Highland Network Limited - Limited company accounts 18.2

REGISTERED NUMBER: SC154414 (Scotland)

Report of the Directors and

Audited Financial Statements for the Year Ended 31 March 2019

for

Highland Network Limited

Page

Company Information

1

Report of the Directors

2

Report of the Independent Auditors

4

Income Statement

6

Balance Sheet

7

Notes to the Financial Statements

8

DIRECTORS:

D M Siegel

D J Siegel

D Alldritt

K Macleod

S MacRae

D J Martin

SECRETARY:

D J Siegel

REGISTERED OFFICE:

Oykel House

Cradlehall Business Park

Inverness

INVERNESS-SHIRE

IV2 5GH

REGISTERED NUMBER:

SC154414 (Scotland)

AUDITORS:

Saffery Champness LLP, Chartered Accountants,

Statutory Auditors

Kintail House

Beechwood Park

Inverness

INVERNESS-SHIRE

IV2 3BW

BANKERS:

Bank of Scotland

Inverness City Branch

PO Box 1000

Inverness

BX2 1LB

The directors present their report with the financial statements of the company for the year ended 31 March 2019.

PRINCIPAL ACTIVITY

The company is a business to business communications service provider supporting a partner channel and thousands of

end-user customers with a wide range of progressive and transformational connectivity and telecommunications products

and services.

Key financial information:

2019

2018

Change

£

£

%

Profit/(Loss) before tax

114,283

(216,497)

152.8

EBITDA

496,151

195,951

153.2

Continued investment in fixed assets means the company is well positioned to offer an efficient and effective service to

its customers whilst continuing to increase returns in an uncertain economic climate. The continued diversification of

customer base across a wide range of sectors is proving to reduce exposure to market risk. The company is able to

mitigate risks by managing its resources effectively and developing its business relationships with its customers.

The performance in 2019 is encouraging and is consistent with historical year on year profitability. The Board work with

openness and commitment to continue to sustain acceptable levels of profitability, growth and financial strength to

pursue its strategic goals and build on its market leading position.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 April 2018 to the date of this report.

D M Siegel

D J Siegel

D Alldritt

K Macleod

S MacRae

Other changes in directors holding office are as follows:

D J Martin was appointed as a director after 31 March 2019 but prior to the date of this report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Report of the Directors and the financial statements in accordance with

applicable law and regulations.

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;

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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have

taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the

company's auditors are aware of that information.

AUDITORS

The auditors, Saffery Champness LLP, Chartered Accountants, will be proposed for re-appointment at the forthcoming

Annual General Meeting.

This report has been prepared in accordance with the provisions of Part 15 of the Companies Act 2006 relating to small

companies.

ON BEHALF OF THE BOARD:

D M Siegel - Director

7 October 2019

Opinion

We have audited the financial statements of Highland Network Limited (the 'company') for the year ended

31 March 2019 which comprise the Income Statement, Balance Sheet and 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 Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted

Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 March 2019 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.

Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the

financial statements section of our report. We are independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard,

and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to

you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Report of

the Directors, but does not include the financial statements and our Report of the Auditors thereon. Our opinion on the

financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing

so, consider whether the other information is materially inconsistent with the financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or

apparent material misstatements, we are required to determine whether there is a material misstatement in the financial

statements or a material misstatement of the other information. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Report of the Directors has been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,

we have not identified material misstatements in the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you

if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit; or

-	the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption from the requirement to prepare a Strategic Report or in preparing the Report of the Directors.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page two, the directors are responsible

for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such

internal control as the directors determine necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic

alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs

(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting

Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

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.

Eunice McAdam (Senior Statutory Auditor)

for and on behalf of Saffery Champness LLP, Chartered Accountants,

Statutory Auditors

Kintail House

Beechwood Park

Inverness

IV2 3BW

8 October 2019

TURNOVER

12,009,555

11,964,276

Cost of sales

(8,776,357

)

(9,041,824

)

GROSS PROFIT

3,233,198

2,922,452

Administrative expenses

(3,086,855

)

(3,122,893

)

146,343

(200,441

)

Other operating income

108,696

142,254

OPERATING PROFIT/(LOSS)

255,039

(58,187

)

Interest receivable and similar income

7,291

7,444

262,330

(50,743

)

Interest payable and similar expenses

(148,047

)

(165,754

)

PROFIT/(LOSS) BEFORE TAXATION

114,283

(216,497

)

Tax on profit/(loss)

(30,799

)

45,408

PROFIT/(LOSS) FOR THE FINANCIAL YEAR

83,484

(171,089

)

FIXED ASSETS

Intangible assets

4

283,722

261,915

Tangible assets

5

976,710

1,125,226

1,260,432

1,387,141

CURRENT ASSETS

Stocks

53,276

66,888

Debtors

6

968,868

1,390,382

Cash at bank and in hand

270,285

104,707

1,292,429

1,561,977

CREDITORS

Amounts falling due within one year

7

(2,127,698

)

(2,418,927

)

NET CURRENT LIABILITIES

(835,269

)

(856,950

)

TOTAL ASSETS LESS CURRENT LIABILITIES

425,163

530,191

CREDITORS

Amounts falling due after more than one year

8

(382,813

)

(586,354

)

PROVISIONS FOR LIABILITIES

(100,059

)

(85,030

)

NET LIABILITIES

(57,709

)

(141,193

)

CAPITAL AND RESERVES

Called up share capital

11

2

2

Retained earnings

(57,711

)

(141,195

)

SHAREHOLDERS' FUNDS

(57,709

)

(141,193

)

The financial statements have been prepared in accordance with the provisions of Part 15 of the Companies Act 2006 relating to small companies.

The financial statements were approved by the Board of Directors on 7 October 2019 and were signed on its behalf by:

D M Siegel - Director

1.	STATUTORY INFORMATION

Highland Network Limited is a private company, limited by shares , registered in Scotland. The company's

registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with the provisions of Section 1A Small Entities of

Financial Reporting Standard 102 "The Financial Reporting Standard" applicable in the UK and Republic of

Ireland" and the Companies Act 2006. The financial statements have been prepared under historical cost

convention.

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 £.

Going Concern

The company continues to rely on working capital support from its directors, and at the time of approving the

financial statements, the directors have a reasonable expectation that the company has adequate resources to

continue in operational existence for a period of at least 12 months from signing the financial statements. Thus

the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover

Turnover represents net invoiced sales of goods and services, excluding value added tax.

Goodwill

Positive purchased goodwill arising on acquisitions is capitalised, classified as an asset on the Balance Sheet and

amortised over its useful economic life of 4 - 10 years. Goodwill is reviewed annually by the directors for any

impairment.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost

less any accumulated amortisation and any accumulated impairment losses.

Telecoms subscriptions are being amortised evenly over their estimated useful life of ten years.

IP addresses are being amortised evenly over their estimated useful life of twenty years.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful

life.

Communicator and Horizon

- 33% straight line

Fixtures and fittings

- 15% on reducing balance and 10% straight line

Network assets

- 10% straight line

Computer equipment

- 33% straight line

Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow

moving items.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to

the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or

substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance

sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from

those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that

have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the

timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Leasing

Tangible fixed assets acquired under finance leases or hire purchase contracts are capitalised and depreciated in

the same manner as other tangible fixed assets. The related obligations, net of future finance charges, are

included in creditors.

Rentals payable under operating leases are charged to the profit and loss account on a straight line basis over the

period of the lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension

scheme are charged to profit or loss in the period to which they relate.

3.	EMPLOYEES AND DIRECTORS

The average number of employees during the year was 52 (2018 - 48 ) .

4.	INTANGIBLE FIXED ASSETS

Telecoms

IP

Goodwill

subscriptions

addresses

Totals

£

£

£

£

COST

At 1 April 2018

567,890

350,388

76,905

995,183

Additions

-

-

58,982

58,982

At 31 March 2019

567,890

350,388

135,887

1,054,165

AMORTISATION

At 1 April 2018

567,890

153,273

12,105

733,268

Amortisation for year

-

32,772

4,403

37,175

At 31 March 2019

567,890

186,045

16,508

770,443

NET BOOK VALUE

At 31 March 2019

-

164,343

119,379

283,722

At 31 March 2018

-

197,115

64,800

261,915

Included in the carrying amount of IP Addresses held at 31 March 2019 was £58,424 (2018: Nil) in respect of

assets held under finance leases. The amortisation charge for the year was £558 (2018: Nil) in respect of these

assets.

