Company registration number 11618169 (England and Wales)
AVL EUROPE LIMITED
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
AVL EUROPE LIMITED
COMPANY INFORMATION
Directors
A Bergman
Ms E Northeast
(Appointed 5 March 2024)
Company number
11618169
Registered office
7 Bell Yard
London
WC2A 2JR
Auditor
TAG Assurance Services Ltd
Unit 8 Pendeford Place
Pendeford Business Park
Wolverhampton
WV9 5HD
Business address
Cd Baby
2nd Floor Unit 23 Tileyard Studios
Tileyard Road
London
N7 9AH
AVL EUROPE LIMITED
CONTENTS
Page
Strategic report
1 - 8
Directors' report
9 - 10
Independent auditor's report
11 - 13
Group statement of comprehensive income
14
Group balance sheet
15
Company balance sheet
16
Group statement of changes in equity
17
Company statement of changes in equity
18
Group statement of cash flows
19
Notes to the financial statements
20 - 33
AVL EUROPE LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

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

Information about the business

AVL Europe Limited is the holding company of all shares of the companies primarily comprising the FUGA Group, as well as Simbals S.A.S., CD Baby LATAM S.A.S. and Curve Royalty Systems Limited.

 

FUGA is the industry-leading technology and services company for international music rightsholders. Headquartered in Amsterdam, FUGA has offices in London, New York, and Milan and representations in Rome, Paris, Berlin, Stockholm, Los Angeles, Tokyo, Seoul, Sao Paolo, Manilla, and Australia.

 

At the company’s core is the FUGA platform, offering best-of-breed digital supply chain integration alongside dynamic promotion and marketing. The flexible platform enables FUGA’s clients to vary services across different Digital Service Providers (DSPs) so that they can develop their catalog management, distribution, marketing, licensing and royalty accounting activity as their needs evolve. Connected to over 200 DSPs worldwide, FUGA’s Platform manages more than 45 million unique tracks, generating over 16 billion streams, delivering 21 million unique tracks during 2023. At present, more than 1300 different businesses, such as labels, artist platforms, distributors and other rights holders around the world rely on FUGA’s technology and services to support their operations.

 

FUGA is listed on the highest distributor tier for Spotify and Apple: a Preferred Plus distributor and encoding house for Apple and preferred platinum partner and recommended delivery platform for Spotify. An active member of the DDEX consortium, FUGA also partnered with Verifi Media as part of a coalition to spearhead development of a global blockchain ecosystem.

 

In 2023, we have continued our track of technical development, adding new and enhanced features to the FUGA Platform. The FUGA Platform provides clients the technology to facilitate content delivery and the requisite licenses to distribute content to DSPs. The Platform is flexible and modular, not one-size-fits-all. Some of our clients may have existing, direct commercial arrangements with DSPs, and those clients can leverage “platform” and services only, or leverage both platform and aggregation services in a

combined supply chain.

 

FUGA’s technology platform extends across the entire value chain for music, with the opportunity to expand upstream into digital rights management.

 

 

The opportunities which have led us to the growth path the company has been on during the last years are continuing:

AVL EUROPE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -

The Macro Trends in the music industry are positive: FUGA is well positioned to capitalize on macro tailwinds for independent music creation and digital distribution.

 

Within the Industry FUGA has developed itself as the Platform of Choice: The only truly global independent technology platform powering digital distribution for businesses across the entire value chain; where even “competitors” can be customers; and where FUGA is a preferred ‘Plus’ and ‘Platinum’ partner at Apple and Spotify respectively.

 

Especially during the last few years, FUGA has developed an attractive financial profile: Strong growth, recurring revenues, improving margins, an evergreen royalty base, cash generative and increasing profitability.

 

The growth opportunities for FUGA are identified in the following areas:

 

AVL Europe Limited and its subsidiaries form part of the Downtown Music Holdings’ portfolio of Music Distribution, Artist & Label Service Businesses.

 

Downtown is a global company that owns, manages, and develops businesses with a vision for a more equitable and innovative music ecosystem. With operations across North America, Europe, Asia, Australia, and Latin America, they are the world’s leading provider of end-to-end services to artists, songwriters, labels, music publishers, and other rights holders. Through their portfolio of companies — Downtown Music Publishing, Songtrust®, AVL Digital Group, and Downtown Music Studios — it manages millions of music copyrights, with a catalog that spans nearly 100 years of popular music, including music for film and television, and the single largest independent sound recording catalog in the industry. The integrated platforms help democratize global music rights management and simplify the distribution, monetization, and promotion of creative works.

