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Registration number: 04045527

Orchid Cellmark Ltd

Annual Report and Financial Statements

for the Year Ended 31 December 2023

 

Orchid Cellmark Ltd

Contents

Company Information

1

Strategic Report

2 to 3

Directors' Report

4 to 6

Statement of Directors' Responsibilities

7

Independent Auditor's Report

8 to 10

Profit and Loss Account

11

Balance Sheet

12

Statement of Changes in Equity

13

Notes to the Financial Statements

14 to 31

 

Orchid Cellmark Ltd

Company Information

Directors

Mark Pearse

Rob Van Dorp

Andrew Nelson

Company secretary

Laura Ganderton

Registered office

Unit G1 Valiant Way
i54 Business Park
Wolverhampton
Staffordshire
WV9 5GB

Auditors

UHY Ross Brooke
Chartered Accountants and Statutory Auditor
Suite I Windrush Court
Abingdon Business Park
Abingdon
Oxfordshire
OX14 1SY

 

Orchid Cellmark Ltd

Strategic Report for the Year Ended 31 December 2023

Business review

The audited financial statements for the year ended 31 December 2023 are set out on pages 11-31.
The Company recorded a loss before tax of £2,460m (2022 loss: £5,990m) from a turnover of £31,827m (2022: £28,192m). Losses after tax were £2,501m (2022 loss after tax: £ 6,487m).

In the 2022 Strategic Report the Directors explained that the ongoing impact on the business from the COVID-19 pandemic had contributed to the Company reporting a loss, but that it had ended the year in a roughly break-even position before accounting for certain one-off tax and provisions adjustments.

A number of temporary factors affecting the company’s performance in 2022 namely; short term reduction in police force work, productivity reductions in toxicology, rapid cost inflation and reduce legal aid funding continued to impact the company’s position into 2023.

Forensic work carried out for law enforcement agencies in England and Wales accounts for approximately 80% of the Company's revenue. It is therefore notable that the Company was awarded a higher value of forensic work in the 2022 police tenders than it previously held, although the timing of some of the contract implementations presented financial challenges during 2022 this increase in work value has been forthcoming in 2023 and is sustained into 2024.

The Company was awarded contracts from all 30 police forces that tendered their work, securing a significant proportion of the Company's forensic work for between three and seven years (depending on extension options). These forensic contracts were awarded at higher pricing and, for the first time, all contracts included annual index linked price increases all of which have been activated during 2023 and 2024.

In addition, as part of its diversification strategy, in April 2022 Cellmark acquired a veterinary testing laboratory, PALS. In 2022, a number of integration activities and costs were required associated with the acquisition which have positioned this division for growth in 2023 and beyond.

As a result of these measures, revenue increased significantly in 2023 resulting in a far smaller loss and, with steadily increasing sales in the second half of 2023 leading into 2024. However, during 2024 the legacy of the 2022 and 2023 performance placed the business under significant cash flow pressure, as such the Directors (DH, GM) decided to explore alternative funding options for the business. After a period of negotiation with potential purchasers, the police customer base and the Competition and Mergers authority the business was sold to Eurofins Forensics Lux a division of Eurofins Scientific Se.

This had led to an immediate stabilisation of the business, including removal of all charges and bank debt. The new Directors, on behalf of the shareholder, have completed a full business review and forecasting process. This has generated a robust and deliverable business plan for 2025 that returns the business to profitability for the year and will allow for further investment in process and system improvements to further improve the sustainability of the business. Eurofins provided funding of £3.948m to help repay the company’s overdue creditors and debt factoring loan in August to October 2024 as an inter-company loan via its parent DNACO Ltd. Further funds were added in November and December 2024 amounting to £8.881m and £3.500m of this was converted to equity in December 2024 and the remaining £5.381m will be converted to equity in 2025.

The Directors monitor the progress of the Company in meeting its strategic objectives by reference to a range of financial and non-financial key performance indicators. The top-level financial performance indicators used are set out below:

Financial KPIs

Unit

2023

2022

Turnover

£m

31.83

28.19

Gross profit / (loss) margin

%

15.72

4.00

Operating profit / (loss) margin

%

(7.73)

(21.25)

 

Orchid Cellmark Ltd

Strategic Report for the Year Ended 31 December 2023

Principal risks and uncertainties

The Directors regularly review risks and uncertainties that impact the Company. The principal risks for the Company concern a number of factors, some of which the Company can influence and other that we are unable to control, including; pricing and the impact of pressure on public sector expenditure; cashflow management; matching capacity with the uncertainty of demand; the achievement of performance targets in ongoing contracts; continuing to win new work; changes in criminal activity and the policing response to the investigation of crime; changes in government policy and public health incidents; and rising costs associated with inflation. A key risk is that a significant proportion of the Company's work is concentrated in one core market.

Financial risk management objectives and policies
The Company seeks to manage financial risk by ensuring sufficient cash resources are available to meet foreseeable needs but there are some risks inherent with the Company’s liquid resources and mitigation of these is summarised:

Interest rate risk

The Company currently finances its operations through retained profits and working capital. When the Company is cash positive the exposure to interest rate risk is limited to the effect of interest rates on income received on credit balances.

Credit risk

The Company's principal financial assets are cash and trade debtors. The credit risk associated with cash is limited, the principal credit risk therefore arises from its trade debtors. A significant proportion of the debt is from UK Government agencies but the remainder is managed through a diversified customer base such that no one customer represents a significant proportion of the Company's trade.

Currency risk

A small proportion of the Company's purchases are from continental Europe. The Company is exposed to foreign exchange risk in this respect. The Company manages this risk by monitoring exchange rates at the time of purchase and by maintaining Euro and Dollar accounts.

Approved by the Board on 10 January 2025 and signed on its behalf by:

.........................................
Andrew Nelson
Director

   
     
 

Orchid Cellmark Ltd

Directors' Report for the Year Ended 31 December 2023

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

Principal activity

The Company is an accredited laboratory services company specialising in DNA testing, toxicology (drugs of abuse testing), veterinary testing and forensic analysis and interpretation. The organisation was established in 1987 as the UK's first commercial DNA fingerprinting company and now trades as Cellmark, Cellmark Forensic Services, Keith Borer Consultants (KBC) and Pinmoore Animal Laboratory services (PALS) and employs approximately 530 staff in the UK, working at 6 locations.

Forensic services for the police accounted for 80% of the Company's revenue in 2022; it is one of the IJKs largest Forensic Science Providers and is contracted by the majority of the IJKs police forces. Trading as Cellmark Forensic Services the Company provides a broad range of quality accredited forensic analytical services to assist the Criminal Justice System from crime scene to court and is an accredited supplier of DNA profiles to the UK National DNA Database@. Trading as Keith Borer Consultants (KBC), the Company is the UKs largest provider of forensic defence review services.

The Company is also a leading provider of DNA paternity and relationship analysis, as well as toxicology services, in civil matters for the Courts, the legal profession and the general public, and provides DNA services under contract to UK and international government agencies. In addition, in 2022 the Company also provided laboratory testing services to vets and pet owners.
 

Director of the Company

The Director who held office during the year was as follows:

D J Hartshorne (resigned 20 August 2024)

The following directors were appointed after the year end:

Mark Pearse (appointed 20 August 2024)

Rob Van Dorp (appointed 20 August 2024)

Andrew Nelson (appointed 20 August 2024)

Dividends

The loss for the year, after taxation, amounted to £2,501m (2022: loss of £6,487m).

The Directors paid a dividend of £nil in 2023 (2022: £nil)

 

Orchid Cellmark Ltd

Directors' Report for the Year Ended 31 December 2023

Going concern

In 2022 the Company was awarded index-linked multi-year contracts (between three and seven years) for the majority of its forensic work and during 2023 output from its toxicology, defence, relationship and veterinary testing businesses all increased. The Company also secured additional contracted work in 2023 which will contribute to further revenue and margin growth in 2024.

The Directors put in place an invoice discounting facility and reduced stocks to free up working capital. In addition, expenditure was minimised as the company geared up to deliver the additional contract work secured during 2022.

In 2023 the Company's revenue grew by 13%, with the company benefitting from increased work in most sectors as well as price increases from its major customers to reflect the impact of inflation. As a result, losses were significantly reduced. However, during 2023 the Company experienced cashflow challenges and extended its invoice discounting facility to assist with cash management. With the support of its police customers and its suppliers, the Company navigated the cashflow challenges of 2023 as business performance steadily improved.

