ACCOUNTS - Final Accounts
ACCOUNTS - Final Accounts
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Registered number: 07022266 (England and Wales)
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The Platinum Equity Group (the "Group") is an opportunistic, value-oriented investor which seeks to acquire businesses with significant operational upside. The Group’s principal strategy is to acquire businesses at an attractive price and then apply disciplined operational improvements that create value in order to generate attractive returns for its investors by leveraging its in-house operations group of over 50 people. The Group also looks for downside protection in its investments through a mixture of target company characteristics and the ability to return capital quickly post acquisition. Additionally, the Group leverages its operational capabilities to create value in its platform investments through the effective integration of one or multiple add-on acquisitions.
Platinum Equity Advisors, LLC, the ultimate parent company, (the “Advisor”) is registered as an investment advisor with the U.S. Securities and Exchange Commission. The Advisor is focused solely on managing Platinum Investment Funds. Platinum Equity Advisors International (UK) Limited (the “Company”) is registered as an investment advisor with the United Kingdom’s Financial Conduct Authority (reference number: 593191). This entity is a wholly owned subsidiary of the Advisor and provides sub advisory services to the Advisor.
Total employee count totalled 31 at the beginning of 2020, increasing to 32 by the end of 2020. As of 26 February 2021, the Company headcount is 32 and is anticipated to increase to 34 by 31 December 2021.
The Company currently resides at 5 Hanover Square, London; this lease expires on 15 June 2024. The lease on the Company's former Bruton Street office expires on 8 June 2021. In consideration for services performed, the Company is reimbursed by the Advisor for all necessary and reasonable operating costs incurred by the Company, including without limitation, employee salaries, travel expenses, professional fees and indirect costs, plus an additional 10% of the total costs aforementioned. COVID-19 adversely impacted the Company's turnover, which is predicated on expenses. Recurring expenses decreased by £5m from 2019 to 2020. The primary drivers of that decrease have been reduction in salary expense and a decrease in rent expense, as the office lease at 40 Bruton Street was fully expensed in 2019.
COVID-19 decreased the Company's turnover and business operations in 2020. With the current rapid and wide-spread roll-out of the COVID-19 vaccine in the United Kingdom and Europe, the Company expects a gradual increase in business activity in 2021.
The impact of Brexit is continuously being monitored and assessed by the Company and the Group. Given the aforementioned factors, the Company does not anticipate Brexit will have a material negative impact on its ability to continue normal operations. While the general environment for investment buyouts continues to be competitive, given the large quantity of cash relative to a more limited opportunity set, the Group has been able to find and execute attractive investments that fit its investment approach. Looking forward, the Group has a strong pipeline of attractive opportunities thanks to its large, proactive and experienced business development group which focuses exclusively on deal origination. Since inception, the Group has been able to create value in both rising and falling economic cycles. Recently, a greater degree of political and economic uncertainty in the United States and Western Europe, combined with tighter availability of debt capital, has created conditions that will fit the Platinum strategy.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Foreign Currency
The Advisor's funds are denominated in U.S. dollars. From time to time, the Group may engage in foreign currency hedging depending on the facts and circumstances of a particular investment. The Group does not engage in foreign currency hedging in its funds as a primary investment and the Company itself does not engage in such hedging.
Investment risks are monitored primarily at the Platinum Investment Committee level (which is comprised of CEO Tom Gores, and several other Platinum Partners), informed by financial and operational due diligence.
The Group's risk is monitored by the CEO, CFO, General Counsel and other executives with leadership responsibility at the firm.
Due to the cost plus nature of the Company, there are no specific financial key performance indicators relevant to its operations.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors present their report and the financial statements for the year ended 31 December 2020. As permitted by s414c (11) of the Companies Act 2006 certain information that is required to be included in the Directors' Report has otherwise been provided in the Strategic Report.
The principal activity of the Company is that of providing sales, marketing and administrative support to the ultimate parent company, Platinum Equity Advisors, LLC.
The directors who served during the year were:
The profit for the year, after taxation, amounted to £1,422,817 (2019 - £1,988,412).
The directors have not proposed a dividend for the current year (2019: £Nil).
The directors are responsible for preparing the Strategic Report, the Directors' Report 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to 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.
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PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
There have been no significant events affecting the Company since the year end as detailed in note 17.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED
We have audited the financial statements of Platinum Equity Advisors International (UK) Limited (the 'Company') for the year ended 31 December 2020, which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes, 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).
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 United Kingdom, including the Financial Reporting Council'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.
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 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.
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PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED (CONTINUED)
The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our Auditors' Report 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
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 Strategic Report or the Directors' Report.
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PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED (CONTINUED)
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 an Auditors' Report 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
∙the responsible individual ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
∙we identified the laws and regulations applicable to the Company through discussions with directors and other management, and from our commercial knowledge and experience.
∙we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the Company, including the Companies Act 2006, taxation legislation and employment;
∙we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
∙identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
∙making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
∙considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
∙performed analytical procedures to identify any unusual or unexpected relationships;
∙tested journal entries to identify unusual transactions;
∙assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
∙investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
∙agreeing financial statement disclosures to underlying supporting documentation;
∙enquiring of management as to actual and potential litigation and claims; and
∙reviewing correspondence with HMRC, the Company’s legal advisors and the Financial Conduct Authority ("FCA").
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if
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PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PLATINUM EQUITY ADVISORS INTERNATIONAL (UK) LIMITED (CONTINUED)
any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
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 Auditors' 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 Auditors' 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.
for and on behalf of
Chartered Accountants and Statutory Auditors
New Penderel House
4th Floor
283 - 288 High Holborn
United Kingdom
WC1V 7HP
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
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BALANCE SHEET
AS AT 31 DECEMBER 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 13 to 23 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
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STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Platinum Equity Advisors International (UK) Limited is a private company limited by shares and incorporated in England and Wales. The registered office is 100 New Bridge Street, London, England, EC4V 6JA.
The principal activity of the Company is that of providing sales, marketing and administrative support to the ultimate parent company, Platinum Equity Advisors, LLC.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The Company is in a net asset position of £7,824,078, primarily supported by £13,494,338 due from Platinum Equity Advisors, LLC., the ultimate parent company. This balance is due on demand and the directors have assessed that the ultimate parent company has sufficient capital available to repay this. The Company has received written confirmation from its ultimate parent company that it will continue to provide financial support to the Company for a period of at least 12 months from the date of signing these financial statements. For these reasons, the directors continue to adopt the going concern basis in preparing these financial statements.
Rendering of services Turnover is recognised on a cost plus 10% basis, in line with the intercompany service agreement with the parent company. Intercompany turnover is recognised when all of the following conditions are satisfied:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash held on deposit by service providers is included within bank and cash balances, as these amounts are highly liquid and repayable without penalty on notice of not more than 24 hours.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
The estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities are addressed below. Depreciation and residual values The directors have reviewed the asset lives and associated residual values of all fixed asset classes and have concluded that these are appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, management consider factors such as technological innovation, product life cycles and maintenance programs. Dilapidation provisions The directors have reviewed the need for a provision in the accounts in respect of restoring premises held under operating leases to a certain condition on vacation of the premises. The provisions are provided on a monthly basis using management's judgement based on the current state of the properties (see note 13). Onerous lease provision The directors have reviewed the need for a provision in respect of a lease being onerous. The provision has been recognised at the present obligation under the contract (see note 13). Bonus provision The directors have reviewed the need for a provision in the accounts in respect of bonuses payable to certain employees for which payment is subject to certain conditions (see notes 13 and 14).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
The remuneration earned by directors in respect of the services performed in their capacity as directors of Platinum Equity Advisors International (UK) Limited was negligible and paid by other group entities.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
On 17 March 2020, it was substantively enacted that the main rate of corporation tax would remain at 19% for the tax years starting 1 April 2020 and 2021.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
During the year, it was identified that a number of employee bonuses were earned in the year ending 31 December 2019 and omitted from the financial statements. The payment of these bonuses was subject to certain conditions being met in 2020 and due to the satisfaction of these conditions being considered probable at the prior year end, a prior year adjustment has been made.
The adjustment made is to recognise a provision of £1,868,596 at 31 December 2019, with the corresponding entry increasing administrative expenses. Due to the transfer pricing agreement in place, the adjustment has increased the turnover by £2,055,456 and increased the associated amounts due from group undertakings by the same amount. The above adjustments have resulted in an increase in the brought forward retained earnings of £186,860.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Platinum Equity, LLC is the parent of the smallest group for which consolidated financial statements are drawn up of which the Company is a member. The registered office of the ultimate parent company is 360 North Crescent Drive, South Building, Beverly Hills, CA 90210, USA.
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