Company registration number 08857442 (England and Wales)
ALERT LOGIC UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2023
ALERT LOGIC UK LIMITED
COMPANY INFORMATION
Directors
Ms K Bolseth
(Appointed 15 March 2022)
Mr M Reck
(Appointed 15 March 2022)
Mr J Ritchie
(Appointed 23 July 2024)
Company number
08857442
Registered office
3rd Floor
1 Ashley Road
Altrincham
Cheshire
United Kingdom
WA14 2DT
Auditor
Azets Audit Services
Ty Derw, Lime Tree Court
Cardiff Gate Business Park
Cardiff
United Kingdom
CF23 8AB
ALERT LOGIC UK LIMITED
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4 - 5
Independent auditor's report
6 - 8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 24
ALERT LOGIC UK LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 30 JUNE 2023
- 1 -
The directors present the strategic report for the 18 months period ended 30 June 2023.
Principal activities
The principal activity of the company continued to be that of innovative security technology services.
Review of the business
Alert Logic UK Limited (the “UK Company”) was founded in 2014. The UK Company is a wholly owned subsidiary of Alert Logic, Inc. (the Direct Parent), a United States of America based corporation with headquarters in Houston, TX. The UK Company is an extension of the Direct Parent’s full infrastructure in the United Kingdom (the “UK”) and includes a security operations center, security team and full sales and marketing departments, all of which support the future growth of the UK Company and, subsequently, the Direct Parent in the UK. The UK Company’s headquarters are located in Cardiff, UK, and the UK Company currently operates in three locations within the UK and Northern Ireland.
The UK Company provides security and compliance solutions delivered to customers through the cloud on a software-as-a-service (“SaaS”) basis. The UK Company provides continuous protection and security insight and analytics for on-premises, cloud, and hybrid technology infrastructures. The UK Company sells a significant portion of its subscriptions and services to end-customers through strategic partners, distributors, and resellers, with the remaining of sales sold directly to end-customers. However, a large part of the UK Company’s turnover comes from providing research and development work, selling and other support services to the Direct Parent.
The UK Company enjoys a number of competitive advantages as it provides Security-as-a-Service solutions that combine cloud-based software and innovative analytics with expert services to assess, detect and respond to threats to applications and other workloads. Protection extends to full stack of web application components and infrastructure to defend against a broad range of server-side threats including hard-to-detect web application attacks such as SQL injection, path traversal and cross-site scripting.
The strategy of the business has historically been to increase its share of the UK and EU security markets through increasing sales through both direct and strategic partners sales; and, secondly, to continue to provide support to the Direct Parent as intended per the UK Company’s establishment.
In March 2022, Alert Logic, Inc. and its subsidiaries were acquired by Fortra, LLC (“Fortra” or the “Parent Company”), a United States of America corporation headquartered in Eden Prairie, MN. Fortra is a global provider of cybersecurity and automation software that offers a comprehensive suite of solutions designed for all major enterprise operating platforms as well as solutions purpose built for clients operating on the IBM platform.
As of the 18-month period ending 30 June 2024, the UK Company has increased its gross profit and EBIT performance by 91% and 223% compared to the year ended 31 December 2021. On a 12-month proforma basis, the UK Company has seen relatively stable sales turnover and increased EBIT compared to 2021. The UK Company sees stability in sales turnover as a result of its continued focus on its MDR Platform. The MDR Platform offers a deep insight into potential threats to a customer’s environment through vulnerability scanning and log management. These insights are digested and displayed in an intuitive dashboard, making actioning on the threats easy. Additionally, the UK Company’s security experts are monitoring customers’ data 24/7 and alerting them to high risk threats while providing helpful remediation tactics to prevent breaches.
Under the management of the Parent Company, the UK Company has also been able to see cost saving synergies, resulting in better Gross Profit and EBIT performance.
ALERT LOGIC UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
- 2 -
Principal risks and uncertainties
The main risks to achieving the business strategy have been assessed by the directors and can be summarized as follows:
Financing
The UK Company requires continued funding by the Parent Company. The Parent Company has sufficient resources to continue to finance the UK Company and confirmed its intention to continue to provide support to the UK Company.
Technological Change
Security-as-a-Service market is highly competitive and innovative. New technology is continuously developed and offered to the consumers.
The UK Company continues to stay competitive by consistently upgrading existing products and offerings, developing new technology, and maintaining the highest level of expertise in-house.
The Direct Parent launched a new Managed Detection and Response (“MDR”) platform in early 2019 and has been the focus of its strategy going forward. Those MDR offerings have received industry accolades and are seeing good traction in the market.
Focus for the current fiscal year will continue to be on maximizing the sales opportunities across the existing customer base and expansion of the UK and EU market share. The Directors expect that the UK Company will continue to provide strong support to the Direct Parent and ultimately to the Parent Company, and execute on overall strategic initiatives.
Future developments
In March 2022, Alert Logic, Inc. and its subsidiaries were acquired by Fortra, LLC (“Fortra” or the “Parent Company”), a United States of America corporation headquartered in Eden Prairie, MN. Following the acquisition, the decision was made to transfer the trade and assets across to its sister entity Fortra International Limited. As at 30 April 2023, employees and customer contracts have started to transfer across to Fortra International Limited where services will be delivered going forward. Whilst the decision has not yet formally been made to close the business and all liabilities are continuing to be met as they fall due, the financial statements have been prepared on a basis other than going concern.
Results and key performance indicators
For the 18-month period ended 30 June 2023, proforma 12-month annualized FY2023 and 12-month period ended 31 December 2021, the UK Company reported the following KPIs:
| | FY2023 (12-month annualized) £'000 | | | |
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ALERT LOGIC UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
- 3 -
Mr J Ritchie
Director
13 September 2024
ALERT LOGIC UK LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 30 JUNE 2023
- 4 -
The directors present their annual report and financial statements for the 18 months period ended 30 June 2023.
Results and dividends
The results for the Period are set out on page 9.
Directors
The directors who held office during the Period and up to the date of signature of the financial statements were as follows:
Mr J O Post
(Resigned 15 March 2022)
Mr J W Sachs
(Resigned 15 March 2022)
Mr B A Stewart
(Resigned 15 March 2022)
Mr S L Reid
(Resigned 15 March 2022)
Ms K Bolseth
(Appointed 15 March 2022)
Mr M Reck
(Appointed 15 March 2022)
Mr J Ritchie
(Appointed 23 July 2024)
Future developments
Following the acquisition of its parent, Alert Logic Inc, by Forta LLP in March 2022, the decision was made to transfer the trade and assets across to its sister entity Fortra International Limited. As at 30 April 2023, employees and customer contracts have started to transfer across to Fortra International Limited where services will be delivered going forward. The company will not take any new contracts but will service existing ones until they end. On this basis, the financial statements have been prepared on a basis other than going concern.
Auditor
In accordance with the company's articles, a resolution proposing that Azets Audit Services be reappointed as auditor of the company will be put at a General Meeting.
Statement of directors' responsibilities
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:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and 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.
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.
ALERT LOGIC UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
- 5 -
Going concern
Following the acquisition of its parent, Alert Logic Inc, by Forta LLP in March 2022, the decision was made to transfer the trade and assets across to its sister entity Fortra International Limited. As at 30 April 2023, employees and customer contracts have started to transfer across to Fortra International Limited where services will be delivered going forward. The company will not take any new contracts but will service existing ones until they end. On this basis, the financial statements have been prepared on a basis other than going concern.
The company's remaining assets have been considered for any necessary write down to net realisable value and any provisions required in respect of contracts which have become onerous at the reporting date where applicable. No provision has been made for the future costs of terminating the business as no such costs were committed at the reporting date.
On behalf of the board
Mr J Ritchie
Director
13 September 2024
ALERT LOGIC UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ALERT LOGIC UK LIMITED
- 6 -
Opinion
We have audited the financial statements of Alert Logic UK Limited (the 'company') for the 18 months period ended 30 June 2023 which comprise 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).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 30 June 2023 and of its profit for the period then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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 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.
