory body and there is no supervisory body which monitors its operations. We also considered those laws and regulations that have a direct impact on the financial statements of the group such as the Companies Act 2006 and UK tax legislation.
Audit procedures performed by the engagement team included:
Discussions with UK directors and key management including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;
Evaluation and testing of the operating effectiveness of management's controls designed to prevent and detect irregularities;
Reviewing relevant meeting minutes;
Identifying and testing journal entries based on risk criteria;
Testing transactions entered into outside of the group's normal course of business.
There are inherent limitations in the audit procedures described above and, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it. Also the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £12,720,752 (2022 - £12,034,390 profit).
Logical Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is located on the General Information page.
The group consists of Logical Holdings Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value, and in accordance with applicable accounting standards. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Logical Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
Turnover and profits on long term contracts for the supply of services are recognised as the right to consideration obtained through the performance of work under the contract. Any unbilled work at a period end is recognised as turnover and accrued income.
Turnover and profits from one-off engagements of short term duration are recognised on the completion of the relevant work. The costs incurred on unfinished work are included within work in progress at cost, less a provision for any loss anticipated on the contract.
Turnover from software support provided to customers is recognised over the term of the agreement.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Investments in subsidiary undertakings are recognised at cost.
Assets not measured at fair value are reviewed for any indication that the asset may be impaired at each balance sheet date. If such indication exists, the recoverable amount of the asset, or the asset's cash generating unit, is estimated and compared to the carrying amount. Where the carrying amount exceeds its recoverable amount, an impairment loss is recognised in profit or loss unless the asset is carried at a revalued amount where the impairment loss is a revaluation decrease.
Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
Current or deferred taxation assets and liabilities are not discounted.
Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.
Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to profit or loss in the period to which they relate.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the company will comply with conditions attaching to them and the grants will be received using the performance/accrual model.
Grants in respect of revenue expenditure are credited to revenue in order to match the income against the expenditure to which the grant relates.
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating result.
Debtors and creditors receivable/payable within one year
Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the profit and loss account in other administrative expenses.
Provisions
Provisions are recognised when the company has an obligation at the balance sheet date as a result of a past event, it is probable that an outflow of economic benefits will be required in settlement and the amount can be reliably estimated.
Current asset investments
Investments in equities are shown at fair market value.
The investments are valued by investment managers, having due regard to the latest dealings, professional valuation, asset values and other appropriate financial information.
The fair value movement (charged) credited to the profit and loss account for the year is £330,564 credit (2022: £412,786 charge).
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements. If, in the future, such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and judgements will be modified as appropriate in the year in which the circumstances change.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include:
The estimated useful lives of tangible fixed assets
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
As permitted by Section 408 of the Companies Act 2006, the Income Statement of the parent company is not presented as part of these financial statements.
Details of the company's subsidiaries at 31 December 2023 are as follows:
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
In the event of winding up, the first £20m is distributed to A Ordinary Shares only. In all other respects, the shares rank pari-passu.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: