Registered number:
FOR THE YEAR ENDED 30 JUNE 2024
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CALLEN-LENZ ASSOCIATES LIMITED
COMPANY INFORMATION
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CALLEN-LENZ ASSOCIATES LIMITED
CONTENTS
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CALLEN-LENZ ASSOCIATES LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
The directors present their strategic report for the period from 1 July 2023 to 30 June 2024.
Principal activity Callen-Lenz Associates Limited (the “Company”) is a member of the BAE Systems plc Group (“BAE Systems Group” or “Group”) of companies. The principal activity of the Company is the design, development and manufacture of innovative uncrewed aerial systems (“UAS”) and the provision of associated technical and consulting services.
Callen-Lenz Associates designs, develops and manufactures novel UAS, delivering solutions tailored to the needs of our customers. The company operates through four core business streams: Operational Services, Technical Services, Products and Platforms.
On 2nd May 2024 the BAE Systems Group acquired 100% of the share capital in the Company. Key highlights in the year included: - The business has continued to grow over the period with revenue increasing from £34.5m to £58.5m and headcount from 115 heads to 161 heads. - Demonstration of new platform capabilities in response to emerging customer requirements. - The business ends the period with a record order backlog of £92.2m across 48 programmes and contracts. - Expansion of the physical site infrastructure with the commissioning of a new 1,600 sq metre facility. - On 2nd May 2024 the Company joined the BAE Systems Group and forms part of the FalconWorks® line of business within BAE Systems’ Air segment.
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CALLEN-LENZ ASSOCIATES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2024
The Company’s principal risks are identified below, along with their potential impact on the Company and how these are currently being managed:
The Company’s potential customer base includes governments – primarily the UK Description: Levels of defence spending by governments are difficult to predict and can fluctuate depending on changes of government policy, other political considerations, budgetary constraints, specific threats to national security and macro-economic conditions. From time to time, there have been constraints on government expenditure in a number of the Company’s principal potential customer markets. Impact :Lower defence spending by the Company’s potential customers could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects. Mitigation: Many of the countries in which the Company may operate have announced increased, or are making plans to increase, spending to address the elevated threat environment. Whilst governments face global economic and fiscal pressures, the commitment to defence in the Company’s major markets remains robust. The Company’s principal defence markets - have a significant and sustained commitment to defence and security – see ‘Our markets’ on pages 18 to 19 of the BAE Systems plc’s 2023 Annual Report (available at: www.baesystems.com/investors). The Company benefits from Group’s established positions on long-term programmes in its principal potential customer markets. The Company also seeks to have a more diverse product portfolio which can be marketed across a range of commercial markets. The Company could be negatively impacted by issues in its supply chain Description: The Company is dependent upon the delivery of services and materials by suppliers and the assembly of components and subsystems by subcontractors used in its products in a timely and satisfactory manner, on satisfactory commercial terms and in full compliance with applicable terms and conditions. This can be exacerbated where the Company is dependent on either one or a limited number of suppliers. Some of the Company’s suppliers or subcontractors may be impacted by the economic environment (including inflationary pressures and material shortages) which could impair their ability to meet their obligations to the Company and to supply on satisfactory commercial terms. Impact: A failure by one or more of the Company’s suppliers to provide the agreed-upon materials, components or products or perform the agreed-upon services, on a timely basis, at the agreed price, according to specifications (including compliance with regulatory requirements) or at all may adversely affect the Company’s ability to perform its obligations, result in additional costs or delays, require the Company to transition work to other companies (resulting in further additional costs and delay) and/or result in penalties under, or the termination of, future customer contracts. This impact is heightened where a supplier is a sole supplier or one of a small number of suppliers. Additionally, the Company could be adversely affected by actions, or issues experienced by, the Company’s suppliers which are outside its control, such as misconduct and reputational issues involving the Company’s suppliers, which could subject the Company to liability or adversely affect its ability to compete for contracts. Any of the foregoing could have a material adverse effect on the Company’s business, results of operations, financial condition, prospects and reputation. Mitigation: The Company’s procurement function establishes and manages enduring end-to-end integrated supplier arrangements. Risk-based due diligence and audit activity is undertaken for each supplier whom the Company engages. Once a supplier has been approved, and a contract has been executed, the procurement function continues to monitor that supplier in close alignment with the commercial function. The Group’s supply chain risk management programme is working toward providing an enterprise-wide view of supplier risk, contributing to the continuity of supply and enabling better intelligence of sub-tier supply chain risk. The Company seeks to manage inflation risk through supplier cost management activity and through its long-term supplier agreements.
