The directors present the strategic report for the year ended 31 December 2023.
Principal Activity
The principal activities of the group are:
that of the design and manufacture of In-Home Displays (IHD) and Consumer Access Devices (CAD) used to capture, display and transfer real-time home energy consumption data from smart meters. Our products give consumers an important introductory insight to their energy data and, as such, are an essential engagement tool for the Smart Meter Installation Programme.
the development of a cloud-based data platform to enable a number of wide reaching and innovative applications and services, based on highly granular and personalised home energy data, to help consumers optimise their energy efficiency and work towards decarbonisation in the home.
The development of a mobile front-end application to allow consumers to engage with and control all elements of their home energy solution from a single platform.
UK Smart Meter Programme
Demand from the UK Smart Metering Programme remained at normalised levels during the first half of the year but then saw a decline in the second half with several large suppliers citing a slow-down in installations resulting in overstocking situations. This appears to have been industry-wide as we largely maintained our market share leadership throughout 2023, maintaining 100% on-time supply to all customers.
Whilst volume demand fluctuated, the post-pandemic, punitive, effects on the supply chain for key components were also still being felt for the majority of FY23 as prices were slow to return to anything like the pre-pandemic levels. However, the improved international logistics conditions and the revision of certain commercial terms by Chameleon through the course of the previous year at both customer and product level supported a modest improvement to margins during the year.
Energy Policy Landscape
The Ukraine conflict continued to create real concern for the country’s energy security and maintained the unprecedented pressure on energy bills. The domestic energy price cap continued to offer some protection to consumers against the spiralling costs of electricity and gas but despite this, consumer energy debt reached almost £3Bn by the end of 2023. Meanwhile, the year saw yet more adverse climate impacts with new records being set once again for temperatures around the globe. Despite the combination of these major factors creating a perfect storm scenario whereby energy security, the need to adopt energy saving solutions in the home and to acknowledge the need to act against the climate emergency should have kept the Government’s energy policy to deliver Net Zero at the top of the political agenda, the prospect of a general election in 2024 and a growing populist backlash against the reported costs of achieving Net Zero created some uncertainty.
Innovation Projects
During the year the company made progress with the NZIP funded research and development projects delivering over £1.2m of revenue. Key learnings from the areas covered by the projects: intelligent electric vehicle charging, the use of smart meter data to calculate the thermal energy efficiency rating of properties and the development of a home energy management system (HEMS), will all form an important contribution to the optimisation of decarbonised heating and transport systems required to achieve the Government’s Net Zero ambitions.
In addition to the government grant-funded projects, the company also commenced a number of new hardware projects aimed at enabling the collection of energy, environmental and water data from other territories and geographies with associated data services. These are expected to come online in late 2024.
ivie
The company continued to support and develop its direct to consumer capabilities via ivie
Subscriber numbers remained steady at around 50,000 reflecting our decision to maintain at this level and use this cohort of engaged users to help us further refine our data insights on energy consumption as well as tips and recommendations on how to save energy. ivie consumers can see a breakdown of where energy is being consumed in the home and also a calculation of their carbon footprint and over 20,000 of them took the option to receive live energy data into the app by installing the ivie Bud, wi-fi connected in-home display. Through 2024, the app and associated services will continue to evolve its functionality and its power to provide actionable insights and tailored advice particularly in the areas of solar and storage and the decarbonisation of domestic heating.
We took the difficult decision to withdraw the ivie EV Charger from sale due to a lack of sales reflecting the wider EV Charger industry in the UK and we focussed instead on making the ivie App compatible with as wide a range of other OEM chargers as possible.
The evolution of the ivie connected energy system will continue with further significant updates planned going forward.
Summary
The continued return to pre-COVID volume levels in half 1 was welcome after enduring such a protracted period of suppressed demand but the unprecedented drop in forecast which occurred in the second half severely impacted our top line recovery and caused the company to constrain some spending on R&D projects and remove the EV Charger product line from sale.
Nevertheless, the company was able to continue the development of a number of new innovations in line with its strategic plan and vision for the future and is positioned well for further acceleration in the coming reporting period.
Revenue decreased by 16% from £30,742,061 to £25,940,246. Gross profit decreased from £6,199,900 to £5,587,758 which represents an actual increase of 1% in gross margin.
Delivered volumes decreased by over 21% to just under 1.3 million units in the year.
Post-COVID hangover affecting supply chain costs
As noted above, supply chain cost were slow to recover and had not returned to pre-pandemic levels by the year end. The expectation is for that this position will continue to normalise, providing further margin recovery during FY24.
Geopolitical Tensions
Our view on the geopolitical landscape and the potential for further conflict escalation remains unchanged from previous reports. We continue to monitor all situations and retain a capability to relocate manufacturing to alternative geographic locations if deemed necessary; but, the original source of key components is out of our direct control and we would be subject to the same risks as other industry participants and adjacent sectors.