Emphasis of matter - financial statements prepared on a basis other than going concern
We draw attention to Note 1.3 to the financial statements which explains that the entity will no longer take on new business and therefore the directors do not consider it to be appropriate to adopt the going concern basis of accounting in preparing the financial statements. Accordingly the financial statements have been prepared on a basis other than going concern as described in Note 1.3. Our opinion is not modified in respect of this matter.
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 Period 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.
ALERT LOGIC UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ALERT LOGIC UK LIMITED
- 7 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, 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.
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.
ALERT LOGIC UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ALERT LOGIC UK LIMITED
- 8 -
Extent to which the audit was considered 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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias;
Performing audit work over the timing and recognition of revenue and in particular whether it has been recorded in the correct accounting period.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
Craig Yearsley FCCA
Senior Statutory Auditor
For and on behalf of Azets Audit Services
18 September 2024
Chartered Accountants
Statutory Auditor
Ty Derw, Lime Tree Court
Cardiff Gate Business Park
Cardiff
United Kingdom
CF23 8AB
ALERT LOGIC UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2023
- 9 -
18 months
Year
ended
ended
30 June
31 December
2023
2021
Notes
£'000
£'000
Turnover
3
28,614
19,615
Cost of sales
(3,456)
(3,247)
Gross profit
25,158
16,368
Administrative expenses
(20,216)
(14,184)
Other operating income
32
Operating profit
4
4,942
2,216
Interest payable and similar expenses
(4)
(7)
Profit before taxation
4,938
2,209
Tax on profit
6
(99)
Profit for the financial Period
4,938
2,110
The profit and loss account has been prepared on the basis that the business will not continue operations post year end.
ALERT LOGIC UK LIMITED
BALANCE SHEET
- 10 -
30 June 2023
31 December 2021
Notes
£'000
£'000
£'000
£'000
Fixed assets
Tangible assets
7
650
894
Current assets
Debtors
8
10,987
11,484
Cash at bank and in hand
158
1,056
11,145
12,540
Creditors: amounts falling due within one year
9
(28,017)
(34,409)
Net current liabilities
(16,872)
(21,869)
Total assets less current liabilities
(16,222)
(20,975)
Creditors: amounts falling due after more than one year
10
(62)
Provisions for liabilities
Provisions
12
123
-
(123)
Net liabilities
(16,222)
(21,160)
Capital and reserves
Called up share capital
Profit and loss reserves
(16,222)
(21,160)
Total equity
(16,222)
(21,160)
The financial statements were approved by the board of directors and authorised for issue on 13 September 2024 and are signed on its behalf by:
Mr J Ritchie
Director
Company Registration No. 08857442
ALERT LOGIC UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2023
- 11 -
Share capital
Profit and loss reserves
Total
£'000
£'000
£'000
Balance at 1 January 2021
(23,270)
(23,270)
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
2,110
2,110
Balance at 31 December 2021
(21,160)
(21,160)
Period ended 30 June 2023:
Profit and total comprehensive income for the period
-
4,938
4,938
Balance at 30 June 2023
(16,222)
(16,222)
ALERT LOGIC UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2023
- 12 -
2023
2021
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash (absorbed by)/generated from operations
18
(768)
44
Interest paid
(4)
(7)
Income taxes paid
(10)
Net cash (outflow)/inflow from operating activities
(772)
27
Investing activities
Purchase of tangible fixed assets
(129)
(68)
Proceeds from disposal of tangible fixed assets
1
Net cash used in investing activities
(128)
(68)
Net decrease in cash and cash equivalents
(900)
(41)
Cash and cash equivalents at beginning of Period
1,056
1,097
Cash and cash equivalents at end of Period
156
1,056
Relating to:
Cash at bank and in hand
158
1,056
Bank overdrafts included in creditors payable within one year
(2)
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2023
- 13 -
1
Accounting policies
Company information
Alert Logic UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3rd Floor, 1 Ashley Road, Altrincham, Cheshire, United Kingdom, WA14 2DT.
