Company registration number 13232475 (England and Wales)
BUTTERFLY MIDCO LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
BUTTERFLY MIDCO LIMITED
COMPANY INFORMATION
Directors
R Sklar
F M Kufer
Company number
13232475
Registered office
Hermes House
88-89 Blackfriars Rd
South Bank
London
United Kingdom
SE1 8HA
Auditor
BDO LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
BUTTERFLY MIDCO LIMITED
CONTENTS
Page
Strategic report
1 - 4
Directors' report
5 - 7
Directors' responsibilities statement
8
Independent auditor's report
9 - 12
Statement of comprehensive income
13
Balance sheet
14
Statement of changes in equity
15
Notes to the financial statements
16 - 25
BUTTERFLY MIDCO LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Principal activities

The Company is part of the Butterfly Topco Limited group of companies (Butterfly Group) whose principal activity is as a leading global provider of on premises or virtual event visualisation solutions, specialising in the provision of the software, hardware and support services that allow creative production teams to pre-visualise, simulate and deliver their 3D shows in real-time.

 

The Company’s immediate parent undertaking is Butterfly Topco Limited.

 

The principal activity of the Company is that of a holding company.

 

The principal risks and uncertainties of the Company relate to the ongoing activities of the companies in which it

holds an investment both directly and indirectly.

Principal risks and uncertainties

The Company generates no income of its own but does incur some administrative costs for the continuation of the business which are settled via intercompany loans with other Group entities.

 

The company is also charged loan interest from its direct parent company Butterfly Topco limited which offset by charging this down the group to its direct subsidiary Butterfly Bidco Limited this is driving the interest expense and income.

 

The Company finished the financial year with a loss after tax of £42k (2021 – loss after tax £26k) and net assets of £2.3m (2022 - net assets £2.4m).

 

In addition, as the Company has no operations of its own, it is reliant on support from other Group Companies to settle any liabilities. The administrative costs relate to professional and audit fees for the Group and intercompany loans are in place throughout the Group with forecast cashflow requirements performed at a Group level ensuring liabilities and adequate funding of the Company is covered.

 

In 2023 the Butterfly Group saw strong revenue growth through continued vertical, geographic and product expansion alongside building out the Meptik LLC and Polygon Labs LLC revenue streams. The Group also underwent an extensive cost rationalisation exercise across our staff and administrative expenses, and finalised the project to onshore the supply chain which will deliver future gross margin improvements.

 

The above cost saving measures were taken to ensure the business is rightsized and in a good position to maximise profit and cash generation in future periods and already the Company has seen a strong improvement year-on year in profitability.

 

The Group also had an injection of £4m from Shareholders in the form of a Convertible Loan Note to ensure the Group’s balance sheet is strengthened and can meet future obligations under appropriate stress testing.

 

The Company ended the financial year with outstanding loan notes of £146.5m (2022 - £133.1m) with the prior year interest charges being rolled up with the original principal.

BUTTERFLY MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Principal risks and uncertainties

The principal risks and uncertainties of the Company relate to the ongoing activities of the companies in which it holds an investment both directly and indirectly.

 

This means it is dependant for its revenues upon the performance of its subsidiaries in the live and virtual events visualisation industry. The risks that the Company are exposed to are managed at a group level. The nature of the risk including the risk management principles and strategies to mitigate these risks are disclosed in the consolidated financial statements of Butterfly Topco Limited.

BUTTERFLY MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Key performance indicators

As the Company itself is not a trading entity it does not assess itself individually but is assessed as part of the larger Butterfly Group as a whole. Disclosure for the Company will be included within the consolidated results of Butterfly Topco Limited.

Analysis based on Non-Financial Key Performance Indicators

The Group also reviews a number of other non-financial KPIs which apply to the subsidiaries of the Company:

 

Future developments

It is the intention of the directors that the Company will continue for the foreseeable future, oversee and managing the operational aspects of the Group. The Group plans to expand its product portfolio and further expand into new verticals alongside building out capabilities in our existing markets and verticals served.

