The directors present the strategic report for the year ended 31 December 2024.
Business Model
The group operates in the corporate real estate sector, supplying software and services across the UK and EU through the parent and through three wholly owned trading subsidiaries. The business creates value by helping commercial real estate owners and operators manage their buildings from a central platform. The business creates mobile applications, workflow tools, access points and messaging portals, to name a few features within the HQO ecosystem. Through these features HQO customers can create a better customer experience thereby improving customer health scores and overall brand.
Strategy and Objectives
The group aims to achieve sustainable growth through expanding its customer base and enhancing adoption of its existing product suite. The business intends to drive renewals with existing customers and expand deployment within existing customer asset pools that have yet to deploy HQO software. Through its Leesman Limited entity, HQO intends to cross sell its leading survey product to building owners, manager and tenants (occupiers).
Review of Business Performance
In 2024, turnover decreased by 20.2% to £6.17m. The reason for the decrease into 2024 can be directly attributed to consumer profitability coming out of the global Pandemic. Following the mass movement to working-from-home, occupancy of commercial office buildings is at an all time low, most severe in 2024. This led to cost cutting at these building owners and operators, our main customer. So to combat these industry headwinds, the business made cost cuts to weather the downturn and uptick in customer churn.
Key risks include currency volatility and long-term group cash flow requirements. The group uses hedging strategies, maintains multiple supplier relationships, and conducts regular reviews of company costs. Risks also include corporate office occupancy – if levels decrease this will impact our customer’s profitability and therefore their ability to pay for our key software product. Interest rate risk is also a factor as increases in lending costs have an impact on the ability for real estate developers to bring new and renovated assets to market, which has an impact on new business growth.
The group absorbed net cash of £1.2m from operating activities and had year-end cash balances of £1.4m. Third party debt levels remained at zero. The business is wholly owned and supported financially by its parent, HQO Inc. This entity is well capitalized and will backstop any operating losses while the HQO UK business returns to profitability.
Management expects flat to moderate growth in 2025 with a focus on maintaining customers and implementing cost cutting measures. We track this through key 2025 goals which are maintained by key department leaders and reviewed monthly. These KPIs are Gross Revenue Retention (90%), EBITDA Margin (0%) and ARR growth (10%). GRR fosters existing client relationships, EBITDA Margin drives spend management and ARR growth motivates client facing staff to grow the business.
The directors consider stakeholder interests in strategic decisions, engaging regularly with employees and suppliers, and promoting the group’s long-term success.
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 8.
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 group plans to invest in automation, software development, and AI to expand its US and European customer base. These investments will create additional features and use cases of HQO’s software for customers, as well as improve the functionality of the existing code base for legacy customers. |
As the group is a medium group, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
At the balance sheet date, following a group net loss of £12.1m (2023 - £4.4m loss), there were group net current assets of £5.2m (2023 - £6.4m) and group net liabilities of £27.7m (2023 - £15.7m). The group has continued to trade at a loss in the period since the balance sheet date and relies on the support of its parent company, HqO Inc to whom it owed £35.3m (2023 - £34.7m) as at 31 December 2024.
HqO Inc, the ultimate parent company, has confirmed in a letter of support that it will neither request the repayment of the outstanding amount at 31 December 2024 nor of the additional funding provided since that date for at least a year following the signature of these accounts. In addition the parent company will provide such necessary financial support to enable the group to meet its debts as they fall due.
The parent company's audited financial statements for the year ended 31 December 2024 include a note about its recurring losses since inception and its own significant accumulated deficit as at that date. The parent company’s audit report references this and states the condition raises substantial doubt about the parent company's ability to continue as a Going Concern.
The directors acknowledge that these conditions indicate the existence of a material uncertainty which may cast significant doubt on the group’s ability to continue as a going concern, due to its reliance on the ongoing financial support of its parent company, which itself has substantial doubt over its ability to continue as a Going Concern.
However, due to successful debt and equity raisings, the parent company did have significant cash reserves at 31 December 2024, and this continues to be the case as at the date of approval of these financial statements. Additionally, the US group, of which the group is a wholly owned subsidiary, are forecasting it will become profitable and cash positive in the future. Additionally, the parent company has a strong track record of raising debt and equity funds, and is prepared to do so in the event additional capital is needed - noting, however, that the parent does not anticipate the need to raise additional funds in the 12 months following this audit. The parent company will have sufficient resources to support the company and group for a year from the date of signing these accounts. On this basis the directors believe that HqO UK Limited will be able to continue in operational existence for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the company's financial statements.
Qualified opinion
We were engaged to audit the financial statements of HQO UK Limited (the '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’s Statement of Changes in Equity, the Group Statement of Cash Flows, and the related notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including the Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ (United Kingdom Generally Accepted Accounting Practice).
Basis for Qualified opinion
Material Uncertainty Related to Going Concern
We draw attention to Note 1.4 in the financial statements, which indicates that the Group incurred a net loss of £12.1m for the year ended 31 December 2024 and, as at that date, had net liabilities of £27.74m.
As set out in Note 1.4, the Group has continued to incur losses in the period since the balance sheet date and is dependent on the ongoing financial support of its ultimate parent company, HqO Inc. While HqO Inc has provided a letter of support confirming that it will not seek repayment of amounts due for at least twelve months from the date of approval of the financial statements and will provide further financial support as required, HqO Inc’s own audited financial statements indicate the existence of substantial doubt over its ability to continue as a going concern due to recurring losses and accumulated deficits.
As stated in Note 1.4, these events and conditions, along with the other matters explained therein, indicate that a substantial doubt exists that may cast significant doubt over the Group’s and the Company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Other information
Opinions on other matters prescribed by the Companies Act 2006
Notwithstanding our qualified opinion on the financial statements, 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.
We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with directors and by updating our understanding of the sector in which the company operates.
Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company’s records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company’s policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above 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 would become aware of it. Also, 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 or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the financial statements 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 directors, 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 directors 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 directors as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by section 408 of the 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 £14,316,972 (2023 - £1,180,354 loss).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
HqO UK Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is C/O Birketts LLP, One London Wall, Barbican, London, EC2Y 5EA.
The group consists of HqO UK 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 functional currency of three of the subsidiaries included within these financial statements is the Euro.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company HqO UK 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 31 December 2024 except for Office App International Limited which is made up to 30 April 2025, it has very low levels of activity and no adjustments are made in respect of this timing difference. 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 balance sheet date, following a group net loss of £12.1m (2023 - £4.4m loss), there were group net current assets of £5.2m (2023 - £6.4m) and group net liabilities of £27.7m (2023 - £15.7m). The group has continued to trade at a loss in the period since the balance sheet date and relies on the support of its parent company, HqO Inc to whom it owed £35.3m (2023 - £34.7m) as at 31 December 2024.
HqO Inc, the ultimate parent company, has confirmed in a letter of support that it will neither request the repayment of the outstanding amount at 31 December 2024 nor of the additional funding provided since that date for at least a year following the signature of these accounts. In addition the parent company will provide such necessary financial support to enable the group to meet its debts as they fall due.
The parent company's audited financial statements for the year ended 31 December 2024 include a note about its recurring losses since inception and its own significant accumulated deficit as at that date. The parent company’s audit report references this and states the condition raises substantial doubt about the parent company's ability to continue as a Going Concern.
The directors acknowledge that these conditions indicate the existence of a material uncertainty which may cast significant doubt on the group’s ability to continue as a going concern, due to its reliance on the ongoing financial support of its parent company, which itself has substantial doubt over its ability to continue as a Going Concern.
However, due to successful debt and equity raisings, the parent company did have significant cash reserves at 31 December 2024, and this continues to be the case as at the date of approval of these financial statements. Additionally, the US group, of which the group is a wholly owned subsidiary, are forecasting it will become profitable and cash positive in the future. Additionally, the parent company has a strong track record of raising debt and equity funds, and is prepared to do so in the event additional capital is needed - noting, however, that the parent does not anticipate the need to raise additional funds in the 12 months following this audit. The parent company will have sufficient resources to support the company and group for a year from the date of signing these accounts. On this basis the directors believe that HqO UK Limited will be able to continue in operational existence for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the company's financial statements.
Turnover comprises the selling of projects, subscriptions and related services to customers, net of discounts and Value Added Tax.
Sales for prepaid projects are recognised when they are available for deployment by the client. Prepaid projects that are not ready for deployment by the client are treated as Deferred Income at the year end date.
Subscription income is recognised over the period of the contract. Subscriptions invoiced for periods after the year end are treated as Deferred Income at the year end date.
The design, development and content assets which give rise to future profits of the business, as a result of online sales generated, are recorded at cost. The economic benefits are estimated to be generated over 3 years.
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.
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.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes option pricing model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the company as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
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.
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.
The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment, the directors consider factors including the ageing profile of receivables, historical default rates, and specific knowledge of individual customer circumstances. Where there is evidence that amounts will not be fully recoverable, an impairment provision is recognised. The level of provision is inherently judgemental and dependent on the financial stability of customers and prevailing economic conditions.
Goodwill is tested for impairment where indicators of impairment exist. The determination of whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. This involves significant judgement in estimating future cash flows, growth rates and discount rates. Changes in these assumptions could lead to a material adjustment to the carrying amount of goodwill in future periods.
Investments in subsidiaries are stated at cost less impairment. The directors assess at each reporting date whether there are indicators that the carrying value of these investments may not be recoverable. This assessment requires the exercise of judgement and is based on a range of factors, including the financial performance and position of the subsidiary, future profit forecasts, cash flow projections, and the economic environment in which the subsidiary operates.
Where indicators of impairment are identified, the directors estimate the recoverable amount of the investment, typically based on value in use calculations or, where appropriate, net assets. This process involves significant estimates and assumptions, including expected future cash flows and growth rates. If the recoverable amount is less than the carrying value, an impairment loss is recognised. Changes in assumptions could result in material adjustments to the carrying amount of investments in future periods.
The company operates share-based payment arrangements, the accounting for which requires the directors to make a number of significant judgements and estimates. In determining the fair value of equity-settled share-based payments at the grant date, valuation techniques are applied which require input assumptions including expected volatility, expected option life, risk-free interest rate, and dividend yield.
The estimation of expected volatility and option life involves judgement, particularly where there is limited historical data. In addition, the company estimates the number of awards expected to vest, taking into account non-market performance conditions and expected employee turnover. Changes in these assumptions could significantly affect the charge recognised in the profit and loss account and the corresponding equity balance.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
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:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
More information on impairment movements in the year is given in note 12.
Details of the company's subsidiaries at 31 December 2024 are 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 group's parent company's Board of Directors and Shareholders approved the 2015 Stock Option and Grant plan ("the 2015" Plan"), as amended, under which it may grant incentive stock options ("ISOs"), non-qualified stock options ("NSOs"), restricted stock awards, unrestricted stock awards, or restricted stock units to purchase up to 12,880,851 shares of Common Stock to employees, officers, directors and consultants of the Group.
Under the 2015 Plan, the group may grant ISOs to employees and NSOs to employees and non-employees to purchase Common Stock in the parent company at specific exercise prices. The exercise price per share for the shares covered by the stock options is determined by the Board of Directors at the time of the grant but cannot be less than 100 percent of the fair market value on the grant date. In the case of an ISO that is granted to a 10 percent owner, the exercise price per share for the shares covered by the ISO cannot be less than 110 percent of the fair market value on the grant date. The Group may also grant restricted stock awards, unrestricted stock awards and restricted stock units to employees or non-employees under the 2015 Plan. Options and awards vest and become exercisable as determined by the parent company's Board of Directors and set forth in the applicable award agreement.
The fair value of stock options granted was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions. Expected volatility was based on average volatility for a representative sample of publicly traded companies in the same industry. The risk-free interest rate is based on a zero-coupon United States Treasury instrument with terms consistent with the expected life of the stock options.
The parent company has not paid, and does not anticipate paying, cash dividends on shares of Common Stock; therefore, the expected dividend yield is assumed to be zero. The fair value is amortised as compensation on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. The options generally expire ten years after the date on which the option is granted.
The following tables show the weighted average exercise price in US Dollars, the currency that the option price will be paid in.
The options outstanding at 31 December 2024 had an exercise price ranging from $1.47 to $2.19, and a remaining contractual life of between 6 and 10 years.
The options outstanding at 31 December 2024 had an exercise price ranging from $1.47 to $2.19, and a remaining contractual life of between 6 and 10 years.
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: