ACCOUNTS - Final Accounts preparation
ACCOUNTS - Final Accounts preparation
Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2021
The Directors have pleasure in presenting their Strategic Report for the period from 1 November 2021 to 31 December 2021.
The principal activity of Circle IT remains to provide managed IT services that enable our clients to use technology to achieve secure business transformation and to receive professional ongoing support and advice.
The business delivers managed support services, professional services from consultancy to implementation as well as the supply of hardware and software.
The principal activity of Circle IT remains to provide managed IT services that enable our clients to use technology to
achieve secure business transformation and to receive professional ongoing support and advice. The results of the Company show sales of £3.5m for the 2 month period to 31 December 2021. The Company has net assets of £5.6m, including £3.3m of cash in hand.
There are no material subsequent events.
The management of the business and the execution of the Group’s strategy are subject to several risks. The process of risk acceptance and risk management is addressed through a framework of policies, procedures and internal control. Compliance with regulation, legal and ethical standards is a high priority for the Group. The CFO and the finance team take an important oversight role in this regard.
The key business risks and uncertainties affecting the Group are considered to relate to macro-economic conditions, risk of non-payment by customers, integration of acquired businesses, and Ofcom regulation changes. These are managed by strong credit control and vetting procedures, a robust commercial approval process for new contracts and re-signs, and a portfolio approach to our product set. All underpinned by the stability provided by long term customer contracts. In 2021, the Group continued to experience some expected adverse financial impact from the Covid-19 pandemic and the subsequent lockdowns enforced by the UK Government. The Group sales and results were not affected by Brexit, because we are largely a domestic-based business. However, we were affected by equipment shortages associated with the global shortage of silicon chips. This has caused some delay in delivering solutions to customers. However, apart from some timing differences that were managed, the financial impact has been modest. Actions taken in 2020 to stabilise the business meant the impact of lower variable usage and temporary project delays (due to being unable to access client sites) was minimal in 2021. The directors have continued to focus on securing complementary strategic acquisitions as part of a buy-and-build strategy. In most respects this has protected the profitability and cash flow for the Group
The Company’s main key performance indicator is earnings before interest, tax, depreciation, and amortisation (EBITDA). The Company achieved an EBITDA of £503k for the 2 month period to 31 December 2021.
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STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2021
The principal financial instruments of the Company comprise of bank balances, trade debtors and trade creditors.
Working capital requirements are met principally out of trade debtors and trade creditors which arise directly from the Company’s normal operations. The Company’s banking facilities are utilised to fund acquisitions and will be repaid out of operating cash flow. The Company’s finance facilities are held in sterling and the Company does not enter any hedging arrangements. Trade debtors are managed in respect of credit and there is a policy to minimise any risk by assessing new customer’s credit risk and monitoring existing customer’s creditworthiness. At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet amounts due. Cash flow is closely monitored as part of day to day control procedures and the directors review cash flow projections on a weekly basis and ensure appropriate facilities are available to be drawn upon, as necessary.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2021
The Directors present their report and the financial statements for the period ended 31 December 2021.
The Directors who served during the period were:
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.
The profit for the period, after taxation, amounted to £372,213 (2021 - £3,328,876).
The directors have not recommended payment of dividends for the period.
The Company has chosen in accordance with Section 414C(II) of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 to set out within the Company’s Strategic Report, the information required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This includes information that would have been included in the business review, future developments and details of the principal risks and uncertainties.
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DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2021
There have been no significant events affecting the Company since the year end.
The auditors, Menzies LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRCLE IT SOLUTIONS LIMITED
We have audited the financial statements of Circle IT Solutions Limited (the 'Company') for the period ended 31 December 2021, which comprise the Statement of comprehensive income, the Statement of financial position, 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.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' report thereon. The Directors are responsible for the other information contained within the Annual Report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRCLE IT SOLUTIONS LIMITED (CONTINUED)
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 period 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.
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 irregularties, including fraud is detailed below:
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRCLE IT SOLUTIONS LIMITED (CONTINUED)
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislations. We determined that the following laws and regulations were most significant:
∙The Companies Act 2006;
∙Financial Reporting Standard 102;
∙General Data Protection Regulations; and
∙UK tax legislation.
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
We understood how the Company is complying with those legal and regulatory frameworks by, making inquiries to management, those responsible for legal and compliance procedures. The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area. We assessed the susceptibility of the Company financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
∙Identifying and assessing the measures management has in place to prevent and detect fraud;
∙Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
∙Challenging assumptions and judgements made by management in its significant accounting estimates; and
∙Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
∙The use of management override of controls to manipulate results, or to cause the Group to enter into transactions not in its best interests; or
∙Posting of unusual journals and complex transactions.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRCLE IT SOLUTIONS LIMITED (CONTINUED)
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
Statutory Auditor
Lynton House
7-12 Tavistock Square
London
WC1H 9LT
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 DECEMBER 2021
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 12 to 26 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
Circle IT Solutions Limited is a private company limited by shares, incorporated in England & Wales under the Companies Act 2006. The registered office and trading address are given on the Company Information page.
The company has changed its accounting period from 31 October 2022 to 31 December 2021 to be in line with the period end of its ultimate parent. The previous period financial statements were drawn up for 11 months to 30 October 2021 so are not comparable with the current 2 month period.
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 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 following principal accounting policies have been applied:
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Arrow Communications Holdings Limited as at 31 December 2021 and these financial statements may be obtained from Companies House.
The Company is a parent company that is also a subsidiary included in the consolidated financial statements of a larger group by a parent undertaking established under the law of any part of the United Kingdom and is therefore exempt from the requirement to prepare consolidated financial statements under section 400 of the Companies Act 2006.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have transferred to the buyer, usually on despatch of the goods, the amount of revenue can be measured reliably, it is probable that the associated economic benefits will flow to the entity, and the costs incurred or to be incurred in respect of the transactions can be measured reliably. Revenue from the provision of customer support is recognised on a straight line basis over the contract duration.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Goodwill
Other intangible assets
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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.
Depreciation is provided on the following basis:
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
Accrued income Amounts recoverable on contact are measured by reference to stage of completion which is calculated by multiplying total contract revenue by a factor of costs incurred at the reporting date over total estimated costs. This requires management to estimate costs on a job by job basis.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
12.Taxation (continued)
There were no factors that may affect future tax charges.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
Share premium account
Capital redemption reserve
Profit and loss account
The prior year allocations between Cost of Sales and Administrative Expenses has been adjusted to be in line with group policies. The impact was increasing Administrative Expenses by £2,821,087 and reducing Cost of Sales by the same amount.
28.Financial commitments
Loans included within entities of the group that the Company is a part are secured by fixed and floating charges over the assets of the Company and the group. At the year end the loans amounted to £176,242,947.
this company, is Arrow Communications Holdings Limited. The company’s registered address is The Wharf, Abbey Mills Business Park, Lower Eashing, Godalming, Surrey, GU7 2QN.
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