4Net Holdings Ltd - Limited company accounts 20.1

REGISTERED NUMBER: 10753247 (England and Wales)

FOR

Page

Company Information  

1

Group Strategic Report  

2

Report of the Directors  

6

Report of the Independent Auditors  

8

Consolidated Income Statement  

12

Consolidated Balance Sheet  

13

Company Balance Sheet  

14

Consolidated Statement of Changes in Equity  

15

Company Statement of Changes in Equity  

16

Consolidated Cash Flow Statement  

17

Notes to the Consolidated Cash Flow Statement

18

Notes to the Consolidated Financial Statements

19

DIRECTORS:

R Pennington

S Tyrrell

C Malthouse

REGISTERED OFFICE:

3 Scholar Green Road

Cobra Court

Trafford Park

Manchester

M32 0TR

REGISTERED NUMBER:

10753247 (England and Wales)

AUDITORS:

Harold Sharp Limited

Statutory Auditors and Chartered Accountants

5 Brooklands Place

Brooklands Road

Sale

Cheshire

M33 3SD

The directors present their strategic report of the company and the group for the year ended 30 June 2021.

REVIEW OF BUSINESS

The Group's results for the year to 30 June 2021 show strong Group revenues of £39m (2020: £32m) and EBITDA of £3.6m (2020: £3.1m) very much in line with expectations.

4Net continued its significant growth during the year to 30 June 2021, with an increase in overall revenues of 22% (2020: 20%) and an increase in operating profit of 27% (2020: 89%) on the company's previous year. This growth was largely due to the continued success of 4Net Technologies Ltd's cloud platforms; Antenna (Government) and Agile Cloud, but also due to significant wins in the Emergency Services market.

The Group's operating profit of £1.4m (2020: £1.1m) and a profit before taxation of £0.6m (2020: £0.7m) are both driven by the accounting requirement to amortise goodwill arising on the acquisition of 4Net Technologies Limited totalling £1.8m (2020 £1.8m).

During these unprecedented times remote working has become imperative for many companies across the globe. 4Net took the opportunity to move towards a cloud-based communications platform.  We have continued to make huge strides in this area since the pandemic, incorporating Microsoft Teams and Avaya ACO platforms into our portfolio, as well as making further significant investments into our own Agile Cloud and Antenna platforms.

During the financial period we were recognised as an outstanding company to work for by the Best Companies program which represents the standard for workplace engagement.  Our 2 Star accreditation demonstrates the importance we place on employee inclusion and recognises that we have become one of the best organisations in the UK to work for. In addition, the annual Megabuyte50 awards identify the UK's 50 best-performing privately-owned technology companies and we have officially ranked as the 36th best technology firm to work for nationwide.  During the same period, we won the Comms Business Enterprise ICT Solution of the Year for our Antenna platform.

In June 2021 it was announced that Project Eaton Topco Limited had acquired the Group.  Project Eaton Topco Limited includes investment from Palatine Private Equity LLP, Kartesia and 4Net's senior management team.

FY22 promises continued growth with revenues forecast to grow by approximately 10% as the business continues to benefit from already contracted new cloud and managed service wins and expected wins from new frameworks. Cashflow forecast remains strong.

PRINCIPAL RISKS AND UNCERTAINTIES

Covid-19 has continued to impact many organization over the 12 months and still poses potential risks for many others. While 4Net have not suffered any major effects from this, the risks to us from customer investment levels being changed or delayed has been something the Senior Management Team have been aware of and taking action in order to mitigate to impact. This has resulted in changes to our product and supplier portfolios to ensure we can offer our customers a range of flexible communications platforms which suit their ever-changing needs best. We have also ensured we are continuously improving our employee skillset through a mixture  or recruitment and training.

The business engages with two key suppliers in the delivery of a significant proportion of its products and services, namely AVAYA and Enghouse. Reputational and contractual risk exists in the event that either of these two key suppliers' product or service offerings fails to meet the Company's customer requirements, or through changes in their Go To Market Strategy.  4Net mitigates these risks by closely engaging with these suppliers at senior level to understand their product roadmaps and business models, and where possible help steer these and also by continually scanning the market for potential additional suppliers and partners to help improve  the services we provide to our customers. 4Net portfolio reviews take place quarterly to this end.

Loss of market competitiveness is a risk should the Company fail to keep up with the introduction of new technological advances. The Company operates and maintains Cloud infrastructure platforms that are utilized by its customers.  4Net run a continual improvement process, whereby we measure the competitiveness of our services, and in particular, our Cloud platforms against our competitors. We constantly analyse the market and engage with our customers to predict future demand; we have formally introduced a product portfolio board that meets on a quarterly basis to steer our solutions roadmap ensuring we are constantly innovating and responding to market demand.

SECTION 172(1) STATEMENT

Section 172 of the companies Act 2006 requires directors to act in a way they consider, in good faith, would be most likely to promote the success of the group for the benefit of its shareholders as a whole and, in doing so have regard (amongst other matters) to:

a. the likely consequences of any decisions in the long-term;

b. the interests of the group's employees;

c. the need to foster the group's business relationships with suppliers, customers and others;

d. the impact of the group's operations on the community and environment;

e. the desirability of the group maintaining a reputation for high standards of business conduct; and

f. the need to act fairly as between shareholders of the Group.'

The requirement of section 172(1) of the companies Act 2006 and the interest of the group's stakeholder groups are taken into consideration through a combination of the following

Risk Management

We provide business-critical services to our clients, often in highly regulated environments. As we grow, our business and our risk environment also become more complex. It is therefore vital that we effectively identify, evaluate, manage and mitigate the risks we face, and that we continue to evolve our approach to risk management.

Our People

The Group is built around the knowledge and experience of our employees and we work hard to demonstrate attractive career paths to our teams and to help them to reach their full potential.

Wellbeing has become a focal point since the pandemic and it's important to us that our employees can find success in all parts of their lives and we are proud of our established approach to supporting them to do this, which now includes the transition to hybrid working model.

Talent is at the centre of our business strategy.  Ensuring that we have the right people in the right roles with the right knowledge and experience to drive the business forward is key to our long term success.  We do this in a variety of ways, recognising the many different learning styles across our teams.

Business Relationships

Our strategy prioritises organic growth, driven by maintaining existing clients relationships and bringing new clients into the Group. We develop and maintain strong client relationships through by having a collaborative approach with our customers to develop innovations to meet their needs.

Supply chain integrity is a critical part of the business as the Group relies on its suppliers to help meet customer needs. