Company registration number 12449472 (England and Wales)
OVERWATCH AEROSPACE LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 27 FEBRUARY 2024
OVERWATCH AEROSPACE LTD
COMPANY INFORMATION
Directors
Mr A G Michael
Mr R K Smith
Secretary
Dr J Wells
Company number
12449472
Registered office
C/O XL Associates
502-504 Dudley Road
Wolverhampton
WV2 3AA
Auditor
BK Plus Audit Limited
29 Waterloo Road
Wolverhampton
West Midlands
WV1 4DJ
OVERWATCH AEROSPACE LTD
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Directors' responsibilities statement
5
Independent auditor's report
6 - 8
Profit and loss account
9
Statement of comprehensive income
10
Balance sheet
11
Statement of changes in equity
12
Notes to the financial statements
13 - 26
OVERWATCH AEROSPACE LTD
STRATEGIC REPORT
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 1 -
The directors present the strategic report for the year ended 27 February 2024.
Review of the business
The results for the period and the financial position at the period end were in alignment with the directors’ expectations.
It had been anticipated that the strong revenues achieved in the previous period would not be sustained into this one, with the business making a strategic decision to invest in and prioritise new product development, skilled staff and new facilities. The war in Ukraine has driven rapid innovation in uncrewed vehicle capabilities and it has been crucial for the business to position itself at the leading edge of that bow wave. During the early part of the year a significant contract ended and no significant new contracts were won by the year end.
Principal risks and uncertainties
The company monitors costs and revenue on an ongoing basis to ensure the financial stability of the company.
Competitive Risks
The company’s business involves contracts that are subject to competitive tender, normally under sovereign defence procurement regulations, and contracts are secured on the basis of technical and performance criteria. The company recognises the need for strong relationships with customers and the importance of successful contract delivery to gain a competitive advantage.
The company recognises that the volume of new uncrewed systems globally continues to increase and is a congested product marketplace. Crucial to navigating that congestion is to ensure that the company develops products that operate within defined niches where competitor offerings are lower.
Health & Safety Risks
The company recognises that its employees and sub-contract partners working in the aerospace design and manufacturing industry face potential hazards in their everyday work. The company ensures that it has robust health and safety policies and procedures in place and that they are adhered to.
Sector Risks
The company recognises the extended defence procurement cycles that exist globally amongst sovereign customers and the challenges that this presents to SMEs with narrow product portfolios of highly innovative technologies. The company seeks to mitigate those challenges through development of best-in-class capabilities, product diversification, investment in end-user stakeholder engagement and forming strategic collaborative partnerships with established industry partners.
Development and performance
The company continues to invest in R&D and product development and has established opportunities to transition into operational test and evaluation with customer stakeholders. The business continues to actively pursue opportunities for sales of proprietary and partner products.
Key performance indicators
The directors consider that the key performance indicators for the period are turnover, gross profit margin and profit before taxation.
The turnover of the company was £15.7m (2023: £39.9m), a decrease of 60.6% from the previous year. Gross profit for the company was £10.7m (2023: £23.3m), a decrease of 53.9% from the previous year. The gross profit margin was 68.4% compared to 58.4% in the previous period. Profit before taxation was £8,810,283 compared to £11,480,003 in 2023.
OVERWATCH AEROSPACE LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 2 -
Mr A G Michael
Director
27 May 2025
OVERWATCH AEROSPACE LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 3 -
The directors present their annual report and financial statements for the year ended 27 February 2024.
Principal activities
The principal activity of the company continued to be that of the research, design, development and sale of unmanned aircrafts.
Results and dividends
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mr A G Michael
Mr R K Smith
Mr G Vaughan
(Resigned 7 November 2023)
Qualifying third party indemnity provisions
The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date.
Independent auditor
In accordance with the company's articles, a resolution proposing that BK Plus Audit Limited be reappointed as auditor of the company will be put at a General Meeting.
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.
Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The company holds cash reserves to sufficiently cover cashflow throughout the next 12 months. Given this the directors continue to adopt the current concern basis of accounting and preparing these financial statements.
The financial statements have been prepared on a going concern basis. While the company was profitable in the current year, a key contract was concluded with no follow-on or new material revenue-generating contracts in the pipeline, leading to a significant reduction in revenue after the year-end. As a result, the company is forecasting a loss in 2025. The directors and management have taken steps to reduce costs in response to this decline.
The company is involved in an ongoing legal case as explained in Note 23. The outcome of this currently unknown from a timing or potential settlement basis.
Whilst these factors create uncertainty, the directors are actively managing these risks, including exploring funding and operational strategies. However, if they are unable to secure additional revenue or funding, there is a risk that the company may not be able to continue operating beyond a 12-month forecast.
Medium-sized companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
OVERWATCH AEROSPACE LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 4 -
On behalf of the board
Mr A G Michael
Director
27 May 2025
OVERWATCH AEROSPACE LTD
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 5 -
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 company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
OVERWATCH AEROSPACE LTD
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF OVERWATCH AEROSPACE LTD
- 6 -
Opinion
We have audited the financial statements of Overwatch Aerospace Ltd (the 'company') for the year ended 27 February 2024 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity 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:
give a true and fair view of the state of the company's affairs as at 27 February 2024 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
OVERWATCH AEROSPACE LTD
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF OVERWATCH AEROSPACE LTD (CONTINUED)
- 7 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report 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:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
From the preliminary of the audit, we ensure our understanding of the entity is up to date. This includes, but is not limited to, current knowledge of their activities, the business and control environments, and their compliance with the applicable legal and regulatory frameworks. This information supports our risk identification and the subsequent design of audit procedures to mitigate those risks; ensuring the that the audit evidence obtained is sufficient and appropriate to support our opinion.
In response to the risks identified, specific to this entity, we designed procedures which included, but were not limited to:
Enquiry of management and those charged with governance around actual and potential litigation and claims;
Reviewing minutes of meetings of those charged with governance, if available;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale for significant transactions outside the normal course of the business.
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.
OVERWATCH AEROSPACE LTD
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF OVERWATCH AEROSPACE LTD (CONTINUED)
- 8 -
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.
Andrew Williams FCCA (Senior Statutory Auditor)
For and on behalf of BK Plus Audit Limited, Statutory Auditor
Chartered Certified Accountants
29 Waterloo Road
Wolverhampton
West Midlands
WV1 4DJ
27 May 2025
OVERWATCH AEROSPACE LTD
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 9 -
2024
2023
Notes
£
£
Turnover
3
15,702,581
39,892,730
Cost of sales
(4,966,018)
(16,600,198)
Gross profit
10,736,563
23,292,532
Distribution costs
(142,473)
(231,376)
Administrative expenses
(2,369,522)
(11,581,812)
Operating profit
4
8,224,568
11,479,344
Interest receivable and similar income
7
587,863
659
Interest payable and similar expenses
8
(2,148)
Profit before taxation
8,810,283
11,480,003
Tax on profit
9
(1,704,963)
(2,022,922)
Profit for the financial year
7,105,320
9,457,081
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 13 to 26 form part of these financial statements.
OVERWATCH AEROSPACE LTD
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 10 -
2024
2023
£
£
Profit for the year
7,105,320
9,457,081
Other comprehensive income
-
-
Total comprehensive income for the year
7,105,320
9,457,081
The notes on pages 13 to 26 form part of these financial statements.
OVERWATCH AEROSPACE LTD
BALANCE SHEET
AS AT
27 FEBRUARY 2024
27 February 2024
- 11 -
29 February 2024
28 February 2023
Notes
£
£
£
£
Fixed assets
Intangible assets
10
92,476
Tangible assets
11
166,800
105,632
Investments
12
73
73
259,349
105,705
Current assets
Stocks
14
250,000
1,663,778
Debtors
15
3,732,326
2,089,725
Cash at bank and in hand
13,009,624
8,395,681
16,991,950
12,149,184
Creditors: amounts falling due within one year
16
(1,871,522)
(4,002,062)
Net current assets
15,120,428
8,147,122
Total assets less current liabilities
15,379,777
8,252,827
Provisions for liabilities
Deferred tax liability
17
41,700
20,070
(41,700)
(20,070)
Net assets
15,338,077
8,232,757
Capital and reserves
Called up share capital
19
100
100
Profit and loss reserves
15,337,977
8,232,657
Total equity
15,338,077
8,232,757
The notes on pages 13 to 26 form part of these financial statements.
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
The financial statements were approved by the board of directors and authorised for issue on 27 May 2025 and are signed on its behalf by:
Mr A G Michael
Director
Company registration number 12449472 (England and Wales)
OVERWATCH AEROSPACE LTD
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 12 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 March 2022
100
(1,224,424)
(1,224,324)
Year ended 28 February 2023:
Profit and total comprehensive income
-
9,457,081
9,457,081
Balance at 28 February 2023
100
8,232,657
8,232,757
Year ended 27 February 2024:
Profit and total comprehensive income
-
7,105,320
7,105,320
Balance at 27 February 2024
100
15,337,977
15,338,077
The notes on pages 13 to 25 form an integral part of these financial statements
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 13 -
1
Accounting policies
Company information
Overwatch Aerospace Ltd is a private company limited by shares incorporated in England and Wales. The registered office is C/O XL Associates, 502-504 Dudley Road, Wolverhampton, WV2 3AA.
