The directors present their strategic report on Prosapient Limited and its subsidiaries (together the ‘Group’) for the year ended 31 December 2023.
The principal activity of the Group is to support professional services firms, investment firms and corporations with the expert intelligence they need to help them make great decisions and succeed in their goals. proSapient’s AI-enabled platform and global client services teams connect clients with industry experts who provide their insight via conference calls, messages and written work. The firm also uses cutting edge technology to create bespoke surveys to gather insights for our clients, and also offers a SaaS platform to help clients manage their own knowledge. Clients recognise proSapient as a technology enabled innovator in the $2 billion expert calls industry and turn to us for support on a broad range of high value projects. A key driver of client demand is for support on M&A activities, particularly from private equity investors and/or the consulting firms they engage to support due diligences.
After 6 years of uninterrupted growth, turnover decreased in 2023 by 4% to £28,289,617 (2022: £29,383,647), which reflected the effects of a sharp contraction in M&A activity. Overall, according to S&P Global, 2023 private equity transaction value declined 35% and industry deal count fell 32% vs. 2022. Within that context, we believe that proSapient continued to take market share in a challenging environment.
During 2023, proSapient took the opportunity to strengthen operating capabilities including:
Continuing to invest in its AI-enabled platform
Refreshing executive leadership with a new CEO and new head of Client Services Americas
Building out its geographic footprint including opening a new Lisbon office (a cost-effective location for high quality talent, similar to our Toronto office)
The average number of employees in the year remained steady at 243 (2022: 242). The Group incurred a loss of £3,998,366 (2022: £1,981,188) in the financial year. Net assets decreased to £6,355,050 (2022: £8,856,920). Thanks to the focus on operational improvements, gross profit improved by 4% vs 2022.
Research and development costs related to the development of the company's platform have been capitalised as software development costs and the respective amortisation charge recognised in the Statement of Comprehensive Income for the year.
The results for the Group are set out in the Consolidated Statement of Comprehensive Income on page 9.
During 2023 and into the first quarter of 2024, there continued to be uncertainty surrounding the global macro-economic backdrop (i.e., inflation, war in Ukraine, concerns about recession). However, as 2024 has progressed, there are encouraging indications that some of the economic headwinds are slowing. Inflation appears to have peaked and central banks are signalling and/or making reductions in interest rates which should create the conditions for a more predictable economic environment and an uptick in investment including M&A activity. In addition, private equity firms hold record amounts of “dry powder” and are under increased pressure from limited partners to return capital which in turn creates momentum for increased deal activity.
In line with other firms in the industry, proSapient faces and actively manages a broad set of risks (e.g., geopolitical, operational, IT/cyber, etc.) in part through the support of a dedicated Legal & Compliance function. In 2023, proSapient continued to strengthen its controls, processes and procedures including through the application of technology as part of a broader effort to offer clients increased confidence in an ever-changing market. Commercial success will be influenced by proSapient’s ability to cost-effectively expand its footprint with existing clients and win new business while maintaining delivery excellence.
The principal KPIs for the firm are revenue and gross profit growth. Revenue reduced over the year from £29,383,647 to £28,289,617, a 4% decrease (2022: 47% increase). Gross Profit improved over the year from £17,719,592 to £17,750,237, a 4% increase (2022: 45% change).
Future developments
The firm looks forward to a successful 2024 as operational investments from 2023 play through and key drivers of business activity recover, particularly private equity investment. proSapient expects to outpace industry growth as the firm continues to take market share.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a dividend.
The group continues to invest in and develop its AI platform.
The following events have occurred after the balance sheet date but before the financial statements were authorised for issue:
Registration of Portuguese subsidiary
On 15 March 2024, the company registered an entity in Portugal, Prosapient Portugal, S.A. which is a 100% owned subsidiary of Prosapient Limited.
Appointment of Director
Aneil Rakity was appointed as a director on 1 January 2024.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with section 485 of the Companies Act 2006, a resolution proposing that the auditor, Moore Kingston Smith LLP, be reappointed will be put at a General Meeting.
We have audited the financial statements of Prosapient 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 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 and the Directors' Report.
We have nothing to report in respect of the following matters where 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 group's and 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 group or 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Explanation as to what extent the audit was considered capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, 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.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.
We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of noncompliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
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 for no purpose other than to draw to the attention of the company’s members those matters we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party 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 year was £4,039,237 (2022: £2,587,897).
Prosapient Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Floor 5, 33 Holborn, London, United Kingdom, EC1N 2HT.
The group consists of Prosapient Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Prosapient Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
As at 31 December 2023 the group balance sheet shows net assets of £6,355,050 (2022: £8,856,920) including cash funds of £3,232,814 (2022: £2,021,128). However, during the year the group incurred a loss of £3,998,366 (2022: £1,981,188).
The directors have prepared detailed cashflow forecasts to 31 December 2025 which show that the group will be able to meet its liabilities as they fall due.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
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.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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 the Black Scholes model. 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.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the company as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
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.
Accounting estimates
The following estimates have had the most significant effect on amounts recognised in the financial statements.
Useful economic life of development costs
Assumptions are made on the useful economic life of the development costs and, if shortened, would increase the amortisation charge recognised in the financial statements. Development costs are detailed in note 10.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Capitalisation of development costs
Management have identified costs that meet the capitalisation criteria. Management must make several judgements in determining that the development costs demonstrate all of the criteria detailed in FRS102 section 18.8H. The development costs carrying value at 31 December 2023 was £4,803,513 as detailed in note 10.
Recognition of deferred tax assets
Deferred tax assets are recognised to the extent that it is considered probable that those assets will be recoverable. This includes an assessment of when those assets are likely to reverse, and a judgement as to whether there will be sufficient taxable income available to offset assets when they do reverse.
This requires assumptions regarding the future profitability of the group for the 12 months from the date of signing of the financial statements, and as this is inherently uncertain, no deferred tax asset in relation to tax losses has been recognised in the financial statements. The group has trading losses of £11.985m (2022: £8.004m) carried forward at 31 December 2023.
Share-based payments
Management are unable to directly measure the fair value of employee services received. Instead the fair value of the share options granted in the year ended 31 December 2023 is determined using the Black-Scholes options pricing model. The model is internationally recognised as being appropriate to value employees share schemes but does require inputs based on best estimates from management and third party professional advisers. Equity settled arrangements are measured at fair value at the date of the grant using the model. The fair value is expensed on a straight-line basis over the vesting period.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The disclosure above includes wages and salaries and social security costs of £1,881,009 (2022: £1,977,018) and £55,052 (2022 £30,651) respectively which have been capitalised as development costs in the year.
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2023 are as follows:
The company directly owns 100% of the Ordinary share capital of all of its subsidiaries.
The registered office of Prosapient Inc is 555 Fayetteville Street, Suite 700, Raleigh, NC 27601.
The registered office of Prosapient Canada Inc is 1255 Bay Street, Toronto, Ontario, M5R 2A9.
The registered office of Prosapient Technologies, Sociedad Limitada is SL-B-01992155, Paseo de Gracia, 50, 5, 08007, Barcelona.
On 15 March 2024, the company registered an entity in Portugal, Prosapient Portugal, S.A. which is a 100% owned subsidiary of Prosapient Limited.
The registered office of Prosapient Portugal S.A is Avenida Antonion Augusto de Aguiar, 19, 4. Dto. Sala B. freguesia de Avenidas, Novas e concelho de Lisboa.
Prosapient Technologies, Sociedade Limitada was dissolved in September 2023.
The company has issued £1,500,000 (2022: £nil) of non-convertible loan notes with an interest rate of 16% per annum. The first capital repayment is due on 30 June 2025, with five further payments at the end of each subsequent quarter. The loans are unsecured.
The loan notes were issued to existing shareholders of the company and £150,000 (2022: £nil) of the loan notes issued were issued to a shareholder who is also a Director.
The company and group have estimated trade losses of £10,982,398 (2022: £8,004,121) available to carry forward against future taxable profits. A deferred tax asset has not been recognised at 31 December 2023 or 31 December 2022 due to the uncertainty of the timing of recurring future taxable profits against which the losses can be utilised.
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 Company operates an EMI Share option Scheme for its employees. Upon vesting, each option allows the holder to purchase one ordinary share at the pre-agreed option price.
In the year ended 31 December 2023, 43,600 options were granted and 58,635 options were exercised. As at 31 December 2023, there were 327,734 options outstanding.
The fair value of the options granted was determined using the Black-Scholes option pricing model. The calculation takes into account no future dividends, a volatility rate of 15% based on expected share price and a vesting period of 3.5 - 4.0 years. The risk free rate was determined as between 4.43% and 4.66% depending upon the date of grant.
The comparative disclosure has been restated with no impact on the share option charge for the year ended 31 December 2022.
The share option charge in the financial statements is £8,698 (2022: £32,487).
In the year ended 31 December 2023, no options were granted to Directors and no options were exercised Directors. As at 31 December 2023, there were 100,000 (2022: 100,000) Director share options outstanding. 62,500 options were exercised after the year end.
The share option charge on these options is £127,836 (2022: £204,077)
On 3 January 2023 500 A Ordinary shares of £0.000001 each were issued at par.
On 19 January 2023 25,000 Growth shares of £0.000001 each were issued at par.
On 30 June 2023 4,500 A Ordinary shares of £0.00001 were issued at £0.0001 each and 2,350 A Ordinary shares of £0.00001 each were issued at £0.1 each.
On 16 October 2023 79,281 Preference shares of £0.000001 each were issued at £18.92 each and 777 Series A1 shares of £0.000001 each were issued at par.
On 4 December 2023 21,752 A Ordinary shares of £0.00001 were issued at £0.01 each, 400 A Ordinary shares of £0.00001 each were issued at £10 each and 4,133 Growth shares of £0.00001 each were issued at par.
The company was subject to a fixed charge in respect of a rent deposit date 10 October 2021 until April 2023 when the fixed charge was satisfied in full.
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:
Issue of new shares
On 15 April 2024, the company issued 1,650 Growth shares each having a nominal value of £0.000001 and were issued at par. The company issued 27,996 Growth shares each having a nominal value of £0.00001 each and were issued at £0.003572 each.
On 22 May 2024, the company issued 68,750 Growth shares each having a nominal value of £0.000001 and were issued at par.
The issue of shares has been recognised as a non-adjusting post balance sheet event as they do not affect the financial position of the company or group as at the balance sheet date.
During the year S Holliday, a director of the company, was issued 165,000 loan notes at a value of £1 each (2022: nil) and was issued with 1,745 warrants (2022: nil).
During the year 24 Haymarket Limited, a company which holds shares in Prosapient as nominee, was issued 100,000 loan notes at a value of £1 each (2022: nil) and was issued with 20,000 warrants (2022: nil).
During the year Smedvig Capital Nominee Limited, a company of which R Toms is a director, charged the company £55,350 (2022: £50,000) as an annual monitoring fee. Smedvig Capital Nominee Limited were charged £1,788 (2021: £4,518) in the year, of which £2,145 (2022: £2,113) is included in outstanding debtors at 31 December 2023.
During the year Begins With Limited, a company of which M Wroe is a director, charged the company £7,500 (2022: £nil) for professional services.