Company registration number 12326101 (England and Wales)
EMPATHY HOLDINGS LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
EMPATHY HOLDINGS LTD
COMPANY INFORMATION
Directors
J Lueje
Mr Angel Maldonado
(Appointed 16 July 2024)
Company number
12326101
Registered office
6 Victoria Avenue
Harrogate
United Kingdom
HG1 1ED
Auditor
Xeinadin Audit Ltd
i2 Mansfield, Office Suite 0.3
Hamilton Court
Oakham Business Park
Mansfield
Nottinghamshire
NG18 5FB
EMPATHY HOLDINGS LTD
CONTENTS
Page
Strategic report
1
Directors' report
2 - 3
Independent auditor's report
4 - 6
Group statement of comprehensive income
7
Group balance sheet
8
Company balance sheet
9
Group statement of changes in equity
10
Company statement of changes in equity
11
Group statement of cash flows
12
Company statement of cash flows
13
Notes to the financial statements
14 - 28
EMPATHY HOLDINGS LTD
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Review of the business/ Development and performance

2023 was a very challenging year with a reduction of revenue driven by the renewal contract with our main client in the US, albeit for two years they committed to utilizing fewer resources.  This factor in combination with the full effects of overstaffing put a lot of pressure on margins with the overall effect for the group of barely breaking even before tax full year.  End of Q1 2023 marked the peak in terms of Headcount and the company has been in restructuring mode since then bringing down the total number of resources by 25%.  Motive on the other hand continued growing reaching 700 paying subscribers by year end.  Finally, our open innovation efforts translated into new business lines such as Visible Privacy, Ethical Alliance and Beautiful consent all of which continue growing and are expected to start contributing to the business next year.

 

 

Principal risks and uncertainties

The business environment remains tough in all regions and therefore is paramount the group continues executing its restructuring and optimizing every single cost line, an ongoing process that will continue well into the following years.  Empathy is very much on a doing-more-with-less mode and while revenue remains stable the focus continues to be in diversification and cost reduction to align margins with historical levels.  In terms of technology, AI applications continues to be where the most room for disruption comes from and the strategy remains to harness this challenge to provide value to our clients and make a significant contribution to the overall growth of the business.  The sector continues to be under heavy pressure, and it is in very much in consolidation mode which in turn could provide interesting opportunities to grow through acquisitions.  Other key challenges include 1) competition from both other market players as well as internal technology groups at key clients 2) product differentiation through new features that add value through innovation 3) acquisition cost of clients and revenue internally generated vs acquisitions 4) customer retention and satisfaction .

 

 

 

 

Key performance indicators

Churn has slowed down significantly at the Empathy platform level with fewer client exiting vs previous years.  At Motive the customer acquisition cost remains elevated and much effort is being put into bringing this down, conversion rates on the other hand are trending well toward the 50% level, while the net number of subscribers exiting the product is very solid in the high single digits.  At the Enterprise level search conversion rates, zero results and add to carts are all in line with expectations with improvement in some areas.  In terms of recurrent revenue 2023 was the trough and a swift recovery is expected through the investments made in areas such are Motive, Visible Privacy, Ethical Commerce Alliance as well as our partnerships at the Enterprise customer level.

 

 

 

On behalf of the board

J Lueje
Director
25 November 2024
EMPATHY HOLDINGS LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company and group continued to be that of the development of software for search and navigation for online merchants.

Results and dividends

The results for the year are set out on page 7.

Ordinary dividends were paid amounting to £1,212,233. The directors do not recommend payment of a further dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

J Lueje
Mr Angel Maldonado
(Appointed 16 July 2024)
Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

Medium-sized companies exemption

This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.

EMPATHY HOLDINGS LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
On behalf of the board
J Lueje
Director
25 November 2024
EMPATHY HOLDINGS LTD
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF EMPATHY HOLDINGS LTD
- 4 -
Opinion

We have audited the financial statements of Empathy Holdings Ltd (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, the company 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).

In our opinion the financial statements:

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:

EMPATHY HOLDINGS LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF EMPATHY HOLDINGS LTD
- 5 -
Matters on which we are required to report by exception

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:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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 company operates, 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 relating to the reporting framework (The Companies Act 2006) and relevant taxation compliance regulations.