Promoting the success of the company

The directors acknowledge that they must act in a way which is considered in good faith and would be most likely to promote the success of the company for the benefit of all interested parties as defined in section 172(1) of the Companies Act 2006. In doing so, the directors have considered the following aspects.

 

 

Have regard to the likely consequence of any decision in the long-term

 

Our mission is to build leading edge technology solutions for creatives around the world to deliver unparalleled performances for audiences in person and in the cloud. We recognise that our decisions must take into account the long-term consequences for our company and its stakeholders. For example, when considering investment in new products or services, we take into account the potential impact on our financial position, our ability to compete in the market, and the interests of our shareholders.

 

The interests of the Group’s employees

 

We monitor the development, performance and impacts of our activity on social and employee matters. We are committed to providing a positive working environment that is free from all forms of illegal and improper discrimination and harassment. Our employees are key to the success of our company, and we are committed to promoting their interests. We provide a wider range of benefits, as well as opportunities for training and development and remote working. We also have policies in place to promote diversity and inclusion, and we seek to foster a positive working environment that promotes innovation and collaboration.

 

BUTTERFLY MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -

The need to foster the Group’s business relationships with suppliers, customers and others

 

We recognise that our success is closely tied to our relationships with our customers and suppliers. We aim to provide high-quality products and services that meet the needs of our customers, and we work closely with our suppliers to ensure that we have reliable and cost-effective supply chains.

 

In 2023 several new products were in Development providing new advances in power and output to match our customers creative needs. We continue to work with all our supply chain to ensure compliance with all relevant legislation and minimising impact on our business operations

 

The impact of the Group’s operations on the community and environment

 

We understand that our operations have an impact on the wider community and the environment. We are committed to minimising our environmental footprint through the use of renewable energy sources and the reduction of waste and emissions. We also support industry initiatives and charities through donations and volunteer work within the Group.

The desirability of the Group maintaining a reputation for high standards of business conduct

 

Respecting human rights is a core value and one that we expect our business partners to share. We have documented policies and procedures internally as well as robust supplier T&C's which reference what we expect from our Suppliers and ensure we limit the risk to the business and uphold our core values. Employees have access to all Group policies and procedures, with training provided as part of the employee onboarding process with regards to the Corporate Criminal Offences Act, Modem Slavery Act, Anti- Bribery and Corruption.

 

We have a zero-tolerance stance for all human rights abuse. We are committed to ensuring we maintain robust programs and procedures to protect our people and prevent such abuse through our supply chain. Our Supplier Code of Conduct expressly prohibit the use of forced, imprisoned, bonded, indentured or involuntary labour including child labour. Other requirements include safe and clean working conditions, fair wages and no discrimination.

 

The need to act fairly between all interested parties within the group

 

The Board considers all interested parties when making business decisions to ensure fair representation irrespective of their interest holding within the Group. The Group has robust policies in place to ensure that fair representation is maintained both at board level and within the wider business through, management meetings and Non-executive representation at the Board.

 

 

On behalf of the board

R Sklar
Director
9 September 2024
BUTTERFLY MIDCO LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -

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

Results and dividends

The loss for the year, after taxation, was £42,213, (2022 £26,340).

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

R Sklar
F M Kufer
Qualifying third party indemnity provisions

The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date.

Auditor

The auditor, BDO LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

Energy and carbon report

The Company has taken the exemption available to subsidiary companies to not disclose information in respect of greenhouse gas emissions, energy consumption, and energy efficiency action given that this is disclosed in the consolidated financial statements of the ultimate parent company, Butterfly Topco Limited.

Matters covered in the Strategic Report

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of a review of the business, future developments, and an indication of exposure to financial risks, as the Directors consider them to be of strategic importance to the Company.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

BUTTERFLY MIDCO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
Going concern

As at 31 December 2023, the Company had net assets of £2.3m (2022 - £2.4m) and net current assets of £148.8m (2022 - £135.5m).