1.1
Reporting period
The company had a change in operations with majority of employees and customer contracts being transferred across to Fortra International Limited where services will be delivered going forward, hence extended the accounting period as part of the process.
1.2
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 £'000.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.3
Going concern
Following the acquisition of its parent, Alert Logic Inc, by Forta LLP in March 2022, the decision was made to transfer the trade and assets across to its sister entity Fortra International Limited. trueAs at 30 April 2023, employees and customer contracts have started to transfer across to Fortra International Limited where services will be delivered going forward. Whilst the decision has not yet formally been made to close the business and all liabilities are continuing to be met as they fall due, the financial statements have been prepared on a basis other than going concern.
The company's remaining assets have been considered for any necessary write down to net realisable value and any provisions required in respect of contracts which have become onerous at the reporting date, where applicable. No provision has been made for the future costs of terminating the business as no such costs were committed at the reporting date.
1.4
Turnover
Turnover comprises revenue recognised by the company in respect of services supplied during the period, exclusive of Value Added Tax and trade discounts.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
1.5
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 14 -
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Leasehold improvements
15 years (over the life of the lease)
Fixtures & fittings
10 years
Computer equipment
3 years
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 credited or charged to profit or loss.
1.6
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible 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.
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 is estimated to be less than its carrying amount, the carrying amount of the asset 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.
1.7
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.
1.8
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.
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 15 -
Other financial assets
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.
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.
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 receipts 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.
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 16 -
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.9
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.
1.10
Derivatives
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
1.11
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.
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 17 -
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.
1.12
Provisions
Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.
1.13
Employee benefits
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.
1.14
Retirement benefits
The company operates a defined contribution pension scheme and the pension charge represents the amounts payable by the company to the fund in respect of the period.
1.15
Leases
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 leases asset are consumed.
1.16
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 18 -
1.17
Foreign exchange
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.
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 have a significant effect on amounts recognised in the financial statements.
Deferred commissions payable
Commission payable is recognised in the profit and loss based on a percentage of customer retention. This is reviewed on an ongoing basis with the percentages being adjusted to reflect the most current and stable rate of customer retention.
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2023
2021
£'000
£'000
Turnover analysed by class of business
Security technology services
28,615
19,615
2023
2021
£'000
£'000
Other significant revenue
Grants received
-
32
2023
2021
£'000
£'000
Turnover analysed by geographical market
UK
13,773
9,194
Europe
882
890
USA
13,626
9,355
Rest of world
334
176
28,615
19,615
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
- 19 -
4
Operating profit
2023
2021
Operating profit for the period is stated after charging/(crediting):
£'000
£'000
Exchange (gains)/losses
(1,872)
414
Government grants
-
(32)
Fees payable to the company's auditor for the audit of the company's financial statements
23
16
Depreciation of owned tangible fixed assets
346
227
Loss on disposal of tangible fixed assets
26
-
Operating lease charges
37
46
5
Employees
The average monthly number of persons (including directors) employed by the company during the Period was:
2023
2021
Number
Number
Direct staff