 

This acquisition by Downtown has provided FUGA the backing to achieve Downtown’s global ambitions in this space so it can continue serving the independent music community, developing its service offering and improving its technology. FUGA shares a common business approach and philosophy with Downtown, one rooted in providing control and flexibility for creators and rights holders.

 

The acquisition by Downtown has also given FUGA access to additional funding to support business growth. In recent years, client royalty advances in music creation and distribution, as well as broader shifts in how music is discovered and consumed, have proven to be an advantage for the industry, particularly independents. In 2023, the balance of outstanding advances funded by FUGA grew from €4.8m in December 2022, to €8.1m in December 2023. Downtown Music Holdings has a credit facility with Bank of America, designed to facilitate advance deployment to clients in the Downtown Music enterprise established a fund to support independent artists and entrepreneurial business owners. This financing from Bank of America enables us to expand our music services business by giving creators and business owners the ability to finance projects and grow their business.

 

Following the acquisition by Downtown in 2020, in the course of 2021 FUGA acquired all outstanding Neighbouring rights assets which were being held within the Downtown Group. These assets are now managed as part of the dedicated entity within the FUGA group, Ivory Plus Records BV.

AVL EUROPE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Development and performance

Furthermore, FUGA has become the delivery pipeline of two other Downtown and AVL Group entities, for their supply of music assets towards DSPs. This step has been taken to create further economies of scale in the group and to avoid further dependency on the supply of external services by third parties.

 

During 2022, Downtown Music Holdings created a new business vertical to manage various B2B divisions across the business. In September 2022 it was announced that Downtown Music would be formed, combining all of Downtown's global business and professional services including distribution, label and artist services, publishing administration, video and user-generated rights monetization, neighbouring rights, royalty accounting solutions, sync licensing and creative support services. FUGA is one of the largest operating companies within the Downtown Music vertical, and former FUGA CEO Pieter van Rijn has been appointed to lead Downtown Music as President.

 

On 15 December 2020, Space Shower Networks Inc and FUGA announced the establishment of a joint venture company in Japan, SPACE SHOWER FUGA. The joint venture combined FUGA’s end-to-end music technology with Space Shower’s local distribution expertise to offer a full suite of B2B digital music services for the world’s second largest music market. Having launched September 2021, the joint venture sees Space Shower’s digital distribution clients benefit from FUGA’s range of technology services and provides FUGA with a platform to develop its existing business and services its large international client base in Japan. The joint venture also helps to deliver and market Space Shower’s music catalogues to a worldwide audience via FUGA’s global distribution and marketing division. FUGA holds 49% of the share capital, and Space Shower Networks owns 51%.

 

Review Of Business Performance

 

In 2023, the consolidated net loss after taxation for the period was £81K compared to £4.56 million last year. The increase in net profit was mainly due to the impact of an increase in revenue resulting in a gross profit improvement of £4.7m and increased interest received on intercompany loans.

 

In 2023, the Group realized total gross revenues of £167.0 million. This is an increase of £21.3m, or 14.6%, compared to the 2022 gross revenue of £145.7 million. The increase in gross revenues can mainly be attributed to the growth in distribution revenues. Gross distribution revenues in 2023 recorded a growth of 12.5%. The total gross margin increased from a level of £22.1 million in 2022 to a level of £26.8 million in 2023, an increase of 21%.

 

In 2023 the Group achieved an EBITDA of £8.4 million compared to £5.2 million in 2022. Our operating expenses were well controlled and stayed below the planned budgets. At the same time the volume and profitability of The Group increased, which allowed us to leverage on the optimal usage of our fixed cost base.

 

On our Balance Sheet, net assets are £21.6 million, compared to £21.7 million at the end of 2022.

 

To ensure FUGA stays closely involved with the development of Blockchain technology in the Music industry, FUGA invested in 2018 in DotBlockchain - renamed Verifi Media in 2019 - a company that develops Blockchain Technology, via a convertible loan note of $250k. A further $100k was invested in the company in 2019, together with various larger entities (i.e. Warner Chappell and Digital Daruma). A new convertible loan of $250k was entered into in Feb 2021 as part of a larger $3M funding round, further building the company. On March 15, 2022 the Convertible Promissory Note with Verifi Media Inc that was issued in 2021 was converted to shares. The Principal amount of $250,000 plus accrued interest of $13,801 converted to 94,795 shares of Common Stock of Verifi Media, Inc. in full repayment of the Note. An additional Convertible Promissory Note was also entered into in March 2022 for $100,000. In 2023, $75,000 was paid as a convertible loan, but this has not been converted into shares yet.

 

In 2023, the gross revenues of our top 10 customers represent 13.6% of total group gross revenues while this is 15.9% on a gross margin basis. The revenues of our top 20 customers represent 27% of total group gross revenues while this is 24% on a gross margin basis.

AVL EUROPE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
Future Developments

The expectations for 2024 continue to show further growth in Distribution and Platform. Based on the run rate of our business as per the end of 2023, and the performance in the early months of 2024, we expect to see continued growth. This growth is fuelled by the double-digit growth of the music market and consumption, further digitalization of music content, the growth of the volume of content represented by our clients as distributors and content providers and as a result of FUGA adding on a further significant number of Digital Service Providers to our network. Expanding our global presence continues to be a priority, and synergies as part of the Downtown group, and specifically within the Downtown Music division, are expected to provide further opportunities for growth.

 

Given the way we have expanded our group over recent years and that we have deeply invested in our Platform to guarantee efficiency and flexibility; we also forecast to be able to continue to leverage our permanent cost base to such an extent that the growth of our margins will more than cover the growth of the operating expense to run the business. Therefore, we forecast to be able to register further growth in Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA). On a net profit basis, we will continue to see increased depreciation of our intangibles, following the deep investments in our platform, and is expected to lead to another positive net result for 2024.

 

On this basis we expect to be able to increase the level of our planned investments both in the quality and capacity of our Platform and strategically by broadening our access to the markets in which we are active. We feel supported by the financial strength the company is showing and the backing of our shareholders, which will also lead to further access to financing, either from shareholders or external financiers.

 

Early in 2024 our shareholders have approved the 2024 budget. This plan reflects a steady growth path going forward, with increasing revenues, EBITDA and net results. Margin levels continue to be healthy, and we continue to see a strong focus on cost and staffing management, allowing leveraging our margin growth from a slower increasing cost base.

 

Personnel

 

In September 2023 former FUGA CEO Pieter van Rijn was appointed to lead Downtown Music as President. As his successor, Christiaan Kröner - former COO of FUGA - has been promoted to President of FUGA. Kröner joined FUGA in 2012, where he led FUGA’s Operations and Services department. In 2020, Kröner was promoted to COO and has since overseen all operational activities of FUGA, being instrumental in building and developing both its marketing services and its licensing and royalty accounting departments. Kröner also played an integral role in the setup of Japanese music and media company Space Shower Networks’ JV, Space Shower FUGA.

 

In January 2022 FUGA’s former CFO Jan Peter Kerstens was appointed Group CFO for the Downtown Group. Tamryn Radford, who joined the FUGA Group in 2019 as Group Controller, took over all finance responsibilities for the FUGA Group of companies during 2022. In April 2023, Radford was appointed SVP of Finance Operations at Downtown Music and was succeeded at FUGA by Anouk van der Linde who started as Executive Vice President of Finance at FUGA on 1 April 2023. The Group has grown from a headcount of 223 (employees + contractors) in 2022 to 223 in 2023. This is expected to remain stable to the end of December 2024.

 

 

Litigation And Legal Cases

 

One of the characterizations of the music industry is the tendency towards frequent claims of infringement of copy- and distribution rights and other intellectual property. The Group maintains strict procedures and guidelines to avoid being confronted with claims and litigation and to perform our role in the industry in a legally and operationally correct way. The Group was, during the past four years, not involved in any litigation, prosecution, arbitration, tribunal, alternative dispute resolution or governmental proceedings as plaintiff or as defendant with any significant liability or cost for The Group.

 

 

 

AVL EUROPE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
Principal Risks

The Group is aware of the principal risks affecting the Group. These include price and market risks, credit risks, cash flow risks and liquidity risks, including those from royalty advances. Looking at the current liquidity position, cash flows, the 2024 forecast and budget and business plans for the coming years, management believes that the cash generated will be adequate to secure the continuity of the Group’s operations. The Group also has strong policies and procedures in place regarding collecting receivables from debtors. This all gives management comfort that the assessed risks are managed appropriately.

 

Credit Risk

 

Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations and arises from the Group’s receivables from customers and other parties, with the carrying amount of the financial assets representing the maximum credit exposure. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, the Group also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and the areas where the customers operate. The Group aims to trade only with recognized, financially healthy and creditworthy third parties. Receivable balances are monitored on an ongoing basis with the result that the Groups’ exposure to bad debts is not significant.

 

In relation to the long overdue invoices, these have been partially or completely paid within the first months of the financial year 2023 or otherwise provided against as bad debt and if not recovered, will be written off in 2024.

 

With respect to credit risk arising from the other financial assets of the Group, i.e. cash and cash equivalents, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

 

Liquidity Risk

 

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial liabilities and financial assets (e.g. accounts receivables, royalty advances receivable, other financial assets) and projected cash flows from operations. This projected cash flow helps the Group manage and ensure it has sufficient liquidity to meet its liabilities when they are due under both normal and stressed conditions without incurring unacceptable losses or risking damage to the Group’s reputation.

 

At the AVL Group level the company has access to external funding, and the FUGA Group of companies has the ability to fund potential cash needs through intercompany funding from AVL.

 

Market Risk

 

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices that will affect the Group’s income or value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

AVL EUROPE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -

Currency Risk

 

The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the USD Dollar (USD) and to a lesser extent the Euro (EUR) and Japanese Yen (JPY). Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

 

The largest foreign exchange exposures of the FUGA group are closely managed. This is a pure transactional exposure given that The Group collects a large part of its Aggregation income in USD, and to a lesser extent GBP and JPY from Merlin, Amazon and other smaller DSP’s, from which the royalty share is paid out to the content providers in Euros. This transactional exposure occurs every month and is hedged with almost 100% effectivity on a monthly basis.

 

In respect of the Group’s foreign operating entities, considering the local nature of our business and the fact that the Group has entities in the United States of America, the United Kingdom and in South Korea, exposures within The Group are identified to be limited, as such exposure arises from local expense and purchases by operating entities in the unit’s functional currency only. Considering the limited risk, the transactional currency exposures are not hedged, or only in those cases that the transactional exposure is material and separately identifiable.

 

With respect to (monetary) assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates or forward rates when necessary to address (short-term) imbalances.

 

The main foreign currency translation exposures are in USD. A change of 10% in the USD foreign exchange rate will impact the net result by approximately less than 1 (one)%.

 

Interest Rate Risk

 

As part of the AVL Group of companies, The Group is a Loan Party to the AVL Holdings and AVL Europe Facility Agreement in place with City National Bank. The Agreement was amended on December 6, 2022, and provides the AVL Group up to $30,000,000 in Revolving Loans, a $60,000,000 Term Loan, and access to an additional Delayed Draw Term Loan of $35m subject to certain conditions with maturity on December 6, 2027. The interest rate on the loans is Term SOFR, plus a 0.1% credit spread adjustment, plus an additional margin at rates from 2.50% to 3.00% depending on the Senior Debt to EBITDA ratio. Additionally, interest is charged on the unused portion of the revolving loans at rates from 0.25% to 0.50%.

 

In case of temporary cash needs within the overall AVL Group, FUGA has lent and will continue to lend excess cash to other operating companies within the AVL Group. These loans are short term in nature and are being repaid in line with agreements in place.

 

Technology & Data Risks

 

Given our place in the technology sector, on a daily basis we process very substantial amounts of data and information. This data is protected by state-of-the-art security measures and is handled with the utmost care and in accordance with applicable governmental and industry guidelines. However, in view of the global developments in respect of cyber criminality and the potential damages which may occur, The Group constantly reviews, implements and monitors strict measures to protect the valuable data and information in its possession.

AVL EUROPE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -

Capital Management

 

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

 

Financial Instruments

 

The Group makes limited use of financial instruments. As part of its process to manage its foreign exchange exposure, on a monthly basis it takes out hedges to assure there is a full matching of currency values between foreign currency flows received from DSPs and the royalties subsequently being paid out to the various clients.

 

Law, Legislation And Regulations

 

Across The Group, but more especially in the EU, USA and UK, we are continuously being informed about any changes in laws, regulations and legislation which may be applicable to our organization. Whenever these are deemed to be relevant, the appropriate measures and new guidelines are taken and are expected to be complied with.

 

During the reporting year there have not been any material changes in the rules and regulations applicable to our organization, which may have a material impact in how we conduct our business. However, there is always the opportunity that such change may have an impact in the future. Given our long-standing experience in the business and industry we do expect to be able to find the appropriate measures in case such material change would occur.

 

In relation to Privacy, The Group is closely monitoring the relevant changes in data protection laws worldwide, including GDPR and CCPA. As The Group is an agile organization, it swiftly adapts and adopts new regulations and guidelines in this area.

 

Risk Appetite

 

As far as risks can be covered by improving internal processes, internal systems or effective and financially efficient instruments or tools, The Group will always consider implementing such measures. In order to be successful, The Group will need to be able to execute sound entrepreneurship and find the proper balance between taking risks to possibly be able to realize ambitions and, on the other hand, risk the costs of a potential failure. Given our experience in the industry and our proven track record, we deem ourselves well equipped to handle such balancing between risk, ambitions and rewards.

 

We look back at a very rewarding 2023. The Group has shown significant growth, has continued to prove its strong reputation and has further built its position as a key industry player. Our distribution platform and content services, offered in a highly modular way, are consistently proving value for a growing customer base.

 

We would like to thank especially our staff which have shown unlimited energy, dedication and passion, collectively as a team, to make The Group the industry-leading technology and services company for international music rightsholders.

AVL EUROPE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -

Diversity

 

Within the remit of The Group of companies being part of the Downtown / AVL Group of companies, we continue with our Diversity Equity and Inclusion (DE&I) work. These include among others the following key initiatives and below reflects our collective progress.

 

The hiring and recruitment process and policies are continuously reviewed to ensure fair and equitable processes for all applicants. By streamlining the process, the goal is to help managers focus solely on the skills needed and interview without bias.

 

The Downtown Group have launched Employee Resource Groups in October 2020 with Black Power in Music (BPM), and in 2022 Womxn+, with a focus on providing support and mentorship to people socialized as, perceived as, and/or who identify as womxn as well as those with variant gender identities and in 2023 Shesaid.so, a community of women, gender nonconforming people, and allies in the music industry.

 

In addition, the company continuously participates in specific awareness programs like Health Awareness month, Earth Day, Volunteering, and various other initiatives.

 

War Between Russia And Ukraine

 

We have not identified any significant impact on our financial statements, or going concern, as a result of the war between Russia and Ukraine. The combined financial impact of these has not been significant to date and is not expected to have a significant impact moving forward. The main impacts on The Group are summarized as follows:

 

Post-Balance Sheet Date Events

 

On 16 December 2024, it was announced that Virgin Music Group, the global independent music division of Universal Music Group, had entered into a definitive agreement to acquire Downtown Music Holdings LLC. The deal is subject to regulatory approvals and is expected to complete in the second half of 2025.

On behalf of the board

A Bergman
Director
29 January 2025
AVL EUROPE LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 9 -

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

Principal activities

The principal activity of the company and group continued to be that of a music distributor.        

Results and dividends

The results for the year are set out on page 14.

No ordinary dividends were paid. The directors do not recommend payment of a further dividend.

Directors

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

A Bergman
T Maddux
(Resigned 15 December 2023)
Ms E Northeast
(Appointed 5 March 2024)
Statement of directors' responsibilities

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

 

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

 

 

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

Statement of disclosure to auditor

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

AVL EUROPE LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
On behalf of the board
A Bergman
Director
29 January 2025
AVL EUROPE LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF AVL EUROPE LIMITED
- 11 -
Opinion

We have audited the financial statements of AVL Europe, Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

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

 

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

 

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

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

AVL EUROPE LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF AVL EUROPE LIMITED
- 12 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

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

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

 

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.

AVL EUROPE LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF AVL EUROPE LIMITED
- 13 -

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.

Shaun Philpott FCA
Senior Statutory Auditor
For and on behalf of TAG Assurance Services Ltd
29 January 2025
Statutory Auditor
Unit 8 Pendeford Place
Pendeford Business Park
Wolverhampton
WV9 5HD
AVL EUROPE LIMITED
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
2023
2022
Notes
£'000
£'000
Turnover
3
167,049
145,716
Cost of sales
(140,276)
(123,622)
Gross profit
26,773
22,094
Administrative expenses
(28,178)
(24,250)
Operating loss
4
(1,405)
(2,156)
Interest receivable from group undertakings
6
1,593
71
Amounts written off investments
7
276
(1,468)
Fair value gains and losses on foreign exchange contracts
-
0
(278)
Profit/(loss) before taxation
464
(3,831)
Tax on profit/(loss)
8
(545)
(819)
Loss for the financial year
(81)
(4,650)
Loss for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.

The notes on pages 20 to 33 form part of these financial statements.

AVL EUROPE LIMITED
GROUP BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 15 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Fixed assets
Goodwill
9
34,067
39,451
Other intangible assets
9
9,485
8,943
Total intangible assets
43,552
48,394
Tangible assets
10
674
769
Investments
11
100
8
44,326
49,171
Current assets
Debtors
13
51,659
32,240
Cash at bank and in hand
18,969
11,683
70,628
43,923
Creditors: amounts falling due within one year
14
(93,360)
(71,419)
Net current liabilities
(22,732)
(27,496)
Net assets
21,594
21,675
Capital and reserves
Called up share capital
17
29,297
29,297
Profit and loss reserves
(7,703)
(7,622)
Total equity
21,594
21,675

The notes on pages 20 to 33 form part of these financial statements.

The financial statements were approved by the board of directors and authorised for issue on 29 January 2025 and are signed on its behalf by:
29 January 2025
A Bergman
Director
Company registration number 11618169 (England and Wales)
AVL EUROPE LIMITED
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023
31 December 2023
- 16 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Fixed assets
Investments
11
45,892
45,884
Current assets
Debtors
13
30
-
0
Creditors: amounts falling due within one year
14
(16,544)
(16,817)
Net current liabilities
(16,514)
(16,817)
Net assets
29,378
29,067
Creditors: amounts falling due after more than one year
-
-
Capital and reserves
Called up share capital
17
29,298
29,298
Profit and loss reserves
80
(231)
Total equity
29,378
29,067

The notes on pages 20 to 33 form part of these financial statements.

The financial statements were approved by the board of directors and authorised for issue on 29 January 2025 and are signed on its behalf by:
29 January 2025
A Bergman
Director
Company registration number 11618169 (England and Wales)
AVL EUROPE LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
Share capital
Profit and loss reserves
Total
£'000
£'000
£'000
Balance at 1 January 2022
29,297
(2,972)
26,325
Year ended 31 December 2022:
Loss and total comprehensive income
-
(4,650)
(4,650)
Balance at 31 December 2022
29,297
(7,622)
21,675
Year ended 31 December 2023:
Loss and total comprehensive income
-
(81)
(81)
Balance at 31 December 2023
29,297
(7,703)
21,594
AVL EUROPE LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
Share capital
Profit and loss reserves
Total
£'000
£'000
£'000
Balance at 1 January 2022
29,298
249
29,547
Year ended 31 December 2022:
Loss and total comprehensive income for the year
-
(480)
(480)
Balance at 31 December 2022
29,298
(231)
29,067
Year ended 31 December 2023:
Profit and total comprehensive income
-
311
311
Balance at 31 December 2023
29,298
80
29,378
AVL EUROPE LIMITED
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from operations
20
11,306
16,355
Income taxes paid
(1,124)
(1,609)
Net cash inflow from operating activities
10,182
14,746
Investing activities
Purchase of intangible assets
(4,188)
(4,535)
Purchase of tangible fixed assets
(209)
(291)
Purchase of subsidiaries, net of cash acquired
-
(8,288)
Interest received
1,593
71
Share of profits from joint ventures
(92)
(80)
Net cash used in investing activities
(2,896)
(13,123)
Net increase in cash and cash equivalents
7,286
1,623
Cash and cash equivalents at beginning of year
11,683
10,060
Cash and cash equivalents at end of year
18,969
11,683
AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
1
Accounting policies
Company information

AVL Europe, Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 7 Bell Yard, London, WC2A 2JR.

 

The group consists of AVL Europe, Limited and all of its subsidiaries.

1.1
Accounting convention

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

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £'000.

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

1.2
Business combinations

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

 

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

1.3
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company AVL Europe, 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.

AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 21 -

Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.

Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.

 

If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.

 

Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.

1.4
Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources, including support by its US parent company, to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.5
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

 

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.

1.6
Research and development expenditure

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 22 -
1.7
Intangible fixed assets - goodwill

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.

 

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

1.8
Intangible fixed assets other than goodwill

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

 

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

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

Patents & licences
20% straight line
Development costs
20% straight line
1.9
Tangible fixed assets

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

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

Plant and equipment
20% straight line
Computers
20% straight line

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

1.10
Fixed asset investments

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.

AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 23 -

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.

1.11
Impairment of fixed assets

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

1.12
Cash and cash equivalents

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

AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 24 -
1.13
Financial instruments

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 25 -
Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

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.

Derecognition of financial liabilities

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

1.14
Equity instruments

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

1.15
Taxation

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

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 26 -
1.16
Employee benefits

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

 

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

 

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

1.17
Retirement benefits

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

1.18
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

2
Judgements and key sources of estimation uncertainty

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

3
Turnover and other revenue
2023
2022
£'000
£'000
Turnover analysed by geographical market
Americas
73,946
63,820
Europe
81,572
71,775
Asia Pacific
11,532
10,121
167,049
145,716
2023
2022
£'000
£'000
Other revenue
Interest income
1,593
71
AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 27 -
4
Operating loss
2023
2022
£'000
£'000
Operating loss for the year is stated after charging:
Exchange losses
379
1,333
Research and development costs
469
204
Depreciation of owned tangible fixed assets
467
254
Amortisation of intangible assets
9,092
8,852
Operating lease charges
702
753
Auditor's remuneration for company and group accounts
24
20
Auditor's remuneration for other services
118
108
5
Employees

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

Group
Company
2023
2022
2023
2022
Number
Number
Number
Number
208
223
3
7

Their aggregate remuneration comprised:

Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Wages and salaries
9,481
9,073
125
179
Social security costs
1,935
8
15
18
Pension costs
430
134
2
2
11,846
9,215
142
199
6
Interest receivable and similar income
2023
2022
£'000
£'000
Interest income
Interest receivable from group companies
1,593
71
Disclosed on the profit and loss account as follows:
Interest receivable from group undertakings
1,593
71
AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 28 -
7
Amounts written off investments
2023
2022
£'000
£'000
Fair value gains/(losses) on financial instruments
Exchange gain/(loss) on financial assets held at fair value through profit or loss
276
(1,468)
8
Taxation
2023
2022
£'000
£'000
Current tax
UK corporation tax on profits for the current period
537
818
Adjustments in respect of prior periods
8
1
Total current tax
545
819

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

2023
2022
£'000
£'000
Profit/(loss) before taxation
464
(3,831)
Expected tax charge/(credit) based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
109
(728)
Adjustments in respect of prior years
8
(1)
Effect of overseas tax rates
84
278
Permanently disallowed expenses
1,376
1,466
Utilisation of tax losses
(867)
(196)
R&D tax credit claim
(165)
-
0
Taxation charge
545
819
AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 29 -
9
Intangible fixed assets
Group
Goodwill
Patents & licences
Development costs
Total
£'000
£'000
£'000
£'000
Cost
At 1 January 2023
54,798
2,116
16,151
73,065
Additions - internally developed
-
0
318
3,870
4,188
Exchange adjustments
(112)
(3)
(173)
(288)
Other movements
318
-
0
-
0
318
At 31 December 2023
55,004
2,431
19,848
77,283
Amortisation and impairment
At 1 January 2023
15,347
1,250
8,074
24,671
Amortisation charged for the year
5,765
342
2,985
9,092
Exchange adjustments
(175)
254
(111)
(32)
At 31 December 2023
20,937
1,846
10,948
33,731
Carrying amount
At 31 December 2023
34,067
585
8,900
43,552
At 31 December 2022
39,451
866
8,077
48,394
The company had no intangible fixed assets at 31 December 2023 or 31 December 2022.
10
Tangible fixed assets
Group
Plant and equipment
Computers
Total
£'000
£'000
£'000
Cost
At 1 January 2023
693
924
1,617
Additions
46
163
209
Exchange adjustments
22
121
143
At 31 December 2023
761
1,208
1,969
Depreciation and impairment
At 1 January 2023
385
463
848
Depreciation charged in the year
278
189
467
Exchange adjustments
(7)
(13)
(20)
At 31 December 2023
656
639
1,295
Carrying amount
At 31 December 2023
105
569
674
At 31 December 2022
308
461
769
AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
10
Tangible fixed assets
(Continued)
- 30 -
The company had no tangible fixed assets at 31 December 2023 or 31 December 2022.
11
Fixed asset investments
Group
Company
2023
2022
2023
2022
Notes
£'000
£'000
£'000
£'000
Investments in subsidiaries
12
-
0
-
0
45,892
45,884
Investments in joint ventures
100
8
-
0
-
0
100
8
45,892
45,884
Movements in fixed asset investments
Group
Shares in joint ventures
£'000
Cost or valuation
At 1 January 2023
8
Valuation changes
33
Issue of Convertible Loan
59
At 31 December 2023
100
Carrying amount
At 31 December 2023
100
At 31 December 2022
8
Movements in fixed asset investments
Company
Shares in subsidiaries
£'000
Cost or valuation
At 1 January 2023
45,884
Valuation changes
8
At 31 December 2023
45,892
Carrying amount
At 31 December 2023
45,892
At 31 December 2022
45,884
12
Subsidiaries

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

AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
12
Subsidiaries
(Continued)
- 31 -
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Ivory Plus Records B.V.
Netherlands
Ordinary
100.00
IIP-DDS B.V.
Netherlands
Ordinary
100.00
FUGA IP B.V.
Netherlands
Ordinary
100.00
FUGA North America LLC
USA
Ordinary
100.00
FUGA Music UK Limited
UK
Ordinary
100.00
FUGA Italy S.R.L.
Italy
Ordinary
100.00
Songspace Acquisition LLC
USA
Ordinary
100.00
FUGA Asia Pacific Ltd
South Korea
Ordinary
100.00
AVL IIP Holdings B.V.
Netherlands
Ordinary
100.00
Simbals S.A.S.
France
Ordinary
100.00
CD Baby LATAM S.A.S.
Colombia
Ordinary
100.00
Independent IP B.V.
Netherlands
Ordinary
100.00
Curve Royalty Systems Limited
UK
Ordinary
100.00
13
Debtors
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£'000
£'000
£'000
£'000
Trade debtors
21,107
13,420
-
0
-
0
Corporation tax recoverable
1,355
776
-
0
-
0
Other debtors
1,621
1,109
31
-
0
Prepayments and accrued income
27,576
16,935
-
0
-
0
51,659
32,240
31
-
14
Creditors: amounts falling due within one year
Group
Company
2023
2022
2023
2022
Notes
£'000
£'000
£'000
£'000
Trade creditors
1,042
250
-
0
-
0
Amounts owed to group undertakings
18,402
15,924
15,545
3,634
Other taxation and social security
903
746
-
-
Deferred income
15
14,205
5,468
-
0
-
0
Other creditors
1,274
4,821
1,000
12,959
Accruals and deferred income
57,534
44,210
-
0
224
93,360
71,419
16,545
16,817
AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 32 -
15
Deferred income
Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Other deferred income
14,205
5,468
-
-
16
Retirement benefit schemes
2023
2022
Defined contribution schemes
£'000
£'000
Charge to profit or loss in respect of defined contribution schemes
37
47

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.

17
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£'000
£'000
Issued and fully paid
Ordinary shares of £1 each
29,297,682
29,297,682
29,298
29,298
18
Operating lease commitments
Lessee

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:

Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Within one year
565
485
-
-
Between two and five years
1,790
40
-
-
2,355
525
-
-
AVL EUROPE LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 33 -
19
Audit exemption for subsidiary and parent company guarantee

For the year ended 31 December 2023, the following subsidiary undertaking of the Company was entitled to an exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies.

 

In order to qualify for this exemption, AVL Europe Limited, the parent undertaking, has guaranteed all outstanding liabilities to which the subsidiary company is subject at 31 December 2023 until they are satisfied in full.

 

Name                     Company number

Curve Royalty Systems Limited        10121597

FUGA Music UK Limited            11172211

20
Cash generated from group operations
2023
2022
£'000
£'000
Loss for the year after tax
(81)
(4,650)
Adjustments for:
Taxation charged
545
819
Investment income
(1,593)
(71)
Amortisation and impairment of intangible assets
9,092
8,852
Depreciation and impairment of tangible fixed assets
467
254
Other gains and losses
(225)
32
Movements in working capital:
Increase in debtors
(18,840)
(8,402)
Increase in creditors
13,204
17,677
Increase in deferred income
8,737
1,844
Cash generated from operations
11,306
16,355
21
Analysis of changes in net debt - group
2023
£'000
Opening net funds
Cash and cash equivalents
11,683
Changes in net debt arising from:
Cash flows of the entity
7,286
Closing net funds as analysed below
18,969
Closing net funds
Cash and cash equivalents
18,969
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