 

The directors have received confirmation from the Group that it will provide ongoing financial support for a period of not less than 12 months in order of the Company to meet its liabilities as they fall due. As a result, the below disclosures which are in respect of the wider Butterfly Topco Limited group, are considered relevant to the Company.

 

As at the year-end date the Group had generated EBITDA of £7.6m (2022 - £0.8m) and generated cash flows from operating activities of £9.8m (2022 - £1.3m). Closing cash balances were £10.7m (2022 - £2.5m), taking into account the injection from its shareholders of £4.0m by way of convertible shareholder loan notes issued on 10 July 2023 after discussion with its Senior Lender.

 

The Group had £12.8m of term loans drawn from its facilities agreement with its Senior Lender to finance the acquisitions of Polygon Labs LLC and Meptik LLC both acquired in 2022. £10m is drawn from one term loan and £2.8m from an additional term loan facility of £7.0m, both of which are not due for repayment until December 2027. At the year-end date the net debt position of the Group excluding shareholder loans was £2.1m (2022 - £9.3m). The Group has access to additional facilities via a £3.0m revolving credit facility which is undrawn and £4.2m of the additional term loan facility which is undrawn to finance further commitments under the acquisitions.

 

The Group’s term loan arrangements with its Senior Lender are based on two covenants. The first is Adjusted Leverage (the ratio of an Adjusted EBITDA-based metric to Total Net Debt) measured on a quarterly basis on a rolling 12-month period with the target ratio reducing over time. The second covenant is an Interest Cover (the ratio of Cashflow to Net Finance Charges) again measured on a quarterly basis on a rolling 12-month period. The Senior Facilities are provided by Santander UK PLC and details can be found in Note 20 to the financial statements.

 

The Group has net current assets of £14.7m (2022 - £10.5m) at 31 December 2023 and has remained stable through 2024 to the date of signing of the financial statements. The directors are satisfied with the cash, additional facilities line and current balance of term loans within the business such that it can meet any future ongoing obligations.

 

The long term debt of the Group is made up of shareholder loan notes of £151.2m (2022 – £132.9m) which mature on the earlier of the Group entering into an agreement with a new acquirer or the maturity of those loan notes in March 2031. The shareholders have not requested any interest repayments until that point.

 

The directors monitor cashflow through short and long term forecasting and its going concern assessment is on a future looking period of a minimum of twelve months from the date of signing the audited financial statements. These forecasts are stress tested on revenue following a deep review of pipeline known projects and historical seasonality, alongside modelling of debtor days lengthening.

 

Our margin forecasts are based on our new supply chain product pricing and working capital is driven predominantly by our sales demand and appropriately run through our financial model taken into account any historical trends. The forecasts have also been heavily sensitised in producing a financing case to ensure that with minimal revenue growth and cost efficiencies actioned we are still able to maintain cash liquidity and meet our covenant requirements.

 

The directors have considered the financial forecasts of the overall Group inclusive of this entity, taking into consideration the current macroeconomic climate, the projections are for the Group to remain profitable and generate positive cashflows in both a short term and long term assessment giving the Group the ability to continue to operate into the future and meet the respective financial covenants.

 

The directors conclude that there are no material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern and have therefore adopted the going concern basis in preparing the financial statements.

BUTTERFLY MIDCO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
On behalf of the board
R Sklar
Director
9 September 2024
BUTTERFLY MIDCO LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -

The directors are responsible for preparing the annual 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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:

 

 

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 enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

BUTTERFLY MIDCO LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF BUTTERFLY MIDCO LIMITED
- 9 -
Opinion

In our opinion the financial statements:

 

We have audited the financial statements of Butterfly Midco Limited (“the Company”) for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including a summary of 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the 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.

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.

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 auditor’s 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.

 

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.

BUTTERFLY MIDCO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF BUTTERFLY MIDCO LIMITED
- 10 -

Opinions on other matters prescribed by the Companies Act 2006

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

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:

Responsibilities of directors

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 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.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

 

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:

Non-compliance with laws and regulations

 

Based on:

 

We considered the significant laws and regulations to be the applicable accounting framework, the Companies Act 2006, UK Corporation tax legislation and UK VAT registration.

 

The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the health and safety legislation, UK employment law and the Data Protection Act.

BUTTERFLY MIDCO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF BUTTERFLY MIDCO LIMITED
- 11 -

Our procedures in respect of the above included:

Fraud

 

We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:

 

Based on our risk assessment, we considered the areas most susceptible to fraud to be:

Our procedures in respect of the above included:

 

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

 

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

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.

BUTTERFLY MIDCO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF BUTTERFLY MIDCO LIMITED
- 12 -

Use of our report

This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.

Neil Ebdon (Senior Statutory Auditor)
For and on behalf of` BDO LLP, Statutory Auditor
Leeds, UK
9 September 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
BUTTERFLY MIDCO LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
2023
2022
Notes
£
£
Administrative expenses
(42,213)
(25,200)
Operating loss
3
(42,213)
(25,200)
Interest receivable and similar income
5
13,316,564
12,105,970
Interest payable and similar expenses
6
(13,316,564)
(12,105,970)
Loss before taxation
(42,213)
(25,200)
Tax on loss
7
-
0
(1,140)
Loss for the financial year
(42,213)
(26,340)

The profit and loss account has been prepared on the basis that all operations are continuing operations.

BUTTERFLY MIDCO LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 14 -
2023
2022
Notes
£
£
£
£
Fixed assets
Investments
8
2,405,914
2,405,914
Current assets
Debtors falling due after more than one year
10
146,451,605
133,135,041
Debtors falling due within one year
10
5,500
-
0
Cash at bank and in hand
2,887
2,000
146,459,992
133,137,041
Creditors: amounts falling due within one year
11
(81,800)
(33,200)
Net current assets
146,378,192
133,103,841
Total assets less current liabilities
148,784,106
135,509,755
Creditors: amounts falling due after more than one year
12
(146,451,605)
(133,135,041)
Net assets
2,332,501
2,374,714
Capital and reserves
Called up share capital
14
6,505
6,505
Share premium account
15
645,513
645,513
Capital contribution reserve
1,753,896
1,753,896
Profit and loss reserves
(73,413)
(31,200)
Total equity
2,332,501
2,374,714
The financial statements were approved by the board of directors and authorised for issue on 9 September 2024 and are signed on its behalf by:
R Sklar
Director
Company registration number 13232475 (England and Wales)
BUTTERFLY MIDCO LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
Share capital
Share premium account
Capital Contribution reserve
Profit and loss reserves
Total
£
£
£
£
£
Balance at 1 January 2022
6,505
645,513
-
(4,860)
647,158
Year ended 31 December 2022:
Loss and total comprehensive loss
-
-
-
(26,340)
(26,340)
Capital contribution in the year
-
-
1,753,896
-
0
1,753,896
Balance at 31 December 2022
6,505
645,513
1,753,896
(31,200)
2,374,714
Year ended 31 December 2023:
Loss and total comprehensive loss
-
-
-
(42,213)
(42,213)
Balance at 31 December 2023
6,505
645,513
1,753,896
(73,413)
2,332,501
BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 16 -
1
Accounting policies
Company information

Butterfly Midco Limited is a private company limited by shares incorporated in England and Wales. The registered office is Hermes House, 88-89 Blackfriars Rd, South Bank, London, United Kingdom, SE1 8HA.

1.1
Accounting convention

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.

This 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:

 

 

The financial statements of the company are consolidated in the financial statements of Butterfly Topco Limited. These consolidated financial statements are available from its registered office, Hermes House 88-89 Blackfriars Rd, South Bank, London, SE1 8HA.

