The directors present the strategic report for the year ended 31 December 2023.
We’re delighted with our 2023 performance as it was our highest group revenue year on record of £166m.
Thanks to all the dedication and focus from our employee’s as it has allowed us to grow in 2023 and in certain areas surpass our forecasted numbers.
Key elements contributing to the increase in the revenue number include:
We achieved our highest permanent fees as a group of over £2.4m;
We had over 1,500 contractors engaged within the group;
Each of the trading entities of the First Recruitment group improved on their 2022 revenue figures.
We continue to maintain a strong focus within the technical and engineering sectors to deliver both contract and permanent solutions to our clients. The market sectors remain broad and extensive, which include Oil and Gas, Petrochemical, Nuclear, Power, Utilities, Life Sciences and General Engineering Sectors.
Although our recruitment and workforce management services are mainly provided to UK based clients, we’ve continued our overseas expansion with the provision of recruitment, contractor payroll, compliance and managed services.
Continuous development, improvement and investment in our recruitment and workforce management processes and systems is a key internal focus as this will enable us to expand and protect our excellent client and candidate relationships. Workplace culture, strong alignment with our values and a steadfast commitment to quality, trust and integrity will be the basis of our strategy. This will also drive our decisions when investing in our front and back office software systems and processes, with an emphasis on in-house development of USP’s. This approach has led to the development of novel live management information reports that support our objectives, decision making and leadership.
During the year, the company undertook a planned share repurchase which resulted in 593 Ordinary J shares being bought back for consideration of £365k. The purchase of shares was funded from the company's working capital, with no external finance being required. Also during the year, the company incurred a non-recurring bad debt expense of £387k as a result of 2 customers entering liquidation. These 2 factors alone have contributed to the overall reduction in total net assets. The company continues to be profitable post year end which has increased net assets accordingly.,
At the year end, the group has significant net assets of £5.4m, which the directors believe illustrates the financial strength of the group.
The group, uses various financial instruments including an invoice discounting facilitiy and various other mainstream items, such as debtors and creditors that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the group's operations.
The existence of these financial instruments exposes the group to a number of financial risks which are described in more detail below. The directors review and agree policies for managing these risks. These policies have remained unchanged from previous years.
Internal control risk
Our leadership team regularly review the system of internal financial and non-financial controls in operation and these include controls designed to ensure that our assets are safeguarded and accurate accounting records are maintained. Continual improvements to our internal systems and processes ensure compliance, efficiency and integrity within a seemingly constant flow of legislative and regulatory changes, related to the hiring and engagement of permanent and contingent workers.
Currency risk
Fluctuations in exchange rates over the year have a minor impact on our results because of the relatively low level sales denominated in foreign currencies and we continue to minimise this risk in our commercial arrangements with customers and suppliers.
Financial risk
We will take quick and appropriate actions to mitigate any risks and uncertainties arising from sudden and unexpected reductions in the demand from our customers to measure, review and manage the impact of these risks regularly. With the cost of living crisis and rising inflation together with interest rate increases resulting in increased banking costs.
Interest rates
The Bank of England base rate increased in early 2023 from 3.5% to 5.25%. Due to the usual nature to fund working capital of a Recruitment Agency with an Invoice Discount facility or similar, our costs in 2023 went up significantly in tandem when we have grown the business. We constantly monitor these trends closely to mitigate any serious impact upon our business overheads and cash flow.
As changes occur, we will evaluate the impact of these on our finances to enable us to react as quickly and confidently as possible to unforeseen movements.
General
We have a wide customer base across a range of market sectors. We’re also anticipating continued demand for our specialist services, for high demand, skilled and experienced engineers and technical personnel on a permanent and contingent basis. Our leadership team remain focussed on continually undertaking regular and robust reviews of the future risks and opportunities that exist within our market sectors.
Our performance continues to be measured and managed against our detailed annual goals, budgets and forecasts by the leadership team.
