Registered number: 11401151
BALLINGER & CO. LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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BALLINGER & CO. LTD
CONTENTS
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Directors' responsibilities statement
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Independent auditor's report
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Statement of changes in equity
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Notes to the financial statements
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BALLINGER & CO. LTD
COMPANY INFORMATION
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Oliver Bridgen (Chief Operating Officer)
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Thomas Dudderidge (Chief Executive Officer)
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William Tracey (Executive Chairman)
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BALLINGER & CO. LTD
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors of Ballinger & Co. Ltd (the “Company”) present the audited financial statements of the Company for the period ended 31 December 2023. The Company's strategic report is provided to be read with other parts of the following report, including the financial statements and notes.
Ballinger & Co. Ltd, formerly known as Financial Services Startup Limited was founded in 2018. The founder was joined by experienced management and a senior team from another leading foreign currency exchange specialist, who had worked together for up to 16 years.
The principal activity of the Company in the financial period of 2023 was providing foreign currency payments services to individual and institutional clients.
In 2023, the Company achieved a turnover of £29.70 million, an increase from £18.60 million in 2022. The gross value of currency transactions sold in 2023 is £5.255 billion (2022: £4.618 billion), the corresponding gross value of the currency transactions purchased is £5.225 billion (2022: £4.599 billion). The profit before tax margin stands at 38 % up from 15 % in 2022. The Company is experiencing rapid growth and is actively using its available capital to reshape the market for clients who need deep, competitive liquidity, along with flexible credit terms, efficient onboarding, and agile foreign currency line agreements.
The board and management routinely review and update the Company's business forecasts and model to ensure they account for recent macroeconomic and microeconomic changes. The Directors of the Company are satisfied with the overall performance of the Company in the current financial year and are confident that the Company has sufficient knowledge and experience to achieve its targets.
Going Concern
The Company's Directors have assessed its ability to continue as a going concern. Management reviewed its day-to-day working capital needs, the current economic conditions, and investments in platform and technology development. Based on these analyses, they concluded that the Company has sufficient financial resources and professional team and is expected to continue operating for at least 12 months from the date of approval of the financial statements. The Company’s annual financial statements are prepared on a going concern basis.
The Company faces both internal and external risks and uncertainties, including legal and regulatory factors specific to the industry in which the Company operates. The main risk areas identified by the Company are as follows:
Credit Risk – This risk arises when a customer or counterparty fails to meet its obligations by the maturity date. To mitigate this risk, management evaluates potential customers before onboarding and regularly reviews existing customers. The counterparty credit risk is considered low since they are well-established and reputable financial institutions.
Liquidity Risk – Liquidity risk relates to the Company’s ability to maintain sufficient liquid funds to meet its liabilities. The Company frequently reviews financial forecasts against actual performance to detect risks early. Additionally, the Company has established financing facility agreements to mitigate liquidity risk.
Foreign Currency Risk – The Company engages in revenue generation and purchases in foreign currencies, making it subject to fluctuations in foreign exchange rates. This risk is mitigated through offsetting trades with customers and financial institutions. The foreign currency risk associated with purchases is minimal, as most vendors invoice the Company in the entity’s base currency.
Operational Risk – The Company maintains a comprehensive risk registry, allowing management to identify and document risks and take appropriate action.
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BALLINGER & CO. LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Management acknowledges that the risks listed above are not exhaustive. A key aspect of the Company's overall risk management strategy is ensuring that both management and staff receive relevant training on legal, regulatory, and professional development areas.
Macro and micro economic conditions and key risks
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The Company considers the following macroeconomic and microeconomic conditions that may directly impact the business. The factors listed below present both risks and opportunities for the business. They may generate demand for certain currencies and products, influence market preferences for long-term or short-term contracts, and impact the Company’s ability to access market liquidity.
∙Interest Rates
∙Economic Indicators: GDP growth, employment rates, and manufacturing output can affect currency values. Strong economic performance often leads to a stronger currency.
∙Political Stability and Performance:
∙Inflation Rates:
∙Market Speculation: Speculators buying and selling currencies can create fluctuations in exchange rates. Market sentiment and speculative activities can drive short-term currency movements.
∙Global Economic Events: financial crises, pandemics, and significant geopolitical events can cause volatility and impact currency exchange rates.
∙Monetary Policies:
∙Capital Flows: Movements of capital in and out of a country (investment opportunities and economic conditions, can affect exchange rates)
∙Commodity Prices: (e.g., oil, gold), changes in global commodity prices can influence their currency value.
∙Government Debt:
∙Market Liquidity:
Management discusses global economic and political events to ensure that the team is informed and up to date on key developments. Additionally, Ballinger shares its expert knowledge and analysis with external stakeholders through publicly available daily newsletters.
The management identifies the following key business risks:
∙Loss of major customer(s)
∙Revenue is generated from a small pool of clients.
∙Withdrawal or reduction of the counterparty credit line
∙Customer defaults
∙Exposure to few currencies
∙Sector concentration (e.g. focusing on retail or logistics industries)
∙Failure to recruit the best talent for the sales, dealing teams and support function.
To address the above-listed risks, management prioritises recruiting top talent, providing regular training, and encouraging professional development. Management also designs and continuously reviews incentive structures to ensure they address revenue, sector, and currency concentration risks. Additionally, the Company diversifies and expands its partnerships with liquidity providers to mitigate liquidity risks.
The sales procedures, technology development, and incentive schemes are designed to provide management with high-quality data to identify key trends and issues, allowing them to devise quick and efficient solutions.
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BALLINGER & CO. LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Directors' duty to promote the success of the Company
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The Company has quickly established itself as the go-to non-bank foreign exchange payments provider for clients with large and complex requirements. The team re-formed at Ballinger & Co Ltd to create a fiercely independent firm, funded by our Executive Chairman Will Tracey, our founders and Directors, the CEO’s Family Office, and a well-known financial services investor Darren Carter (Chairman of investment bank Peel Hunt). The Company has been profitable since inception, with all profit retained in the business to fuel growth of the business and its balance sheet.
The Directors identified that access to the best technology portfolio is critical for the Company’s steady growth and effective operational risk management. The Company leverages a sophisticated and integrated technology portfolio to enhance operational efficiency, streamline processes, and drive business growth. The board has agreed to allocate resources for technology development.
The Company is subject to environmental legislation in accordance with applicable law in the United Kingdom. Its operations have minimal environmental impact.
The Company encourages and supports employees in their professional development. Many employees pursue well-recognised and highly regarded qualifications and regularly attend training sessions and seminars. The Company provides both financial assistance and other necessary support.
Financial key performance indicators
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The Company monitors the following key performance indicators:
∙Turnover increase on monthly and quarterly basis
∙Rolling monthly turnover increase
∙Increases of the gross profit and net profit margins
∙New customers onboarded and traded
∙Diversifying its revenue
The headline financial performance for the financial years 2023 and 2022 is summarised below:
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Gross value of currency transactions sold
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Gross value of currency transactions purchased
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Profit before tax for the financial year
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Profit before tax as a percentage of turnover
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This report was approved by the board and signed on its behalf.
On behalf of the board
Thomas Dudderidge (Chief Executive Officer)
Director
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BALLINGER & CO. 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.
The profit for the financial year amounted to £8,632,939 (2022 - £2,221,559 restated).
The directors do not recommend the payment of a dividend (2022: £nil).
There were no changes from the previous year, the directors who served during the year were:
Oliver Bridgen (Chief Operating Officer)
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Thomas Dudderidge (Chief Executive Officer)
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William Tracey (Executive Chairman)
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The highest paid director's total compensation was £830,000 in 2023 (2022 - £650,879).
Report related to directors' remuneration is provided in note 5.
Future developments
The Company’s primary activity, along with other companies in the Ballinger Group, is providing foreign currency payment services to both private and institutional clients. The Maltese entities, regulated under local and EU laws, are set to become operational in 2024. The Company expects to open new sales channels through these Maltese entities.
The Company is also investing in new technologies, the development of sales processes, and the professional growth of its team. The directors anticipate that the technology solutions will contribute to the Company’s long-term growth.
Matters covered in the Strategic report
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As permitted by s414c(11) of the Companies Act 2006, the directors have elected to disclose information, required to be in the directors' report by Schedule 7 of the 'Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008', in the strategic report.
Disclosure of information to auditor
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Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware, and
∙the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
Post balance sheet events
The Company has signed a settlement agreement regarding ongoing litigation with one client and anticipates receiving funds by late 2024. There have been no other significant events affecting the Company since the year end.
The auditor, Forvis Mazars LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
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BALLINGER & CO. LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
This report was approved by the board and signed on its behalf.
On behalf of the board
Thomas Dudderidge (Chief Executive Officer)
Director
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BALLINGER & CO. LTD
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors are responsible for preparing the Strategic report, the Directors' 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 for the Company's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙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 to 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 statements and other information included in Directors' reports may differ from legislation in other jurisdictions.
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BALLINGER & CO. LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BALLINGER & CO. LTD
FOR THE YEAR ENDED 31 DECEMBER 2023
We have audited the financial statements of Ballinger & Co Ltd (the ‘Company’) for the year ended 31 December 2023 which comprise the profit and loss account, the balance sheet, the 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 FRS 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 profit 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.
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 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
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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 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.
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.
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BALLINGER & CO. LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BALLINGER & CO. LTD (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Opinion on other matters prescribed by the Companies Act 2006
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In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
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In the light of the 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 in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept, 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 directors' remuneration specified by law are not made; or
∙ we have not received all the information and explanations we require for our audit.