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CALLEN-LENZ ASSOCIATES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2024
The Company could be negatively impacted by threats to the security of its information technology and operational technology systems
Description: It is critical that the Company’s information technology and operational technology (“IT & OT”) infrastructure, as well as the products and services it sells, are cyber resilient and the proprietary, classified, confidential or otherwise protected information, intellectual property and personal data held and processed on them are appropriately secured. Cyber security threats are continuous and evolving, and vary from attacks common to most industries, including those originating both externally and internally, to those from more advanced and persistent, highly organised adversaries, including nation states. The war in Ukraine has also increased Russian-aligned hacktivist activity against pro-Ukraine nations and their defence industries. The cyber security threats faced by the Company include (but are not limited to): an attack impacting the availability of the Company’s IT & OT infrastructure and systems and/or those of its potential customers, partners and suppliers; unlawful attempts to gain access to the Company’s proprietary, classified, confidential or otherwise protected information, intellectual property and personal data, and that held or generated by the Company on behalf of its potential customers, partners and suppliers; and compromise of products and services for the purposes of sabotage or to disable or deny their use and/or alter their performance characteristics. The Company might also be exposed to cyber security risks through an attack on the Company’s supply chain. Impact: Given the nature and scope of cyber attacks, it is possible that the Company is unable to defend itself against all cyber-attacks, that unknown vulnerabilities could be exploited or that the Company may otherwise be unable to mitigate customer losses and other potential liabilities (including potential liabilities related to privacy and intellectual property). The Company could potentially be subject to: (a) production downtimes; (b) operational delays; (c) other detrimental impacts to its operations or ability to provide products and services to customers; (d) the compromise, misappropriation, destruction or corruption of the Company’s proprietary, classified, confidential or otherwise protected information, intellectual property and personal data, and that held or generated by the Company on behalf of its potential customers, partners and suppliers; (e) security breaches; (f) other manipulation or improper use of the Company’s or third-party systems, networks or products; and/or (g) financial losses from remedial actions, loss of business, or potential liability, penalties, fines and/or damages. Any of these could have a material adverse effect on the Company’s business, results of operations, financial condition, prospects and reputation. Mitigation: The security of the BAE Systems Group’s products and services, data, facilities and IT & OT infrastructure is regularly considered by the BAE Systems Group’s Board and senior management and underpins the BAE Systems Group’s strategy and influences its engineering, technology and digital strategies. Education and awareness to embed a strong cyber security culture across the Company is another vital part of its preventative activities. Employees are subject to applicable mandatory training which, depending on role, covers cyber security, physical security, document marking, security of export-controlled information, and personal data protection. The Cyber Incident Response plan feeds into the BAE Systems Group’s crisis management plan and regular exercises are conducted across the business to test the Cyber Incident Response plan, including up to the BAE Systems Group’s Executive Committee. The BAE Systems Group purchases cyber insurance; however, as with all insurance, it does not provide full cover against all potential loss scenarios. To mitigate the cyber security risk posed by suppliers, the Company includes cyber security related obligations in its contracts where relevant. Cyber security risk is constantly reviewed and an agile, proactive, approach to mitigating the risk is taken. The Company’s strategy is dependent on its ability to recruit and retain people with appropriate talent and skills Description: Competition for the people the Company needs to deliver its strategy, including those with innovative technological capabilities, is high. Competition may be intensified by nationality and regulatory restrictions (including the requirement for security clearances for certain roles), and exacerbated by macroeconomic, industry and labour market conditions more generally. Impact: The loss of key employees or inability to attract the appropriate people on a timely basis could adversely impact the Company’s ability to deliver its strategy, meet its business plan and deliver on its contractual commitments, which accordingly could have a material adverse effect on the Company’s business, results of
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CALLEN-LENZ ASSOCIATES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2024
operations, financial condition and prospects.
Mitigation: The Company recognises that its employees are key to delivering its strategy and business plan and focuses on developing the existing workforce and hiring talented people to meet current and future requirements. The Company recruits apprentices and graduates and, to maximise the contribution that its workforce can make to the performance of the business, has an effective through career capability development programme. In order to seek to maximise its talent pool, the Company is committed to creating a diverse and inclusive environment for its employees. The Company is subject to risk from a failure to comply with laws and regulations Description: The Group operates in a highly regulated environment, across UK and US jurisdictions and is therefore subject to a variety of legal, regulatory and litigation risks. These risks relate to (among other things) trade controls, intellectual property rights, data protection and security, contract-related claims, government contracts (including audits and reviews of those contracts), taxes, environmental matters, sanctions, product safety and reliability, health and safety, employment matters, competition laws and laws governing improper business practices (such as money laundering, false accounting, anti-bribery and corruption, and anti-boycott laws). These laws and regulations may be interpreted in different ways, conflict and/or change from time to time (as may any related interpretations and guidance). For example, export restrictions could become more stringent and political factors or changing international circumstances could result in the Company being unable to obtain or maintain necessary export licences. Impact: Changes in laws and regulations (or the interpretation thereof) could result in higher compliance costs and impact future customer or supplier contracts. Uncertainty relating to laws and regulations may also affect how the Company conducts its business and could limit its ability to enforce its rights. A breach of applicable legislation and/or regulations by the Company, its employees, sales representatives, marketing advisers or others working on its behalf could result in significant fines, penalties or other damages and/or the suspension or debarment of the Company from government contracts or the suspension of the Company’s export privileges. If future customers or other third parties were harmed by the conduct of members of the Company, this may also give rise to legal proceedings, including class actions. Other legal disputes may also arise between members of the Company and third parties relating to matters such as breaches or enforcement of legal rights or obligations arising under contracts, statutes or common law. Adverse findings in any such matters may result in members of the Company being liable to third parties or may result in rights not being enforced or not being enforced in the manner intended or desired. Any of the foregoing could have a material adverse effect on the Company’s business, results of operations, financial condition, prospects and reputation. Mitigation: The Group has a well-established legal and regulatory compliance structure and resource aimed at ensuring adherence to regulatory requirements and identifying restrictions that could adversely impact the Company’s activities as it looks to operate in jurisdictions outside of the UK. Internal and external market risk assessments form an important element of ongoing corporate development and training processes. A uniform global policy and process for the appointment of advisers engaged in business development is in effect and an export control policy mandates compliance with all applicable trade controls requirements. It is important that the Company maintains a culture in which it focuses on responsible business behaviours and that all employees act in accordance with the requirements of the BAE Systems Group’s policies, including the Code of Conduct, at all times. Accordingly, it continues to reinforce the BAE Systems Group’s ethics programme globally, supporting employees in making ethical decisions and embedding responsible business practices. The Company’s legal support and, where appropriate, external counsel manage litigation and advise on the management of associated impacts. Section 172(1) statement This statement contains an overview of how the directors have performed their duty to promote the success of the Company as set out in Section 172(1) of the UK’s Companies Act 2006. That section requires a director of a company to act in the way he considers, in good faith, would most likely promote the success of the company for the benefit of its shareholders. In doing this, the director must have regard, amongst other matters, to:
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CALLEN-LENZ ASSOCIATES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2024
a) the likely consequences of any decision in the long term,
b) the interests of the Company's employees, c) the need to foster the Company's business relationships with suppliers, customers and others, d) the impact of the Company's operations on the community and the environment, e) the desirability of the Company maintaining a reputation for high standards of business conduct, and f) the need to act fairly as between members of the Company. Decision making The BAE Systems Group Operational Framework (the “Operational Framework”) sets out the principles of good governance to which BAE Systems Group subsidiaries are required to adhere, together with BAE Systems Group’s values and applicable policies. Decisions affecting a subsidiary are required to be taken in line with the Operational Framework, including in accordance with applicable delegations of authority. Pursuant to the Operational Framework, BAE Systems’ businesses each produce a strategic plan, a financial forecast for the current year and financial projections for the next five years. The directors of