During the year the directors changed the year end to 27th February 2024.
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 £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Overwerx Limited. These consolidated financial statements are available from its registered office, C/O XL Associates. 502-504 Dudley Road, Wolverhampton, WV2 3AA.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
1
Accounting policies
(Continued)
- 14 -
1.2
Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The company holds cash reserves to sufficiently cover cashflow throughout the next 12 months. Given this the directors continue to adopt the current concern basis of accounting and preparing these financial statements.true
The financial statements have been prepared on a going concern basis. While the company was profitable in the current year, a key contract was concluded with no follow-on or new material revenue-generating contracts in the pipeline, leading to a significant reduction in revenue after the year-end. As a result, the company is forecasting a loss in 2025. The directors and management have taken steps to reduce costs in response to this decline.
The company is involved in an ongoing legal case as explained in Note 23. The outcome of this currently unknown from a timing or potential settlement basis.
Whilst these factors create uncertainty, the directors are actively managing these risks, including exploring funding and operational strategies. However, if they are unable to secure additional revenue or funding, there is a risk that the company may not be able to continue operating beyond a 12-month forecast.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods 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.
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.
1.4
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.
1.5
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:
Development costs
10% straight line
1.6
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.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
1
Accounting policies
(Continued)
- 15 -
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 machinery
33% straight line
Fixtures and fittings
33% straight line
Equipment
33% straight line
Motor vehicles
20% reducing balance
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 credited or charged to profit or loss.
1.7
Fixed asset investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
1.8
Impairment of fixed assets
At each reporting period end date, the company 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.
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.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
1
Accounting policies
(Continued)
- 16 -
1.9
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.10
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.
1.11
Financial instruments
The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
1
Accounting policies
(Continued)
- 17 -
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 company 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 company after deducting all of its liabilities.
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.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
1
Accounting policies
(Continued)
- 18 -
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.12
Equity instruments
Equity instruments issued by the company 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 company.
1.13
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.14
Provisions
Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
1
Accounting policies
(Continued)
- 19 -
1.15
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.
1.16
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.17
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
2
Judgements and key sources of estimation uncertainty
In the application of the company’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.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Stock provision
The company considers it necessary to evaluate the recoverability of the cost of stock. The stock levels are constantly reviewed and should there be an indication of obsolescence the stock is written down to its assessed net realisable value.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 20 -
3
Turnover and other revenue
2024
2023
£
£
Turnover analysed by class of business
15,702,581
39,892,730
2024
2023
£
£
Turnover analysed by geographical market
Europe
14,702,097
39,892,730
Rest of the world
1,000,484
-
15,702,581
39,892,730
2024
2023
£
£
Other revenue
Interest income
587,863
659
4
Operating profit
2024
2023
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(126,746)
1,467
Fees payable to the company's auditor for the audit of the company's financial statements
16,850
15,000
Depreciation of owned tangible fixed assets
62,805
43,498
Amortisation of intangible assets
5,107
-
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2024
2023
Number
Number
Direct staff
22
4
Administrative staff
8
9
Total
30
13
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
5
Employees
(Continued)
- 21 -
Their aggregate remuneration comprised:
2024
2023
£
£
Wages and salaries
1,660,999
1,842,693
Social security costs
180,411
220,480
Pension costs
17,430
7,560
1,858,840
2,070,733
6
Directors' remuneration
2024
2023
£
£
Remuneration for qualifying services
335,333
1,030,437
Company pension contributions to defined contribution schemes
2,201
1,649
337,534
1,032,086
Remuneration disclosed above include the following amounts paid to the highest paid director:
2024
2023
£
£
Remuneration for qualifying services
250,000
977,104
7
Interest receivable and similar income
2024
2023
£
£
Interest income
Interest on bank deposits
587,863
659
8
Interest payable and similar expenses
2024
2023
£
£
Other interest
2,148
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 22 -
9
Taxation
2024
2023
£
£
Current tax
UK corporation tax on profits for the current period
1,683,333
2,002,852
Deferred tax
Origination and reversal of timing differences
21,630
20,070
Total tax charge
1,704,963
2,022,922
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2024
2023
£
£
Profit before taxation
8,810,283
11,480,003
Expected tax charge based on the standard rate of corporation tax in the UK of 24.49% (2023: 19.00%)
2,157,638
2,181,201
Tax effect of utilisation of tax losses not previously recognised
(178,271)
Group relief
(473,174)
Permanent capital allowances in excess of depreciation
18,048
28,020
130% super deduction
(8,028)
Effect of change in deferred tax rate
2,451
Taxation charge for the year
1,704,963
2,022,922
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 23 -
10
Intangible fixed assets
Development costs
£
Cost
At 1 March 2023
Additions
97,583
At 27 February 2024
97,583
Amortisation and impairment
At 1 March 2023
Amortisation charged for the year
5,107
At 27 February 2024
5,107
Carrying amount
At 27 February 2024
92,476
At 28 February 2023
11
Tangible fixed assets
Plant and machinery
Fixtures and fittings
Equipment
Motor vehicles
Total
£
£
£
£
£
Cost
At 1 March 2023
11,114
18,406
98,827
26,753
155,100
Additions
24,533
99,440
123,973
At 27 February 2024
11,114
42,939
198,267
26,753
279,073
Depreciation and impairment
At 1 March 2023
8,027
6,769
29,321
5,351
49,468
Depreciation charged in the year
3,087
10,544
44,893
4,281
62,805
At 27 February 2024
11,114
17,313
74,214
9,632
112,273
Carrying amount
At 27 February 2024
25,626
124,053
17,121
166,800
At 28 February 2023
3,087
11,637
69,506
21,402
105,632
12
Fixed asset investments
2024
2023
Notes
£
£
Investments in subsidiaries
13
73
73
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 24 -
13
Subsidiaries
Details of the company's subsidiaries at 27 February 2024 are as follows:
Name of undertaking
Registered office
Nature of business
Class of
% Held
shares held
Direct
Overwatch Aerospace LLC - Florida
505 Brevard Avenue, Suite 104, Cocoa, Florida. 32922
Dormant
Ordnary shares
100.00
14
Stocks
2024
2023
£
£
Raw materials and consumables
250,000
1,663,778
Following the conclusion of contracts and the nature of stock items held, the company has a stock provision of £1,062,586 (2023: £Nil).
15
Debtors
2024
2023
Amounts falling due within one year:
£
£
Trade debtors
75,000
Amounts owed by group undertakings
3,494,346
Other debtors
143,252
2,078,902
Prepayments
19,728
10,823
3,732,326
2,089,725
Amounts owed by group undertakings is secured, interest free and payable on demand.
Within other debtors there is an amount owed by a related party of £100,000 (2023: £Nil).
16
Creditors: amounts falling due within one year
2024
2023
£
£
Trade creditors
85,116
778,447
Amounts owed to group undertakings
797,555
Corporation tax
1,683,333
2,002,852
Other taxation and social security
66,176
94,965
Other creditors
16,827
300,656
Accruals
20,070
27,587
1,871,522
4,002,062
Amounts owed to group undertakings is secured, interest free and payable on demand.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 25 -
17
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
2024
2023
Balances:
£
£
Accelerated capital allowances
41,700
20,070
2024
Movements in the year:
£
Liability at 1 March 2023
20,070
Charge to profit or loss
21,630
Liability at 27 February 2024
41,700
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
18
Retirement benefit schemes
2024
2023
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
17,430
7,560
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
19
Share capital
2024
2023
2024
2023
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
100
100
100
100
20
Related party transactions
Amounts due from Strategic Atlantic Technologies Ltd at the year end amounted to £100,000 (2023: £Nil), a company under the control of one of the directors.
Other information
In accordance with FRS102 section 33.1a the company has taken advantage of the exemption available not to disclose related party transactions with wholly owned subsidiaries within the group.
Key management personnel are considered to be the directors, their remuneration is disclosed in note 7.
OVERWATCH AEROSPACE LTD
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 27 FEBRUARY 2024
- 26 -
21
Ultimate controlling party
The largest and smallest group in which results of the company are consolidated is that headed by the parent company, Overwerx Limited, a company incorporated in England and Wales.
The consolidated financial statements of Overwerx Limited are available to the public and may be obtained from the Registrar of Companies in England and Wales.
The publicly available financial statements can be obtained from C/O XL Associates, 502-504 Dudley Road, Wolverhampton, WV2 3AA.
22
Charitable donations
The Company made a charitable donation to the Special Reconnaissance Regimental Association (Charity No. 1147005) for £100,000 during the year.
23
Contingent liability
The Group is a named defendant in an ongoing legal proceeding in the United States related to alleged misappropriation of proprietary information. The claim, filed in June 2024, seeks injunctive relief and damages. The Group has filed a motion to dismiss the claim, and a court ruling is awaited. Given the early stage of proceedings, the outcome and any potential financial impact cannot be reliably estimated at this time. The Group continues to assess the matter and will provide updates as appropriate.
24
Post balance sheet event
On 21 June 2024, a legal claim was filed against the Group in the United States alleging misappropriation of proprietary information. The case is at a preliminary stage, with no substantive rulings issued by the court. The Group continues to monitor the situation and will reassess the provision as necessary. This is further explained within Note 23: Contingent liability.
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