The company is exempt under section 400 of the Companies Act 2006 from the requirement to produce group accounts because it is included in the published consolidated financial statements of its ultimate parent undertaking Butterfly Topco Limited. Therefore these accounts present information about the company and not about its group.

BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
1.2
Going concern

As at 31 December 2023, the Company had net assets of £2.3m (2022 - £2.4m) and net current assets of £148.8m (2022 - £135.5m).true

 

The directors have received confirmation from the Group that it will provide ongoing financial support for a period of not less than 12 months in order of the Company to meet its liabilities as they fall due. As a result, the below disclosures which are in respect of the wider Butterfly Topco Limited group, are considered relevant to the Company.

 

As at the year-end date the Group had generated EBITDA of £7.6m (2022 - £0.8m) and generated cash flows from operating activities of £9.8m (2022 - £1.3m). Closing cash balances were £10.7m (2022 - £2.5m), taking into account the injection from its shareholders of £4.0m by way of convertible shareholder loan notes issued on 10 July 2023 after discussion with its Senior Lender.

 

The Group had £12.8m of term loans drawn from its facilities agreement with its Senior Lender to finance the acquisitions of Polygon Labs LLC and Meptik LLC both acquired in 2022. £10m is drawn from one term loan and £2.8m from an additional term loan facility of £7.0m, both of which are not due for repayment until December 2027. At the year-end date the net debt position of the Group excluding shareholder loans was £2.1m (2022 - £9.3m). The Group has access to additional facilities via a £3.0m revolving credit facility which is undrawn and £4.2m of the additional term loan facility which is undrawn to finance further commitments under the acquisitions.

 

The Group’s term loan arrangements with its Senior Lender are based on two covenants. The first is Adjusted Leverage (the ratio of an Adjusted EBITDA-based metric to Total Net Debt) measured on a quarterly basis on a rolling 12-month period with the target ratio reducing over time. The second covenant is an Interest Cover (the ratio of Cashflow to Net Finance Charges) again measured on a quarterly basis on a rolling 12-month period. The Senior Facilities are provided by Santander UK PLC and details can be found in Note 20 to the financial statements.

 

The Group has net current assets of £14.7m (2022 - £10.5m) at 31 December 2023 and has remained stable through 2024 to the date of signing of the financial statements. The directors are satisfied with the cash, additional facilities line and current balance of term loans within the business such that it can meet any future ongoing obligations.

 

The long term debt of the Group is made up of shareholder loan notes of £151.2m (2022 – £132.9m) which mature on the earlier of the Group entering into an agreement with a new acquirer or the maturity of those loan notes in March 2031. The shareholders have not requested any interest repayments until that point.

 

The directors monitor cashflow through short and long term forecasting and its going concern assessment is on a future looking period of a minimum of twelve months from the date of signing the audited financial statements. These forecasts are stress tested on revenue following a deep review of pipeline known projects and historical seasonality, alongside modelling of debtor days lengthening.

 

Our margin forecasts are based on our new supply chain product pricing and working capital is driven predominantly by our sales demand and appropriately run through our financial model taken into account any historical trends. The forecasts have also been heavily sensitised in producing a financing case to ensure that with minimal revenue growth and cost efficiencies actioned we are still able to maintain cash liquidity and meet our covenant requirements.

 

The directors have considered the financial forecasts of the overall Group inclusive of this entity, taking into consideration the current macroeconomic climate, the projections are for the Group to remain profitable and generate positive cashflows in both a short term and long term assessment giving the Group the ability to continue to operate into the future and meet the respective financial covenants.

 

The directors conclude that there are no material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern and have therefore adopted the going concern basis in preparing the financial statements.

BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
1.3
Fixed asset investments

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

1.4
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.5
Financial instruments

The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with 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

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.