Forex
The Company maintains a well established hedging strategy, geared towards protecting downside risk, along with the forex adjustment corridor mechanism implemented in the majority of our customer supply contracts, to mitigate the impact of foreign exchange fluctuations during the year.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 11.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
No preference dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with the company's articles, a resolution proposing that Counting North Limited be reappointed as auditor of the group will be put at a General Meeting.
We have audited the financial statements of Chameleon Technology Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outline 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:
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations we considered the following:
the nature of the industry and sector, control environment and business performance.
management's own assessment of the risks that irregularities may occur either as a result of fraud or error.
results of our enquiries of management about their own identification and assessment of the risk of irregularities.
the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the company for fraud.
In common with all audits under ISA's (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the company operates in, focussing on provisions of those laws and regulations that:
have a direct effect on the determination of material amounts and disclosures in the financial statements.
do not have a direct effect on the financial statements but compliance with which may be fundamental to the company's ability to operate or to avoid a material penalty.
As a result of performing the above procedures, we identified the key matters related to the potential risk of fraud. Our procedures to respond to the risks identified included the following:
reviewing the financial statements disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements.
enquiring of management concerning actual and potential litigation and claims.
challenging management on key estimates, assumptions and judgements made in the preparation of the financial statements.
performing substantive procedures to verify the validity of transactions included in the financial statements.
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud.
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments, assessing whether judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated the relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Through these procedures, we did not become aware of any material misstatement or any actual or suspected non-compliance with laws and regulations impacting on the company and the group.
We planned and performed our audit in accordance with auditing standards but owing to the inherent limitations of procedures required in these areas, there is an unavoidable risk that we may not have detected a material misstatement in the financial statements. The more 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 any non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of directors and other management and the inspection of regulatory and legal correspondence, if any.
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 concealment, collusion, forgery, misrepresentations, or override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £1,358,919 (2022 - £1,368,048 loss).
Chameleon Technology Holdings Limited ("the company") is a private limited company domiciled and incorporated in England and Wales. The registered office is 1st Floor, Central House, Otley Road, Beckwith Knowle, Harrogate, HG3 1UF.
The group consists of Chameleon Technology Holdings Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Chameleon Technology Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
Despite the downturn in results in FY23 and the continued protraction experienced in the mandate IHD market during FY24, at the time of approving the financial statements, the director has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future.
Communications with our customer base and with the Department for Energy Security and Net Zero indicate that the smart meter roll-out is fully expected to be mandated beyond the original 2025 end date and that demand for smart meters and IHD’s will stabilise and start to grow in the coming few years. Added to this, new product launches announced during Q4 FY24 and still to come during H1 FY25 have already generated significant interest and commercial traction with current customers and new customers in adjacent markets, and we anticipate this to continue to grow throughout FY25.
During Q4 FY24, significant new funds were committed by existing funders and shareholders, providing the working capital support required to deliver the FY25 business plan.
On this basis, the director considers it appropriate to prepare the financial statements on a going concern basis.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
Intangible assets comprise software costs and development costs. Development cost are internally generated assets relating to the development of new products for which:
- the technical feasibility of the product has been established
- there is an intention and ability to sell the product
- there is a demonstrable market for the product from which future economic benefits are probable
- adequate technical, financial and other resources are available to complete the development of the
product
- the company can reliably identify and measure the costs attributable to development of the product
Such assets are defined as having a finite useful life and the costs are amortised over the anticipated product life. Assets under construction are not depreciated until they are brought into use.
Software assets are not amortised until they are brought into use.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
Schemes granted before the transition date for FRS102 have taken advantage of the transition exemptions available and no liability is recorded for these options.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Research and Development
Development costs are capitalised within intangible assets where they can be identified with a specific product of project anticipated to produce future benefits. These intangible assets are amortised over an estimated number of units to be supplied over the anticipated life of the completed product or project.
Deferred research and development costs are reviewed annually, and, where future benefits are deemed to have ceased or to be in doubt, the balance of any related research and development is written off to the profit and loss account.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Development costs, as detailed in Note 10, are amortised over an estimated number of units to be supplied over the anticipated life of the completed project. Due to the technological nature of the product it can be difficult to identify the number of units that can be sold of each product. The directors review the current projected sales for each product at each year end and adjust the amortisation accordingly.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
More information on impairment movements in the year is given in note 10.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Other loans include a loan which is secured by a fixed and floating charge on the assets of the company.
Other loans include an invoice factoring agreement which is secured by a fixed and floating charge on the assets of the company. The rate of interest is 2%.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse within 5 years and relates to accelerated capital allowances, development costs and tax losses that are expected to mature within the same period.
Included within Other Deferred Tax movements is an opening deferred tax balance recognised on consolidation.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: