Company registration number 01095512 (England and Wales)
OTICON LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
OTICON LIMITED
CONTENTS
Page
Company information
1
Strategic report
2 - 4
Directors' report
5 - 8
Independent auditor's report
9 - 11
Statement of comprehensive income
12
Statement of financial position
13
Statement of changes in equity
14
Notes to the financial statements
15 - 25
OTICON LIMITED
COMPANY INFORMATION
- 1 -
Directors
S Nielsen
R Schneider
B Coleman
(Appointed 2 May 2023)
Secretary
L Graham
(Appointed 2 May 2023)
Company number
01095512
Registered office
3800 Parkside Solihull Parkway
Birmingham Business Park
Birmingham
West Midlands
England
B37 7YG
Auditor
Consilium Audit Limited
169 West George Street
Glasgow
Scotland
G2 2LB
OTICON LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
The directors present the strategic report for the year ended 31 December 2023.
Principal Activities
The company is a wholly owned subsidiary of Demant A/S of Denmark which manufactures and sells hearing instruments, hearing implants, audiological equipment and related products, whose ultimate parent company is the William Demant Foundation. Oticon Limited is engaged in the manufacture and sale of hearing instruments, hearing implants and audiological consumables.
Results and key performace indicators
Turnover for the year was £73.0m (2022: £66.1m) and the profit before tax was £5.2m (2022: £3.4m). Net assets at the balance sheet date are £27.5m (2022: £23.5m). Management consider these to be the only relevant key performance indicators.
The results for the year have been strong across all our divisions. Hearing Aids have had the biggest growth up 21% on 2022. The launch of Premium product Oticon Real became a first choice for users and customers in the independent market, and the NHS has returned to more stable levels. The Medical division has had continued growth with the success of Ponto 5.
Financial risk management objectives and policies
Policies and procedures adopted by the company in respect of the principal risks and uncertainties affecting the business include the following:
The company’s principal financial assets are cash, trade and other debtors. The company’s credit risk is primarily attributable to its trade and other debtors. The amounts presented in the balance sheet are net of allowances for doubtful debtors. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The company has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
The company maintains strong relationships with each of its key customers and has established credit control parameters. Appropriate credit terms are agreed with all customers, and these are closely managed.
The company monitors forthcoming and current legislation regularly.
The company operates in highly competitive markets. Product innovations or technical advances by competitors could adversely affect the company. The diversity of operations reduces the possible effect of action by any single competitor.
Key areas of strategic development and performance of the business
Customers: Deliver a world-class customer and user experience. To achieve this, we have invested in a new CRM system and additional employee training.
ESG: During 2023 we have focused on the “E” with green walks, encouraging awareness and improved recycling to meet our reduction in general waste target of 5%. Office lighting has been fully switched to 100% LED. For 2024 we shift focus to the “S” looking at 3 main areas; 1. Employee engagement, retention and attraction; 2. Diversity, equity, inclusion and wellbeing, and 3. Sustainable supply chain.
OTICON LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Section 172 statement
We report here on how our directors have addressed the matters set out under Section 172 (1) (a) to (f) of the Companies Act 2006.
The directors have acted in a way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members, and in doing so have regard (amongst other matters) to:
(a) The likely consequences of any decision in the long term
The board uses insights obtained through relevant stakeholder engagement and considers any future consequences of its decision. Local management have regular meetings to review, underpin and implement decisions.
The overall goal for the company remains unchanged, to create life-changing differences through hearing health. Our ambition is to improve as many lives as possible. In doing so, we contribute to building a more sustainable world where more people have the opportunity to enjoy an active life.
(b) The interests of the company’s employees
Employee engagement is key to our success. As an ambitious company, we want to be the best at what we do, attract and retain the best employees and work smarter to deliver our strategy and reach our goals. Pulse is our global employee engagement program, which involves a survey in Q1 every year. The survey provides us with valuable information on the engagement level across our global business, while, at the same time, enabling us to work with engagement in a far more professional manner.
Regular Town hall meetings are held to provide all employees with continuous communication.
All employees are encouraged to do their best in daily work and we have an employee nominated recognition award scheme.
(c) The need to foster the company’s business relationships with suppliers, customers and others
Suppliers
Our main suppliers are all intercompany and all Group supplier related activity is managed in line with the Group Procedures.
Customers
Innovation at our product launch, allowed it to be live streamed, enabling more customers to be part of the event where they maybe couldn’t attend in person. We have also invested in customer services training and a new CRM system to improve customer experience.
(d) The impact of the company’s operations on the community and the environment
We continuously work to reduce the footprint of our operations and are both ISO 9001 and 14001 certified.
Sustainability is embedded in our solutions and culture: Our core commitment to society is to help people overcome hearing loss and improve their quality of life through care and innovative solutions. Our priority in 2023 has been to continue to implement our sustainability strategy and to further develop our two main priorities, diversity and climate action.
Our parent company Demant A/S, publish its CSR report at www.demant.com/sustainability/society-and-local-community
OTICON LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
(e) The desirability of the company maintaining a reputation for high standards of business conduct
The Board is responsible for monitoring and upholding the culture, values, standards, ethics and reputation of the Company to ensure that our obligations to our shareholder and to our stakeholders are met. All Oticon Limited employees have attended compliance training and new employees complete it as as part of the onboarding process.
Our whistleblower hotline provides a platform for all employees, business partners and other stakeholders to raise concerns if they encounter serious and sensitive improper actions. https://demant.codeofconduct.app/wb;eFormGuid=d36668f5-81fc-4548-880a-23326b412d89;siteId=21023http
(f) The need to act fairly as between members of the company.
Oticon Limited is a wholly owned subsidiary of Demant A/S. There is ongoing communication and engagement with the Demant A/S board as two of the directors of Oticon Limited are also directors of Demant A/S.
The company is funded by a combination of cash flows generated from its trading activities and an intercompany account with Oticon A/S, a fellow subsidiary of Demant A/S. The company has no third party borrowings and is not subject to any cross guarantee arrangements in respect of any third party borrowings of other group undertakings.
Two of the directors of the company are also a directors of Demant A/S. The directors consider that the group, and consequently the company, has considerable financial resources available to it and that its business activities are diversified over a number of customers and geographic locations.
S Nielsen
Director
23 September 2024
OTICON LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
The directors present their annual report and financial statements for the year ended 31 December 2023.
Principal activities
The company's principal activities can be found in the Strategic Report on page 2 and form part of this report by cross-reference.
Results and dividends
The results for the year are set out on page 12.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
S Nielsen
R Schneider
B Coleman
(Appointed 2 May 2023)
A Tait
(Resigned 2 May 2023)
Research and development
All R&D is carried out at the Group headquarters in Denmark.
Disabled persons
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the company continues and that the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
Employee involvement
The company's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the company's performance.
Auditor
The auditor, Consilium Audit Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Energy and carbon report
This reporting period covered by this disclosure is 1 January 2023 to 31 December 2023. This includes the UKs energy use and associated emission for Oticon Limited across the reporting period for electricity and gas, illustrated below:
OTICON LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
2023
2022
Energy consumption
kWh
kWh
Aggregate of energy consumption in the year
- Gas combustion
533,410
627,741
- Electricity purchased
190,260
214,053
723,670
841,794
2023
2022
Emissions of CO2 equivalent
metric tonnes
metric tonnes
Scope 1 - direct emissions
- Gas combustion
110.00
146.00
- Fuel consumed for owned transport
-
-
110.00
146.00
Scope 2 - indirect emissions
- Electricity purchased
39.00
50.00
Scope 3 - other indirect emissions
- Fuel consumed for transport not owned by the
-
-
Total gross emissions
149.00
196.00
Intensity ratio
Tonnes CO2e per employee
1.08
1.45
Quantification and reporting methodology
The energy usage within this SECR disclosure relates to Oticon Limited only.
All calculations have been performed using actual data across the reporting period. Data and electricity usage was obtained from utility invoices.
Intensity measurement
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per employee, the recommended ratio for the sector.
Environmental statement
Caring for people’s health and well-being goes hand in hand with caring for the environment.
In relation to the community and environment, we have met the obligations for the Energy and Savings Opportunity Scheme (ESOS) for phase 1, 2 and 3. We have been monitoring our packaging for The Producer Responsibility Obligations (Packaging Waste) Regulations and for 2022 we are under the 50 tonnes threshold. For 2023 the threshold is changed to 25 tonnes, as such we are now in scope and have completed all reporting. We are compliant with European Union (Waste Electrical and Electronic Equipment) Regulations 2014 and currently reporting in both the UK and Ireland. Among other legislation, we are continuing our roadmap for Net Zero by 2050.
The local environmental objectives for 2023 included switching to 100% LED lighting and a reduction in energy use and general waste by 5%. Both of these objectives were achieved.
For 2024 there will be a packaging redesign and we are targeting another 5% reduction in general waste and 5% reduction in electricity use.
OTICON LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
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;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
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.
Modern Slavery Act
In 2010, our immediate parent, Demant A/S joined the United Nations Global Compact. The Group reports annually on its actions and initiatives based on the 10 UNGC principles in the four areas of human rights, labour rights, environmental and anti-corruption actions. The Group believes this helps to scope its commitment to corporate responsibility and align strategies and goals. We pay above the National Minimum Wage for all employees. The Board of Directors of Oticon Limited are responsible for the development and review of local policies.
Demant A/S supports the Universal Declaration of Human Rights, ILO's Declaration of Fundamental Principles and Rights at Work and the Modern Slavery Act. With respect to these declarations, we have five principles as guidance for management and employees. In 2016, we updated our reporting in order to adhere to the new British legislation on Modern Slavery. Our CSR report functions as Demant‘s statement on the UK Modern Slavery Act.
We stand by building awareness of modern slavery and against exploitation of labour, slavery, servitude, forced and compulsory labour and human trafficking.
We consider the risk of human trafficking in our supply chain to be very mild. Our revenue model has a predominant base in OECD countries, where the government has a higher level of control over human rights, labour rights and modern slavery enforcement. In terms of production and assemblies of our products, the company operates predominantly in Europe, North and Latin America, where the risks are contained.
We tackle the risk of exploitation in the labour market by working with suppliers, entities, sales subsidiaries and distributions network that comply and abide with our code of conduct, regulations on human rights, labour rights and business ethics.
OTICON LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
On behalf of the board
S Nielsen
Director
23 September 2024
OTICON LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF OTICON LIMITED
- 9 -
Opinion
We have audited the financial statements of Oticon Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity 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 31 December 2023 and of its profit for the year 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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.
OTICON LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF OTICON LIMITED
- 10 -
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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
We ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
We identified the laws and regulations applicable to the company through discussions with directors and management and from our knowledge of the regulatory environment relevant to the company.
We assessed the extent of compliance with laws and regulations through making enquiries of management and inspecting legal correspondence.
We assessed the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by making enquiries of management as to where they considered there was susceptibility to fraud and their knowledge of actual, suspected and alleged fraud.
To address the risk of fraud through management bias and override of controls, we tested journal entries to identify unusual transactions, we assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias and we investigated the rationale behind significant or unusual transactions.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
OTICON LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF OTICON LIMITED
- 11 -
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.
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.
Brian Thomson BA(Hons) CA (Senior Statutory Auditor)
For and on behalf of Consilium Audit Limited
Statutory Auditor
169 West George Street
Glasgow
Scotland
G2 2LB
23 September 2024
OTICON LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
2023
2022
Notes
£'000
£'000
Turnover
3
73,036
66,054
Cost of sales
(62,295)
(55,578)
Gross profit
10,741
10,476
Distribution costs
(6,886)
(7,285)
Administrative expenses
(1,132)
(868)
Other operating income
910
689
Operating profit
4
3,633
3,012
Interest receivable and similar income
1,622
453
Interest payable and similar expenses
8
(99)
(29)
Profit before taxation
5,156
3,436
Tax on profit
9
(1,128)
(654)
Profit for the financial year
4,028
2,782
There was no other comprehensive income recognised during the year (2022:£Nil).
The notes on pages 15 to 25 form part of these financial statements.
OTICON LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2023
31 December 2023
- 13 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Fixed assets
Goodwill
10
20
Tangible assets
11
499
460
499
480
Current assets
Stocks
12
10,240
9,469
Debtors
13
33,023
27,131
Cash at bank and in hand
2,848
1,313
46,111
37,913
Creditors: amounts falling due within one year
14
(18,575)
(14,454)
Net current assets
27,536
23,459
Total assets less current liabilities
28,035
23,939
Provisions for liabilities
Provisions
15
553
485
(553)
(485)
Net assets
27,482
23,454
Capital and reserves
Called up share capital
18
30
30
Profit and loss reserves
27,452
23,424
Total equity
27,482
23,454
The notes on pages 15 to 25 form part of these financial statements.
The financial statements were approved by the board of directors and authorised for issue on 23 September 2024 and are signed on its behalf by:
S Nielsen
Director
Company Registration No. 01095512
OTICON LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
Share capital
Profit and loss reserves
Total
£'000
£'000
£'000
Balance at 1 January 2022
30
20,642
20,672
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
2,782
2,782
Balance at 31 December 2022
30
23,424
23,454
Year ended 31 December 2023:
Profit and total comprehensive income for the year
-
4,028
4,028
Balance at 31 December 2023
30
27,452
27,482
The notes on pages 15 to 25 form part of these financial statements.
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
1
Accounting policies
Company information
Oticon Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3800 Parkside Solihull Parkway, Birmingham Business Park, Birmingham, West Midlands, England, B37 7YG. The company's registration number is 01095512.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional and presentational currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Turnover
Turnover represents the amounts receivable for goods and services supplied to customers in the normal course of business net of VAT and trade discounts. Turnover is recognised upon shipment of goods to customers.
Interest income
Interest income is recognized when it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through expected life of the financial asset to the asset’s net carrying amount on initial recognition.
1.4
Intangible fixed assets - goodwill
Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 5 years (20% straight line).
This estimate is based on a variety of factors such as the expected use of the acquired business, the expected useful life of the cash generating units to which the goodwill is attributed, any legal, regulatory or contractual provisions that can limit useful life and assumptions that market participants would consider in respect of similar businesses.
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
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.
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:
Machinery and equipment
20% straight line
Fixtures, fittings and motor vehicles
20% - 25% straight line
Computer equipment
20% - 100% straight line
Heritable property
2.5% straight line
No depreciation is provided on freehold land.
1.6
Stocks
Stocks are held at standard cost and stated at the lower of cost and net realisable value after making allowance for obsolete and slow-moving items. Net realisable value is based on estimated selling price. In the case of work in progress, cost is represented by materials, direct labour and appropriate production overheads.
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 statement of financial position 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.
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 the profit and loss account, 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.
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
Impairment of financial assets
Financial assets, other than those held at fair value through the profit and loss account 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 the profit and loss account.
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 the profit and loss account.
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.
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 the profit and loss account 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 the profit and loss account. Debt instruments may be designated as being measured at fair value through the profit and loss account 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
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 income statement 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.
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
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 income statement, 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.
1.11
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 the profit and loss account in the period in which it arises.
1.12
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.
1.13
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.14
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 the profit and loss account.
1.15
Under FRS 102, the company is exempt from the requirement to prepare a cash flow statement on the grounds that a parent undertaking includes the company in its own published consolidated financial statements.
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
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 accounting judgements in applying the Company's accounting policies
In the opinion of the directors there are no critical accounting judgements made in applying the Company's accounting policies that require disclosure in the financial statements.
Key source of estimation uncertainty
In the opinion of the directors there are no key sources of estimation uncertainty that require disclosure in the financial statements.
3
Turnover and other revenue
2023
2022
£'000
£'000
Turnover analysed by geographical market
United Kingdom
71,575
64,599
Other European countries
1,461
1,455
73,036
66,054
2023
2022
£'000
£'000
Other revenue
Interest income
1,622
453
Management recharges
910
689
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£'000
£'000
Depreciation of owned tangible fixed assets
167
201
Profit on disposal of tangible fixed assets
(61)
(91)
Amortisation of intangible assets
20
27
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£'000
£'000
For audit services
Audit of the financial statements of the company
24
22
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Production
53
45
Sales
70
78
Administration
13
10
Total
136
133
Their aggregate remuneration comprised:
2023
2022
£'000
£'000
Wages and salaries
5,991
6,044
Social security costs
555
612
Pension costs
273
272
6,819
6,928
7
Directors' remuneration
2023
2022
£'000
£'000
Remuneration for qualifying services
117
Company pension contributions to defined contribution schemes
6
-
123
8
Interest payable and similar expenses
2023
2022
£'000
£'000
Interest on financial liabilities measured at amortised cost:
Other interest on financial liabilities
99
29
9
Taxation
2023
2022
£'000
£'000
Current tax
UK corporation tax on profits for the current period
1,181
650
Adjustments in respect of prior periods
(6)
Total current tax
1,175
650
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
9
Taxation
2023
2022
£'000
£'000
(Continued)
- 21 -
Deferred tax
Origination and reversal of timing differences
