The director presents the strategic report for the year ended 31 March 2024.
Compass (Alexander Associates) has performed consistently through the year. Some KPIs have fallen noticeably, but by exploring growing sectors in the UK economy we have continued to outperform the wider umbrella industry.
Brand
As a group, Compass has continued to promote its brand with a focus on service levels, building an honest reputation, and a unique character that spotlights honesty, integrity and transparency in the industry. Compass has maintained a Trust Pilot score of 4.8 / 5 Stars.
People
As a payroll company, we know that our team are our biggest asset. We continually invest in creating an environment that is enjoyable to work in, with a culture that rewards hard work, and provides many benefits so that people feel like they are taken care of, even when they are not at work.
The Board continues to invest in the health and wellbeing of our staff through Private Medical Insurance, with an option extended to families as well as employees, and we continue to look for other health and happiness initiatives that benefit our teams.
Board
The Compass Executive Team is a well-balanced team and aims for integrity, intelligence, and evolution when making decisions. This means that we only make decisions in the board room that we would be comfortable declaring in a public forum, and we aim to drive the industry forward by showing that you can do well by following your moral and ethical Compass.
Using these principles as our guiding light, the Board is committed to taking a long-term perspective on all matters to ensure the ongoing success of Compass and oversee a structured approach to the development of the company’s strategic plan.
The market
Factors in the market that influence our strategy:
while Compass AA outperformed the market for much of the year: while the market has been depressed, with signs of recovery only showing in late February/early March 2024. Compass AA has bucked the general industry trend by tapping into growing sectors of the economy, like aerospace engineering.
the lead up to the election and subsequent change in government has paused work on the governments plans for Tackling non-compliance in the umbrella company market. What Labour choose to do in the new parliament may have significant implications for the umbrella industry – they are yet to indicate whether they will drop the changes altogether or look to go further than the original proposals
further, as early adopters of SafeRec, a new compliance technologies that provide real-time compliance for both contractors and agencies alike, we expect to see a net positive impact from any legislation, as competitors scramble to catch up.
while legislation could go some way to improving the situation, major change could still be some time away. In the meantime, malpractice is still rife and continues to erode trust in the industry. Until compliance standards in the industry improve, we will continue to promote best practise due diligence with our partners, and campaign for a legislative environment that supports compliant umbrella and pro-actively seeks to curb non-compliance
the incidence of major Cyber-attacks has decreased but we continue to remain vigilant. Compass continues staff training alongside comprehensive cyber protection systems cyber insurance should the worst happen.
Opportunities
Looking ahead, the opportunities are clear:
Our reputation and the reputation of the industry
Our campaigns to improve the reputation of the industry continues. Our reputation is tied to that of the wider industry – when one provider is found to be non-compliant, we are all tarred with the same brush. Historically, people have chosen to keep quiet when suspicions have been raised, but we have chosen to call people out where evidence of malpractice has been found. We have a reputation for being outspoken on matters of compliance and due diligence, and we will continue to challenge the status quo until the reputation of the industry is exemplary.
We fully accept that we cannot lead this movement unless our own reputation is beyond reproach and that is why we have adopted SafeRec – industry-leading, real-time, compliance technology – and have maintained our Professional Passport accreditation – the only independent annual accreditation available. Further, we continue to refuse entry to other accreditations until they demonstrate in the long-term that they put the interests of contractors and hirers above their own interests and those of their members.
Systemisation, Automation and Outsourcing
Our bespoke, automated robotic payroll app has allowed us to scale our operations while simultaneously improving the quality of work that we are able to offer our employees and improving the conversations we have with contractors and agencies.
Follow the successful launch, we seeded an ARP team in other major departments within the business, to find small, repetitive tasks that can be automated, however due to the soft growth in the market, development was paused. With strong growth returning, we are now pushing ahead with phase 2, which will expand these smaller bots until they link together and across departments.
The group maintained its strong growth through the year to 31 March 2024. Comparing our KPIs to the same period a year earlier:
4-Week Rolling Average to 31 March:
Weeks paid decreased by 6%
Gross margin decreased by 8%
Totals for the 12 Months to 31 March:
Weeks paid increased by 8%
Gross margin increased 10%
This statement is intended by the Directors to set out how they have approached and met their responsibilities under Section 172 of the Companies Act 2006 in the financial period ending 31 March 2024.
The Directors of Compass CE act in accordance with a set of general duties, including those under Section 172 of the Companies Act 2006 to promote the success of the company for the benefit of its members as a whole. In doing so they complied with the below factors:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct,
(f) the need to act fairly as between members of the company.
Our relationships with suppliers, customers, community and the environment
As a socially responsible company, Compass supports the wider UK community by donating to a wide variety of charity partners, and engaging the local community by supporting efforts to improve the local environment for our employees and neighbours, and the local regulations that support small businesses.
We believe in building long-term relationships within the supply chain, such that our suppliers and customers view us as partners in their business, and they in ours.
Greenhouse Gas Emissions
It is deemed that the energy consumed by the group is less than 40,000 kWh, therefore the exemption has been taken not to disclose the energy used during the period.
Summary
In summary, the results have been mixed. While the business has outperformed the market, the market has been depressed. The group has responded to these economic conditions in a sensible way, using new technology and flexible hiring policy to minimise cost without restraining growth, while Compass AA has pushed into new sectors of the economy where there is considerable groawth. External factors will again play a significant role in the performance of the business over the next 12-24 months as the new government unveils new policies for the economy.
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 March 2024.
The results for the year are set out on page 11.
Ordinary dividends were paid amounting to £49,000. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
Azets Audit Services were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's 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 director with respect to going concern are described in the relevant sections of this report.
Other information
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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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:
the engagement partner 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 other management, and from our commercial knowledge and experience of the employment of contractors sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgments and assumptions made in determining the accounting estimates set out in the accounting policies were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The income statement has been prepared on the basis that all operations are continuing operations.
The notes on pages 14 to 21 form part of these financial statements.
Compass (Alexander Associates) Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 2 Oriel Court, 106 The Green, Twickenham, Middlesex, United Kingdom, TW2 5AG.
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 £.
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 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.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, 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 company’s contractual obligations expire or are discharged or cancelled.
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.
In the application of the company’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Revenue and cost of sales include work carried out but potentially not invoiced at the year end. This involves the use of judgement by management as to the value of work done. Any work that has been completed before the year end would have been accrued into the financial statements, if not invoiced, to ensure correct cut off.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
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:
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. At the balance sheet date the amount due to the pension fund was £10,235 (2023: £9,321).
Ordinary B shares are ranked pari passu in respect of dividend payments or any other distribution, and also in respect of voting at general meetings of the company.
During the year the company loaned a company which has certain directors in common £400,000 (2023: £nil) and received repayment of £350,000 (2023: £nil). At the balance sheet date the amount due from the related company was £50,000 (2023: £nil). Interest is applied on the loan. There are no set repayments and the loan is repayable on demand.