The directors present the strategic report for the year ended 31 December 2023.
Founded in 2016, TrueLayer is Europe’s leading open banking payments network. We power smarter, safer and faster online payments in 28 countries by combining real-time bank payments with financial and identity data. Businesses big and small use our products to onboard new users, accept money and make payouts in seconds, and at scale. Our customers include industry leaders like Coinbase, Revolut and William Hill. Trusted by millions of consumers and hundreds of companies, our mission is to change the way the world pays.
Regulatory
The business, through its subsidiary entities Truelayer Limited and Truelayer (Ireland) Limited, holds an Electronic Money Institution ("EMI") licence in the UK, and a Payment Institution ("Pl") licence in Europe from the Central Bank of Ireland ("CBI").
TrueLayer is Europe’s leading open banking payments network with significant market share across Europe, including in particular the UK, Ireland, Spain, France, Germany and The Netherlands. 2023 was a year of important growth as the company continued to expand its network across Europe, and win new customers including some of the largest enterprise merchants in the world.
At the end of the 2023 financial year, the business's annualised Total Payment Volume (TPV) increased 2x from the previous financial year to £25.5bn.
In 2023, we continued to see progress with Signup+, launched in 2022 and announced in January 2023. Signup+ is the first open-banking product to combine payments with identity data. Signup+ is designed to simplify customer onboarding for TrueLayer’s clients by combining account set up with making a payment. This product will change how TrueLayer clients onboard their users, with customer sign on now taking seconds rather than days.
July 2023 also marked the launch of Payment Links. Payment Links enables merchants to turn every channel into a checkout simply by sending a link, whether online or in-store. They can either send a URL or QR code to their customer via text, email, social, in store or in person. By clicking the link, customers are sent to their bank app where they confirm the payment.
This was also a year of considerable growth for TrueLayer’s Variable Recurring Payments (VRP) product. Since its launch until June 2023, TrueLayer had processed a total of 1 million Variable Recurring Payments (VRPs). By September 2023, it matched this volume in just one month. VRPs are increasingly popular, offering customers faster, more cost effective and smoother transactions than other payment options.
Popularity of TrueLayer’s Payouts product also rose sharply, growing by over 20x, with particularly strong growth in EU markets including Belgium, France, The Netherlands and Portugal.
Financial review
2023 marked TrueLayer’s strongest year-on-year growth to date (in nominal GBP terms), with revenue increasing approximately 3.0x to £12,430,271 (2022: £4,138,147), while gross profit grew approximately 2.6x to £7,787,983 (2022: £2,962,882). Operating losses decreased by approximately 11% as we expanded revenues while decreasing administrative expenses during the year. Overall this was a significant year of growth for the company and has laid strong foundations for continued growth and success in 2024.
During 2023 and early 2024 the group closely monitored the continued uncertainty in the global macroeconomic outlook. In response to inflationary pressures, interest rate changes and the market turbulence stemming from events such as the Silicon Valley Bank crisis, the group proactively strengthened its liquidity stress testing procedures, and diversified its banking partners. It remains adequately resourced to adapt as required.
The Directors continue to monitor the current and future economic outlook as part of its business planning and will continue to adapt and pivot to ensure TrueLayer is positioned for long-term success.
The process of risk identification and management is addressed through a framework of policies and internal controls. All policies are subject to continued review and iteration by management. Compliance with regulation, legal and ethical standards is a high priority for the group and an appropriate governance structure is in place to monitor this.
The Directors consider that the principal risks and uncertainties faced by the group are in the following categories.
Regulatory risk:
TrueLayer operates in a highly regulated industry. The group and its subsidiaries are currently regulated by the FCA (UK), and the CBI (Europe). Dedicated resources are in place to ensure continued and ongoing compliance with regulatory requirements in the jurisdictions in which the group operates. These include, but are not limited to, governance requirements, capital and liquidity requirements, consumer protection and anti-financial crime requirements.
Cyber risk:
The group is exposed to the risk of operational disruption, customer detriment, financial loss and/or reputational damage arising from cyber attacks that may result in unauthorised access, or denial of access to TrueLayer systems and information. Taking into consideration the very recent and public cyber attacks happening elsewhere, the group continues to actively manage this risk through a range of controls including, but not limited to, system monitoring and alerts, staff awareness training, customer support, and incident management guidelines.
Financial management & treasury risk:
Financial management risks are monitored by the preparation of regular cash flow forecasts which review liquidity, credit and other financial requirements. The group has prepared detailed plans covering the next 12 months of trading. The plan is updated on a regular basis as and when new information becomes available.
The group manages treasury and counterparty risk by employing detailed policies and procedures which include, but are not limited to, the diversification of cash on hand and on deposit across a number of top tier corporate banking partners.
The directors have financial reporting procedures in place to manage credit, liquidity, and other financial risk.
Macroeconomic risk:
The group’s business is sensitive to global macroeconomic conditions such as growing inflation and fluctuations in
consumer sentiment which may impact TrueLayer’s customers and their user base. The group manages this risk
through strategic reviews to ensure any potential or future impacts to operations are minimised.
Under Section 172 of the Companies Act 2006, the directors are required to act in a manner that promotes the long-term success of the group and take into account the interests of Truelayer's stakeholders in their decision making, the Board considers a number of matters in this regard, including:
the likely consequences of any decision in the long term;
the interests of the group’s employees;
the need to foster the group's business relationships with suppliers, customers and others;
the impact of the group's operations on the community and the environment;
the desirability of the group's maintaining a reputation for high standards of business conduct; and
the need to act fairly between members of the group.
In doing so, the directors, both individually and together, confirm that they have acted in good faith, in the way which they consider would be most likely to promote the success of the Group for the benefit of its stakeholders, and in doing so, have fulfilled their duty accordingly, and as outlined below:
Likely consequence of any decision in the long term: As the board of directors, we behave responsibly and ensure that senior management operate the business in a responsible manner. Management achieves this through the deployment of decision making frameworks which ensure alignment to the group’s long term strategic objectives and goals. In addition, the Board of Directors seek to ensure that TrueLayer maintains the high standards of business conduct which the board of directors has set out for the group. The board monitors adherence to these standards through attendance at regular internal management and committee meetings.
As the board of directors, we are committed to open engagement with our investors. It is of vital importance to us that our investors understand and align with our strategy and long term goals. We ensure there is consensus and agreement with our strategy by way of clear and concise communication. We welcome and encourage feedback from our investors and ensure that any issues or concerns raised, are properly considered and factored into the strategy of the group. Through strategic scaling efforts, we successfully renegotiated our Cost of Sales and slightly decreased our administrative expenses compared to the 2022 financial year. Our strategic business plan is aligned with the rest of the group and our performance is monitored on a monthly basis against this plan.
Interest of our Employees: Our employees are considered paramount to the success of our group, and are a vital component to the services we provide to our customers. Our aim is to be a responsible employer, and we achieve this through our approach to pay and benefits, supported by our Compensation Philosophy, and annualised Gender Pay Gap reporting. In addition, the group’s policy is to consult and discuss with employees matters which may likely impact or affect their interests. This is achieved through group wide meetings held on a monthly basis.
Community and Environment: At TrueLayer we take pride in being an active member of our community. We engage and support our communities through participation (employees are encouraged to take advantage of an annual paid volunteer day), and charitable giving to Career Accelerator Programmes and other community fundraising activities.
Business Relationships with Customers, Suppliers and Others: As we continue to scale our business, the group’s focus is to build and maintain our business relationships. Value People is our most important group value and we strongly believe in a culture of collaboration. At TrueLayer, we value each and every one of our customers and suppliers and we maintain these relationships through regular engagement and communication. TrueLayer is committed to dealing with Customers and Suppliers in a fair and ethical fashion. It is important for firms such as TrueLayer to engage openly with regulators, particularly in the current climate. We actively engage with and provide timely information to all our regulators, including the Financial Conduct Authority and Central Bank of Ireland.
Principal Decisions/Risks & Uncertainties: As our services provided grow, our risk environment also becomes more complex. Therefore, it is important that TrueLayer effectively identify, evaluate, manage and mitigate for the risks the group faces. For details of our Principal Risks & uncertainties, and strategic decision making in the period please defer to our Strategic Report.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The group has a branch established in Italy.
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
No preference dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group has funded growth by raising funds from external investors including convertible loan notes. Liquidity risk has been managed through careful monitoring to ensure the group has sufficient liquidity available to meet forecast cash flows.
The group has exposure to exchange rate fluctuations mainly in US Dollars but also Euros. Whilst the group does have a natural hedge in its receivables and payables this remains a risk that is constantly monitored by the directors.
The primary risk arises from the recovery of trade debtors. Management of this risk is on-going. Steps include credit checks of potential clients.
The group continues to invest in the development of its platform and has significantly increased the size of its research and development teams.
The group's policy is to consult and discuss with employees, through meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through company wide meetings which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
Pursuant to Section 487 of the Companies Act 2006, the shareholders have agreed to the appointment of Ernst & Young LLP as auditors for the year ending 31 December 2024. Mercer & Hole LLP will therefore cease to act as auditors.
During the year the group was responsible for the emission of the following tonnes of CO2 during the course of its business activities.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £1m of revenue.
No specific measures have been taken by the group regarding energy efficiency.
We have audited the financial statements of TrueLayer Group Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches under the group's Financial Conduct Authority registration and General Data Protection Regulations, and we considered the extent to which non-compliance may have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006.
We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements and the financial report (including the risk of override of controls), and determined that the principle risks were related to posting inappropriate entries including journals to understate revenue or overstate expenditure, and management bias in accounting estimates.
Audit procedures performed by the engagement team included:
discussions with management, including considerations of known or suspected instances of non-compliance with laws and regulations and fraud;
evaluation of the operating effectiveness of management's controls designed to prevent and detect irregularities;
challenging assumptions and judgements made by management in its significant accounting estimates;
identifying and testing journal entries.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the period was £3,635,368.
TrueLayer Group Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Part Ground Floor (East), Floors 6 and 7, The Gilbert, 40 Finsbury Square, London, EC2A 1PX.
The group consists of TrueLayer Group Holdings Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The directors have reassessed the nature of certain costs and have determined they are an overhead rather than a direct cost. As a consequence, costs of £854,579 have been reclassified from direct costs to administration in the prior year.
The consolidated group financial statements consist of the financial statements of the parent company TrueLayer Group Holdings Limited together with all entities controlled by the parent company (its subsidiaries). Subsidiaries acquired during the year are consolidated using the merger accounting method. Their results are presented as if the group had always existed.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Notwithstanding the loss for the year of £55,047,964, the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
The group has prepared detailed forecasts of its future working capital requirements which indicate that the group will have sufficient cash resources. Consequently, the directors are confident that the group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and have therefore prepared the financial statements on a going concern basis.
Turnover is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes.
Revenue from subscriptions are recognised monthly based on the contracted agreed fee.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group 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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
The company operates equity-settled share-based scheme for some of its employees. The company awards share options to employees to acquire shares of the company.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using either the fair value of the services received or the Black-Scholes model if that fair value cannot be estimated reliably. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
In determining whether there are any circumstances regarding a customer's inability to meet its financial obligation and whether a provision is required against the debt, the directors consider factors such as potential prevailing economic conditions in the industry and their potential impact on customers.
The fair value of compound financial instruments is measured using valuation techniques including discounted cash flow models. The inputs into these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the report fair value of financial instruments.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Estimation and judgement is required in determining the fair value of shares at the date of award. The fair value is estimated using valuation techniques which take into account the award's terms, the risk-free interest rate and the expected volatility of the market price of the shares in the company.
The group's revenue is generated solely from its principal activity.
The group has chosen not to disclose revenue by geographical market as they believe this to be seriously prejudicial to the group's business interests.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
In March 2021, the 2021 budget announced an increase in the UK corporation tax rate from 19% to 25% from 1 April 2023 for taxable profits above £50,000.
The actual credit 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:
The group has estimated tax losses of £152m (2022: £106m) to use against future trading profits. These losses relate to subsidiaries that have a history of losses, do not expire, and may not be used to offset taxable income elsewhere in the group. A deferred tax asset on these losses has not been recognised as there is currently insufficient evidence that the subsidiaries will generate sufficient profits in the near future to utilise them.
Details of the company's subsidiaries at 31 December 2023 are as follows:
During 2020, the group issued convertible loan notes amounting to $25m in exchange for cash. The conditions attached to the loan notes are such that they do not meet the criteria to account for them as compound instruments and instead are required to be carried at fair value with movements accounted for through profit and loss account.
In accordance with the requirements to carry out a fair value assessment based on the assessed market value of shares, management undertook a review of the fair value of loan notes held as at year end, the results of which determined that a fair value gain of $4.9m (£3.9m) be accounted for in the profit and loss account as at year end.
The value of the loan included within creditors due greater than one year represents the loan principal of the remaining notes in issuance and the movement in fair value as calculated in accordance with the accounting policy of the company per Note 1.
The group is required to vacate buildings occupied under operating leases in good repair at the end of the lease. Provision has been made for the estimated cost of this.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The options outstanding at 31 December 2023 had an exercise price of $0.13, and a remaining contractual life of between 6 and 10 years.
The weighted average fair value of options granted in the year was determined using the Black-Scholes option pricing model. The Black-Scholes model is considered to apply the most appropriate valuation method.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.
Non-vesting conditions and market conditions are taken into account when estimating the fair value of the option at grant date. Service conditions and non-market performance conditions are taken into account by adjusting the number of options expected to vest at each reporting date.
Share warrants
In October 2021, the company issued warrants to subscribe for up to 491,793 E Preference Shares to certain existing shareholders. The warrants can be exercised in tranches subject to certain conditions being met and expire on 31 December 2028.
During August 2022, the company issued warrants to subscribe for up to 474,378 ordinary shares. The warrants can be exercised in certain tranches subject to certain conditions being met and expire on 04 August 2032.
Management regularly monitor the conditions attaching to these warrants to determine whether an expense associated with these warrants needs to be recognised. As at the year end, the directors have determined that recognition criteria has not been met and so no expense has been recorded in the these financial statements.
All share classes rank pari passu in all respects but shall constitute separate classes of shares save that:
- holders of A, B, C, D and E Preference Shares and Series Seed Shares may at any time convert all, or any part of, their preference share holding into an equal number of Ordinary shares;
- holders of B, C, D and E Preference Shares are entitled to an annual non-cumulative dividend rate of 5% out of available profits, only upon director approval, in preferential order starting with E Preference shares
- holders of A Ordinary Shares are not entitled to receive any preference dividend or distribution from any available profits.
During the year the company issued the following shares:
- 40,189 Ordinary shares at $0.13 per share
Share based payment reserve relates to cumulative share based payment charges.
Profit and loss reserves represents accumulated comprehensive deficit for the year and prior periods.
The group's bankers have a fixed charge over certain bank accounts held by the group.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
There have been no significant events affecting the group since the year end.
The remuneration of key management personnel is as follows.
The group has taken the exemptions available in FRS102 not to disclose transactions with wholly owned members of the group.