The directors present the strategic report for the year ended 31 December 2024.
The group seeks to review total revenue and cash balances as its key performance indicators. These are reviewed below:
KPI | Year to 31/12/2024 (£) | Year to 31/12/2023 (£) | 18 Months to 31/12/2023 (£) | ||||
Total Revenue | 8,166,382 | 5,736,562 | 7,986,320 | ||||
| 4,641,714 | 3,842,506 | 3,842,506 | ||||
|
|
|
| ||||
|
|
|
|
The year to 31 December 2024 marked a year of strong performance for the business. Revenue increased from £7,954,992 for the combined 2022-2023 period to £8,166,382 in 2024. The company maintained a strong closing cash balance, increasing from £3,842,506 to £4,641,714.
The directors believe that the following risks are key to the business's future success:
Liquidity and cash flow risk: The group monitors the group's cash flow on a regular basis, including forecasting future cash flows. Prudent levels of cash at bank are maintained at all times.
Credit risk: The group is exposed to credit risk in relation to customer invoices. Debtors are proactively managed, and the level of bad debt remains low.
Exchange rate risk: The group is exposed to exchange rate risk through its US trading subsidiary. The group manages this risk through careful monitoring of exchange rates and balances held in US dollars.
Customer retention: We seek to manage and mitigate this risk by providing valued and versatile support to our customers, to encourage their continued use and enjoyment of our products.
Future developments
The directors are committed to investing in the business to achieve long-term, sustainable growth, and to unlock better learning for everyone. The group focus will remain on providing excellent service to customers and learners, investing in research and development, technological innovation and learning science; to ensure a first-class, leading edge product range, alongside a continued investment in the company's core values and the engagement, development and retention of staff.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2024.
The results for the year are set out on page 7. The prior period is an 18 month period and so the comparative period is not entirely comparable with current year.
Ordinary dividends were paid amounting to £20,000. 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:
BHP LLP were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
The period ending 31 December 2024 is the first in which the company has been audited.
The Company continues to invest in research and development to refine and further expand its product offering.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Sonocent Holdings Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2024 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
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;
we identified the laws and regulations applicable to the Group through discussions with directors and other management, and from our commercial knowledge and experience of the trade;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the Group;
we assessed the extent of compliance with the laws and regulations considered above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the group’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by;
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risks of fraud through management bias and override controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates 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 were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
discussions with senior management regarding relevant regulations and reviewing the company’s legal and professional fees.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the director’s and other management and the inspection of regulatory and legal correspondence.
As part of our audit, we addressed the risk of management override of internal controls, including testing of journals and review of the nominal ledger. We evaluated whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
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.
Other matters which we are required to address
The financial statements of the group for the period ended 31 December 2023 were not audited. Accordingly, we do not express an opinion on the comparative financial information.
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 £2,697 (2023 - £2,095 profit).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
Sonocent Holdings Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 4 The Boulevard, Department Leeds Dock, Leeds, England, LS10 1PZ.
The group consists of Sonocent Holdings Ltd and all of its subsidiaries details of which can be found in note 12.
The prior period financial statements have been drawn up from the 1 July 2022 to the desired year end of 31 December 2023 and thus represent a period of greater than 12 months. As a consequence, the comparatives (including related notes) are not entirely comparable.
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 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 for parent company information presented within the consolidated financial statements:
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 consolidated group financial statements consist of the financial statements of the parent company Sonocent Holdings Ltd together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2024. 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.
The group is loss making and has a net current liability, this is driven by the significant deferred income balance as licence income is recognised on a straight-line basis over the term of the agreement. This has a non-cash impact on net liabilities, which when adjusted for gives rise to net current assets position. Customers pay for licences up front and cash balances within the business remain strong and are forecast to increase as the business continues to grow. Additionally, the group is forecast to reach a profitable position by the end of December 2025.
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.
Turnover is measured at the fair value of the consideration received or receivable, net of discounts and value added taxes. Turnover includes revenue earned from the sale of goods and from the rendering of services. Turnover from the rendering of services is recognised by reference to the stage of completion of the contract. The stage of completion of a contract is measured by comparing the costs incurred for work performed to date to the total estimated contract costs.
The primary source of income is the sale of licence income which is deferred and recognised on a straight-line basis over the period of the licence agreement which span between 1-4 years.
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.
At each reporting period end date, the group reviews the carrying amounts of its tangible 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.
Share-based benefits are provided to employees via the Sonocent Holdings EMI Share Option Scheme.
The fair value of options granted is recognised as an employee benefits expense, with a corresponding increase in equity. The total amount to be expensed is determined using the Black-Scholes model by reference to the fair value of the options granted:
including any market performance conditions (e.g., the entity’s share price);
excluding the impact of any service and non-market performance vesting conditions (e.g., profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
including the impact of any non-vesting conditions (e.g., the requirement for employees to save or hold shares for a specific period of time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the company revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases. The rights of use and obligations under finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Minimum lease payments are apportioned between the finance charge and the reduction in the outstanding liability using the effective interest rate method. The finance charge is allocated to each period during the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability. Leased assets are depreciated in accordance with the company's policy for tangible fixed assets. If there is no reasonable certainty that ownership will be obtained at the end of the lease term, the asset is depreciated over the lower of the lease term and its useful life. Operating lease payments are recognised as an expense on a straight line basis over the lease term.
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.
Cost of sales
Expenses included within cost of sales are only those that are wholly variable and can be directly attributed to generating a sale in the period. Any expenses which are partially attributable to generating sales are accounted for within administrative expenses.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Valuation of share-based payments requires assumptions about the achievement of non-market conditions and the number that will vest. If actual performance is different from these assumptions, costs recorded in future periods will be different from expectations and will include revisions to amounts recognised so far.
Revenue recognition on licence sales occurs when it is invoiced however, in some contract instances, the recognition commences on activation rather than invoicing. The Directors estimate the timing between invoicing and activation on a population basis, using actual historic data of activation periods. The Directors believe this estimate to be appropriate and it would require a large movement in the activation period to have a material impact.
During the prior period the Company reached a settlement with a US based company for a strategic change project. The Directors have estimated the associated costs of this project which have been included within provisions. See note 16 for additional information.
The Directors perform an annual impairment review on investments held in subsidiaries. This is performed by using a discounted cashflow which is supported by the positive operational cashflows of the business. There is a high level of estimation with future forecast cashflows, growth rates and discount rates used within the discounted cashflow model. The Directors have performed sensitivity analysis over the key assumptions within the model and are comfortable that the investment balance is free from material impairment.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2024 are as follows:
Amounts owed by group undertakings are interest free and repayable on demand.
Amounts owed to group undertakings are interest free and repayable on demand.
During the period ended 31 December 2023, the group reached a settlement with a US based entity, receiving $500k to in relation to a strategic change project. The full amount was included as a provision based on costs the group is expected to incur.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Deferred income is included in the financial statements as follows:
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 ordinary shares entitle the shareholder to one vote per share and the right to receive dividends. The C shares have no voting rights and are not entitled to any dividend payments or distribution.
The options outstanding at 31 December 2024 had an exercise price of £2.12, and a remaining life of 9 years.
In July and August 2024, the company issued to employees of its subsidiary undertaking 23,072 share options exercisable at £2.12 on an exit within ten years,
The fair value of the options and the resulting charge was determined using the Black-Scholes model with the following key inputs:
share value £6.64
share price volatility 50%
Risk-free rate 4.11%
In July 2024, the company granted 8,016 C growth shares to certain shareholders.
The valuation of the shares and the result charge was determined using the the Black-Scholes model with the following key inputs:
share value £10.03
share price volatility 50%
Risk-free rate 4.13%
In 2023 and 2024, the Directors of the Group were of the opinion that the fair value of the options are immaterial, and accordingly did not reflect any charge in the profit or loss account.
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:
During the year the group purchased services from a company under common directorship totalling £30,200 (2023: £46,242). Amounts owed to this related company at the year end were £291 (2023: £145).
At the year end, a loan of £100,000 is due from a Director (2023: £nil). This represents an advance during the year, there were no other transactions within the Directors loan account.
There was a prior year adjustment to correct the split of deferred income due within one year and due over one year, which had no impact on reserves in the year to 31 December 2023, plus an adjustment to increase the deferred income recognised in the prior year by £110,750 and reduce income by the same amount, which reduced the net assets at 31 December 2023 by £110,750.
There was a further prior year adjustment to correct the rent provision accrual to recognise additional rent of £61,530 in the prior year and reduce the reserves brought forward in the prior year by £65,789 which reduced the net assets at 30 June 2022 by £65,789 and the net assets at 31 December 2023 by £127,319.