In the first quarter of 2024, average monthly revenue increased again in line with budget to average £2.866m compared to £2.751m in 2023 (4.2% increase) and as a result 2024 started well. However, during 2024 the legacy of the 2022 and 2023 performance placed the business under significant cash flow pressure, as such the Directors (DH, GM) decided to explore alternative funding options for the business. After a period of negotiation with potential purchasers, the police customer base and the Competition and Mergers authority the business was sold to Eurofins Forensics Lux a division of Eurofins Scientific Se.

Following the acquisition by Eurofins Forensics Lux on behalf of Eurofins Scientific and subsequent immediate stabilisation of the business, including removal of all charges and bank debt, the new Directors, on behalf of the shareholder, have completed a full business review and forecasting process. This has generated a robust and deliverable business plan for 2025 that returns the business to profitability for the year and will allow for further investment in process and system improvements to further improve the sustainability of the business. Eurofins provided funding of £3.948m to help repay the company’s overdue creditors and debt factoring loan in August to October 2024 as an inter-company loan via its parent DNACO Ltd. Further funds were added in November and December 2024 amounting to £8.881m and £3.500m of this was converted to equity in December 2024 and the remaining £5.381m will be converted to equity in 2025.

With the investment by the new shareholders and the significant program of work now being undertaken the Directors consider the business to be a going concern.

 

Research and development

The Company continues to focus on developing its scientific approaches and services, in order to maintain its competitive position and to extend its scope of ISOI 7025 accreditation, through a targeted research and development programme. The Company employs a team of R&D scientists and software developers and maintains collaborations with other leading scientists, institutions and laboratories. The total R&D spend in the period was £0.825m (2022: £0.798m).

Employee involvement

Employees are provided with information about the Company's performance at both the departmental and Company level through team and cross-departmental meetings, by the circulation of Company management information and through updates by the Managing Director.

Employees are actively encouraged to contribute and participate in the review of operational and business metrics.

The Company met its obligations as a Real Living Wage employer. It is an Equal Opportunity Employer and does not discriminate on the basis of race, national origin, religion, colour, gender, sexual orientation, age, non-disqualifying physical or mental disability or any other basis covered by law. Employment decisions are based solely on qualifications, merit and business need.

 

Orchid Cellmark Ltd

Directors' Report for the Year Ended 31 December 2023

Employment of disabled persons

We seek to ensure that employees with disabilities are considered for promotion according to their abilities and qualifications, and that any employee who becomes disabled will receive continued employment and training by making any reasonable adjustments necessary to do so.

Qualifying third party indemnity provisions
During the year and up to the date of this report, the Company maintained liability insurance and third-party indemnification provisions for its Directors, under which the Company has agreed to indemnify the Directors to the extent permitted by law in respect of all liabilities to third parties arising out of, or in connection with, the execution of their powers, duties and responsibilities as the Directors of the Company.

COVID-19
During 2023 the Company continued to operate a number of COVID-19 precautions to support and protect its employees and business services.

Information included in the Strategic Report

The Directors have set out the Company's financial management risk objectives and policies in the strategic report rather than the Director's report.

Disclosure of information to the auditors

Each Directors have taken the steps that they ought to have taken as Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information. The Directors confirm that there is no relevant information that they know of and of which they know the auditors are unaware.

Approved by the Board on 10 January 2025 and signed on its behalf by:

.........................................
Andrew Nelson
Director

   
     
 

Orchid Cellmark Ltd

Statement of Directors' Responsibilities

The Directors acknowledge their responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

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

select suitable accounting policies and apply them consistently;

make judgements and accounting estimates that are reasonable and prudent;

state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statement may differ from legislation in other jurisdictions.

 

Orchid Cellmark Ltd

Independent Auditor's Report to the Members of Orchid Cellmark Ltd

Opinion

We have audited the financial statements of Orchid Cellmark Ltd (the 'Company') for the year ended 31 December 2023, which comprise the Profit and Loss Account, Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

give a true and fair view of the state of the Company's affairs as at 31 December 2023 and of its loss for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of the Companies Act 2006.

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 responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the original financial statements were authorised for issue.

Our responsibilities and the responsibilities of the Director with respect to going concern are described in the relevant sections of this report.

Other information

The Director is responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

 

Orchid Cellmark Ltd

Independent Auditor's Report to the Members of Orchid Cellmark Ltd

the Strategic Report and Directors' Report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of our knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

the financial statements are not in agreement with the accounting records and returns; or

certain disclosures of Director's remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Statement of Directors' Responsibilities (set out on page 7), the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor Responsibilities for the audit of the financial statements

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

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

 

Orchid Cellmark Ltd

Independent Auditor's Report to the Members of Orchid Cellmark Ltd

We obtained an understanding of the laws and regulations applicable to the company through discussions with management, and from our wider knowledge of the company and industry. We determined that the most significant laws and regulations, which may have a material effect on the financial statements, include the Companies Act 2006, Taxation Legislation, Employment Law and Health & Safety legislation.

- the identified laws and regulations were communicated to the audit engagement team;
- we assessed the extent of compliance with the laws and regulations identified, through making enquiries of management, inspecting legal correspondence, personnel records and health and safety logs.

We assessed the susceptibility of the company's financial statements to material misstatement due to fraud, by:

- reviewing managements’ own assessment of the company’s susceptibility to fraud;
- considering the strength of the control environment; and
- evaluating management’s incentives for fraudulent manipulation of the financial statements, such as capitalising costs to boost profits.

We determined that the principle risks were related to inflation of revenues and profit, through fraudulent manipulation of judgements relating to WIP valuation and debtor recoverability.

To address the risk of fraud, we:

- compared financial statement disclosures to supporting documentation;
- performed analytical procedures to identify any unusual trends;
- tested journal entries to identify unusual transactions; and
- investigated the rationale behind significant or unusual transactions, as well as key assumptions and estimates used in the preparation of the financial statements.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: 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.

......................................
Caroline Webster FCA (Senior Statutory Auditor)
For and on behalf of UHY Ross Brooke, Statutory Auditor

Suite I Windrush Court
Abingdon Business Park
Abingdon
Oxfordshire
OX14 1SY

10 January 2025

 

Orchid Cellmark Ltd

Profit and Loss Account for the Year Ended 31 December 2023

Note

2023
£ 000

2022
£ 000

Turnover

3

31,827

28,192

Cost of sales

 

(26,823)

(27,063)

Gross profit

 

5,004

1,129

Administrative expenses

 

(7,464)

(7,119)

Operating loss

4

(2,460)

(5,990)

Loss before tax

 

(2,460)

(5,990)

Tax on loss

8

(41)

(497)

Loss for the financial year

 

(2,501)

(6,487)

The above results were derived from continuing operations.

The Company has no recognised gains or losses for the year other than the results above.

 

Orchid Cellmark Ltd

(Registration number: 04045527)
Balance Sheet as at 31 December 2023

Note

2023
£ 000

2022
£ 000

Fixed assets

 

Intangible assets

9

-

226

Tangible assets

10

1,013

963

Investments

11

442

442

 

1,455

1,631

Current assets

 

Stocks

12

1,784

1,885

Debtors

13

3,292

3,830

Cash at bank and in hand

14

157

157

 

5,233

5,872

Creditors: Amounts falling due within one year

15

(8,282)

(7,007)

Net current liabilities

 

(3,049)

(1,135)

Total assets less current liabilities

 

(1,594)

496

Creditors: Amounts falling due after more than one year

15

-

(20)

Provisions for liabilities

16

(1,261)

(830)

Net liabilities

 

(2,855)

(354)

Capital and reserves

 

Called up share capital

18

-

-

Profit and loss account

19

(2,855)

(354)

Total equity

 

(2,855)

(354)

Approved and authorised by the Board on 10 January 2025 and signed on its behalf by:
 

.........................................
Andrew Nelson
Director

   
     
 

Orchid Cellmark Ltd

Statement of Changes in Equity for the Year Ended 31 December 2023

Other reserves
£ 000

Profit and loss account
£ 000

Total
£ 000

At 1 January 2022

3,154

2,979

6,133

Loss for the year

-

(6,487)

(6,487)

Transfers

(3,154)

3,154

-

At 31 December 2022

-

(354)

(354)

Profit and loss account
£ 000

Total
£ 000

At 1 January 2023

(354)

(354)

Loss for the year

(2,501)

(2,501)

At 31 December 2023

(2,855)

(2,855)

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

1

General information

The Company is a private company limited by share capital, incorporated in England and Wales.

The address of its registered office is:
Unit G1 Valiant Way
i54 Business Park
Wolverhampton
Staffordshire
WV9 5GB
United Kingdom

The principal place of business is:
Unit 16 Blacklands Way
Abingdon Business Park
Abingdon
Oxon
OX14 1DY

These financial statements were authorised for issue by the Board on 10 January 2025.

2

Accounting policies

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Statement of compliance

These financial statements were prepared in accordance with Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland and the Companies Act 2006'.

Basis of preparation

These financial statements have been prepared using the historical cost convention except that as disclosed in the accounting policies certain items are shown at fair value.

The financial statements are presented in Sterling (£) which is the functional currency of the company and rounded to the nearest £000 for presentation purposes.

Summary of disclosure exemptions

A statement of cash flows has not been prepared as the Directors have taken advantage of the exemption under FRS 102 on the grounds that the Company is wholly owned and its ultimate parent, DNACO Limited, publishes publicly available group financial statements that include cash flows.

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

Going concern

The financial statements have been prepared on a going concern basis.

In 2022 the Company was awarded index-linked multi-year contracts (between three and seven years) for the majority of its forensic work and during 2023 output from its toxicology, defence, relationship and veterinary testing businesses all increased. The Company also secured additional contracted work in 2023 which will contribute to further revenue and margin growth in 2024.

The Directors put in place an invoice discounting facility and reduced stocks to free up working capital. In addition, expenditure was minimised as the company geared up to deliver the additional contract work secured during 2022.

In 2023 the Company's revenue grew by 13%, with the company benefitting from increased work in most sectors as well as price increases from its major customers to reflect the impact of inflation. As a result, losses were significantly reduced. However, during 2023 the Company experienced cashflow challenges and extended its invoice discounting facility to assist with cash management. With the support of its police customers and its suppliers, the Company navigated the cashflow challenges of 2023 as business performance steadily improved.

In the first quarter of 2024, average monthly revenue increased again in line with budget to average £2.866m compared to £2.751m in 2023 (4.2% increase) and as a result 2024 started well. However, during 2024 the legacy of the 2022 and 2023 performance placed the business under significant cash flow pressure, as such the Directors (DH, GM) decided to explore alternative funding options for the business. After a period of negotiation with potential purchasers, the police customer base and the Competition and Mergers authority the business was sold to Eurofins Forensics Lux a division of Eurofins Scientific Se.

Following the acquisition by Eurofins Forensics Lux on behalf of Eurofins Scientific and subsequent immediate stabilisation of the business, including removal of all charges and bank debt, the new Directors, on behalf of the shareholder, have completed a full business review and forecasting process. This has generated a robust and deliverable business plan for 2025 that returns the business to profitability for the year and will allow for further investment in process and system improvements to further improve the sustainability of the business. Eurofins provided funding of £3.948m to help repay the company’s overdue creditors and debt factoring loan in August to October 2024 as an inter-company loan via its parent DNACO Ltd. Further funds were added in November and December 2024 amounting to £8.881m and £3.500m of this was converted to equity in December 2024 and the remaining £5.381m will be converted to equity in 2025.

With the investment by the new shareholders and the significant program of work now being undertaken the Directors consider the business to be a going concern.

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

Adjusting events after the financial period

On 20 August 2024 the company's parent company, DNACO Limited was acquired by Eurofins Forensics LUX Holding SARL, a company incorporated in Luxembourg.

Judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported in the profit and loss account for the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:

Operating lease commitments: The Company has entered into operating leases as a lessee. The classification of such leases as operating or finance leases requires the company to determine, based on an evaluation of the terms and conditions of the arrangements, whether it acquires the significant risks and rewards of ownership of these assets and accordingly whether the lease requires an asset and liabilities to be recognised in the balance sheet.

The following are the Company's key sources of estimation uncertainty:

Goodwill and intangible assets: The Company establishes a reliable estimate of the useful life of goodwill and intangible assets arising on business combinations. The estimate is based on a variety of factors such as the expected use of the acquired business, any legal, regulatory or contractual provision that can limit useful life and assumptions that market participants would consider in respect of similar business.

Dilapidation provisions: The Company has made provisions for dilapidation in respect of its leasehold properties. The provision requires the cost of returning the properties to their original state at the end of the lease to be estimated and the actual costs incurred may differ from the original estimate.

Revenue recognition

Turnover comprises the fair value of the consideration received or receivable for the sale of goods and provision of services in the ordinary course of the Company’s activities. Turnover is shown net of sales/value added tax, returns, rebates and discounts.

Revenue is recognised on the submission of a report of results of an analysis to the customer.

Government grants

Government grants are recognised based on the accrual model and are measured at the fair value of the asset received or receivable. Grants relating to revenue are recognised in income over the period in which the related costs are recognised.

Foreign currency transactions and balances

The Company’s functional and presentational currency is GBP.

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 except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Profit and Loss Account with ‘finance income or costs’. All other foreign exchange gains and losses are presented in the Profit and Loss Account within ‘other operating income’.

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

Tax

The tax expense for the period comprises current tax payable and deferred tax.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates taxable income.

Deferred tax is recognised in respect of all timing differences between taxable profits and profits reported in the financial statements.

Unrelieved tax losses and other deferred tax assets are recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date and that are expected to apply to the reversal of the timing difference.

Tangible assets

Tangible assets are stated in the balance sheet at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

The cost of tangible assets includes directly attributable incremental costs incurred in their acquisition and installation.

Depreciation

Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives, as follows:

Asset class

Depreciation method and rate

Leasehold improvements

life of lease

Plant and machinery

2 to 5 years

Business combinations

Business combinations are accounted for using the purchase method. The consideration for each acquisition is measured at the aggregate of the fair values at acquisition date of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquired, plus any costs directly attributable to the business combination. When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the group includes the estimated amount of that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured reliably.

Goodwill

Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is held in the currency of the acquired entity and revalued to the closing rate at each reporting period date. Goodwill is amortised over its useful life, which shall not exceed ten years if a reliable estimate of the useful life cannot be made.

Amortisation

Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their useful life as follows:

Asset class

Amortisation method and rate

Goodwill

5 years straight line

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

Other intangible assets

Internally generated intangible assets arise from directly attributable expenditure towards projects that will generate probable future economic benefits measured at cost. Amortization is based on the useful economic lives which are assessed annually and are principally amortized straight line over five years.

Investments

Investments in equity shares which are publicly traded or where the fair value can be measured reliably are initially measured at fair value, with changes in fair value recognised in profit or loss. Investments in equity shares which are not publicly traded and where fair value cannot be measured reliably are measured at cost less impairment.


Interest income on debt securities, where applicable, is recognised in income using the effective interest method. Dividends on equity securities are recognised in income when receivable.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

Trade debtors

Trade debtors are amounts due from customers for merchandise sold or services performed in the ordinary course of business.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell.

Trade creditors

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.

Borrowings

Interest-bearing borrowings are initially recorded at fair value, net of transaction costs. Interest-bearing borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the Profit and Loss Account over the period of the relevant borrowing.

Interest expense is recognised on the basis of the effective interest method and is included in interest payable and similar charges.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Provisions

Provisions are recognised when the Company has an obligation at the reporting date as a result of a past event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

Leases

Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.

Assets held under finance leases are recognised at the lower of their fair value at inception of the lease and the present value of the minimum lease payments. These assets are depreciated on a straight-line basis over the shorter of the useful life of the asset and the lease term. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance costs in the profit and loss account and reduction of the lease obligation so as to achieve a constant periodic rate of interest on the remaining balance of the liability.

Defined contribution pension obligation

A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the Company has no legal or constructive obligation to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

Contributions to defined contribution plans are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as a prepayment.

Financial instruments

The company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.

Debt instruments (other than those wholly repayable or receivable within on year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and are subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received. However if the arrangements of short-term instruments constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence or impairment is found, an impairment loss is recognised in the Profit and Loss Account.

For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset’s carrying amount and best estimate, which is an approximation of the amount that the company would receive for the asset if it were to be sold at the reporting date.

Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is an 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.

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

3

Revenue

The analysis of the Company's Turnover for the year by market is as follows:

2023
£ 000

2022
£ 000

UK

31,051

27,779

Europe

155

169

Rest of world

621

244

31,827

28,192

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

4

Operating loss

Arrived at after charging/(crediting)

2023
£ 000

2022
£ 000

Depreciation expense

241

238

Amortisation expense

-

8

Research and development cost

627

798

Operating lease expenses

1,144

1,149

5

Staff costs

The aggregate payroll costs (including Directors' remuneration) were as follows:

2023
£ 000

2022
£ 000

Wages and salaries

17,709

17,421

Social security costs

1,845

1,821

Pension costs, defined contribution scheme

1,756

1,700

21,310

20,942

The average number of persons employed by the company (including the Directors) during the year, analysed by category was as follows:

2023
No.

2022
No.

Operational

462

445

Support services

92

94

554

539

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

6

Director's remuneration

The Director's remuneration for the year was as follows:

2023
£ 000

2022
£ 000

Remuneration

171

152

Contributions paid to money purchase schemes

16

16

187

168

7

Auditors' remuneration

2023
£ 000

2022
£ 000

Audit of the financial statements

30

25


 

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

8

Taxation

Tax charged/(credited) in the income statement

2023
£ 000

2022
£ 000

Current taxation

UK corporation tax adjustment to prior periods

41

-

Deferred taxation

Arising from changes in tax rates and laws

-

497

Tax credit in the income statement

41

497

The tax on profit before tax for the year is lower than the standard rate of corporation tax in the UK (2022 - the same as the standard rate of corporation tax in the UK) of 23.52% (2022 - 19%).

The differences are reconciled below:

2023
£ 000

2022
£ 000

Loss before tax

(2,460)

(5,990)

Corporation tax at standard rate

(579)

(1,138)

Increase in UK and foreign current tax from adjustment for prior periods

41

-

Tax increase from effect of capital allowances and depreciation

44

73

Tax increase from effect of unrelieved tax losses carried forward

535

497

Effect of tax losses

-

1,065

620

1,635

Total tax charge

41

497

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

Deferred tax

Deferred tax has not been recognised in respect of total tax losses carried forward of £12,269,000.

There is a an unprovided asset in respect of depreciation in excess of capital allowances of £44,000 (2022: £73,000).

The debtor amounting to £78,000 relates to R&D tax claims (2022: £118,000).

9

Intangible assets

Goodwill
 £ 000

Internally generated development costs
 £ 000

Total
£ 000

Cost or valuation

At 1 January 2023

4,265

234

4,499

Disposals

-

(234)

(234)

At 31 December 2023

4,265

-

4,265

Amortisation

At 1 January 2023

4,265

8

4,273

Amortisation eliminated on disposals

-

(8)

(8)

At 31 December 2023

4,265

-

4,265

Carrying amount

At 31 December 2023

-

-

-

At 31 December 2022

-

226

226

The aggregate amount of research and development expenditure recognised as an expense during the period is £627,000 (2022 - £798,000).
 

The carrying value of development costs represents two internal development projects for which there is visible future income generation: (1) LIMS system upgrade; (2) Canine DNA Database Project.

Intangible assets have been written off during the year to align with the parent company's accounting policy.

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

10

Tangible assets

Short leasehold land and buildings
£ 000

Plant and machinery
£ 000

Total
£ 000

Cost or valuation

At 1 January 2023

4,995

6,836

11,831

Additions

72

223

295

Disposals

(4)

(25)

(29)

At 31 December 2023

5,063

7,034

12,097

Depreciation

At 1 January 2023

4,569

6,299

10,868

Charge for the year

68

173

241

Eliminated on disposal

-

(25)

(25)

At 31 December 2023

4,637

6,447

11,084

Carrying amount

At 31 December 2023

426

587

1,013

At 31 December 2022

426

537

963

Assets held under finance leases and hire purchase contracts

The net carrying amount of tangible assets includes the following amounts in respect of assets held under finance leases and hire purchase contracts:

2023
£ 000

2022
£ 000

Plant and machinery

23

25

   
 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

11

Investments

2023
£ 000

2022
£ 000

Investments in subsidiaries

442

442

Subsidiaries

£ 000

Cost or valuation

At 1 January 2023

754

At 31 December 2023

754

Provision

At 1 January 2023

312

At 31 December 2023

312

Carrying amount

At 31 December 2023

442

At 31 December 2022

442

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

Details of undertakings

Details of the investments in which the Company holds 20% or more of the nominal value of any class of share capital are as follows:

Undertaking

Registered office

Holding

Proportion of voting rights and shares held

2023

2022

Undertaking

Country of Incorporation

Operation

% of ordinary shares held by the Group

Pinmoore Animal Laboratory Services Ltd

England and Wales

Veterinary activities

100%

Investment shares the same registered address as the ultimate parent company, DNACO Limited, being Unit G1 Valiant Way, i54 Business Park, Wolverhampton, Staffordshire, WV9 5GB, United Kingdom.

12

Stocks

2023
£ 000

2022
£ 000

Raw materials and consumables

904

1,058

Work in progress

880

827

1,784

1,885

Stock recognised in cost of sales during the year as an expense was £3,172,000 (2022: £4,060,000)

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

13

Debtors

Current

Note

2023
£ 000

2022
£ 000

Trade debtors

 

2,086

3,103

Amounts owed by related parties

23

313

-

Other debtors

 

24

32

Prepayments

 

791

577

Income tax asset

8

78

118

   

3,292

3,830

14

Cash and cash equivalents

2023
£ 000

2022
£ 000

Cash at bank

157

157

15

Creditors

Note

2023
£ 000

2022
£ 000

Due within one year

 

Loans and borrowings

20

37

44

Trade creditors

 

3,252

1,808

Amounts due to related parties

23

-

86

Social security and other taxes

 

1,778

2,492

Outstanding defined contribution pension costs

 

182

168

Other payables

 

566

653

Accruals

 

2,467

1,756

 

8,282

7,007

Due after one year

 

Loans and borrowings

20

-

20

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

16

Provisions for liabilities

Dilapidations
£ 000

Total
£ 000

At 1 January 2023

830

830

Additional provisions

431

431

At 31 December 2023

1,261

1,261

17

Pension and other schemes

Defined contribution pension scheme

The Company operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the Company to the scheme and amounted to £1,756,000 (2022 - £1,700,000).

Contributions totalling £182,000 (2022 - £168,000) were payable to the scheme at the end of the year and are included in creditors.

18

Share capital

Allotted, called up and fully paid shares

2023

2022

No.

£

No.

£

Ordinary shares of £100 each

1

100

1

100

       

19

Reserves

Other reserves
On 31 December 2002 the Company's former parent, Orchid Cellmark Inc, made a capital contribution of £3,395,000 that was offset against the inter-company balance payable by the Company to Orchid Cellmark Inc. Subsequent movements on this reserve relate to waivers of inter-company balances.
The waiver is a qualifying consideration for the cancelling of a liability and therefore the balance was transferred in the prior year to the profit and loss account as shown on the Statement of Changes in Equity.

Profit and loss account
This includes all current and prior period retained profits and losses and the other reserves transfer as noted above.

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

20

Loans and borrowings

Non-current loans and borrowings

2023
£ 000

2022
£ 000

Hire purchase contracts

-

20

Current loans and borrowings

2023
£ 000

2022
£ 000

Hire purchase contracts

37

44

21

Obligations under leases and hire purchase contracts

Operating leases

The total of future minimum lease payments is as follows:

2023
£ 000

2022
£ 000

Not later than one year

1,181

1,142

Later than one year and not later than five years

3,167

3,129

Later than five years

1,781

2,004

6,129

6,275

The amount of non-cancellable operating lease payments recognised as an expense during the year was £1,144,000 (2022 - £1,149,000).

22

Commitments

Capital commitments

Capital commitments relate to fixed asset expenditure contracted for prior to the year end but not provided in the financial statements.
The total amount contracted for but not provided in the financial statements was £Nil (2022 - £779,000).

 

Orchid Cellmark Ltd

Notes to the Financial Statements for the Year Ended 31 December 2023

23

Related party transactions

The Company is a wholly owned subsidiary of DNACO Limited. It has taken advantage of the exemption in FRS 102 Section 33 not to disclose transactions or balances with entities which form part of the group.

24

Parent and ultimate parent undertaking

The Company's immediate parent is DNACO Limited, incorporated in England and Wales.

 From 20 August 2024, the ultimate parent is Eurofins Forensics Lux Holdings Sarl, incorporated in Luxembourg.

 The most senior parent entity producing publicly available financial statements is DNACO Limited. These financial statements are available upon request from Companies House.

 

25

Non adjusting events after the financial period

On 20 August 2024 the company's parent company, DNACO Limited was acquired by Eurofins Forensics LUX Holding SARL, a company incorporated in Luxembourg.

On 6 December 2024, a loan due from the subsidiary company of £500,000 was converted to equity and 500,000 Ordinary shares of £1 each were issued.

Eurofins provided funding of £3.948m to help repay the company’s overdue creditors and debt factoring loan in August to October 2024 as an inter-company loan via its parent DNACO Ltd. Further funds were added in November and December 2024 amounting to £8.881m and £3.500m of this was converted to equity in December 2024 and the remaining £5.381m will be converted to equity in 2025.