5.	TANGIBLE FIXED ASSETS

Communicator

Fixtures

and

and

Network

Computer

Horizon

fittings

assets

equipment

Totals

£

£

£

£

£

COST

At 1 April 2018

103,521

610,109

1,142,477

346,280

2,202,387

Additions

-

-

30,273

17,861

48,134

At 31 March 2019

103,521

610,109

1,172,750

364,141

2,250,521

DEPRECIATION

At 1 April 2018

54,597

283,782

444,039

294,743

1,077,161

Charge for year

24,242

55,550

85,508

31,350

196,650

At 31 March 2019

78,839

339,332

529,547

326,093

1,273,811

NET BOOK VALUE

At 31 March 2019

24,682

270,777

643,203

38,048

976,710

At 31 March 2018

48,924

326,327

698,438

51,537

1,125,226

Included in the carrying amount of Fixtures and Fittings held at 31 March 2019 was £135,187 (2018: £159,044)

in respect of assets held under finance and hire purchase leases. the depreciation charge for the year was £23,857

(2018: £28,067) in respect of these assets.

Included in the carrying amount of Network Assets held at 31 March 2019 was £76,485 (2018: £360,564) in

respect of assets held under finance and hire purchase leases. The depreciation charge for the year was £8,741

(2018: £35,900) in respect of these assets.

Included in the carrying amount of Computer Equipment held at 31 March 2019 was £10,251 (2018: £16,724) in

respect of assets held under finance leases. The depreciation charge for the year was £6,474 (2018: £8,874) in

respect of these assets.

6.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

31/3/19

31/3/18

£

£

Trade debtors

187,319

420,997

Other debtors

258,801

140,644

Directors' loan accounts

202,420

221,972

Accrued income

154,401

200,981

Prepayments

165,927

405,788

968,868

1,390,382

7.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

31/3/19

31/3/18

£

£

Other loans

232,458

232,458

Finance leases (see note 9)

85,193

207,675

Trade creditors

1,101,386

1,348,002

Corporation tax

19,998

7,891

Social security and other taxes

40,928

46,720

VAT

250,979

189,000

Other creditors

39,617

28,177

Deferred income

79,706

107,362

Accrued expenses

277,433

251,642

2,127,698

2,418,927

The Bank of Scotland holds a bond and floating charge over the whole assets of the company.

Maven Capital Partners UK LLP hold a second ranking bond and floating charge over the whole assets of the

company.

8.

CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

31/3/19

31/3/18

£

£

Other loans - 2-5 years

357,457

527,415

Finance leases (see note 9)

25,356

58,939

382,813

586,354

9.	LEASING AGREEMENTS

Minimum lease payments fall due as follows:

Finance leases

31/3/19

31/3/18

£

£

Net obligations repayable:

Within one year

85,193

207,675

Between one and five years

25,356

58,939

110,549

266,614

Non-cancellable operating

leases

31/3/19

31/3/18

£

£

Within one year

23,963

221,309

Between one and five years

246,874

641,516

In more than five years

809,214

352,246

1,080,051

1,215,071

10.	SECURED DEBTS

The following secured debts are included within creditors:

31/3/19

31/3/18

£

£

Other loans

589,915

759,873

Finance leases

110,549

266,614

700,464

1,026,487

11.	CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number:

Class:

Nominal

2019

2018

value:

£

£

2,000

Ordinary

£0.001

2

2

12.	DIRECTORS' ADVANCES, CREDITS AND GUARANTEES

The following advances and credits to directors subsisted during the years ended 31 March 2019 and

31 March 2018:

31/3/19

31/3/18

£

£

D M Siegel

Balance outstanding at start of year

91,605

(41,598

)

Amounts advanced

737,368

539,828

Amounts repaid

(770,000

)

(406,625

)

Amounts written off

-

-

Amounts waived

-

-

Balance outstanding at end of year

58,973

91,605

D J Siegel

Balance outstanding at start of year

130,367

106,018

Amounts advanced

13,080

24,349

Amounts repaid

-

-

Amounts written off

-

-

Amounts waived

-

-

Balance outstanding at end of year

143,447

130,367

Loans to directors were subject to an interest charge of 2.5% (2018: 2.5%) per annum.

13.	ULTIMATE CONTROLLING PARTY

The company was under the control of Messrs D M and D J Siegel throughout the present and previous year.

14.	SHARE-BASED PAYMENT TRANSACTIONS

125 £0.001 Enterprise Management Incentive (EMI) share options each were granted to participating

employees on 21 May 2015. The exercise price is £442 per option share and the options are constituted by the

share option agreement. Three employees participate in the EMI share scheme, with each employee obtaining

options of over 5% of the company's shareholding.

The EMI option scheme is an equity-settled share-based payment transaction. As required by Section 26 of the

accounting standard FRS102 an assessment of the fair value of the EMI options was carried out by the directors.

Following the fair value assessment it was determined that no adjustment to the accounts would be required for

the transaction.