The directors present the strategic report for the year ended 31 December 2024.
The company itself generates revenue from management services performed on behalf of the Group and generates no external revenue.
The company is also charged loan interest from its direct parent company Butterfly Midco Limited which is driving the overall loss for the entity. In addition there was a group reorganisation within the financial year where the Company became the immediate parent of Disguise Technologies Limited, and New Leaf Topco Limited and New Leaf Bidco Limited both entered into Members Voluntary Liquidation. As such the Company received dividends and impairment of receivables which have offset each other. These transactions are further described in note 12 to the financial statements.
The Company finished the financial year with a loss after tax of £17.2m (2023 – loss after tax of £13.9m) and net liabilities of £50 million (2023 – £32.9 million) and net current assets of £17.6m (2023 – £43.8m), inclusive of £21.4m (2024: £48.0m) due from group undertakings.
The Company provides management services for the Butterfly Group, and it is reliant on support from other group companies to settle any liabilities. The administrative costs relate to professional and audit fees for the Group and intercompany loans are in place throughout the Group with forecast cashflow requirements performed at a Group level ensuring liabilities and adequate funding of the Company is covered.
The Company ended the financial year with outstanding loan notes of £161.2 million (2023 - £146.5 million) with the prior year interest charges being rolled up with the original principal.
In 2024 the Butterfly Group saw revenue stabilise and results in line with prior year. This result highlights some resilience in a challenging economic climate with cautious spending patterns from customers in the last quarter of the year and focus of those customers to other areas of spend in their projects that would have seen price increases due to potential tariffs.
We continued our review into the operational expenditure further leveraging costs to ensure we are well placed to continue our commitment to innovation and at the same time maximise profitability and cash generation.
The principal risks and uncertainties of the Company relate to the ongoing activities of the companies in which it holds an investment both directly and indirectly.
This means it is dependant for its revenues upon the performance of its subsidiaries in the live and virtual events visualisation industry. The risks that the Company are exposed to are managed at a group level. The nature of the risk including the risk management principles and strategies to mitigate these risks are disclosed in the consolidated financial statements of Butterfly Topco Limited.
Risk 1 - Economic headwinds
Description - A significant change in the global economy may have impact on the Group's ability to generate revenues and growth.
Potential impact - The Company and Group is unable to meet its strategic growth targets, which may result in financial difficulties. The decision of the US government to impose wide-ranging tariffs during Q2 of 2025 is such an example of this risk crystallising, as this has had a direct impact on the Group's supply chain and its ability to service its core US market.
Mitigation - The business constantly monitors the external business environment using both financial and non-financial measures to enable it to react quickly to changes in the global environment.
Risk 2 - Supply chain vulnerability
Description - Interruption to the supply of critical components used in the Group's hardware sales may lead to projects being deferred or cancelled if the Group is unable to meet its contractual conditions.
Potential impact - Inability to meet customer demand, reducing revenues. The interruption of supplies from the US tariffs has caused such an issue in 2025.
Mitigation - The product development and operations teams work closely with the Company and Group's suppliers to ensure contingency plans are in place to minimise business interruption and react quickly to route supply through different geographies within our network. The Group also places orders in advance to secure supply, and owns all intellectual property and drawings to move the supply chain if required. In addition, the Group is increasingly positioned as a software business, which has less reliance on critical components.
Risk 3 - Research and Development
Description - The Group makes significant investment in research and development to future-proof its products and revenues.
Potential impact - Failure to manage this investment may result in the failure to generate future revenues and increased costs charged through the income statement.
Mitigation - The business constantly reviews the costs invested in research and development, analysing the costs by project. Projects are reviewed both in terms of cost and commercial viability. Should a project be deemed unviable it is abandoned at the earliest opportunity.
Risk 4 - Environmental factors
Description - With the Group operating in multiple jurisdictions, there is a risk that one or more places increasing obligations on the Group to reduce the impact of electronic materials on the environment.
Potential impact - The cost of production may increase as the Group tries to meet the new stringent environmental laws by having to invest in R&D to identify alternative materials, or incur additional costs in reducing the impact on the environment.
Mitigation - The Company & Group has registered with the WEEE directive to ensure products are disposed of in a suitable manner. The directors also recognise there are further improvements to be made and are looking at schemes to offset the business activities' carbon footprint and have set a three year timeframe to embed this in our overall strategy (of which one year has passed).
The Company's activities expose it to a variety of financial risks. These risks are managed at a group level of the ultimate parent undertaking Butterfly Topco Limited. The principal financial risks are summarised below:
Credit risk
The Company's main financial assets are its cash balances, and intercompany debtors. For banks and financial institutions, only independent rated parties with a strong credit rating are accepted. Intercompany debtors are regularly reviewed for recoverability from an overall Group perspective for recoverability. The Company position is predominantly due to shareholder loan notes and other financing activities.
Liquidity risk
Liquidity risk arises from timing differences between cash inflows and outflows. At the reporting date, the Company had net cash balances and was in a net current asset position. However the liquidity of the Company is wholly reliant on the support of the Butterfly Topco Group, with this ongoing support being received and confirmed by way of a letter of support.
The Group is also subject to Adjusted Leverage and Interest Cover Covenants which are tested quarterly on a rolling last twelve-month basis. If there was a potential breach, this would allow Santander as the Senior Lender discretion to recall the loan in full which if actioned could adversely impact liquidity if the Group were not able to refinance or remedy.
To mitigate this risk the Group regularly monitors and reports to the Senior Lender on the Covenant position. We also actively engage the Senior Lender in finding solutions and have had support previously from both the Senior Lender and Group’s owners.
Interest rate risk
Interest bearing financial liabilities comprise loan notes issued by a fellow group company and bank loans. Loan notes are held at fixed rates of interest. There is no hedging policy in place to protect changes to the SONIA rate and relies where possible on natural hedges of its financial assets and liabilities.
As the Company itself is not a trading entity it does not assess itself individually but is assessed as part of the larger Butterfly Group as a whole. Disclosure for the Company will be included within the consolidated results of Butterfly Topco Limited.
The Group also reviews a number of other non-financial KPIs which apply to the subsidiaries of the Company:
Annual employee engagement reviews and net promoter scores with all global employees. The Group uses electronic systems and perform regular employee surveys, focussing on happiness, personal motivation, company motivation, and relationships. The average at December 2024 was 4 (December 2023 - 4) (from a maximum score of 5), which the Directors are pleased with.
Collection and review of customer satisfaction surveys. Based on several metrics, the average score in 2024 was 4.57 (December 2023 - 4.53) (from a maximum score of 5). The Directors are pleased with this outcome and demonstrates a key driver behind the Group's growth.
Manufacturing quality and survey reviews including return to manufacturer authorisations ("RMA") within the first 90 days of production. Such data is tracked electronically but the Group only commenced this data collection during 2024, and as such no comparatives are presented. The average returns during 2024 were 1.0% (December 2023 – 1.1%), which demonstrates a high level of reliability of the Group's products (both hardware and software).
Future developments
It is the intention of the directors that the Company will continue for the foreseeable future, oversee and managing the operational aspects of the Group. The Group plans to expand into new geographical locations and accelerate growth through the acquisition of new businesses alongside organic growth with new products and verticals.
Promoting the success of the company
The Directors of the Group acknowledge that they must act in a way which is considered in good faith and would be most likely to promote the success of the company and its wider Group for the benefit of all interested parties as defined in Section 172(1) of the Companies Act 2006. In doing so, the Directors of the Group have considered the following aspects and how they have regarded each of the matters set out below.
Have regard to the likely consequence of any decision in the long-term
Our mission is to build leading edge technology solutions for creatives around the world to deliver unparalleled performances for audiences in person and in the cloud. We recognise that our decisions must take into account the long-term consequences for our company and its stakeholders. For example, when considering investment in new products or services, we take into account the potential impact on our financial position, our ability to compete in the market, and the interests of our shareholders.
The interests of the Group’s employees
We monitor the development, performance and impacts of our activity on social and employee matters. We are committed to providing a positive working environment that is free from all forms of illegal and improper discrimination and harassment. Our employees are key to the success of our company, and we are committed to promoting their interests. We provide a wider range of benefits, as well as opportunities for training and development and remote working. We also have policies in place to promote diversity and inclusion, and we seek to foster a positive working environment that promotes innovation and collaboration.
The need to foster the Group’s business relationships with suppliers, customers and others
We recognise that our success is closely tied to our relationships with our customers and suppliers. We aim to provide high-quality products and services that meet the needs of our customers, and we work closely with our suppliers to ensure that we have reliable and cost-effective supply chains.
In 2024 several new products were in development providing new advances in power and output to match our customers creative needs. We continue to work with all our supply chain to ensure compliance with all relevant legislation and minimising impact on our business operations.
The impact of the Group’s operations on the community and environment
We understand that our operations have an impact on the wider community and the environment. We are committed to minimising our environmental footprint through the use of renewable energy sources and the reduction of waste and emissions. We also support industry initiatives and charities through donations and volunteer work within the Group.
The desirability of the Group maintaining a reputation for high standards of business conduct
Respecting human rights is a core value and one that we expect our business partners to share. We have documented policies and procedures internally as well as robust supplier T&C's which reference what we expect from our Suppliers and ensure we limit the risk to the business and uphold our core values. Employees have access to all Group policies and procedures, with training provided as part of the employee onboarding process with regards to the Corporate Criminal Offences Act, Modem Slavery Act, Anti- Bribery and Corruption.
We have a zero-tolerance stance for all human rights abuse. We are committed to ensuring we maintain robust programs and procedures to protect our people and prevent such abuse through our supply chain. Our Supplier Code of Conduct expressly prohibit the use of forced, imprisoned, bonded, indentured or involuntary labour including child labour. Other requirements include safe and clean working conditions, fair wages and no discrimination.
The need to act fairly between all interested parties within the group
The Board considers all interested parties when making business decisions to ensure fair representation irrespective of their interest holding within the Group. The Group has robust policies in place to ensure that fair representation is maintained both at board level and within the wider business through, management meetings and Non-executive representation at the Board.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2024.
The loss for the financial year after taxation was £17,229,113 (2023 - £13,851,145). The results for the year are set out in further detail on page 14.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
On 30 September 2025, the Group breached both the Adjusted Leverage and Interest Cover Covenants. The Group entered into negotiations with Santander UK PLC (the “Senior Lender”) requesting a waiver to remedy the breaches. The definitions of both Covenants are defined in Note 1.2).
The Adjusted Leverage breach (threshold: 2.5x) was a timing delay on production which straddled a reporting period. The Interest Cover breach (threshold: 2x) is down to higher working capital costs as Debtors increased and slowed Operational Cashflow generation, against the backdrop of a challenging market environment and the Group is forecasting that will remain in breach across the 31 December 2025 reporting period.
The outstanding Senior Debt was £14.4m at the date of breach (up from £12.8m at the year-end), borrowed from the Senior Lender, who has the ability to recall the loan in full as one option to remedy the breach. Given the breach was a Post Balance Sheet Event for 31 December 2024 accounts, the Senior Lender debt is still recognised as being due after more than one year, as set out in Note 20 to the Group Financial Statements.
The negotiations to date are progressing and it is the Senior Lender's current intention to agree to a waiver for the Q3 Covenant Reporting, subject to terms. The waiver is not legally effective at the date of signing the Financial Statements. As the Financial Statements will be signed before the 31 December 2025 there will need to be further negotiations for the Q4 31 December 2025 Interest Cover breach. As the Group moves into the Financial Year end 31 December 2026 there will be a continued sensitivity until Q3 30 September 2026 and the rolling twelve month period since breach has passed.
The Group remains liquid to meet its operational obligations in the short and long term on the basis that the Senior Lender does not demand full loan repayment. If that situation were to occur the Group would seek additional refinancing by way of either debt or equity financing.
The auditor, BDO LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
The Company has taken the exemption available to subsidiary companies to not disclose information in respect of greenhouse gas emissions, energy consumption, and energy efficiency action given that this is disclosed in the consolidated financial statements of the ultimate parent company, Butterfly Topco Limited.
The assessment of the Company’s going concern position is intrinsically linked to that of the Butterfly Topco Limited group “Group” due to the Group’s banking arrangements, the way cash flows are generated across the Group entities and the intercompany balances that exist. The below assessment is written in respect of the Group but is relevant to the assessment of the Company.
As at 31 December 2024, the Group had net liabilities of £123.9m (2023 - net assets of £86.3m) and net current assets of £13.7m (2023: £14.7m). As at the year-end date the Group had generated EBITDA (as defined in Note 7) of £5.2m (2023 - £7.6m) and generated cash flows from operating activities of £4.3m (2023 - £9.8m). Closing cash balances were £9.1m (2023 - £10.7m).
At the Balance Sheet reporting date, the Group had £12.8m of term loans drawn from its facilities agreement with its Senior Lender, Santander UK PLC, to finance the acquisitions of Polygon Labs LLC and Meptik LLC, both of which were acquired in 2023. £10m is drawn from one term loan and £2.8m from an additional term loan facility of up to £7.0m, both of which are not due for repayment until December 2027. At the year-end date the net debt position of the Group excluding shareholder loans and convertible loan notes was (£3.7m) (2023 – (£3.4m)). The Group has access to additional facilities via a £3.0m revolving credit facility which remain undrawn and £4.2m of the additional term loan facility which is undrawn to finance further commitments under the acquisitions.
The Group's term loan arrangements with its Senior Lender are based on two covenants. The first is Adjusted Leverage (the ratio of an Adjusted EBITDA-based metric to Total Net Debt) measured on a quarterly basis on a rolling 12-month period with the target ratio reducing over time. The second covenant is an Interest Cover (the ratio of Cashflow to Net Finance Charges) again measured on a quarterly basis on a rolling 12-month period. The Senior Facilities are provided by Santander UK PLC and details can be found in note 39 of the Group financial statements of Butterfly Topco Limited.
In the Financial Year 2025 at the Q3 Covenant reporting date 30 September 2025 the Group breached both the Adjusted Leverage (threshold: 2.5x) and Interest Cover Covenants (threshold: 2x). The outstanding Senior Debt had increased to £14.4m as at the date of breach, up from £12.8m at the year end, borrowed from Santander UK PLC. The Adjusted Leverage breach was a timing delay on production which straddled a reporting period and management expect this to be rectified in the Q4 31 December 2025 test. The Interest Cover breach is down to higher working capital costs as Debtors increased and slowed Operational Cashflow generation, against the backdrop of a challenging market environment.
The Group has sought to engage with Santander UK PLC for a waiver of the Q3 Covenants up to the 30 September 2025. It is the Senior Lender's current intention to agree to a waiver for the Q3 Covenant Reporting, subject to terms. The waiver is not legally effective at the date of signing the financial statements. The Group is also forecasting to breach the interest cover again at the Q4 Covenant reporting date 31 December 2025 and is in further discussions with Santander UK PLC on options to remedy. On the assumption that the Senior Lender does not demand repayment, the directors are satisfied with the overall cash liquidity in the business to meet its operating obligations but due to the timing of the Covenant Breaches there is a material uncertainty in the Group if the negotiations with the Senior Lender were to fail and a legal waiver was not able to be agreed. This would allow the Senior Lender in line with the Facilities agreement a right to call repayment of the outstanding balance in full. If this were to materialise this would cause an acute liquidity issue and the business would need to further refinance by way of debt or equity.
As the Group moves into the Financial Year end 31 December 2026 there will be a continued sensitivity until Q3 30 September 2026 and the rolling twelve month period since breach has passed.
The long term debt of the Group is made up of shareholder loan notes of £161.5m (2023 - £148.6m) which mature on the earlier of the Group entering into an agreement with a new acquirer or the maturity of those loan notes in March 2031. The shareholders have not requested any interest repayments until that point.
The directors monitor cashflow through short- and long-term forecasting and its going concern assessment is on a future looking period of a minimum of twelve months from the date of signing the audited financial statements.
These forecasts are stress tested on revenue following a deep review of pipeline known projects and historical seasonality, alongside modelling of debtor days lengthening. Our margin forecasts are based on our new supply chain product pricing and working capital is driven predominantly by our sales demand and appropriately run through our financial model taken into account any historical trends. The forecasts have also been heavily sensitised in producing a financing case to ensure that with minimal revenue growth and cost efficiencies actioned we are still able to maintain operational cash liquidity.
The directors have considered the financial forecasts of the overall Group inclusive of this entity, taking into consideration the current macroeconomic climate, the projections are for the Group to remain profitable at an EBITDA level, and generate positive operational cashflows in both a short term and long-term assessment. However, overall cashflows are predicated on the Senior Lender not demanding repayment of the debt following the covenant breaches.
On the basis the Senior Lender does not demand repayment the directors conclude that the Group remains liquid and can meet its operational obligations. However, at the date of signing of the financial statement the Group has not received a legal waiver for its existing or expected future breach of covenants. The Group is therefore dependent on those banking facilities not being called for immediate repayment, which is not guaranteed. This indicates the existence of a material uncertainty which may cast significant doubt over the Company's ability to continue as a going concern, and therefore it may not be able to realise its assets and discharge its liabilities in the ordinary course of business.
Having undertaken this going concern assessment the directors believe that the Group, and therefore Company, will have adequate resources to continue for the foreseeable future, including at least 12 months from the date of the signing of the financial statements and that waivers for covenant breaches will be obtained and/or a remedy will be put in place with support from shareholders. No adjustments have been made to the financial statements presented that would result if the Company were unable to continue as a going concern.
Qualifying third party indemnity provisions
The Company has taken out qualifying third party indemnity insurance for the benefit of one or more of the directors of the Company. Such third-party indemnity provisions were in place at the date of the signing of the Directors' Report.
Matters covered in the Strategic Report
Disclosures required under S416(4) of the Companies Act 2006 are commented upon in the Strategic Report as the directors consider them to be of strategic importance to the Group.
Disclosure of information to auditor
Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
So far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware; and
The director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
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; 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.
Basis for opinion
Material uncertainty related to going concern
We draw attention to note 1.2 to the financial statements, which indicates that the Company’s going concern position is intrinsically linked to that of the Butterfly Topco Limited group (“Group”) and the Group has breached financial covenants on banking facilities after the reporting date, and is expected to continue breaching those covenants beyond the date these financial statements are signed. At the date of signing of the financial statement the Group has not received a legal waiver for its existing or expected future breach of covenants. The Group is therefore dependent on those banking facilities not being called for immediate repayment, which is not guaranteed. As stated in note 1.2, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern, as the company is reliant on financial support from the Group. The financial statements do not include any adjustments that would result if the Company were unable to continue as a going concern. Our opinion is not modified in respect of this matter.
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.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Other information
Other Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the 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.
Extent to which the audit was capable of detecting irregularities, including fraud
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:
Non-compliance with laws and regulations
Based on:
Our understanding of the Company and the industry in which it operates;
Discussion with management, legal counsel and those charged with governance; and
Obtaining and understanding of the Company’s policies and procedures regarding compliance with laws and regulations;
We considered the significant laws and regulations to be the applicable accounting framework, the Companies Act 2006, UK Corporation tax legislation and UK VAT registration.
The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the health and safety legislation, UK employment law and the Data Protection Act.
Our procedures in respect of the above included:
Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations;
Discussions with legal counsel to identify any instances of non-compliance with laws and regulations; and
Review of financial statement disclosures and agreeing to supporting documentation.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;
Obtaining an understanding of the Company’s policies and procedures relating to:
Detecting and responding to the risks of fraud; and
Internal controls established to mitigate risks related to fraud.
Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these.
Based on our risk assessment, we considered the areas most susceptible to fraud to be:
Management override of controls, predominantly through the posting of inappropriate journals or manipulation of key accounting estimates.
Our procedures in respect of the above included:
Testing a sample of journal entries throughout the year, which met a defined risk criteria, by agreeing to supporting documentation; and
Testing of significant estimates and evaluating whether there was evidence of bias in the financial statements by management that represented a risk of material misstatement due to fraud. In particular, we identified the equity-settled and cash-settled share-based payment charges, recoverability of intercompany balances and the impairment of investment balances as being the principal estimates and judgements.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 17 to 32 form part of these financial statements.
Butterfly Bidco Limited is a private company limited by shares incorporated in England and Wales. The registered office is Hermes House, 88-89 Blackfriars Rd, South Bank, London, United Kingdom, SE1 8HA.
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 £.
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 Butterfly Topco Limited. These consolidated financial statements are available from its registered office, Hermes House, 88-89 Blackfriars Road, South Bank, London, SE1 8HA.
These forecasts are stress tested on revenue following a deep review of pipeline known projects and historical seasonality, alongside modelling of debtor days lengthening. Our margin forecasts are based on our new supply chain product pricing and working capital is driven predominantly by our sales demand and appropriately run through our financial model taken into account any historical trends. The forecasts have also been heavily sensitised in producing a financing case to ensure that with minimal revenue growth and cost efficiencies actioned we are still able to maintain operational cash liquidity.
The directors have considered the financial forecasts of the overall Group inclusive of this entity, taking into consideration the current macroeconomic climate, the projections are for the Group to remain profitable at an EBITDA level, and generate positive operational cashflows in both a short term and long-term assessment. However, overall cashflows are predicated on the Senior Lender not demanding repayment of the debt following the covenant breaches.
On the basis the Senior Lender does not demand repayment the directors conclude that the Group remains liquid and can meet its operational obligations. However, at the date of signing of the financial statement the Group has not received a legal waiver for its existing or expected future breach of covenants. The Group is therefore dependent on those banking facilities not being called for immediate repayment, which is not guaranteed. This indicates the existence of a material uncertainty which may cast significant doubt over the Company's ability to continue as a going concern, and therefore it may not be able to realise its assets and discharge its liabilities in the ordinary course of business.
Having undertaken this going concern assessment the directors believe that the Group, and therefore Company, will have adequate resources to continue for the foreseeable future, including at least 12 months from the date of the signing of the financial statements and that waivers for covenant breaches will be obtained and/or a remedy will be put in place with support from shareholders. No adjustments have been made to the financial statements presented that would result if the Company were unable to continue as a going concern.
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.
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.
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, including creditors, bank loans, and loans from fellow group companies, 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.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
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.
Where shares are awarded under the group's long term incentive plan, the fair value of the shares at the grant date is charged to the statement of comprehensive income over the vesting period. Market vesting conditions are factored into the fair value of options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors that are within the control of one or other of the parties (such as the company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of shares are modified before they vest, the increase in the fair value of the shares, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period.
Where shares are issued by one group entity for settlement in its own shares and these are granted to employees of a subsidiary entity, the issuing entity recognises the charge as an increase in cost of investment while the subsidiary recognised this as a capital contribution.
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.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
In preparing the financial statements, the directors have considered whether there are any indicators of impairment of the company's investments. Factors taken into consideration include the past and expected future performance of the subsidiaries, development costs and customer relationships, with this performance being compared against the multiple expected to be achieved on a sale with adjustment for net debt.
Whilst performance in the year in the subsidiaries has been challenging, the primary net debt of the group is in a parent company and therefore the value of the subsidiaries is expected to exceed the carrying value. The directors are therefore satisfied that there are no such indicators of impairment at the reporting date as development costs remain current as well as the underlying customer base.
The company has issued shares and share-matching arrangements as part of its long-term incentive plan for employees. For shares, these are classified as equity-settled share-based payments and are therefore fair valued at the grant date, and the resultant share-based payment charge spread over the expected vesting period of the instruments.
There are a number of existing schemes from prior years. For the shares issued in June 2024, these were valued using a Monte-Carlo simulation option pricing model based on the Black-Scholes model. This requires a number of assumptions to be made including the share price at the grant date, the volatility of the share price, expected dividend yield and expected period to exercise.
The shares were issued with an average exercise price of £3 per share for E shares only. The weighted average fair value net of exercise price is £39.18, which was determined with input from an expert.
The directors are satisfied that the share price is reasonable taking into consideration the EBITDA performance and the resultant expected enterprise value of the company, based on benchmarking of the earnings ratio to comparable companies in the sector.
The total anticipated share-based payment charge is spread over the vesting period of the instruments. For those instruments that do not vest before the year-end, management make an assessment of the expected timing of the vesting date.
The directors have assessed the ability of other group companies to pay the amounts owed and concluded that these debts remain recoverable. This assessment is integrated with the investment judgement disclosed above.
The whole of the turnover is attributable to the principal activity of the Company.
All turnover arose within the United Kingdom.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2023 - 1).
The number of directors who are entitled to receive shares under long term incentive schemes during the year was 2 (2023 - 2).
The amounts received were a one-off dividend arising on the group reorganisation, as explained in note 12.
The actual charge/(credit) 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:
On 14 August 2024 the group headed by Butterfly Topco Limited completed a group reorganisation, with a view to removing two UK legal entities from the structure (as detailed in note 13). This resulted in the Company taking direct ownership of Disguise Technologies Limited.
As part of the reorganisation, the Company permitted a subsidiary to convert intercompany liabilities owed to the Company into share capital, which has transferred to be recognised as an investment. Following this transaction, New Leaf Topco Limited distributed its remaining retained profits to the Company which was settled against the amount payable for the acquisition of Disguise Technologies Limited by the Company, resulting in an impairment in the remaining value of New Leaf Topco Limited.
Details of the company's subsidiaries at 31 December 2024 are as follows:
(1) Following a restructuring of the subsidiaries owned by the Company, on 14 August 2024 the Company took direct ownership of the entire ordinary share capital of Disguise Technologies Limited. This leaves New Leaf Topco Limited ("NLT"), and its subsidiary New Leaf Bidco Limited ("NLB"), as non-trading legacy companies.
This restructuring involved NLT issuing two ordinary shares for total consideration of £23,845,142, which was as part of a debt-for-equity swap. NLT then undertook a capital reduction, effective on 13 August 2024, which cancelled the share premium account in its entirety.
On 14 August 2024, the Company then acquired the entire share capital of the trading subsidiaries from NLB at par value. All remaining profits of NLB and NLT were then distributed to BBL, and the remaining value of the investment in NLT was impaired in full.
In December 2024, a liquidator was appointed to commence the process of removing NLT and NLB from the registrar of companies. As a result of the above steps, the Company does not expect to receive any additional further value, nor is is exposed to any credit risk from the liquidation.
(2) During the year Disguise New Zealand Limited was placed into liquidation. No income or expenditure is expected in the Company as a result of this.
The amounts owed by group undertakings arising from trading are interest-free and repayable on demand. However, at the date of approval of the financial statements these are not expected to be repaid within a year of the balance sheet date, therefore have been presented as debtors falling due after more than one year. In the previous year these balances were expected to be recovered in less than one year.
The amounts owed by group undertakings arising from trading are interest-free and repayable on demand.
Loan notes owed to group undertakings are repayable on 3 March 2031. Interest is charged at 10% per annum.
The bank loans consist of a £10m term loan that is fully drawn and £2.53m of an additional facility loan totalling £7m, and is secured by a fixed and floating charge over the assets of the group and bears interest at a rate of 4.25% per annum on top of the prevailing SONIA rate. The facility matures in December 2027.
The facility arrangement fees have been amortised over the term of the bank loan for the amounts falling after more than 5 years.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The Company has estimated tax losses carried forward of £13,861,000 (2023 - £8,157,000). No losses are recognised as a deferred tax asset (2023 - all losses recognised as a deferred tax asset). If the losses were recognised as an asset this would increase the company's reported net assets by approximately £3,102,000 (2023 - £nil) with the deferred tax being calculated at the prevailing UK tax rate of 25% (2023 - 25%).
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.
Contributions of £12,067 (2023: £8,425) were due to the fund as at the year end date.
Share capital
Called up share capital represents the nominal value of shares issued.
Share premium account
The share premium account represents the premium on issue of equity shares less any issue costs.
Capital contribution reserve
This represents contributions made by a parent company in relation to settling share-based payments issued to employees or rollover securities in the ultimate parent company.
Profit and loss account
This represents retained profits after dividends paid and other adjustments.
On 30 September 2025, the Group breached both the Adjusted Leverage and Interest Cover Covenants. The Group entered into negotiations with Santander UK PLC (the “Senior Lender”) requesting a waiver to remedy the breaches. The definitions of both Covenants are defined in Note 1.2).
The Adjusted Leverage breach (threshold: 2.5x) was a timing delay on production which straddled a reporting period. The Interest Cover breach (threshold: 2x) is down to higher working capital costs as Debtors increased and slowed Operational Cashflow generation, against the backdrop of a challenging market environment and the Group is forecasting that will remain in breach across the 31 December 2025 reporting period.
The outstanding Senior Debt was £14.4m at the date of breach (up from £12.8m at the year-end), borrowed from the Senior Lender, who has the ability to recall the loan in full as one option to remedy the breach. Given the breach was a Post Balance Sheet Event for 31 December 2024 accounts, the Senior Lender debt is still recognised as being due after more than one year, as set out in Note 20 to the Group Financial Statements.
The negotiations to date are progressing and the Senior Lender has verbally agreed to a waiver for the Q3 Covenant Reporting. While this is not effective at the point of signing the Financial Statements paperwork is underway to formally remediate the breach. As the Financial Statements will be signed before the 31 December 2025 there will need to be further negotiations for the Q4 31 December 2025 Interest Cover breach. As the Group moves into the Financial Year end 31 December 2026 there will be a continued sensitivity until Q3 30 September 2026 and the rolling twelve month period since breach has passed.
The Group remains liquid to meet its operational obligations in the short and long term on the basis that the Senior Lender does not demand full loan repayment. If that situation were to occur the Group would seek additional refinancing by way of either debt or equity financing.
The Company has taken advantage of the exemption available in Section 33.1A of FRS 102 whereby it has not disclosed transactions with the ultimate parent company or any wholly owned subsidiary undertaking of the group. Balances with group undertakings are shown in notes 14 and 15.