 

In addition, we also concluded that there are certain significant laws and regulations which may have an effect on the determination of the amounts and disclosures in the financial statements, being those laws relating to environmental and occupational health and safety regulations, and also data protection and GDPR guidelines.

 

We understood how the company is complying with these frameworks and regulations by making enquiries of management and those responsible for compliance and corroborated these enquiries with reviews of board minutes and any available correspondence with legal advisors.

 

We assessed that there were risks of material impact on the financial statements from irregularities, including fraud from the override of controls by management, timing and recognising of income and in the manipulation of the company's key performance indicators to meet targets.

 

 

EMPATHY HOLDINGS LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF EMPATHY HOLDINGS LTD
- 6 -

Audit response to risks identified

 

We carried out procedures to respond to these risks, including enquiries of management about their systems and controls to identify these risks of irregularities, testwork to review a sample of journal entries made during the year, reviewing and testing assumptions made on accounting estimates for management biases and testing the timing and recognition of revenue.

 

Our audit procedures were designed to respond to risks of material misstatements in the financial statements, recognising that 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 more sophisticated acts, including concealment, collusion or deliberately failing to record transactions through intentional misrepresentation.

 

There are inherent limitations within an audit, even though it has been properly planned and carried out in accordance with auditing standards and we cannot be responsible for preventing non-compliance and cannot be expected to detect non compliance with all laws and regulations.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Christopher Holder BA BFP FCA (Senior Statutory Auditor)
For and on behalf of Xeinadin Audit Ltd
25 November 2024
Accountants
Statutory Auditor
i2 Mansfield, Office Suite 0.3
Hamilton Court
Oakham Business Park
Mansfield
Nottinghamshire
NG18 5FB
EMPATHY HOLDINGS LTD
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
2023
2022
Notes
£
£
Turnover
3
15,134,540
19,799,334
Cost of sales
(201,951)
(328,738)
Gross profit
14,932,589
19,470,596
Administrative expenses
(17,139,837)
(17,387,594)
Other operating income
1,559,303
599,626
Operating (loss)/profit
4
(647,945)
2,682,628
Interest receivable and similar income
7
32,523
822
Interest payable and similar expenses
8
(5,778)
(11,349)
(Loss)/profit before taxation
(621,200)
2,672,101
Tax on (loss)/profit
9
25,392
(401,765)
(Loss)/profit for the financial year
(595,808)
2,270,336
Other comprehensive income
Currency translation loss taken to retained earnings
(565,385)
(518,942)
Currency translation gain arising in the year
46,443
217,418
Total comprehensive income for the year
(1,114,750)
1,968,812
(Loss)/profit for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.
EMPATHY HOLDINGS LTD
GROUP BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 8 -
2023
2022
Notes
£
£
£
£
Fixed assets
Intangible assets
11
2,457,605
1,523,698
Tangible assets
12
317,561
473,270
2,775,166
1,996,968
Current assets
Debtors
15
4,497,776
5,497,688
Cash at bank and in hand
727,769
2,481,968
5,225,545
7,979,656
Creditors: amounts falling due within one year
16
(1,183,710)
(1,342,898)
Net current assets
4,041,835
6,636,758
Total assets less current liabilities
6,817,001
8,633,726
Provisions for liabilities
Deferred tax liability
18
349,077
357,761
(349,077)
(357,761)
Net assets
6,467,924
8,275,965
Capital and reserves
Called up share capital
20
1,263
1,263
Share premium account
20,594
20,594
Capital redemption reserve
61
61
Other reserves
610,431
563,988
Profit and loss reserves
5,835,575
7,690,059
Total equity
6,467,924
8,275,965

These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.