Impairment of financial assets

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.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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.

BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 19 -
Classification of financial liabilities

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 company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors and loans from fellow group companies, 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.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.6
Equity instruments

Equity instruments issued by the company 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 company.

1.7
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

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 when the company has 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.

BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 20 -
1.8

Interest income

Interest income is recognised in the Statement of Comprehensive Income using a effective interest method.

1.9

Finance costs

Finance costs are charged to the Statement of Comprehensive Income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

1.10

Borrowing costs

All borrowing costs are recognised in the Statement of Comprehensive Income in the period in which they are incurred.

2
Judgements and key sources of estimation uncertainty

In the application of the company’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.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Investments and loan notes owed by group undertakings

In preparing the financial statements, the directors have considered whether there are any indicators of impairment of the Company's investments and loan notes owed by group undertakings. Factors taken into consideration include the past and expected future financial performance of the subsidiaries, development costs, and customer relationships. The directors are satisfied that there are no such indicators of impairment at the reporting date as development costs remain current as well as the underlying customer base.

3
Operating loss
2023
2022
Operating loss for the year is stated after charging:
£
£
Fees payable to the company's auditor for the audit of the company's financial statements
6,300
6,000
4
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
Directors
-
0
-
0
BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
4
Employees
(Continued)
- 21 -

The Company has no employees other than the directors, who did not receive any remuneration in the year (2022 - £nil).

5
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest receivable from group companies
13,316,564
12,105,970
6
Interest payable and similar expenses
2023
2022
£
£
Interest payable to group undertakings
13,316,564
12,105,970
7
Taxation
2023
2022
£
£
Deferred tax
Adjustment in respect of prior periods
-
0
1,140

The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
Loss before taxation
(42,213)
(25,200)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%)
(9,928)
(4,788)
Tax effect of expenses that are not deductible in determining taxable profit
-
0
3,648
Group relief
9,928
1,140
Deferred tax adjustments in respect of prior years
-
0
1,140
Taxation charge for the year
-
1,140

The main corporation tax rate increased from 19% to 25% on 1 April 2023. The deferred tax balances at 31 December 2023 have been measured using the rates expected to apply in the reporting periods when the timing differences reverse, being 25% (2022 - 25%).

BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
8
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
9
2,405,914
2,405,914
9
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Indirect
Butterfly Bidco Limited
Hermes House, 88-89 Blackfriars Road, South Bank, London Se1 8HA
Ordinary
100.00
-
New Leaf Topco Limited
Hermes House, 88-89 Blackfriars Road, South Bank, London Se1 8HA
Ordinary
-
100.00
New Leaf Bidco Limited
Hermes House, 88-89 Blackfriars Road, South Bank, London Se1 8HA
Ordinary
-
100.00
Disguise Technologies Limited
Hermes House, 88-89 Blackfriars Road, South Bank, London Se1 8HA
Ordinary
-
100.00
Disguise Systems Limited
Hermes House, 88-89 Blackfriars Road, South Bank, London Se1 8HA
Ordinary
-
100.00
Disguise Systems (APAC) Limited
16/F Wing On Centre 111 Connaught Road Central, Sheung Wan, HongKong
Ordinary
-
100.00
Disguise Systems Inc
421 Colyton Street, #1R, Los Angeles, CA 90013
Ordinary
-
100.00
Disguise Systems (China) Limited
Room 103, 6/F WeWork, The Konnect, 118 South Yunnan Road, Huangpu District, Shanghai, China
Ordinary
-
100.00
Disguise EMEA Limited
Hermes House, 88-89 Blackfriars Road, South Bank, London Se1 8HA
Ordinary
-
100.00
Disguise Spain, Sociedad Limitada
Calle Tanger (Glories) 86, Baracelona, 08018, Spain
Ordinary
-
100.00
Disguise Systems Canada Inc
630, boul. ReneLevesque Quest, Bureau 2780, Montreal, Quebec H3B 1S6, Canada
Ordinary
-
100.00
Disguise New Zealand Limited
Level 4 BDO Centre, 4 Graham Street, Aucjland 1010, New Zealand
Ordinary
-
100.00
Disguise Korea Limited
127 Beobwon-ro, Songp-gu, Seoul, 05836, Korea
Ordinary
-
100.00
Disguise Japan GK
71 We Work Ocean Gate Minato Mirai, Japan
Ordinary
-
100.00
Previz LLC
1115 W Sunset Boulevard, Los Angeles, CA 90012, US
Ordinary
-
100.00
Disguise Systems Singapore Pte. Limited
600 North Bridge Road, #23-01, Parkview Square, Singapore (188788)
Ordinary
-
100.00
Polygon Labs LLC
228 Bushwick Ave 3G, Brooklyn, NY, 11206, New York
Ordinary
-
100.00
Meptik LLC
215 Chester Ave SE Suite A-111, Atlanta, GA 30316
Ordinary
-
100.00
10
Debtors
2023
2022
Amounts falling due within one year:
£
£
Other debtors
5,500
-
0
BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
10
Debtors
(Continued)
- 23 -
2023
2022
Amounts falling due after more than one year:
£
£
Amounts owed by group undertakings
146,451,605
133,135,041
Total debtors
146,457,105
133,135,041

Loan notes owed by group undertakings are repayable before March 2031. Interest is charged at 10% per annum. The interest is repayable on the earlier of a sale of the majority of the share capital in Butterfly Topco Limited or on maturity of the term loan.

11
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
-
0
19,200
Amounts owed to group undertakings
75,500
8,000
Accruals and deferred income
6,300
6,000
81,800
33,200

Amounts owed to group undertakings are unsecured and repayable on demand.

12
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Loan notes owed to group undertakings
13
146,451,605
133,135,041

Loan notes are repayable on or before March 2031. Interest is charged at 10% per annum. The interest is repayable on the earlier of a sale of the majority of the share capital in Butterfly Topco Limited or on maturity of the term loan.

Amounts included above which fall due after five years are as follows (except in the event of the sale of Butterfly Topco Limited, which is outside the control of this company):
Payable other than by instalments
146,451,605
133,135,041
BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 24 -
13
Loans and overdrafts
2023
2022
£
£
Loan notes owed to group undertakings
146,451,605
133,135,041
Payable after one year
146,451,605
133,135,041
14
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary of 1p each
650,453
650,453
6,505
6,505

Ordinary shares confer voting rights, and enable the holder to participate pari passu in any distribution and dividend payments. All shares are non-redeemable.

15
Reserves

Called up share capital

Called up share capital represents the nominal value of the shares issued.

 

Share premium account

The share premium account includes the premium on issue of equity shares, net of any issue costs.

 

Capital contribution reserve

The capital contribution reserve represents contributions made by a parent company in relation to settling share-based options issued to employees or rollover securities in the ultimate parent company.

 

Profit and loss account

The profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.

BUTTERFLY MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
16
Related party transactions

The company has taken the disclosure exemptions of section 33.1A of FRS 102 to not disclose transactions with wholly owned group members of Butterfly Topco Limited. Details of balances outstanding at the year end are given in notes 10 and 11.

17
Ultimate controlling party

The Company's immediate and ultimate parent undertaking at the reporting date was Butterfly Topco Limited, incorporated in England & Wales, whose registered office is Hermes House, 88-89 Blackfriars Road, South Bank, London, SE1 8HA.

 

The smallest and largest group into which the results of the company are consolidated was Butterfly Topco Limited. The consolidated statements of Butterfly Topco Limited are available to the public and may be obtained from its registered office at Hermes House, 88-89 Blackfriars Road, South Bank, London, SE1 8HA.

 

CETP IV Investments S.a.r.l. is the ultimate controlling party at the reporting date.

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