48
81
Administration staff
76
80
Total
124
161
Their aggregate remuneration comprised:
2023
2021
£'000
£'000
Wages and salaries
11,197
8,016
Social security costs
1,508
1,089
Pension costs
857
394
13,562
9,499
6
Taxation
2023
2021
£'000
£'000
Current tax
Adjustments in respect of prior periods
99
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
6
Taxation
(Continued)
- 20 -
The actual charge for the Period can be reconciled to the expected charge for the Period based on the profit or loss and the standard rate of tax as follows:
2023
2021
£'000
£'000
Profit before taxation
4,938
2,209
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
938
420
Tax effect of expenses that are not deductible in determining taxable profit
(827)
12
Adjustments in respect of prior years
(107)
99
Rate changes
(1,068)
Deferred tax not recognised
640
Enhanced capital allowances
(4)
(4)
Taxation charge for the period
-
99
7
Tangible fixed assets
Leasehold improvements
Fixtures & fittings
Computer equipment
Total
£'000
£'000
£'000
£'000
Cost
At 1 January 2022
1,093
1,351
1,640
4,084
Additions
129
129
Disposals
(253)
(964)
(1,469)
(2,686)
At 30 June 2023
840
387
300
1,527
Depreciation and impairment
At 1 January 2022
507
1,154
1,529
3,190
Depreciation charged in the Period
181
84
81
346
Eliminated in respect of disposals
(315)
(898)
(1,446)
(2,659)
At 30 June 2023
373
340
164
877
Carrying amount
At 30 June 2023
467
47
136
650
At 31 December 2021
586
197
111
894
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
- 21 -
8
Debtors
2023
2021
Amounts falling due within one year:
£'000
£'000
Trade debtors
688
1,800
Amounts owed by group undertakings
10,186
8,158
Other debtors
77
652
Prepayments and accrued income
36
94
10,987
10,704
2023
2021
Amounts falling due after more than one year:
£'000
£'000
Other debtors
780
Total debtors
10,987
11,484
9
Creditors: amounts falling due within one year
2023
2021
Notes
£'000
£'000
Bank loans and overdrafts
11
2
Trade creditors
6
341
Amounts owed to group undertakings
26,356
30,845
Taxation and social security
257
669
Other creditors
1,241
2,073
Accruals and deferred income
155
481
28,017
34,409
10
Creditors: amounts falling due after more than one year
2023
2021
£'000
£'000
Other creditors
62
11
Loans and overdrafts
2023
2021
£'000
£'000
Bank overdrafts
2
Payable within one year
2
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
11
Loans and overdrafts
(Continued)
- 22 -
12
Provisions for liabilities
2023
2021
£'000
£'000
Dilapidations
-
123
13
Retirement benefit schemes
2023
2021
Defined contribution schemes
£'000
£'000
Charge to profit or loss in respect of defined contribution schemes
857
394
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
14
Financial commitments, guarantees and contingent liabilities
A fixed and floating charge was created on 4 June 2014 in favour of Square 1 Bank which is held over all assets of the company.
A fixed and floating charge was created on 1 June 2017 in favour of Pacific Western Bank which is held over all assets of the company.
15
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2023
2021
£'000
£'000
Within one year
350
354
Between two and five years
281
810
631
1,164
16
Related party transactions
Transactions with related parties
During the period the company entered into the following transactions with related parties
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
16
Related party transactions
(Continued)
- 23 -
Sales
Sales
Purchases
Purchases
2023
2021
2023
2021
£'000
£'000
£'000
£'000
Entities with control, joint control or significant influence over the company
13,440
9,339
8,055
5,926
The following amounts were outstanding at the reporting end date:
2023
2021
Amounts due to related parties
£'000
£'000
Entities with control, joint control or significant influence over the company
26,356
30,845
The following amounts were outstanding at the reporting end date:
2023
2021
Amounts due from related parties
£'000
£'000
Entities with control, joint control or significant influence over the company
10,186
8,158
17
Ultimate controlling party
The ultimate controlling party is considered to be Fortra Inc by virtue of their majority shareholding.
18
Cash (absorbed by)/generated from operations
2023
2021
£'000
£'000
Profit for the Period after tax
4,938
2,110
Adjustments for:
Taxation charged
99
Finance costs
4
7
Loss on disposal of tangible fixed assets
26
-
Depreciation and impairment of tangible fixed assets
346
227
Decrease in provisions
(123)
(49)
Movements in working capital:
Decrease/(increase) in debtors
497
(1,375)
Decrease in creditors
(6,456)
(967)
Decrease in deferred income
-
(8)
Cash (absorbed by)/generated from operations
(768)
44
ALERT LOGIC UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2023
- 24 -
19
Analysis of changes in net funds
1 January 2022
Cash flows
30 June 2023
£'000
£'000
£'000
Cash at bank and in hand
1,056
(898)
158
Bank overdrafts
(2)
(2)
1,056
(900)
156
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