The financial statements were approved by the board of directors and authorised for issue on 25 November 2024 and are signed on its behalf by:
25 November 2024
J Lueje
Director
Company registration number 12326101 (England and Wales)
EMPATHY HOLDINGS LTD
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Investments
13
444,651
1,331,502
Current assets
Debtors
15
3,583,577
-
0
Cash at bank and in hand
729
443,402
3,584,306
443,402
Creditors: amounts falling due within one year
16
(490)
(151)
Net current assets
3,583,816
443,251
Net assets
4,028,467
1,774,753
Capital and reserves
Called up share capital
20
1,263
1,263
Profit and loss reserves
4,027,204
1,773,490
Total equity
4,028,467
1,774,753

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 £3,465,947 (2022 - £2,025,284 profit).

The financial statements were approved by the board of directors and authorised for issue on 25 November 2024 and are signed on its behalf by:
25 November 2024
J Lueje
Director
Company registration number 12326101 (England and Wales)
EMPATHY HOLDINGS LTD
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
Share capital
Share premium account
Capital redemption reserve
Other reserves
Currency translation reserve
Profit and loss reserves
Total
Notes
£
£
£
£
£
£
£
Balance at 1 January 2022
1,263
20,594
61
4,842
301,524
5,671,517
5,999,801
Year ended 31 December 2022:
Profit for the year
-
-
-
-
-
2,270,336
2,270,336
Other comprehensive income:
Currency translation differences
-
-
-
-
217,418
-
217,418
Total comprehensive income
-
-
-
-
217,418
2,270,336
1,968,812
Dividends
10
-
-
-
-
-
(251,794)
(251,794)
Transfers
-
-
-
40,204
-
-
40,204
Balance at 31 December 2022
1,263
20,594
61
45,046
518,942
7,690,059
8,275,965
Year ended 31 December 2023:
Loss for the year
-
-
-
-
-
(595,808)
(595,808)
Other comprehensive income:
Currency translation differences
-
-
-
-
46,443
(46,443)
-
Total comprehensive income
-
-
-
-
46,443
(642,251)
(1,114,750)
Dividends
10
-
-
-
-
-
(1,212,233)
(1,212,233)
Balance at 31 December 2023
1,263
20,594
61
45,046
565,385
5,835,575
6,467,924
EMPATHY HOLDINGS LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 January 2022
1,263
-
0
1,263
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
2,025,284
2,025,284
Dividends
10
-
(251,794)
(251,794)
Balance at 31 December 2022
1,263
1,773,490
1,774,753
Year ended 31 December 2023:
Profit and total comprehensive income
-
3,465,947
3,465,947
Dividends
10
-
(1,212,233)
(1,212,233)
Balance at 31 December 2023
1,263
4,027,204
4,028,467
EMPATHY HOLDINGS LTD
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
22
1,759,898
2,374,501
Interest paid
(5,778)
(11,349)
Income taxes paid
(415,034)
(753,620)
Net cash inflow from operating activities
1,339,086
1,609,532
Investing activities
Purchase of intangible assets
(1,262,491)
(360,474)
Proceeds from disposal of intangibles
-
(60,531)
Purchase of tangible fixed assets
(4,423)
(118,618)
Proceeds from disposal of tangible fixed assets
14,666
964
Proceeds from capital reserve
-
40,204
Repayment of loans
(494,019)
878,662
Interest received
32,523
822
Net cash (used in)/generated from investing activities
(1,713,744)
381,029
Financing activities
Repayment of borrowings
-
(886,851)
Repayment of bank loans
(167,308)
138,100
Dividends paid to equity shareholders
(1,212,233)
(251,794)
Net cash used in financing activities
(1,379,541)
(1,000,545)
Net (decrease)/increase in cash and cash equivalents
(1,754,199)
990,016
Cash and cash equivalents at beginning of year
2,481,968
1,491,952
Cash and cash equivalents at end of year
727,769
2,481,968
EMPATHY HOLDINGS LTD
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash absorbed by operations
23
(3,583,577)
-
0
Investing activities
Proceeds from disposal of subsidiaries
886,851
(1,330,277)
Interest received
1,785
794
Dividends received
3,464,501
2,024,641
Net cash generated from investing activities
4,353,137
695,158
Financing activities
Dividends paid to equity shareholders
(1,212,233)
(251,794)
Net cash used in financing activities
(1,212,233)
(251,794)
Net (decrease)/increase in cash and cash equivalents
(442,673)
443,364
Cash and cash equivalents at beginning of year
443,402
38
Cash and cash equivalents at end of year
729
443,402
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
1
Accounting policies
Company information

Empathy Holdings Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 6 Victoria Avenue, Harrogate, United Kingdom, HG1 1ED.