(47)
4
Total tax charge
1,128
654
From April 2023 onwards, the main rate of corporation tax will rise from 19% to 25%. Companies with profits of £50,000 or less will continue to be taxed at 19% which is a new small profits rate. Deferred tax has been calculated at a rate of 25%.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2023
2022
£'000
£'000
Profit before taxation
5,156
3,436
Expected tax charge based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
1,212
653
Tax effect of expenses that are not deductible in determining taxable profit
21
14
Tax effect of income not taxable in determining taxable profit
(14)
(17)
Adjustments in respect of prior years
(6)
Double tax relief
(38)
Group relief
(3)
Remeasurement of deferred tax for changes in tax rates
(44)
4
Taxation charge for the year
1,128
654
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
10
Intangible fixed assets
Goodwill
£'000
Cost
At 1 January 2023 and 31 December 2023
138
Amortisation and impairment
At 1 January 2023
118
Amortisation charged for the year
20
At 31 December 2023
138
Carrying amount
At 31 December 2023
At 31 December 2022
20
11
Tangible fixed assets
Land and heritable property
Machinery and equipment
Fixtures, fittings and motor vehicles
Computer equipment
Total
£'000
£'000
£'000
£'000
£'000
Cost
At 1 January 2023
791
42
870
79
1,782
Additions
248
248
Disposals
(169)
(169)
At 31 December 2023
791
42
949
79
1,861
Depreciation and impairment
At 1 January 2023
726
21
497
78
1,322
Depreciation charged in the year
7
160
167
Eliminated in respect of disposals
(131)
(131)
At 31 December 2023
726
28
526
78
1,358
Carrying amount
At 31 December 2023
65
14
423
1
503
At 31 December 2022
65
21
373
1
460
12
Stocks
2023
2022
£'000
£'000
Finished goods and goods for resale
10,240
9,469
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
13
Debtors
2023
2022
Amounts falling due within one year:
£'000
£'000
Trade debtors
8,623
9,538
Amounts owed by group undertakings
5,924
4,248
Other debtors
210
135
Prepayments and accrued income
64
79
14,821
14,000
Deferred tax asset (note 16)
130
83
14,951
14,083
2023
2022
Amounts falling due after more than one year:
£'000
£'000
Amounts owed by fellow group companies
18,072
13,048
Total debtors
33,023
27,131
Amounts owed by group companies are unsecured, repayable on demand and do not accrue any interest. Other debtors due after one year include loans to associate companies that accrue interest monthly.
14
Creditors: amounts falling due within one year
2023
2022
£'000
£'000
Trade creditors
64
65
Amounts owed to group undertakings
12,417
9,141
Corporation tax
1,010
535
Other taxation and social security
2,339
2,197
Deferred income
35
157
Other creditors
197
110
Accruals and deferred income
2,513
2,249
18,575
14,454
Amounts due to group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable on demand.
15
Provisions for liabilities
2023
2022
£'000
£'000
Warranty provision
553
485
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
15
Provisions for liabilities
(Continued)
- 24 -
Movements on provisions:
Warranty provision
£'000
At 1 January 2023
485
Additional provisions in the year
68
At 31 December 2023
553
The provision for product warranties relates to expected warranty claims on products sold in the last two to four years. It is expected that the majority of this expenditure will be incurred in the next financial year and that all will be incurred within four years of the balance sheet date.
16
Deferred taxation
The following are the major deferred tax balances recognised by the company and movements thereon:
Assets
Assets
2023
2022
Balances:
£'000
£'000
Difference between accumulated depreciation and capital allowances
135
84
Retirement benefit obligations
(5)
(1)
130
83
2023
Movements in the year:
£'000
Asset at 1 January 2023
(83)
Credit to profit or loss
(47)
Asset at 31 December 2023
(130)
17
Retirement benefit schemes
2023
2022
Defined contribution schemes
£'000
£'000
Charge to profit or loss in respect of defined contribution schemes
273
272
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.
OTICON LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
18
Share capital
2023
2022
£'000
£'000
Ordinary share capital
Issued and fully paid
30,000 Ordinary shares of £1 each of £1
30
30
19
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
During the year the company sold goods to the value of £84,026 (2022: £93,359) to an associated company, which is 49% owned by Ensco 772 Limited. The amount due from this company at the year-end was £18,790 (2022: £17,131).
During the year the company sold goods to the value of £574,292 (2022: £695,871) to an associated company, which is 25% owned by Ensco 772 Limited. The amount due from this company at the year-end was £170,620 (2022: £153,381).
During the year the company sold goods to the value of £2,389,642 (2022: £2,055,193) to an associated company, which is 25% owned by Ensco 772 Limited. The amount due from this company at the year-end was £4,123,286 (2022: £1,886,682).
During the year the company sold goods to the value of £595,467 (2022: £796,721) to an associated company, which is 20% owned by WDH UK Limited. The amount due from this company at the year-end was £276,005 (2022: £282,193).
The company is controlled by Demant A/S. The company has therefore taken advantage of the exemption available within FRS 102 paragraph 33.1A with regard to non-disclosure of transactions between wholly owned group undertakings.
20
Ultimate controlling party
The company is a subsidiary undertaking of William Demant Foundation incorporated in Denmark.
The largest and smallest group in which the results of the company are consolidated is that headed by Demant A/S, incorporated in Denmark. The consolidated financial statements of these groups are available to the public and may be obtained from Kongebakken 9, 2765 Smørum, Denmark or https://www.demant.com.
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