the Company contribute towards this process for the respective businesses of the Company for which they are responsible and are also responsible for identifying and managing principal and emerging risks in such businesses. In so doing, the directors have regard to a variety of matters including the interests of various stakeholders, the consequences of their decisions in the long term and the long term reputation of both the Company and the BAE Systems Group. Employees The safety, wellbeing, skills, capabilities and commitment of the Company’s people are critical to ensuring the long-term sustainability of the Company’s business and delivering the innovation needed to solve the Company’s future customers’ complex challenges. Effective engagement enables our employees to contribute to improving business performance and helps the Company to create an environment in which everyone is safe, valued and can fulfil their potential. The Company used a range of channels to engage with employees throughout the year, as well as keeping employees informed about the performance, developments and prospects of the business and the BAE Systems Group. This included in-person and virtual meetings, newsletters briefings, events and regular leadership updates through videos and events throughout the year (including in relation to financial and business performance); and engagement through the email systems. These engagement activities form part of the Company’s implementation of the BAE Systems Group-wide employee engagement processes and policies which are described on pages 24 and 56 of BAE Systems plc’s 2023 Annual Report (available at: www.baesystems.com/investors). Pursuant to the BAE Systems Group’s People Policy, directors and employees are required to contribute to creating an engaged and inclusive working environment, where individuals are respected and where the value of a diverse workforce is recognised. Fostering business relationships with suppliers, customers and others The directors recognise that fostering business relationships with key stakeholders, such as potential future customers and suppliers, is essential to the Company’s success. The Company is fostering key relationships with its customers, suppliers and industry partners which will help us to create best-in-class, cost-effective equipment, goods, services and solutions. Strong and collaborative relationships with the Group’s principal customers help it to identify the Company’s customer’s potential requirements and help position the Company as a trusted provider. The directors and their teams are in contact with the principal potential customer base of the Company. The Company, through its procurement function, is working with its suppliers and their supply chains to provide services that ensure it will meet its anticipated future customers’ requirements. Meetings are held with key suppliers to foster deeper relationships with businesses in the supply chain and develop strategic relationships. The Company’s supply chain function continues to actively manage supply lead times against demand requirements. The community and the environment The directors recognise the importance of leading a company that not only generates value for shareholders but
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CALLEN-LENZ ASSOCIATES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2024
also contributes to wider society. The Company implements the requirements of the BAE Systems Group’s Community Investment Policy, which looks to ensure that BAE Systems Group builds and nurtures mutually beneficial relationships between its business, its people and local stakeholders. Giving back to the communities in which BAE Systems Group operates, and to charities that have meaning to our business, is vitally important to our BAE Systems Group and its subsidiaries and employees, allowing it to make a positive difference and have an impact where it counts. As a manufacturer, the Company recognises that its operations have an impact on the environment – from the energy and resources it uses, to the products it manufactures and the waste that it generates. As an organisation, the BAE Systems Group is committed to reducing the environmental impact of its operations and products, minimising its environmental footprint and, in turn, decreasing its operational costs. Through the Operational Framework the Company implements the requirements of the BAE Systems
Group’s Environmental Policy, which details the Group’s commitment to high standards of environmental management. In particular, the Company is supporting the Group’s target of achieving net zero greenhouse gas emissions across the Group’s operations (scope 1 and 2) by 2030 and its target of working towards a net zero value chain by 2050. The above activities form part of the Company’s tailored implementation of the BAE Systems Group-wide community and environment policies and the BAE Systems Group’s impacts thereon which are described on pages 48 to 55 of BAE Systems plc’s 2023 Annual Report (available at: www.baesystems.com/investors). Maintaining a reputation for high standards of business conduct The BAE Systems Group aims to be a recognised leader in business conduct which helps it to earn and maintain stakeholder trust and sustain business success. The directors consider it fundamental to maintain a culture focused on embedding responsible business behaviours. All employees of the Company are expected to act in accordance with the requirements of applicable BAE Systems Group policies, including the Code of Conduct, at all times. As well as being the right thing to do, this reduces the risk of compliance failure and supports the Company in attracting and retaining high-calibre employees. Detailed information on the BAE Systems Group-wide business conduct processes and policies is described on pages 62 to 65 in BAE Systems plc’s 2023 Annual Report (available at: www.baesystems.com/investors).
The key performance indicators that the Board use to judge performance are revenue growth, operating profit and closing order book.
Key financial performance indicators are shown below 2023 2024 £000 £000 Revenue 34,495 58,492 Operating Loss (204) (4,710) Closing Order Book 39,348 92,186 Revenue represents the amounts derived from the provision of goods and services. The increase reflects the introduction of new products to market. Operating Loss is used for internal performance analysis as a measure of operating profitability that is comparable over time. Closing Order Book represents the value of customer orders received that have yet to be discharged by the Company.
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CALLEN-LENZ ASSOCIATES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2024
This report was approved by the board and signed on its behalf.
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CALLEN-LENZ ASSOCIATES LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2024
The directors present their report and the financial statements for the year ended 30 June 2024.
The directors are responsible for preparing the Group strategic report, the Directors' report and the consolidated financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £1,168,164 (2023 - profit £824,568).
The directors who served during the year were:
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CALLEN-LENZ ASSOCIATES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2024
The auditors, Xeinadin Audit Limited, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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CALLEN-LENZ ASSOCIATES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CALLEN-LENZ ASSOCIATES LIMITED
We have audited the financial statements of Callen-Lenz Associates Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 30 June 2024, which comprise the Consolidated statement of comprehensive income, the Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
We draw attention to Note 27 of the accounts, which describes a prior year adjustment in respect of revenue, cost of sales and deferred tax. Our opinion is not modified in respect of this adjustment.
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 or the 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.
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CALLEN-LENZ ASSOCIATES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CALLEN-LENZ ASSOCIATES LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group 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 Group 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 Group strategic report or the Directors' report.
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CALLEN-LENZ ASSOCIATES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CALLEN-LENZ ASSOCIATES LIMITED (CONTINUED)
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CALLEN-LENZ ASSOCIATES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CALLEN-LENZ ASSOCIATES LIMITED (CONTINUED)
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 Auditors' 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 Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
We assessed the risk of material misstatement due to non-compliance with laws and regulations by: - Obtaining an understanding of the legal and regulatory frameworks that are applicable to the Group and how it complies with those through enquiries of management and those charged with governance. Laws and regulations which have a direct material effect on the financial statements include the Companies Act 2006. Other laws and regulations which may have a material effect on the financial statements include the National Security and Investment Act 2021, Civil Aviation Authority regulations, data protection, contract law, and money laundering, false accounting, anti-bribery and corruption and sanctions laws; - Making enquiries of management and reviewing documentation to understand whether there were any known instances of non-compliance with laws and regulations; and - Communicating within the audit team and maintaining professional scepticism. Specifically in respect of fraud we discussed with those charged with governance areas in which the Group was susceptible to fraud and whether there were any instances of known, suspected or alleged fraud. We also assessed the ability of internal controls to mitigate the risk of fraud. We assessed the risk of non-compliance with laws and regulations by: - Making enquiries of management and those charged with governance concerning actual and potential litigation or claims; - Reading meeting minutes for evidence of discussions which may indicate potential litigation and claims; - Reviewing the company's records for evidence of legal costs which may indicate non-compliance with laws and regulations; and - Considering the effectiveness of internal controls to mitigate such risks. To address the fraud risk of management override of controls we: - Tested the validity of journal entries; - Tested accounting estimates for evidence of potential bias; - Performed detailed testing of revenue and cost of sales recognised on a percentage completion basis where management’s forecast of future costs could materially affect the financial statements; - Performed analytical procedures to identify any unusual relationships;
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CALLEN-LENZ ASSOCIATES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CALLEN-LENZ ASSOCIATES LIMITED (CONTINUED)
- Sought explanations and evidence for any transactions outside the normal course of business; - Assessed the appropriateness of accounting policies, including in respect of revenue recognition; and - Performed additional tests on inventory, purchases and revenue recognition where internal control weaknesses had been identified.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' 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 Auditors' 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.
