The directors present the strategic report for Santos Vision Limited (the "Company") and its subsidiaries (the "Group") for the year ended 31 December 2023.
The Group continues to drive engagement with its key clients, a number of which are major players in the industry, which has resulted in the Group expanding in to more countries and expanding the utilisation of the Group's products and services. The year has been a successful one with results as expected by management.
The Group's primary operating strategy is to seek out projects which are profitable, rather than purely focusing on turnover and market share levels, however differing projects do vary in the gross margin they yield, and management continues to review and base strategy around acceptable project margin yields for the Group to undertake with customers. During the year, turnover has increased from £12.9m to £17.2m, up by 33%. However the Group did see a slight decline in gross profit margin from 65.9% (as reclassified) to 57.1%. The decrease in margin is primarily due to the Group generating a higher proportion of equipment sales in 2023, compared to consulting sales in 2022, with consulting sales typically generating a higher gross margin.
During the year, the Group undertook a new investment venture in the form of the development of a residential flat block in Bournemouth, England. The project was still in its planning stages at the reporting date.
There are a number of risks and uncertainties that can impact the performance of the Group which are beyond the control of the Company and its directors.
These include:
Geopolitical factors
Geopolitical factors are the biggest risk to the business since a geopolitical disruption in a specific worldwide location could adversely impact the energy sector and our customers' operations and activities there. Should customers' be restricted from activities by war, regulation or political changes, subsequent business generated could suffer.
Market risk
The price of commodities, such as oil, produced by customers' remains a key influencer of investment decisions made by clients of the Group. Significant drops in the price of such commodities could pose a risk to the ability of the Group to generate revenue and profits, which is largely out of the Group's control.
Key Inputs
With the pandemic a lot of suppliers are facing difficulties with raw materials and electronic components. We have been advised that some components will be delayed, and this may impact the delivery of some of our equipment projects. We are actively seeking alternatives and interacting with the clients to find possible and feasible alternatives to reduce the overall impact.
Personnel logistics is another key parameter. Restrictions are introduced and changed without much notice, people cannot apply for Visa, entry permissions are delayed, and this is causing problems to support the various projects. We have seen situation improving in some countries, but getting worse in others. There is no certainty on what is going to happen and when we will get back to some normality.
Conflict in Ukraine and sanctions on Russia
Although the Group operate in the energy industry, no operations are held or operated in either Russia or Ukraine, and no direct disruption or adverse impacts have been felt as a result of the conflict.
Inflation
Following a dramatic increase in 2022, UK inflation decreased during the year and has steadied post year end. However, the directors consider this to have had a negligible impact on the Group and its operations. With office rent costs fixed and staffing costs at competitive industry levels across its primary operating locations, the Group has not seen dramatic cost base increases causing concern. One of the main drivers of inflation is increased energy prices, which actually is deemed to have a benefit to the Group given the industry it operates in.
The directors anticipate the primary business environment that the Group operate to remain the same and continue to be competitive. The Group continues to be in a good financial position and the risks identified continue to be closely managed. The directors continue to place careful focus on appropriate diversification and development of new products, as well as continuing review of the state of the market and the activities of competitors. The directors are confident in the Group's ability to maintain and build on this position, albeit with cautious growth expectations, with new innovative solutions in product offerings and the expansion of additional projects and new customers.
Given the nature of the business, the Group's directors are of the opinion that analysis using KPIs beyond those reported within the financial statements, is not necessary for the understanding of the development, performance or position of the business.
The main financial metrics the directors monitor to assess the position and performance of the business are cash on hand, which decreased from £12.5m to £10.0m during the year to 31 December 2023, due primarily to the Group's £1.8m short term investment in the Bournemouth residential flat development project, held in work in progress at the year end. Turnover can fluctuate drastically based on energy and other input commodities to the energy sector such as oil, so profitability is monitored and provides a better depiction of the performance of the business. Total gross profit rose from £8.5m (as reclassified) to £9.8m during the year, driven by higher sales volumes across the Group, Operating profit margin was 19.9% in 2023 compared to 14.8% in 2022. The primary overheads of the Group continue to be wages and salaries, depreciation of equipment and IT and insurance related expenditure. Management continues to ensure competitive salaries are paid to retain high quality staff whilst ensuring sufficient investment in IT infrastructure and ongoing services are maintained.
The Group has a solid financial position, holding more than sufficient cash reserves to meet its liabilities as they fall due with a suitable surplus to support any unforeseen business interruptions or unexpected costs. Beyond its current creditors, the Group does not expect to require further external financing or borrowings. The exposure of the Group to liquidity or cash flow risks is deemed to be low due to the structuring of its existing debts from related parties and contracts in place with customers and suppliers.
The Group's primary borrowings are from key management personnel and although repayable on demand are not expected to be called in the short term or at a time where the Group is not well placed to settle them without compromising its short term working capital or liquidity. The interest rate applicable to the borrowings are at favourable rates compared to current market financing options and remain a suitable source of debt finance within the Group.
The Group does not enter into any formally designated hedging arrangements and does not use hedge accounting.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The directors find the Group's performance for the year satisfactory and as expected. The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £45,422 (2022: £38,856). The directors do not recommend the payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Group has no notable events after the reporting date to report.
The auditor, FLB Audit LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Aside from a subsidiary operating in the United States of America, the Group maintained branch operations in Norway, Australia and Suriname during the current year.
The directors have chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the group's strategic report, information required by Sch. 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) to be contained in the directors' report. It has done so in respect of future developments and financial instruments.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Santos Vision Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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:
We obtained an understanding of the legal and regulatory frameworks within which the Group and company operate, focusing on those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The laws and regulations we considered in this context were the Companies Act 2006 and UK taxation legislation.
We identified the greatest risk of material impact on the financial statements from irregularities, including fraud, to be the override of controls by management and revenue recognition. Our audit procedures to respond to management override risks included inquiries of management about their own identification and assessment of the risks of irregularities, sample testing on the posting of journals, reviewing accounting estimates for biases and assessing the treatment of non-routine transactions. Our audit procedures to respond to revenue recognition risks included sample testing revenue across the period and deferred revenue as at period end to agree to supporting documentation and reviewing revenue received either side of the period end to ensure this has been recognised correctly.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
The potential effects of inherent limitations are particularly significant in the case of misstatement resulting from fraud because fraud may involve sophisticated and carefully organised schemes designed to conceal it, including deliberate failure to record transactions, collusion or intentional misrepresentations being made to us.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
A reclassification to the prior year Group income statement has been included in the above, to reflect a correction to the allocation of cost of sales and administrative expenditure of the Group in 2022. The reclassification resulted in a decrease of £581,774 to cost of sales and a corresponding increase of the same amount to administrative expenses.
The directors believe this reclassification providers a more accurate reflection of direct costs associated with the Group's turnover and the resultant gross profit margin. The reclassification has been applied consistently in the current year Group income statement.
As permitted by s408 Companies Act 2006, the Company has not presented its own profit and loss account and related notes. The Company’s profit for the year was £1,869,170 (2022: £429,838 loss).
Santos Vision Limited (the "Company”) is a private company limited by shares, domiciled and incorporated in England and Wales. The registered office is 1010 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire, United Kingdom, RG41 5TS.
The Group consists of Santos Vision 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 all companies within the Group, with the exception of Safekick Americas LLC, of which the functional currency is United States Dollars. Monetary amounts in these financial statements are rounded to the nearest £, being the chosen presentational currency of the Group.
The parent company has taken advantage of the exemption from preparing a company statement of cash flows, on the basis that it is a qualifying entity and the group statement of cash flows, included in these financial statements, includes the Company's cash flows.
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 Santos Vision Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 2022. 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.
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.
The Group continues to maintain a strong short term working capital position based around holding more than sufficient cash reserves, to cover its working capital requirements for the foreseeable future. The directors continue to manage and develop a robust pipeline of work across various geographical locations around the globe. This is strengthened by the current environment of a high energy, and energy input commodities such as oil, prices which although volatile at times, are expected to remain at a generally high level for the foreseeable future. Post year end performance of the Group and forecasts into future years continue to provide strong indication of the Group's ability to continue in operational existence and profitability.
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.
Revenue from equipment sales is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
When the outcome of a consulting contract can be estimated reliably, contract costs and turnover are recognised by reference to the stage of completion at the balance sheet date. Where the outcome cannot be measured reliably, contract costs are recognised as an expense in the period in which they are incurred and contract turnover is recognised to the extent of costs incurred that it is probable will be recoverable. When it is probable that contract costs will exceed the total contract turnover, the expected loss is recognised as an expense immediately, with a corresponding provision.
Licensing fees are recognised when customers are granted the right to use the software and are recognised based on usage over the term of the contract.
Software
The Group has created software that it markets to customers through licensing and hosting services as an application service provider. Costs incurred related to the development of the software to be licenced prior to technological feasibility are expensed. Once the Group concludes that technological feasibility is obtained, all subsequent development costs are capitalised and reported at the lower of amortised cost or net realisable value. Amortisation is computed on an individual product basis over the estimated useful economic life of the product of 5 years, using the straight line method.
Patents
The cost of patents with determinable useful lives is amortised to reflect the pattern of economic benefits consumed on a straight line basis over 17 years from the date the patent is filed. Patents with contractual terms are generally amortised over their respective legal or constructive lives. When certain events or changes in operating conditions occur, an impairment assessment is performed and the life of the patents may be adjusted. The patents are held in the name of the a Group company.
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
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 income statement.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date where there is an indication of impairment and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
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.
Other investments, where the Group does not exert control or significant influence, are held at cost and subsequently measured at cost less any accumulated impairment losses.
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.
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 statement of financial position when the Group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors and amounts due to key management personnel, 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.
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 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 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 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 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 Group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the statement of financial position. The Assets of the plan are held separately from the Group in independently administered funds.
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.
Consolidated within the Group financial statements are the results and financial position of a foreign subsidiary undertaking. Items included in the financial statements of each of the entities in the Group are measured using the currency of the primary economic environment in which the Group operates (the functional currency). The functional currency is British Pounds Sterling. The Company financial statements are presented in sterling.
(i) Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end, foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account.
(ii) Translation
The trading results of Group undertakings that have a different functional currency from that of the group are translated into sterling at the average exchange rate for the year. Their assets and liabilities, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rate as at the year end.
Exchange adjustments arising from the retranslation of opening net investments and from the translation of the profits or losses at average rates are recognised in ‘Other comprehensive income’.
In the application of the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements have had the most significant effect on amounts recognised in the financial statements.
The key judgements made by management in respect of revenue is the point at which that revenue should be recognised. Management consider the underlying contract terms and conclude upon the most appropriate point of the cycle at which to recognise revenue based upon these terms and in particular where the risks and rewards of ownership transfer.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. Residual value assessment consider issues such as the remaining life of the asset and the projected disposal value.
Intangibles are capitalised in accordance with accounting standards and the Group's accounting policy. Management estimate the useful life of intangible assets based on factors such as the expected use in the business.
Turnover is attributable to the one principal activity of the Group, which can be analysed into the following classes of business, in the following geographical markets.
The average monthly number of persons (including directors) employed by the Group and Company during the year was:
Their aggregate remuneration comprised:
*Remuneration to directors of the Group has been correctly restated for 2022 from £31,578.
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 Group has no tax adjusted losses available for carry forward against future trading profits. The Group has unrelieved foreign tax credits amounting to £1,211,813 (2022: £930,250), for which a deferred tax asset has not been recognised due to uncertainty around recoverability and timing of the realisation of benefits from such tax credits.
On 1 April 2023, the main rate of UK corporation tax increased from 19% to 25%.
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
Details of the Company's subsidiaries at 31 December 2023 are as follows:
Included in other creditors is £9,011,938 (2022: £9,457,730) owed to key management personnel, relating to loan note borrowings which are unsecured, repayable on demand and carry interest at 2.66% per annum.
The following are the major deferred tax liabilities and assets recognised by the Group and Company, and movements thereon:
Deferred tax liabilities relate to Group companies resident in both the UK and US and are expected to reverse in line with the depreciation or amortisation of the underlying tangible and intangible fixed assets to which they relate, being 3 to 7 years.
Deferred tax assets relate to Safekick Americas LLC, which is tax resident in the United States of America. The principal factor in the net deferred tax asset recognised, is the timing difference for qualifying tax relief on accrued interest costs within that subsidiary's financial statements. The timing of the realisation of the associated tax relief for which the deferred tax asset is provided, is uncertain due to the underlying loan notes being repayable on demand, but unlikely to be recalled for payment in the near future.
At the comparative reporting date the deferred tax assets and liabilities related to separate tax jurisdictions and there was no legal right to offset the underlying timing differences against one another. As such the deferred tax assets and liabilities were not presented net of each other in the Group financial statements.
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.
Contributions totalling £16,650 were payable to the fund at the prior year end and were included in other creditors. No contributions remained payable at the reporting date
Each class of Ordinary share capital is entitled to one vote in each circumstance, to equal dividend payments and distributions (including on winding up).
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases for the rental of office premises in the UK and United States of America, which fall due as follows:
The Group has no notable events after the reporting date to report.
The only key management personnel are the directors, whose remuneration has been disclosed in note 7 to the financial statements.
During the year the Group and Company entered into the following transactions with related parties. All transactions between fellow Group undertakings have been eliminated on consolidation are not disclosed within the Group financial statements. Related party transactions between the parent Company and non-wholly owned Group members are disclosed in this note.
The following amounts were outstanding at the reporting end date:
Amounts owed to key management personnel consist of loan note borrowings which are unsecured, repayable on demand and carry interest at 2.66% per annum. During the year, the Group paid $200,000 (approximately £160,874) of accrued interest to the loan note holder (2022: nil).
The following amounts were outstanding at the reporting end date:
Amounts owed by other related parties consist of intercompany loan advances made by the Group, which bear interest at 2.74% and is repayable to the Group by way of instalment, maturing October 2034.