∙ the directors were not entitled to prepare the financial statements in accordance with the small companies
regime and take advantage of the small companies exemption in preparing the directors' report and from
the requirement to prepare strategic report.
Responsibilities of directors
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As explained more fully in the directors’ responsibilities statement 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's responsibilities for the audit of the financial statements
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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.
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.
Based on our understanding of the Company and its industry, we considered that non-compliance with the following laws and regulations might have a material effect on the financial statements: employment regulation, health and safety regulation, and anti-money laundering regulation.
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:
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BALLINGER & CO. LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BALLINGER & CO. LTD (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
∙Inquiring of management and, where appropriate, those charged with governance, as to whether the Company is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations
∙Inspecting correspondence, if any, with relevant licensing or regulatory authorities
∙Communicating identified laws and regulations to the engagement team and remaining alert to any indicationsof non-compliance throughout our audit; and
∙Considering the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as tax legislation and the Companies Act 2006.
In addition, we evaluated the directors’ and management’s incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in relation to the valuation of derivatives, revenue recognition, and significant one-off or unusual transactions.
Our audit procedures in relation to fraud included but were not limited to:
∙Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud;
∙Gaining an understanding of the internal controls established to mitigate risks related to fraud;
∙Discussing amongst the engagement team the risks of fraud; and
∙Addressing the risks of fraud through management override of controls by performing journal entry testing.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s 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.
Pauline Pélissier (Senior Statutory Auditor)
for and on behalf of Forvis Mazars LLP
Chartered Accountants and Statutory Auditor
Address: 30 Old Bailey, London EC4M 7AU
Date
19 December 2024
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BALLINGER & CO. LTD
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
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Interest receivable and similar income
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Interest payable and similar expenses
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Profit for the financial year
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There are no items of other comprehensive income for either the year or the prior year other than the profit for the year. Accordingly, no statement of other comprehensive income has been presented.
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(*) Refer to note 20 for the prior year adjustments.
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REGISTERED NUMBER:11401151
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BALLINGER & CO. LTD
BALANCE SHEET
AS AT 31 DECEMBER 2023
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Debtors: amounts receivable within one year
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Derivative financial assets
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Creditors: amounts falling due within one year
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Derivative financial liability
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Total assets less current liabilities
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The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
Thomas Dudderidge (Chief Executive Officer)
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The notes on pages 14 to 39 form part of these financial statements.
(*) Refer to note 20 for the prior year adjustments.
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REGISTERED NUMBER:11401151
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BALLINGER & CO. LTD
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2023
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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Share option reserve (restated)
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Retained earnings (restated)
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At 1 January 2022 (as previously stated) (*)
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Adjustment to opening retained earnings
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At 1 January 2022 (as restated)
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Profit for the financial year (as previously stated)
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Capital contribution from parent
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Shares issued during the year
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At 1 January 2023 (opening balances prior 2022 adjustments)
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At 1 January 2023 (as restated)
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Profit for the financial year
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Capital contribution from parent
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The notes on pages 14 to 39 form part of these financial statements.
(*) Refer to note 20 for the prior year adjustments.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Ballinger & Co Ltd main activity is the provision of foreign exchange and payment services to institutional, corporate and private clients worldwide.
The Company is a private Company limited by shares and incorporated in England and Wales. The address of the registered office is 65 Curzon Street, London, England, W1J 8PE.
The principal accounting policies for the Company are summarised below. They have all been applied consistently throughout the year and preceding year.
The financial statements are presented in Sterling (£) which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest (£).
The principal activities of the Company together with the nature of the Company's operations are set out in the strategic report on pages 2 to 4.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the company's accounting policies.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The company was, at the end of the year, a wholly-owned subsidiary of Ballinger Group Holdings (UK) Limited, whose registered address is 65 Curzon Street, London, England, W1J 8PE. Ballinger Group Holdings (UK) Limited prepares consolidated financial statements, in which the company is included, that are equivalent to UK requirements. In accordance with the exemption given in Section 400 of the Companies Act 2006, the company is not required to produce, and has not published, consolidated accounts.
The following principal accounting policies have been applied:
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Financial Reporting Standard 102 - reduced disclosure exemptions
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The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙Section 33 Related Party Disclosures paragraph 33.7 (disclosures of key management personnel compensation).
This information is included in the consolidated financial statements of Ballinger Group Holdings (UK) Limited as at 31 December 2023 and these financial statements may be obtained from Companies House, Crown Way, Cardiff, CF14 3UZ.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The Company's directors have assessed the Company’s ability to continue as a going concern. Management reviewed its day-to-day working capital needs, the current economic conditions, and investments in platform and technology development. Based on these analyses, they concluded that the Company has sufficient financial resources and professional team and is expected to continue operating for at least 12 months from the date of approval of the financial statements. The Company’s annual financial statements are prepared on a going concern basis.
The Company generated turnover from providing domestic and foreign currency payment services to individual and institutional customers. The turnover comprised of the difference between gross value of currency transactions sold and gross value of currency transactions purchased.
The revenue is recognised when:
(a) the gross value of sold currency and gross value of purchased currency can be measured reliably,
(b) there is an agreed and accepted contract between the Company and customer,
(c) and to the extent that it is probable that the economic benefits will flow to the Company.
The revenue from the spot contracts is recognised at the time a contract is entered into and accepted by the customer and the Company. The Company also provides foreign currency forward contracts, and the revenue is recognised at the point when both the Company and the customer agree and accept the contract terms.
Foreign currency forward contracts can include provisions for early drawdowns which allow clients execute trades fully or partially before the agreed settlement date. In some cases, early drawdown may generate losses. To reliably model and adjust recognised revenues under such contracts, management should assess whether sufficient historical data and client insights are available as at the reporting date.
Management evaluated open forward contracts as of the reporting date and applies various scenarios to assess expected cash flows from early drawdowns.
When client insights are available, management models an indicative monthly drawdown schedule to estimate expected gains or losses based on the remaining contract duration.
The Company incurs costs directly related to its revenue-generating activities, primarily consisting of commissions, bank charges, and costs related to market fluctuations. Commissions are accrued in the same period in which the associated revenue is recognised, while bank charges and market-related costs are recognised as they arise.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is Sterling (£).
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the 'interest receivable and similar income' and 'interest payable and similar expenses' within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'administrative expenses'.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed annually, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Intangible assets are only recognised separately from goodwill where they are separable and arise from contractual or other legal rights.
Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated, using the straight-line method, to allocate the depreciable amount of the assets to their residual values over their estimated useful lives, as follows:
Computer software - 5 years
The Company recognises the computer software intangible asset in relation to software configuration and enhancement to incorporate critical features and bring the software into service.
Where factors, such as technological advancement or changes in market price, indicate that residual value or useful life have changed, the Company will test the assets for impairment and recognise the cost in profit or loss statement.
The Company has elected to apply Sections 11 and 12 of FRS 102 in respect of financial instruments.
Financial assets and financial liabilities are recognised when the Company becomes party to the contractual provisions of the instrument.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
The Company’s policies for its major classes of financial assets and financial liabilities are set out below.
Financial assets
Basic financial assets, including trade and other debtors, cash and bank balances, intercompany working capital balances, and intercompany financing are initially recognised at transaction price, 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 for a similar debt instrument. Financing transactions are those in which payment is deferred beyond normal business terms or is financed at a rate of interest that is not a market rate.
Such assets are subsequently carried at amortised cost using the effective interest method, less any impairment.
As of the reporting date, management analyse open forward contracts and applies various scenarios to analyse expected gains or losses from early drawdowns. They assess expected net cash flows. When client insights and reliable data are available, management uses detailed model to estimate gains or losses from early or partial settlement.
Financial assets are adjusted for estimated losses from early drawdowns, with corresponding entries posted to turnover.
The company in some circumstances may hold collateral against trade receivables, with corresponding liability. Apart from this, the Company does not trade in financial instruments and all such instruments arise directly from operations. All trade and other debtors are initially recognised at transaction value, as none contain in substance a financing transaction. Thereafter trade and other
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Financial instruments (continued)
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debtors are reviewed for impairment where there is objective evidence based on observable data that the balance may be impaired. The Company may hold the collateral against its trade receivables if clients are not within agreed margin facility. In all other circumstances its exposure to credit risk is the net balance of trade and other debtors after allowance for impairment.
Financial liabilities
Basic financial liabilities, including trade and other creditors 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 for a similar debt instrument. Financing transactions are those in which payment is deferred beyond normal business terms or is financed at a rate of interest that is not a market rate.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade and other creditors and accruals are initially recognised at transaction value as none represent a financing transaction. They are only derecognised when they are extinguished. As the Company only has short term receivables and payables, its net current asset position is a reasonable measure of its liquidity at any given time.
Derivative financial instruments
Derivative foreign exchange contracts are standalone, non-hedging derivative financial assets and liabilities. They are measured at fair value as of the reporting date, with any changes in fair value recognised in profit or loss.
Impairment of financial assets
Financial assets measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of 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 the asset's carrying amount and the best estimate of the amount the Company would receive for the asset if it were to be sold at the reporting date.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If the financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Financial instruments (continued)
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Derecognition of financial assets and financial liabilities
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) despite having retained some significant risks and rewards of ownership, control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.
Offsetting of financial assets and financial liabilities
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.
In these financial statements, where the Company has the right to settle outstanding debtor and creditor balances with the broker on a net basis, those balances have been offset in the balance sheet.
Investments in unlisted company shares, whose market value can be reliably determined, are remeasured to market value at each balance sheet date. Gains and losses on remeasurement are recognised in the profit and loss account for the period. Where market value cannot be reliably determined, such investments are stated at historic cost less impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet. The assets of the plan are held separately from the Company in independently administered funds.
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Current and deferred taxation
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The tax expense for the year comprises current and deferred tax. Tax is recognised in the profit and loss account, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
Current tax is the amount of income tax payable in respect of taxable profit for the year or prior years.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the company operates and generates income.
Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
A deferred tax asset is recognised in respect of share options granted in 2021 and 2023. Typically,
tax relief for the cost of share option grants is provided as a deduction in the accounting period when
the shares are acquired (as per s.1013 CTA 2009). This creates a deferred tax asset due to the
recognition of the cost of equity-settled transactions over the vesting period.
Management believes that Ballinger & Co Ltd’s profit projections indicate that the Company can sustain the deferred tax asset.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Provisions for liabilities
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Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the Balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Balance sheet.
All finance costs are recognised in profit or loss in the year in which they are incurred.
Ordinary shares are classified as equity. Where the total consideration received exceeds the nominal value of the allotted shares, the Company records the excess as share premium. From time to time, the Company's management may consider purchasing its own shares. Any excess payment for such purchases is deducted from the initial share premium (received from the allotment of shares), and the remaining balance is recorded in the Capital Redemption Reserve.
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
The Company has elected to allocated all share-based payment costs to Ballinger & Co Ltd, as all eligible option holders are employees of Ballinger & Co Ltd.
The grants also give rise to deferred tax, which is disclosed in the notes.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Provisions, contingent liabilities and contingent assets
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The directors make estimates and assumptions that may impact the financial statements. These estimates include provisions and contingent liabilities. Actual results could be different from the initial assumptions and estimates.
Provisions are recognised in the financial statements when it is probable that an outflow of economic benefits will be required to settle a present obligation for which the estimation of the amount of the obligation can be made reliably.
A contingent liability is either a possible but uncertain obligation or a present obligation that is not recognised because either an outflow of economic benefits is not probable or the amount of the obligation cannot be reliably made.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent assets are not recognised.
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Judgements and key sources of estimation uncertainty
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The preparation of financial statements involves directors making estimates and assumptions that impact the reported values of assets, liabilities, and the disclosure of contingent assets and liabilities as of the financial statement date, as well as the reported revenue and expenses throughout the year. Actual results may differ from these estimates.
Items that require significant management estimates include the fair value of financial instruments, provisions related to ongoing litigation, and share-based payments. Management bases these estimates on historical experience, current market conditions, and other factors deemed reasonable under the circumstances, in accordance with the Group's accounting policies. Further details on these estimates are provided in the relevant accounting policies and disclosures. The Company collaborates with various experts, including legal and valuation consultants, to ensure that appropriate assumptions are applied.
Analysis of turnover by country of destination:
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3.Turnover (continued)
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The Company acts as a riskless principal broker between the buyer and seller, with all contracts agreed upon and accepted by customers being booked back-to-back with a counterparty.
As of the reporting date, management reviewed open forward contracts and applied various scenarios to assess expected cash flows from early drawdowns.
These cash flows include both client settlements and transactions with counterparties. After the analysis, management concluded that there were no indications for fair value adjustments to the open forward contracts.
Where sufficient and reliable client data was available, management modelled early drawdown scenarios to assess expected gains or losses. The model was based on the remaining contract duration and assumed fixed monthly drawdowns. The analysis indicated a total reduction of £1,822,316 to account for potential losses from early drawdowns (2022: Nil).
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The operating profit is stated after charging:
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Audit fees payable to the company's auditor
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Other operating lease rentals
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Depreciation and amortisation
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The average monthly number of employees, including the directors, during the year was 37 (2022 - 27).
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Cost of contributions to pension schemes
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Employment cost (continued)
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Directors
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Cost of contributions to pension schemes
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Two rounds of option grants were made, in 2021 and 2023 respectively, with the valuation and fixed exercise price per share agreed with HMRC for each round. The options are granted to eligible employees according to government-defined participation rules and company eligibility criteria. Further details regarding share-based payments are provided in Note 19.
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Interest receivable and similar income
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Interest payable and similar expenses
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Current tax on profits for the year
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Movement in temporary differences
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Effects of changes in tax rate
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The corporation tax on profits for the year has been calculated after claiming group relief from a qualifying associated UK company, member of 51% group. In 2023, the Company claimed £414,682 in group relief (2022: £315,490).
Factors affecting tax charge for the year
The tax assessed for the year is higher than (2022 - higher than) the standard rate of corporation tax in the UK of 23.5% (2022 - 19 %). The differences are explained below:
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Profit on ordinary activities before tax
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Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 23.5% (2022 - 19%)
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Pension contributions adjustments
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Effect of changes in tax rates
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Total tax charge for the year
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Factors that may affect future tax charges
In 2021 an increase in the corporation tax rate to 25% with effect from 1 April 2023 was substantively enacted. The 23.5% rate used above reflects 9 months of this new rate and 3 months of the previous rate of 19%. The 25% rate is used to measure UK deferred taxes in 2023 (and in 2022 to the extent the related timing differences were expected to reverse after 1 April 2023).
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Charged to profit or loss
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Corporation tax rate change
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Deferred taxation (continued)
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Deferred tax liability
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Charged to profit or loss
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Corporation tax rate change
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Accelerated capital allowances
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The Company has no unused tax losses or credits.
The net reversal of deferred tax liabilities expected in 2024 is £36,655. This is expected to rise as the depreciation and amortisation is anticipated to be higher than the available capital allowances.
The Company does not expect reversal of deferred tax asset in 2024.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Tangible fixed assets (restated)
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The 2022 computer equipment balances have been adjusted. Details of the prior year's restatement are explained in note 20.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Intangible assets (restated)
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The 2022 computer equipment balances have been adjusted. Details of the prior year's restatement are explained in note 20.
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Charge for the year on owned assets
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Amortisation charge for 2022 was £86,400. There was no indication for intangible assets impairment in the current financial period.
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Investments in group companies
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Debtors due within one year
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Prepayments and accrued income
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Prior year reclassifications are explained in note 20.
Amounts owed by parent company undertakings are unsecured, interest-free, have no fixed date of repayment and are repayable on demand.
Included in other debtors are total collateral balances of £29,063,882 (2022: £12,139,739) held with counterparties.
As of the reporting date, the total intercompany loan balance with group companies is £2,269,157 receivable (2022 - £2,308,649 payable).
In 2022 the Company provided interest free loan of EUR 725,000 to Ballinger Group Holdings (Jersey) Limited via Ballinger Group Holdings (UK) Limited for the investment in Ballinger Market Limited.
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Cash and cash equivalents
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Creditors: amounts falling due within one year (restated)
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Other taxation and social security
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Amounts owed to group undertakings
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Netted trade creditors consist of client sell currency receivable balances and client buy currency payable balances as of the reporting date. These receivable and payable balances are set off on the basis that the asset is realised, and the liability is settled simultaneously.
The 2022 comparative balances have been restated, and other provisions are now presented separately. Prior year reclassifications are explained in note 20.
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Other provisions (restated)
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The Company had the following provisions during the year:
As of 31 December 2022, two provisions have been recognised and reflect management’s best estimate based on all available information at the time they were made.
One provision of £1,931,481 relates to ongoing litigation with a client. The litigation is still active. Management believes this provision should remain unchanged as of 31 December 2023.
The second provision of £297,381 pertains to a contractual dispute with a client. Mediation efforts ceased in 2023 when the client formally ended the process. Management believes the client terminated mediation to allow the litigation to proceed. Management believes this provision should remain unchanged as of 31 December 2023.
Other provisions, previously disclosed with creditors, are now presented separately. Prior year reclassification and adjustment are explained in note 20.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
A financial instrument is an agreement that creates a financial asset for one entity and a financial liability or equity interest for another. These instruments are recorded when the company enters into the contractual terms associated with them. Their importance stems from their influence on a company’s financial condition, operational outcomes, and risk exposure. Key financial instruments for the company typically include cash, bank deposits with trading bank counterparties, client margin accounts, trade receivables and payables, accruals, provisions, and derivatives instruments.
Carrying values of financial instruments
The following table sets out the carrying values of the main financial assets and financial liabilities.
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Financial assets held at amortised cost
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Deposits with trading bank counterparties
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Deposits held with trading bank counterparties are included in the Balance Sheet under 'Debtors: amounts receivable within one year'. Further details are provided in note 13.
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Financial liabilities held at amortised cost
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Accruals are included on the Balance Sheet under 'Creditors: amounts falling due within one year'. Further details are provided in note 15.
Other provisions are shown on the Balance Sheet under non-current liabilities. Further details are available in note 16.
The Company believes that the carrying amounts of the above financial instruments closely approximate their fair values, primarily due to their short-term maturities.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Financial instruments (continued)
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Offsetting financial instruments
The Company offsets the financial assets and liabilities, 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.
The financial assets and financial liabilities subject to offsetting consist of client sell currency receivable balances and client buy currency payable balances as of the reporting date. These receivable and payable balances are set off on the basis that the asset is realised and the liability is settled simultaneously. The offset balances are presented on the Balance Sheet under 'Creditors: amounts falling due within one year'. Further details can be found in note 15.
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Netted financial assets and financial liabilities
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Fair value measurement
The fair value reflects the net amount the Company would settle if the foreign currency exchange contracts were terminated on the reporting date. The valuation is derived from publicly available quoted prices for open foreign exchange contracts. The Company obtains these quotes either directly through its platform or from open sources like Bloomberg. The fair value charges are recognised by the Company on the reporting date.
The foreign exchange forward and SWOP contracts fall into Level 2 of the fair value hierarchy: ‘Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. The following table sets out derivative financial instruments net change in relation to foreign exchange open contracts:
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Derivative financial asset
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Derivative financial liability
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Fair value net change charged to profit or loss
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Fair value net change charged to profit or loss is presented in the Profit and Loss account within administrative expenses.
At the reporting date the management reviewed open forward contracts and where sufficient and reliable client data was available, management modelled early drawdown scenarios to assess expected gains or losses. The model was based on the remaining contract duration and assumed fixed monthly drawdowns, while interest rates and foreign exchange spot rates remained unchanged. The analysis indicated a total reduction of £1,822,316 to account for potential losses from early drawdowns (2022: Nil).
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Financial instruments (continued)
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Derivative financial liabilities were previously presented under 'Creditors: amounts falling due within one year'. Management has identified that derivative financial liabilities require separate presentation and disclosure. Providing a separate disclosure ensures readers have a comprehensive understanding of derivative financial assets and liabilities. The reclassification has no impact on net assets or profit or loss. Further details of the reclassification are provided in note 20.
Financial risk management
Credit risk analysis
Credit risk refers to the potential loss that may occur if a client fails to meet their contractual obligations on the settlement date. The Company expects its clients to meet these obligations and has implemented strong client onboarding and credit risk management processes. These measures include setting credit facility limits, requiring cash collateral, and terminating relationships with high-risk clients. The Company has a negligible history of client defaults.
The credit risk associated with liquidity providers is considered very low, as they are well-established financial institutions with extensive access to global financial markets.
Liquidity risk analysis
Liquidity risk is the risk that the Company may not have sufficient funds to meet its obligations in a timely manner. The Company manages this risk by regularly reviewing its working capital requirements and forecasts. The risk team provides management with weekly cash position reports, allowing for ongoing review and analysis of liquidity risks.
Market risk analysis
Market risk refers to the Company’s exposure to fluctuations in market prices. The Company's market risk management includes credit facility agreements tailored to each client, along with initial and variation margin limits. As of the reporting date, the Company held total margins of £31,572,397 (2022: £11,837,305) against clients' open positions. These margins are primarily held in GBP, EUR, CHF, and USD. Other debtors include cash collateral of £29,063,882 (2022: £12,139,739), representing deposits with trading bank counterparties for open positions held with those banks. The cash collaterals with the trading bank counterparties are held in GBP and CHF.
On the reporting date, management modelled various scenarios and assessed the net cash flows required if open trades were terminated on different dates. The model assumed trades were settled at the Bank of England’s spot rates, with no changes to interest rates.
The model indicates that, in highly unlikely scenarios, the Company may incur minimal market losses. Where sufficient and reliable client data was available, management modelled early drawdown scenarios to assess expected gains or losses. The model was based on the remaining contract duration and assumed fixed monthly drawdowns. The analysis indicated a total reduction of £1,822,316 to account for potential losses from early drawdowns (2022: Nil).
Capital management
The Company manages its capital to ensure its ability to operate as a going concern while maximising returns. Additionally, it must manage its capital to comply with regulatory capital adequacy requirements. The capital structure comprises fully paid share capital, the share premium account, the share-based payment reserve, and retained earnings. The board periodically reviews and monitors the capital in alignment with management reporting processes.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Allotted, called up and fully paid
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19,086 (2022 - 19,086) Ordinary shares of - £0.0001 each
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Share-based payment (restated)
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Share-based payment represent the cumulative amounts charged to the profit and loss statement in respect of share-based payment arrangements below.
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Cost of share-based payment
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Basis of Valuation
There are several valuation methodologies which may be used to value businesses including the price earnings method, the net asset method, the investment method, the discounted cashflow valuation, the dividend yield method and relative valuations.
The management has adopted EBITDA (earnings before interest, tax, depreciation and amortisation) relative valuation method in valuing the Company. Relative valuation methods derive valuations by comparing financial characteristics of businesses. Turnover valuations are generally used to value businesses that have a steady level of turnover.
Vesting requirements
The options can be vested only on or following a listing, an asset sale or share sale in accordance with the term of the share option contracts. If the optionholder ceased to hold employment, the directors shall have a discretion to permit option to be exercised to any extent or remain in force to such an extent and subject to such conditions of exercise as they shall determine.
Maximum term of options granted
This option shall immediately lapse and cease to be exercisable on the expiry of ten years after the date of grant.
Method of settlement
The options are settled in the equity of Ballinger Group Holdings (UK) limited, the holding company of Ballinger & Co Ltd.
Basis of the cost allocation
The cost of share-based payment is fully allocated to Ballinger & Co Ltd on the bases that all eligible option holders are employees of Ballinger & Co Ltd.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Prior period adjustment, reclassifications and error corrections
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A prior period adjustment has been recognised for the cost of share options granted to the Company's employees, including directors. The total cumulative effect of the adjustments results in a decrease of £41,640 in the profit before tax for the year ended 31 December 2022 and an increase in the deferred taxation asset of £10,410 as at that date. This adjustment resulted in an overall reduction in the retained earnings of £31,230 as at 31 December 2022.
Management identified that a total deferred tax liability of £132,502 related to accelerated capital allowances should have been recognised. A prior period adjustment of £68,194 has been recognised in 2022, along with an adjustment of £64,308 for the period before 2022. The opening retained earnings balance for 2022 has been adjusted by £64,308 to reflect this correction.
The above adjustments resulted in an overall reduction in the retained earnings of £163,732. Of this amount, £99,424 was recorded in the period ended 31 December 2022, and £64,308 was recorded in periods prior to 2022.
Reclassifications and errors
Management identified errors in the 2022 presentation, specifically related to Debtors, Creditors, Financial Assets, and Financial Liabilities. Management further identified that intangible assets were incorrectly presented with tangible assets. After reviewing the relevant sections of FRS 102, management implemented the necessary presentational changes to the 2022 financial statements and disclosure notes. The following described prior period reclassifications and error corrections had no impact on net assets.
Tangible and intangible assets
The capitalised costs related to software configuration and enhancements, aimed at incorporating critical features and bringing the software into service, were previously incorrectly presented on the balance sheet under 'Tangible assets'. After a review of the relevant sections of FRS 102, management concluded that the nature of these items requires a separate classification as intangible assets. As a result, the intangible assets at a net book value of £302,767 (2022: 336,000) are restated and presented separately on the balance sheet and disclosed in note 11. The restatement had no impact on net assets or profit or loss.
Other debtors
Other debtors have been adjusted to include a £37,378 foreign exchange currency translation correction related to a USD deposit balance held with trading bank counterparties. This correction did not affect net assets.
Other provisions
After reviewing the relevant sections of FRS 102, management concluded that two provisions related to legal disputes with two clients required separate classification under 'Other provisions'. In the previous year's financial statements this was incorrectly presented with Creditors on the balance sheet. As a result of the reclassification this year £2,228,862 (2022: £2,228,862) has been reclassified as 'Other provisions' and is now separately presented on the balance sheet under non-current liabilities, with additional disclosure in the note 16.
£95,240 has been reclassified as accruals and reversed in January 2023. The restatement had no impact on net assets or profit or loss.
Financial liabilities
Financial liabilities in relation to open forward contracts were not separately presented in last year's financial statements. Management identified this error and made the necessary adjustment to the 2022 balance sheet. £978,571 is now separately presented in the restated 2022 Balance Sheet, with further details provided in note 17.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
21.Prior period adjustment, reclassifications and error corrections (continued)
Cost of sales
The reclassification relates to turnover-generating activities, such as team commissions. Management believes it is more appropriate to present these as part of the "cost of sales" as they are directly linked to the turnover. The reclassification will give the readers better understanding of the Company's gross profit. The reclassification is intended to provide readers with a clearer understanding of the full costs associated with turnover-generating activities and to better evaluate the Company's efficiency. The reclassification impact is presented below:
Reconciliation of cost of sales as at 31 December 2022
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Year ended
31 December
2022 as
previously
reported
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Prior year
adjustment
(share-based
payment
cost)
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Year ended
31 December
2022 as
previously
reported
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Reconciliation of changes to the balance sheet as at 31 December 2022
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Prior period adjustment, reclassifications and error corrections (continued)
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Reconciliation of retained earnings as at 31 December 2022
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Retained earnings as previously stated
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Adjustment to opening retained earnings
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The company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund and amounted to £36,818 (2022 - £30,499). Contributions totalling £7,813 (2022 - £6,781) were payable to the fund at the balance sheet date and are included in creditors.
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Commitments under operating leases
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At 31 December 2023 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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In the opinion of the directors, the Company's ultimate parent company and ultimate controlling party is Ballinger Group Holdings (UK) Limited, a company incorporated in the United Kingdom and whose registered address is 65 Curzon Street, London, W1J 8PE. Copies of the group financial statements of Ballinger Group Holdings (UK) Limited are available from Companies House, Crown Way, Maindy, Cardiff CF14 3UZ.
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BALLINGER & CO. LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company is involved in ongoing litigation with a former client. Although a settlement payment is expected, details regarding the litigation remain confidential and cannot be disclosed.
Settlement payment is expected in late 2024 in line with the settlement agreement, given the level of uncertainty of whether funds will actually be received, a contingent asset has been disclosed in these financial statements, however details regarding the litigation remain confidential.
The Company evaluated all subsequent events through 29 December 2023. In 2024, the Company signed a settlement agreement related to ongoing litigation mentioned in note 24, with the funds expected by late 2024.
No other significant events occurred after the balance sheet date and before the issuance of the financial statements that would have a material impact on the Company’s financial results.
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