The directors present the strategic report for the year ended 28 February 2025.
The Group's subsidiary company, Vertical Pharma Resources Limited, trades as IPS Pharma. It offers in the region of 20,000 formulations to providers of primary and secondary care mainly in the UK. These include the bespoke and batch compounding of unlicensed pharmaceuticals (usually adaptations of products that are licensed in the UK) and the import of products licensed outside the UK. It also sources and supplies low volume licensed products known as special obtains and also provides full management of the delivery of Investigational Medical Products (IMP) and comparators for clinical trials.
It sells to independent pharmacies directly and through buying groups, as well as to small and large pharmacy chains and to specialist wholesalers.
It aims to set and maintain fair pricing on its many product lines but certain lines are subject to the NHS Drug Tariff in England & Wales which is periodically updated by the Department of Health.
Customer service and quality are critical, and the year has seen further investment in staff in order to continue to deliver excellent service.
The Group continues to devote significant resources to research and development in order to remain at the forefront of innovation and improve its service offering, it also continues to invest in its compliance and quality systems. The directors and the regulatory department ensure that the Group complies with its obligations in all its operations.
The Group’s subsidiary company has won some strong contracts for clinical trial services supported by its IMP certification granted by the MHRA and continues to grow in this area particularly with direct to patient deliveries via its own site pharmacy.
The Group’s subsidiary company’s joint venture, Grow Pharma Ltd, with Grow Group Plc continues to grow as a leader in medicinal cannabis supply to patients in the UK. The Group’s subsidiary company is solely responsible for customer fulfilment, as it is the only party within the joint venture arrangement with the regulatory ability to buy/sell medicinal cannabis products, and has the knowledge, facilities and expertise to hold, distribute and in certain cases manufacture goods. The company also bears significant regulatory risk. The Group has considered the various indicators described in FRS102 for accounting for the Revenue for medicinal cannabis as Principal or Agent and given the customer fulfilment role, management have formed the view that the Group should account for the revenue on external sales and costs of sales incurred. In addition, the profit share due to Grow Group Plc should also be accounted for as a cost of sale.
The Group’s turnover includes £27.6M (Year ended 28 February 2024 - £12.2M) from the sales of medicinal cannabis, and correspondingly £21.2M (Year ended 28 February 2024 - £9.8M) to cost of sales.
Principal risks and uncertainties
The primary objective of the financial policies is to minimise risks at reasonable cost and without damaging growth prospects. The principal risks faced by the Group are as follows:
Price and competition risk
This risk within the trading subsidiary is managed through attention to customers' requirements and through regular tracking of sales levels against budgets and against prior year. It also involves an understanding of competitors’ offerings and an anticipation of future changes within the market.
Credit risk
Trade debtors in the trading subsidiary are managed through policies around the credit terms offered to customers and regular monitoring of amounts outstanding against those terms.
Currency risk
Imported materials are generally priced in foreign currencies; if the pound weakens, the trading subsidiary’s selling prices are raised where possible. However, this also creates opportunities for exports which can balance out the risk.
Liquidity and cash flow risk
In respect of bank balances the liquidity risk is managed by maintaining continuity of funding. In respect of the lenders and the trading subsidiary’s trade creditors the liquidity risk is managed by ensuring sufficient funds are available to meet amounts due.
Regulatory risk
The trading subsidiary carries out its main activities under certain licences, as well as certifications from various regulatory bodies. As technology and best practice change, regulations may be revised or implemented in different ways, and so maintaining certification can never be taken for granted. Risk is managed by (a) continued investment and maintenance of equipment (b) recruitment and training of staff and (c) designing and implementing robust processes across the business that ensure compliance with regulations. The Group also monitors a number of non-financial key performance indicators (KPIs) to ensure that the Group maintains high product quality and customer service levels. These non-financial KPIs include quality complaints, product quality, delivery performance, pharmacovigilance and medical information enquiries. Risk is managed by (a) continued investment and maintenance of equipment (b) recruitment and training of staff and (c) designing and implementing robust processes across the business that ensure compliance with regulations. The Group also monitors a number of non-financial key performance indicators (KPIs) to ensure that the Group maintains high product quality and customer service levels. These non-financial KPIs include quality complaints, product quality, delivery performance, pharmacovigilance, and medical information enquiries.
Inflation
With the current cost of living crises and inflation the Group has seen an increase in energy costs and transport costs. It works continuously to find the best source possible to mitigate these increases as it continues to deliver best value for its customers.
Key financial performance indicators were as follows:
| 2025 £ | 2024 £ |
|
|
|
|
|
|
Turnover | 39.2m | 23.6m |
Gross profit | 30% | 31% |
Normalised EBITDA | 4.7m | 1.8m |
Normalised EBITDA | 12% | 8% |
Normalised EBITDA is considered after adding back one-off legal and professional costs of £86k (Year ended 28 February 2024 £95k) included within administrative expenses.
Future developments
The Group plans to enhance its unique position by:
selling its existing portfolio of products into new geographical markets by leveraging its current relationships and distribution network
seeking to develop unlicensed products into pharmaceuticals suitable to pursue a Marketing Authorisation Application
On behalf of the board
The directors present their annual report and financial statements for the year ended 28 February 2025.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Company is subject to a cross guarantee in connection with shareholder and investor loans within the wider Group.
The directors have reviewed the Group's profit and loss and cash flow forecasts for the foreseeable future, being at least one year from the date of approval of these financial statements, the available financial resources, the recurring income stream from customers, other contracted income and whether there is headroom on covenants. Management have a high degree of confidence in delivering these numbers and the actuals to date are ahead of budget.
Subsequent to the year end, the Group's main loan note holders formally extended the repayment date of these loans from 30 June 2025 to 30 June 2028 and the financial covenants amended to create sufficient headroom against base case forecast.
The Group has strengths in importing products globally and hence has not been subject to disruption as a result of Brexit and customs declarations. The Company has implemented controls and procedures in place to ensure there is smooth supply of medicines and continues to work with the Department of Health and Social Care (DHSC) and The Medicines and Healthcare products Regulatory Agency (MHRA).
As a result of the above the directors have a reasonable expectation that the Group and Company has adequate resources to continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of approval of these financial statements, and continue to adopt the going concern basis of accounting in preparing the financial statements.
We have audited the financial statements of Ipsco Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 28 February 2025 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
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.
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.
Our audit procedures were primarily directed towards testing the accounting systems in operation which we have based our assessment of the financial statements for the year ended 28 February 2025.
We planned our audit so that we have a reasonable expectation of detecting material misstatements in the financial statements resulting from irregularities, fraud or non-compliance with law or regulations.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:
The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
Enquiring of management of whether they are aware of any non-compliance with laws and regulations.
Enquiring of management whether they have knowledge of any actual, suspected or alleged fraud.
Enquiring of management their internal controls established to mitigate risk related to fraud or non-compliance with laws and regulations.
Discussions amongst the engagement team on how and where fraud might occur in the financial statements and any potential indicators of fraud. As part of this discussion, we identified potential for fraud in the following areas; posting of unusual journals.
Obtaining understanding of the legal and regulatory framework the company operates in focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations. The key laws and regulations we considered in this context included UK Companies Act, tax legislation, data protection, anti-bribery, employment and health and safety, MHRA regulations.
To address the risk of fraud through management bias and override of controls, we:
Performed analytical procedures to identify any unusual or unexpected relationships;
Audited the risk of management override of controls, including through testing journal entries for appropriateness;
Assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and
Investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non compliance with laws and regulations, we designed procedures which included, but are not limited to:
Agreeing financial statements disclosures to underlying supporting documentation.
Reviewing minutes of meetings of those charged with governance.
Enquiring of management as to actual and potential litigation claims.
Reviewing correspondence with HMRC.
The test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, mean that there is an unavoidable risk that even some material misstatements in respect of irregularities may remain undiscovered even though the audit is properly planned and performed in accordance with ISAs (UK). Furthermore, the more removed that laws and regulations are from financial transactions, the less likely that we would become aware of non-compliance.
Our examination should therefore not be relied upon to disclose all such material misstatements or frauds, errors or instances of non-compliance that might exist. The responsibility for safeguarding the assets of the company and for the prevention and detection of fraud, error and non-compliance with law or regulations rests with the directors.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £1,894,144 (2024 - £2,237,338 loss).
IPSCO Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 41 Central Avenue, West Molesey, Surrey, KT8 2QZ.
The group consists of IPSCO Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The Group has considered the various indicators described in FRS102 for accounting for the Revenue for medicinal cannabis as Principal or Agent and given the customer fulfilment role, management have formed the view that the Group should account for the revenue on external sales and costs of sales incurred. In addition, the profit share due to Grow Group Plc should also be accounted for as a cost of sale.
The consolidated group financial statements consist of the financial statements of the parent company Ipsco Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 28 February 2025. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
The directors have reviewed the Group's profit and loss and cash flow forecasts for the foreseeable future, being at least one year from the date of approval of these financial statements, the available financial resources, the recurring income stream from customers, other contracted income and whether there is headroom on covenants. Management have a high degree of confidence in delivering these numbers and the actuals to date are ahead of budget.
Subsequent to the year end, the Group's main loan note holders formally extended the repayment date of these loans from 30 June 2025 to 30 June 2028 and the financial covenants amended to create sufficient headroom against base case forecast.
The Group has strengths in importing products globally and hence has not been subject to disruption as a result of Brexit and customs declarations. The Group has implemented controls and procedures in place to ensure there is smooth supply of medicines and continues to work with the Department of Health and Social Care (DHSC) and The Medicines and Healthcare products Regulatory Agency (MHRA).
As a result of the above the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of approval of these financial statements and continue to adopt the going concern basis of accounting in preparing the financial statements.
Revenue represents the sale of pharmaceutical products and services provided.
Revenue is measured at the full list price of products sold, net of returns, discounts and rebates based on the sales price, net of Value Added Tax.
Management review all contracts and considers itself to be the principal for sales of the products/services. The group's subsidiary company is solely responsible for customer fulfilment, given it has the regulatory ability to buy/sell products, and has the knowledge, facilities and expertise to hold, distribute and manufacture goods
The companies recognises the principal associated revenue and cost of goods sold on a gross basis.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue is recognised for identified contracts with customers. Revenue comprises the fair value of the consideration receivable for services sold to third party customers in the ordinary course of business.
It is the group's policy and customary business practice to receive a valid order from the customer in which each parties rights and payment terms are established. The group assesses revenue contracts and prices in an upfront fee to reflect the initial work required such as set up fees and then spreads the balance over the remaining term of contracts to reflect the various performance obligations to be delivered.
The group recognises revenue as the amount of value expected to be received for services provided as the contractual performance obligations are satisfied.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
Intangible fixed assets include directly attributable development costs of new pharmaceutical products. They are capitalised on the basis that the cost will generate future revenues that will recover all costs incurred on a product by product basis. Management considers that each product being developed will reach the stage of being fully licensed and will generate sufficient income over future periods to recover these costs. Some development costs have been amortised when they start generating revenue in line with the accounting policy over 7 years which the directors consider reasonable. The recoverability of the development costs and their future economic lives are assessed annually.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are 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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Critical judgements that management have made in the process of applying accounting policies disclosed herein and that have a significant effect on the amount recognised in the financial statement relate to the following.
The recognition of deferred tax assets is based on forecasts of future taxable profits. The measurements of future taxable profit for the purposes of determining whether or not recognise deferred tax assets depends on many factors, including the company's ability to generate such profits and the implementation of effective tax planning strategies.
The directors have prepared forecasts based on estimates of future sales of non-core products, which indicate headroom against EBITDA and cash covenants. In the event that such sales fall significantly below expectations, in order to avoid covenant breaches, the directors have considered mitigating actions.
The company's joint venture, Grow Pharma Ltd, with Grow Group Plc supplies medicinal cannabis to patients in the UK. The company is solely responsible for customer fulfillment, as it is the only party within the joint venture arrangement with the regulatory ability to buy/sell medicinal cannabis products, and has the knowledge, facilities and expertise to hold, distribute and in certain cases manufacture goods. The company also bears significant regulatory risk.
The company has considered the various indicators described in FRS102 for accounting for the revenue for medicinal cannabis as principal or agent and given the customer fulfilment role, management have formed the view that the company will account for the revenue on external sales and costs of sales incurred and the profit share due to Grow Group Plc has been accounted for as a cost of sale. The accounting for this share is judgemental, but as medicines supply is the core business of the company, management deem it appropriate to treat as cost of sale.
Intangible fixed assets include directly attributable development costs of new pharmaceutical products. They are capitalised on the basis that the cost will generate future revenues that will recover all costs incurred on a product by product basis. Management considers that each product being developed will reach the stage of being fully licensed and will generate sufficient income over future periods to recover these costs. Some development costs have been amortised when they start generating revenue in line with the accounting policy over 7 years which the directors consider reasonable. The recoverability of the development costs and their future economic lives are assessed annually.
An impairment has been made to the investment carrying value in the prior year based on assumptions regarding future recoverability.
All turnover arises from the principal activity of the company being the sale of pharmaceutical products and services provided.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The other income relates to reduction in the bad debt provision on balances due from the joint venture, Grow Pharma Ltd.
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 28 February 2025 are as follows:
The investment in Vertical Pharma Resources Limited is directly held through integrated Pharmaceutical Services (IPS) Limited.
The Group has 60% of the equity with 50% voting rights in Intergro Medicals Clinics Limited.
Details of joint ventures at 28 February 2025 are as follows:
During the year £133,582 was provided against inventory (2024: £149,000).
In 2019 the shareholder and investor loans were restructured and reissued as 3 new loans. This resulted in a 6% PIK debt with a face value of £10,000,000, a 6% super senior loan with a face value of £700,000 and a 0% subordinate debt with a face value of £2,950,000. All of these facilities had a term of 3 years. In the previous year, the principal loan note holders formally extended the maturity date to February 2023, with the interest rate relating to the PIK debt and the super senior loan increased to 9%, with effect from 1 June 2021. In the same year, the loan note holders formally further extended the maturity date of the above facilities to 30 June 2025 and the interest rate relating to the PIK debt and the super senior loan increased to Base +12% per annum variable rate, with effect from 1 April 2023.
Subsequent to the year end, the loan note holders have formally further extended the maturity date of the above facilities to 30 June 2028 and the interest rate relating to the PIK debt and the super senior loan changed to Base +7% per annum variable rate, with the addition of cash interest of 5%, all effective from 25 April 2025.
The shareholder loans are secured with a fixed, floating and negative pledge over the assets of the company.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The particulars of the shares are:
A preferred ordinary shares:
a. rights to receive notice of and attend and speak at any general meeting and at any separate class meeting of the company for shares of the class they hold; one vote for one share on a written resolution; weighted voting rights in certain circumstances; b. rights to participate in a dividend; c. rights to participate in a return of capital whether on liquidation or capital reduction or otherwise.
B1 ordinary shares:
a. rights to receive notice of and attend and speak at any general meeting and at any separate class meeting of the company for shares of the class they hold; one vote for one share on a written resolution; b. rights to participate in a dividend; c. rights to participate in a return of capital whether on liquidation or capital reduction or otherwise.
B2 ordinary shares:
a- rights to receive notice of and attend and speak at any general meeting and at any separate class meeting of the company for shares of the class they hold; one vote for one share on a written resolution; b. rights to participate in a dividend; c. rights to participate in return of capital whether on liquidation or capital reduction or otherwise.
C1 Ordinary shares:
a. rights to receive notice of and attend and speak at any general meeting and at any separate class meeting of the company for shares of the class they hold; one vote for one share on a written resolution; b. rights to participate in a dividend; c. rights to participate in a return of capital whether on liquidation or capital reduction or otherwise.
C2 Ordinary shares:
a. rights to receive notice of and attend and speak at any general meeting and at any separate class meeting of the company for shares of the class they hold; one vote for one share on a written resolution; b. rights to participate in a dividend; c. rights to participate in a return of capital whether on liquidation or capital reduction or otherwise.
D Ordinary shares:
a. rights to receive notice of and attend and speak at any general meeting and at any separate class meeting of the company for shares of the class they hold; one vote tor one share on a written resolution; b. rights to participate in a dividend; c. rights to participate in a return of capital whether on liquidation or capital reduction or otherwise.
The reserve records the nominal value of shares repurchased by the company.
Other reserves
The reserve represents capital contributions made by the company's shareholders.
Includes all current and prior period retained profits and losses.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The Company has taken advantage of the exemption in Financial Reporting Standard 102 from the requirement to disclose transactions with group companies that are 100% owned by the group
During the year, rentals of £112,576 (2024: £68,965) were paid to Basewell Investments Limited.
At the year end, the amount due from Herisse Limited was £11,647 (2024: £17,330). A D Patel is a director of Herisse Limited. During the year, rentals of £186,500 (2024: £124,000) were paid to Herisse Limited in addition to sales made of £24,796 (2024: £31,058).
Furthermore, additional purchases were made from Herisse Limited in the amount of £2,736 (2024: £3,430) leaving an amount due to the Herisse limited, at the year-end date of £Nil (2024: £Nil) at the year end.
During the year, the Company invoiced Grow Pharma Ltd (joint venture with Grow Group Plc) £Nil (2024: £5,808,623) relating to the medicinal cannabis. The balance of invoiced amounts due from Grow Pharma Ltd at the year end is £2,913,795 (2024: £12,592,634)
During the year, Grow Pharma Ltd invoiced the Company £Nil (2024: £5,910,535). The balance of invoiced amounts due to Grow Pharma Ltd at the year end is £241,401 - debtor (2024: £10,988,914 - creditor).
At year end, the net balance due to Grow Pharma Ltd is £24,358 (2024: £968,819 - debtor)
During the year the Company invoiced Integro Medical Clinics Limited £980,231 (2024: £477,530). The balance of invoiced amounts due from Integro Medical Clinics Limited at the year end is £1,716,883 (2024: £477,530).
Furthermore, Integro Medical Clinics Limited invoiced the Company £1,952,080 (2024: £1,112,966). The balance of invoiced amounts due to Integro Medical Clinics Limited at the year end is £2,270,068 (2024: £601,429).
Expense reimbursements to directors amounted to £6,654, with various balances due to directors amounting to £1,183.
Refer to note 20 for shareholder loans.
The prior year adjustment relate to the recognition of development costs as intangible fixed assets which was recognised as prepayments. The debenture loan has also been restated as long term in consideration of the expiry date.