for and on behalf of
Chartered Accountants
Statutory Auditor
Wadebridge House
16 Wadebridge Square
Dorset
DT1 3AQ
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CALLEN-LENZ ASSOCIATES LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2024
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CALLEN-LENZ ASSOCIATES LIMITED
REGISTERED NUMBER: 06361441
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2024
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CALLEN-LENZ ASSOCIATES LIMITED
REGISTERED NUMBER: 06361441
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS AT 30 JUNE 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 25 to 56 form part of these financial statements.
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CALLEN-LENZ ASSOCIATES LIMITED
REGISTERED NUMBER: 06361441
COMPANY BALANCE SHEET
AS AT 30 JUNE 2024
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CALLEN-LENZ ASSOCIATES LIMITED
REGISTERED NUMBER: 06361441
COMPANY BALANCE SHEET (CONTINUED)
AS AT 30 JUNE 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 25 to 56 form part of these financial statements.
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Page 43
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Page 45
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
Non-current preference shares which are treated as debt are recognised at transaction value, which management concludes is materially the same as the present value of the future payments discounted at a market rate of interest for similar instruments.
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
23.Deferred taxation (continued)
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
On 6 December 2023, the company issued 5,000,000 B preference shares of £1.00 each for consideration of £5,000.000.
On 2 May 2024, the company issued 8,083 B ordinary shares with an aggregage nominal value of £81 for consideration of £81 and 12,736 C ordinary shares with an aggregate nominal value of £127 for consideration of £784,655. A Preference shares are non-voting and carry a fixed, non-cumulative dividend at 9% of the issue price and B Preference shares are non-voting and carry a fixed, non-cumulative dividend at 10% of the issue price. All Ordinary shares are voting and carry a right to dividends after 30 June 2024 and after the preference share dividends have been paid. All shares have equal rights on a liquidation or return of capital.
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
Share premium account
Capital redemption reserve
Other reserves
Merger Reserve
Profit and loss account
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
Page 53
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
Two projects which had been treated as completed as at 30 June 2023, were in fact still operational at that date causing revenue and costs to be duplicated. Further projects were treated as complete when they were still open and one project had revenue recognised in excess of the contract value. Separately, inventory of £205k had been treated as a project expense in the prior period. The effect of the prior year adjustments is to reduce revenue by £2,593k and cost of sales by £1,331k. There is an increase in the deferred tax asset of £316k and the profit and loss reserve has therefore reduced by £946k.
The directors have considered the position of the company and do not consider there to be any material contingent liabilities, provisions or commitments at or since the period end.
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £1,412,585 (period ended 30 June 2023 - £870,205) . Contributions totalling £115,035 (2023 - £75,115) were payable to the fund at the balance sheet date and are included in creditors.
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
Page 55
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CALLEN-LENZ ASSOCIATES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
The Group's immediate parent is BAE Systems (Holdings) Limited.
The ultimate controlling party is BAE Systems PLC, which is incorporated in the United Kingdom and registered in England and Wales. The consolidated financial statements of BAE Sytems PLC are available to the public and may be obtained from 6 Carlton Gardens, London, SW1Y 5AD.
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