 

The group consists of Empathy Holdings Ltd and all of its subsidiaries.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, [modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value]. The principal accounting policies adopted are set out below.

1.2
Business combinations

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

 

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

1.3
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company Empathy Holdings Ltd 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.

EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -

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.

1.4
Going concern

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.

1.5
Turnover

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.

Revenue from the sale of goods 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.

1.6
Research and development expenditure

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.

1.7
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -

Intellectual property is valued at the costs incurred to obtain the property or the right to use or to grant the use of the property. These include but are not limited to invention patents, utility model protection certificates, industrial design and production patents.

Intellectual property rights are valued at the acquisition price or production cost, including the carrying value of development expenses activated at the time of obtaining the corresponding patent or similar, including the cost of registration and formalisation of intellectual property.

They are subject to amortisation and valuation adjustment for impairment.

 

Development costs are made up of research and development expenditure.

Research expenditure is activated from the time that the following conditions are met (if chosen to activate them);

Development expenditure is activated from the time in which all the following conditions are met;

The fulfilment of all the above conditions is verified during all the years in which the project is executed. The amount to be activated is the one that occurs from the time at which said conditions are fulfilled.

Research and development projects that are commissioned to other companies or institutions are valued at their purchase price.

Projects executed with the company's own resources are valued at their production cost, which includes all costs directly attributable and which are necessary to create, produce and prepare the asset so that it can operate as intended.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Intellectual property
10% per annum straight line
Development costs
10% & 20% per annum straight line
1.8
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Freehold land and buildings
10% on straight line basis
Fixtures and fittings
8% & 10% on straight line and 25% on reducing balance basis
Computers
25% on straight line basis
Motor vehicles
16% on straight line basis
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -

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.

1.9
Fixed asset investments

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.

1.10
Impairment of fixed assets

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.

1.11
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.12
Financial instruments

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

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

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.

EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the 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.

Classification of financial liabilities

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

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.

1.13
Equity instruments

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.

1.14
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the 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.

EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 19 -
Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the 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.

1.15
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.16
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.17
Leases

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.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

1.18
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
2
Judgements and key sources of estimation uncertainty

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.

3
Turnover and other revenue
2023
2022
£
£
Turnover analysed by geographical market
Europe
3,162,529
5,645,258
North America
11,972,011
14,154,076
15,134,540
19,799,334
2023
2022
£
£
Other revenue
Interest income
32,523
822
4
Operating (loss)/profit
2023
2022
£
£
Operating (loss)/profit for the year is stated after charging/(crediting):
Exchange losses/(gains)
120,584
(357,525)
Fees payable to the group's auditor for the audit of the group's financial statements
6,000
6,000
Depreciation of owned tangible fixed assets
143,932
93,370
Loss on disposal of tangible fixed assets
1,534
-
Amortisation of intangible assets
328,584
204,069
(Profit)/loss on disposal of intangible assets
-
60,531
Operating lease charges
87,315
63,388
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company and its subsidiaries
29,560
24,000
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
6
Employees

The average monthly number of persons (including directors) employed by the group and company during the year was:

Group
Company
2023
2022
2023
2022
Number
Number
Number
Number
230
293
-
0
-
0

Their aggregate remuneration comprised:

Group
Company
2023
2022
2023
2022
£
£
£
£
Wages and salaries
12,057,437
11,812,184
-
0
-
0
Pension costs
80,704
62,884
-
0
-
0
12,138,141
11,875,068
-
0
-
0
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
31,864
822
Other interest income
659
-
Total income
32,523
822
2023
2022
Investment income includes the following:
£
£
Interest on financial assets not measured at fair value through profit or loss
31,864
822
8
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
177
859
Other interest on financial liabilities
145
10,490
322
11,349
Other finance costs:
Other interest
5,456
-
Total finance costs
5,778
11,349
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
9
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
118,859
323,291
Foreign current tax on profits for the current period
224,807
486,971
Total current tax
343,666
810,262
Deferred tax
Origination and reversal of timing differences
(801)
1,642
Changes in tax rates
(368,257)
(410,139)
Total deferred tax
(369,058)
(408,497)
Total tax (credit)/charge
(25,392)
401,765

The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
(Loss)/profit before taxation
(621,200)
2,672,101
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%)
(146,106)
507,699
Tax effect of expenses that are not deductible in determining taxable profit
12,134
33,104
Tax effect of income not taxable in determining taxable profit
7,020
291,728
Unutilised tax losses carried forward
386,349
197,187
Change in unrecognised deferred tax assets
(418,958)
(257,287)
Effect of change in corporation tax rate
4,553
-
Permanent capital allowances in excess of depreciation
(796)
(2,232)
Movement on disallowed/(allowed) amounts in overseas subsidiaries
130,412
(368,434)
Taxation (credit)/charge
(25,392)
401,765
10
Dividends
2023
2022
Recognised as distributions to equity holders:
£
£
Interim paid
1,212,233
251,794
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
11
Intangible fixed assets
Group
Intellectual property
Development costs
Total
£
£
£
Cost
At 1 January 2023
1,866,090
852,387
2,718,477
Additions - internally developed
-
0
1,225,461
1,225,461
Additions - separately acquired
37,030
-
0
37,030
At 31 December 2023
1,903,120
2,077,848
3,980,968
Amortisation and impairment
At 1 January 2023
1,174,576
20,203
1,194,779
Amortisation charged for the year
293,344
35,240
328,584
At 31 December 2023
1,467,920
55,443
1,523,363
Carrying amount
At 31 December 2023
435,200
2,022,405
2,457,605
At 31 December 2022
691,514
832,184
1,523,698
The company had no intangible fixed assets at 31 December 2023 or 31 December 2022.
12
Tangible fixed assets
Group
Freehold land and buildings
Fixtures and fittings
Computers
Motor vehicles
Total
£
£
£
£
£
Cost
At 1 January 2023
27,972
227,247
572,670
60,653
888,542
Additions
-
0
3,405
1,018
-
0
4,423
Disposals
-
0
-
0
(16,200)
-
0
(16,200)
At 31 December 2023
27,972
230,652
557,488
60,653
876,765
Depreciation and impairment
At 1 January 2023
9,685
87,328
273,834
44,425
415,272
Depreciation charged in the year
2,570
14,393
124,592
2,377
143,932
At 31 December 2023
12,255
101,721
398,426
46,802
559,204
Carrying amount
At 31 December 2023
15,717
128,931
159,062
13,851
317,561
At 31 December 2022
18,287
139,919
298,836
16,228
473,270
The company had no tangible fixed assets at 31 December 2023 or 31 December 2022.
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 24 -
13
Fixed asset investments
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Investments in subsidiaries
14
-
0
-
0
444,651
1,331,502
Movements in fixed asset investments
Company
Shares in subsidiaries
£
Cost or valuation
At 1 January 2023
1,331,502
Transfer
(886,851)
At 31 December 2023
444,651
Carrying amount
At 31 December 2023
444,651
At 31 December 2022
1,331,502

During the year there was a reclassification of capital contributions in respect of Motive Commerce Search Corp.

14
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Empathybroker Limited
6 Victoria Avenue, Harrogate HG1 1ED
Ordinary
100.00
Empathy Systems Corporation S.L.U
C. Jimena Fernadez de la Vega, 101, 33394 Gijon, Asturias, Spain
A
100.00
Empathybroker Inc.
9435 Waterstone Blvd, Ste 140, Cincinnati, Ohio, OH 45140 USA
Ordinary
100.00
Motive Commerce Search Corp
C. Jimena Fernadez de la Vega, 101, 33394 Gijon, Asturias, Spain
A
100.00
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
15
Debtors
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£
£
£
£
Trade debtors
2,148,634
3,893,803
-
0
-
0
Corporation tax recoverable
-
0
61,167
-
0
-
0
Amounts owed by group undertakings
-
-
3,583,577
-
Other debtors
1,198,678
780,505
-
0
-
0
Prepayments and accrued income
27,877
-
0
-
0
-
0
3,375,189
4,735,475
3,583,577
-
Amounts falling due after more than one year:
Deferred tax asset (note 18)
1,122,587
762,213
-
0
-
0
Total debtors
4,497,776
5,497,688
3,583,577
-
16
Creditors: amounts falling due within one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Bank loans
17
8,632
175,940
-
0
-
0
Trade creditors
441,520
127,037
-
0
-
0
Corporation tax payable
169,632
302,167
490
151
Other taxation and social security
97,186
91,721
-
-
Other creditors
438,146
434,611
-
0
-
0
Accruals and deferred income
28,594
211,422
-
0
-
0
1,183,710
1,342,898
490
151
17
Loans and overdrafts
Group
Company
2023
2022
2023
2022
£
£
£
£
Bank loans
8,632
175,940
-
0
-
0
Payable within one year
8,632
175,940
-
0
-
0
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 26 -
18
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Group
£
£
£
£
Accelerated capital allowances
349,077
357,761
-
503,284
Tax losses
-
-
1,122,587
258,929
349,077
357,761
1,122,587
762,213
The company has no deferred tax assets or liabilities.
Group
Company
2023
2023
Movements in the year:
£
£
Asset at 1 January 2023
(404,452)
-
Credit to profit or loss
(369,058)
-
Asset at 31 December 2023
(773,510)
-
19
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
80,704
62,884

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.

20
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of 0.1p each
1,263,000
1,263,000
1,263
1,263
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 27 -
21
Related party transactions
Remuneration of key management personnel

The remuneration of key management personnel is as follows.

2023
2022
£
£
Aggregate compensation
766,994
571,967
Transactions with related parties

As at 31 December 2023, controlling shareholder Angel Maldonado, owed companies within the group £595,725 (2022: £240,430) in the form of directors loans within those companies.

 

Also at 31 December 2023, Angel Maldonado SLU, a company controlled by Angel Maldonado owed a company within the group £56,896 (2022: £58,199).

 

As at 31 December 2023 Jose Lueje, the director owed companies within the group £25,000 (2022: £10,000) in the form of a directors loan within those companies.

 

No interest has been charged on these loans and there are no repayment terms.

 

During the year, a group company rented a property from Angel Maldonado. Payments were made at a market rental value and totalled £27,971 (2022: £14,013).

 

22
Cash generated from group operations
2023
2022
£
£
(Loss)/profit for the year after tax
(595,808)
2,270,336
Adjustments for:
Taxation (credited)/charged
(25,392)
401,765
Finance costs
5,778
11,349
Investment income
(32,523)
(822)
Loss on disposal of tangible fixed assets
1,534
-
(Gain)/loss on disposal of intangible assets
-
60,531
Amortisation and impairment of intangible assets
328,584
204,069
Depreciation and impairment of tangible fixed assets
143,932
93,370
Foreign exchange gains on cash equivalents
46,443
217,418
Movements in working capital:
Decrease/(increase) in debtors
1,793,137
(1,591,492)
Increase in creditors
94,213
707,977
Cash generated from operations
1,759,898
2,374,501
EMPATHY HOLDINGS LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 28 -
23
Cash absorbed by operations - company
2023
2022
£
£
Profit for the year after tax
3,465,947
2,025,284
Adjustments for:
Taxation charged
339
151
Investment income
(3,466,286)
(2,025,435)
Movements in working capital:
Increase in debtors
(3,583,577)
-
Cash absorbed by operations
(3,583,577)
-
24
Analysis of changes in net funds - group
1 January 2023
Cash flows
31 December 2023
£
£
£
Cash at bank and in hand
2,481,968
(1,754,199)
727,769
Borrowings excluding overdrafts
(175,940)
167,308
(8,632)
2,306,028
(1,586,891)
719,137
25
Analysis of changes in net funds - company
1 January 2023
Cash flows
31 December 2023
£
£
£
Cash at bank and in hand
443,402
(442,673)
729
2023-12-312023-01-01falseCCH SoftwareCCH Accounts Production 2024.100J LuejeMr Angel 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