We’re delighted with the performance of the group during the year and remain confident in our focus on continually reviewing and modifying our operations to meet our 2024 forecasts as we continued to operate on a profitable and cash-generative basis.
|
|
| 2023 | 2022 |
Turnover |
|
| £166m | £140m |
Gross profit margin |
| 4.7% | 5.6% | |
Profit before tax ("PBT") | £2.3m | £3.5m | ||
Net current assets |
| £5.1m | £6.8m | |
Net assets |
|
| £5.4m | £7.2m |
The directors strategically achieved turnover growth during 2023 by focusing on the Permanent opportunities post Covid-19 and the continued growth on the contingent labour market. Our permanent revenue of over £2.4m represents a 20% increase on last year and has had a significant contribution to our profit before tax for the year. The gross profit margins have been squeezed due to the inflationary pressures felt within the UK economy.
The effective cost controls and profitability focus by the management team has allowed the group to maintain significant profit levels.
The group continues to maintain a net current asset position, illustrating liquidity has been maintained within satisfactory parameters during 2023. The planned share repurchase and exceptional bad debt expense incurred in 2023 has reduced net current assets. Improvements are envisaged for future years.
The significant net assets of the group continue to demonstrate the financial strength of the wider group.
We are committed to supporting our local and the wider community. Our culture is driven by our commitment to our mission, vision and values which ensures that we succeed in the current rapidly changing political and economic economy.
We remain positive and determined to continue to focus on investment in staff development and our business systems to minimise risk and maximise opportunities.
Recent investments have demonstrated our commitment to be a quality, honest and trustworthy company with efficient and reliable recruitment and workforce management solutions. We remain committed to safeguarding and maintaining our compliance and that of our clients and candidates within the highly regulated contingent workforce market sector.
We have regular social events, celebrations, gifts for births, birthdays, weddings etc. and regular group meetings to explain our operational and financial results, present employee awards and provide updates of our charity and social support initiatives.
We’re fully invested in our employees’ development.
We support each of them, in every possible way.
We involve them in significant decisions.
We’re there for them when they have personal or family issues.
We all pull together to minimise the negatives and maximise the positives.
We’re delighted that our staff are central in defining the mission and values of our company.
All staff are kept up to date with our bi-weekly newsletter, highlighting personal achievements, positive clients focussed news, new employees, legislative, system, QHSE updates and more.
We celebrate successes on a daily basis and our staff are rewarded based on their agreed goals, service delivery and openly shared performance results.
We remain committed to all our staff being paid at least the “real” Living Wage.
Our approach is based upon the values of the original founders of the company, who created a unique business model, based on a strong commitment to maintaining regular contact and good understanding of our experienced engineering and technical sector candidates. The foundations of this approach continue to change and evolve to satisfy the needs and desired work aspirations of our candidates and our clients’ workforce requirements.
We provide additional value through regular contact, open dialogue and by sharing with our customers our knowledge and expertise via news insights, blogs and recruitment legislation guidance. Alongside this we maintain strong relationships with our key suppliers with an emphasis on fair and ethical trading, open and honest dialogue.
Environmental/ social responsibility
We believe in supporting charitable organisations that align with our two main desired outcomes;
To be effective, whilst not having to spend vital donations on employing lots of highly paid staff and;
To provide sustainable support and development to poor and/or vulnerable people.
We’re a Disability Confident Employer (Level 2) and we approach diversity and inclusion (D&I) by actively engaging with EVENBREAK to further develop our knowledge and capabilities of disability in the workplace. We strongly believe our organisation can benefit through tapping into this broader range of talent both for ourselves and for our clients and this is central to us achieving a diverse, inclusive and vibrant organisation.
We are committed to full compliance with GDPR. Our GDPR processes and policy are regularly reviewed to ensure all risks are addressed and compliantly managed. We also take cyber security very seriously therefore our systems and customer data are well protected, tested and verified.
The senior management team will continue to focus on delivering world class recruitment solutions to our existing clients whilst developing new relationships with clients within our chosen sectors. We’re pleased to report that our investments into “neutral vendor” workforce management services and a new fully compliant payroll and billing solution are now well established. The senior management team expect these solutions to continue to grow in line with the expectations of our clients and contractors and with the continual increases in legislative compliance requirements. Our broad range of service offerings, engagement with our contractors, our clients and the wider contingent workforce will also help to promote our brand and enhance our reputation as a provider of excellent, fully compliant recruitment solutions.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 12.
Ordinary dividends were paid amounting to £2,997,588. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees, matters likely to affect employees' interests.
Information about matters of concern to employees is communicated through channels such as our Weekly Voice internal newsletter, social media and our intranet and these seek to achieve a common awareness on the part of all employees of the factors affecting the group's performance.
As part of the group's Diversity and Inclusion policy, the following areas have been identified to further promote employee involvement throughout the group:
Educating employees so they are aware of the group's strategy and obligations, how they can support these and keeping them updated on the group's progress.
Developing the group's understanding of where it is and identifying what more it needs to do through interaction with employees and candidates.
We will continue to develop and invest in current and new solutions, to the benefit of our customers, through our focus on the provision of tailored recruitment solutions, based on quality and trust.
Sumer Auditco Limited were appointed as auditor to the company and is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The group presents its emissions and energy consumption below:
The directors report the group's emissions with reference to the UK Government Environmental Reporting Guidelines. The 2023 UK Government Conversion Factors for Company Reporting published by the UK Department for Environmental, Food and Rural Affairs (DEFRA) are used to convert energy used in the company's operations to emissions of CO2. Data sources includes bills from energy suppliers plus internal fuel use.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £1,000,000 turnover, the recommended ratio for the sector.
The following measures have been taken to reduce the groups CO2 emissions:
Commitment to "Net-Zero" by 2030
Green/sustainability team established to identify emission reduction opportunities alongside other sustainability initiatives
Integrated HSE Management System operating in accordance with ISO 45001 and ISO 14001 standards
Sustainability Action Plan; managed by our Green/Sustainability Team
Energy Efficiency Policy implemented
Adoption of "Agile Working" minimises carbon footprint through reduced commuting miles
Establishment of remote candidate interviewing and client liaison encouraged via videoconferencing
Annual transport/commute survey conducted in FY 2023 and results/areas for improvement analysed
"Bike-to-Work" salary sacrifice scheme in place
Electric car salary sacrifice scheme in place
Car-share promoted
Multipoint EV charging points installed for employees
Sustainability/energy awareness training embedded in the induction process
Sustainability/energy efficiency progress reported at the periodic Management Review
Parry House, the main office of the group is 'Rating C' with the EPC Certificate valid until 4th March 2031.
EPC Certificate no: 2100-3987-4090-9200-9101
We have audited the financial statements of First Technical Recruitment 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 and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussions with the directors (as required by auditing standards) and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: laws related to employment, off-payroll working, health & safety and data protection.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Through these procedures we did not become aware of any actual or suspected non-compliance.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
We design procedures in line with our responsibilities, outlined below to detect material misstatement due to fraud:
Matters are discussed amongst the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud
Identifying and assessing the design and effectiveness of controls that management have in place to prevent and detect fraud
Detecting and responding to the risks of fraud following discussions with management and enquiring as to whether management have knowledge of any actual, suspected or alleged fraud;
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 £2,640,907 (2022 - £1,438,121 profit).
First Technical Recruitment Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Parry House, Birchwood Boulevard, Birchwood, Warrington, Cheshire, WA3 7QU.
The group consists of First Technical Recruitment 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. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company First Technical Recruitment Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue constitutes the value of services undertaken by the company from its principal activities, which are recruitment consultancy and other ancillary services. These consist of:
Revenue from temporary placements, which represents amounts billed for services of temporary staff, including the salary cost of these staff. This is recognised when the service has been provided.
Revenue from permanent placements is typically based on a percentage of the candidate's remuneration package. Income is recognised at the candidate's start date.
Revenue from amounts billed to clients for expenses incurred on their behalf is recognised when the expense is incurred.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently accounted for at cost less impairment.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
The company has issued share options to certain directors and employees. These must be measured at fair value and recognised as an expense in the profit and loss with a corresponding increase in equity. The fair value of the options was estimated at the date of grant using the option-pricing model. The fair value will be charged as an expense in the profit and loss account over the vesting period. The charge is adjusted each year to reflect the expected and actual level of vesting.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The results of First Technical Recruitment Singapore Pte Ltd, a subsidiary company, have not been included within the consolidated figures as the impact is not considered material.
The results of First Technical (Ghana) Limited, an associate company, have not been accounted for under equity accounting as the impact is not considered material.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The directors make estimates regarding the cost of sales accruals required at year-end. The estimate is based on the level of corresponding accrued income less an appropriate gross margin. At the year-end, the directors have included cost of sale accruals of £3,554,977 (2022: £4,237,467).
The realisation of the deferred tax asset is dependent upon projections of future trading coming to fruition, and therefore by its very nature there is a level of estimation uncertainty. At the year-end, the directors have included a deferred tax asset of £1,884,504 (2022: £2,226,355) based on the estimated utilisation of tax losses in future years.
An exceptional bad debt write off was made during the year ended 31 December 2023, following a customer of the group entering liquidation.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1).
The actual charge/(credit) 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:
Deferred tax has been recognised at a rate of 25%. In October 2022, the government announced an increase in the corporation tax main rate from 19% to 25% for companies with profit over £250,000. There is a small company rate of 19% for taxable profits under £50,000 and marginal relief available for profits falling between £50,000 - £250,000 with effect from 1 April 2023.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
Whilst the company owns 90% of the issued share capital of Operam Managed Solutions Limited, it has retained 100% voting control as the B Ordinary shares issued in Operam Managed Solutions Limited hold no voting rights.
Details of associates at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
1 F676/1, Angola Road, Kuku Hill Accra, P.O Box 0854 Ghana
Group
Included in other creditors are balances of £12,166,772 (2022: £7,377,086) in respect of invoice discounting facilities which are secured by a fixed and floating charge over the group's assets.
Company
Included in other creditors is a balance of £8,916,466 (2022: £7,258,369) in respect of an invoice discounting facility which is secured by a fixed and floating charge over the company's assets.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax asset set out above is the net of tax relief timing differences. Pension contributions will attract tax relief in the year paid. Accelerated capital allowances are expected to mature over the associated fixed assets useful economic life. Tax losses will be utilised against expected profits in future periods.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
As at the year-end, contributions due to the schemes in respect of the current reporting year were £304,277 (2022: £237,152).
On 12 August 2022, 640 H Ordinary shares of £1 each were granted under an EMI share option to 1 employee/director of the company. . The holder of the EMI share options can exercise the share options following the satisfaction of certain performance related conditions. The EMI share options lapse if the employee leaves employment or on the 10th anniversary of the grant.
The market value of the shares at the date of grant has been agreed by HM Revenue and Customs at £69.34 per share.
On the 20th February 2023, 256 EMI share options had been exercised at market value.
On the 5th October 2023, the remaining 384 EMI share options had been exercised at market value.
As at the year end, all of the EMI share options had been exercised.
All shares carry no fixed right to income and rank pari passu in every respect.
On 18 September 2023, 593 Ordinary J shares of £1 each were bought back as a purchase of own shares for £365,233.
Other reserves relates to a merger relief reserve that arose as a result of the acquisition of Lema Holdings Limited.
The share premium account represents consideration paid or payable in excess of the par value of the share capital.
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:
At the year end, the company owed £199,939 (2022: £277,383) to an entity under common control. Rent of £222,154 (2022: £3231,153) was charged in the year.
At the year end, the company was owed £Nil (2022: £63,294) from a company under significant influence. During the year, repayments totalling £60,000 (2022: £75,000) were received from the company. This balance relates to monies advanced in previous years. Management service fees of £74,770 (2022: £84,511) were received from this company during the year. Expense recharges of £3,294 (2022: £Nil) were charged during the year.
At the year end, the company was owed £28,458 (2022: £28,458) from a company under common control. This balance relates to monies advanced in previous years.
At the year end, a subsidiary within the group owed £Nil (2022: £5,299) to a company under significant influence. Subcontractor labour services of £66,395 (2022: £Nil) were charged from this related company during the year.
At the year end, a subsidiary within the group was owed £141,391 (2022: £Nil) from a company under significant influence. Subcontractor labour services of £141,705 (2022: £Nil) were charged to this related company during the year.
Balances outstanding at the year-end are unsecured, non-interest bearing and repayable on demand.
Dividends totalling £2,953,910 (2022 - £1,407,951) were paid in the year in respect of shares held by the company's directors.