The Directors present their Strategic Report for the year ended 31 December 2025 for Understanding Recruitment Limited (the “Company”) and its subsidiary undertakings (together, the “Group”), prepared in accordance with the Companies Act 2006 and applicable UK accounting standards, including FRS 102.
The principal activity of the Group during the year remained the provision of specialist recruitment, executive search, and talent solutions services.
The Group operates primarily in the United Kingdom, with its head office in St Albans, Hertfordshire, and has an 80% owned subsidiary in the United States. The Group delivers services across eight core technology-focused verticals, supported by Contracts and Charity divisions, alongside a developing Statement of Work (“SoW”) and solutions-based offering.
The Group completed the establishment of an Employee Ownership Trust (“EOT”) in January 2023. The EOT forms a key component of the Group’s long-term strategy to promote employee engagement, retention, and alignment with business performance.
Following a period of strong financial performance in 2022, trading conditions remained challenging throughout 2023 to 2025. This reflected reduced hiring activity across key markets, driven by macroeconomic uncertainty, inflationary pressures, and constrained client investment.
The Directors exercised judgement in 2023 and 2024 in maintaining operational capacity, including headcount, in order to preserve long-term capability. This approach, while strategically aligned to the Group’s people-led model, resulted in reduced profitability in those periods.
During the year ended 31 December 2025, the Group implemented a series of actions to improve operational efficiency and align the cost base with current market conditions. These actions included organisational restructuring, reallocation of resources toward higher-performing markets (notably the United States), and the implementation of enhanced performance management processes.
As a result, the Group’s financial performance improved during the year, with trading losses significantly reduced and the business approaching break-even at the reporting date.
The Group has continued to invest selectively in key areas, including workforce capability, technology infrastructure, and brand development. The Directors remain committed to the delivery of a diversified “Total Talent” model, aimed at providing integrated and scalable workforce solutions.
The Directors have carried out a robust assessment of the principal risks and uncertainties facing the Group. The Group’s risk management framework is designed to identify, evaluate, and mitigate risks that could impact the achievement of strategic objectives.
1. Loss of Key Personnel
The Group’s future performance is dependent on its ability to attract, retain, and motivate skilled employees.
Mitigation measures include the operation of an Employee Ownership Trust and Enterprise Management Incentive (“EMI”) schemes, alongside competitive remuneration benchmarking. The Group also invests in employee engagement, wellbeing initiatives, and Diversity & Inclusion (“D&I”) programmes.
2. Client Retention and Concentration
The Group is exposed to the risk of reduced demand from, or loss of, key clients.
This risk is mitigated through active client relationship management, structured feedback processes, and continued investment in candidate networks and CRM systems. The Group maintains a focus on diversifying its client base to reduce concentration risk.
5. Technological Change and Artificial Intelligence
The increasing adoption of artificial intelligence presents both structural risks and opportunities.
There is a risk of reduced demand in certain areas of technology recruitment; however, the Group is actively repositioning its service offering toward higher-growth areas, including AI-related specialisms.
6. Liquidity and Going Concern
The Group maintains a focus on liquidity and working capital management.
Cash flow forecasts are prepared and reviewed regularly, incorporating a range of scenarios reflecting potential downside risks. The Group maintains access to funding through an invoice discounting facility, which was expanded during the year to include permanent placement revenue.
The Group continues to service its CBILS loan, with full repayment expected in 2026.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, accordingly, continue to adopt the going concern basis in preparing the financial statements.
7. UK Economic Environment and Cost Pressures
The Group is exposed to UK-specific economic pressures, including inflation and increases in employer-related costs.
The Directors continue to monitor these pressures and take actions to manage the cost base and maintain operational efficiency.
The Directors monitor a range of financial and operational KPIs to assess the Group’s performance and financial position. These include:
Net Fee Income (“NFI”) and NFI per fee earner;
Revenue;
Profit before taxation;
Headcount and productivity ratios; and
Net current assets and working capital metrics.
These KPIs are reviewed regularly and are used to inform strategic and operational decision-making.
The Group will continue to focus on:
Strengthening its position in core and emerging technology verticals;
Expanding its solutions-based and SoW offerings;
Scaling its US operations; and
Enhancing its use of technology and data to drive efficiency and client outcomes.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2025.
The results for the year are set out on page 10.
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 has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the group's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments and financial risk management.
The Directors consider that Understanding Recruitment Limited remains a going concern for the consideration and approval of the financial statements. Despite economic challenges in previous periods, the group has maintained a suitable cash position, improved debtor days, and maintained its invoice financing through Cynergy Bank.
The business has returned to profitability in early 2026 outside of the impact of refocusing some of the UK teams into the much more profitable and stable US Artificial Intelligence market and the exceptional cost impact of cost saving initiatives. All of the measures undertaken by management provide a more cost efficient and scalable business to trade going forward in both the remainder of 2026 and beyond.
The directors continue to review the financial and cash flow forecasts for a period of at least twelve months from the date of approval of the financial statements. The business has a close working relationship and support from its financial providers. Understanding Recruitment Limited continues to actively manage risks, invest in staff retention, and diversify its services. On the basis of the above assessment the going concern assumption is considered appropriate.
We have audited the financial statements of Understanding Recruitment Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2025 which comprise the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
The information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the group and parent 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 group and parent company by discussions with directors and by updating our understanding of the sector in which the group and parent company operates.
Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006 and UK Tax legislation.
Audit response to risks identified
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 group and parent company financial statement disclosures. We reviewed the parent 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 parent 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.
As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.
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 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 parent 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 parent 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 parent company and the parent company’s members 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 profit for the year was £219,903 (2024 - £788,591 loss).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
Understanding Recruitment Ltd (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is Second Floorsuite, Abbeyview, 38-40 The Maltings, St Albans, Hertfordshire, AL1 3HL.
The group consists of Understanding Recruitment Ltd and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Understanding Recruitment Ltd together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2025. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The Directors consider that Understanding Recruitment Limited remains a going concern for the consideration and approval of the financial statements. Despite economic challenges in 2023 and 2024, the group has maintained a strong cash position, improved debtor days, and secured enhanced invoice financing through Cynergy Bank.
The business has returned to profitability in early 2026 outside of the impact of refocusing some of the UK teams into the much more profitable and stable US Artificial Intelligence market and the exceptional cost impact of cost saving initiatives. All of the measures undertaken by management provide a more cost efficient and scalable business to trade going forward in both the remainder of 2026 and beyond.
The directors continue to review the financial and cash flow forecasts for a period of at least twelve months from the date of approval of the financial statements. The business has a close working relationship and support from its financial providers. Understanding Recruitment Limited continues to actively manage risks, invest in staff retention, and diversify its services. On the basis of the above assessment the going concern assumption is considered appropriate.
Turnover, which excludes value added tax, comprises of the value of services undertaken by the company under its principal activity, which is the provision of recruitment consultancy services. This broadly consists of:
- turnover from contractor placements, representing fees billed for the services of contractors including their costs which is recognised when the service has been provided.
- turnover from permanent placements, representing fees billed for placing a candidate which is recognised on the start date of the candidate.
Turnover not invoiced at the balance sheet date is included within accrued income.
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 income statement.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's statement of financial position 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, 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, 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.
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 income statement 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 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 intrinsic valuation 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.
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.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Redundancy and termination payments in the year amounted to £70,537.
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2024 - 2).
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2025 are as follows:
Within bank loans and overdrafts is an invoice finance facility which is secured by a fixed and floating charge over the property and undertaking of the company.
The company has a loan with Barclays Bank UK Plc of £45,000 (2024: £135,000). The loan is repayable over the period until 19 July 2026 (72 months from the date in which the loan was drawn down). Interest is charged on a Floating Rate Basis, under which the interest rate will never be less than 3.16% p.a.
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.
In the 2024 financial year, the company issued equity settled share options over 3,082 of £0.01 each 3 employees.
Options are allocated on a discretionary basis to employees and are subject to non-market vesting conditions and only become exercisable subject to the conditions set out in the option scheme rules. The options may not be exercised later than the 5th anniversary of the share issue.
The options outstanding at 31 December 2025 had an exercise price of £0.01, and a remaining contractual life of 4 years.
The weighted average fair value of options granted in the year was determined using the Black-Scholes option pricing model. The Black-Scholes model is considered to apply the most appropriate valuation method due to the relatively short contractual lives of the options and the requirement to exercise within a short period after the employee becomes entitled to the shares (the “vesting date”).
All shares have voting and dividend rights attached.
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:
Recharges of £697,920 (2024: £121,079) were made during the year to Understanding Recruitment Inc. At 31 December 2025 Understanding Recruitment Inc owed Understanding Recruitment Limited £218,899 (2024: £36,150).
Also at 31 December 2025, a balance of £284,895 (2024: £307,986) was due in relation to intercompany loans with Understanding Recruitment Inc. Interest of £nil (2024: £nil) was received from Understanding Recruitment Inc. in relation to intercompany loans.
The company also had expenses totalling £35,102 (2024: £36,438) to Benula Limited, a company controlled by a director, for consulting services. The balance outstanding at the year end was £2,700 (2024: £3,116).
As at 31 December 2025, the company was owed £26,530 (2024: £26,530) by 1 (2024: 1) director.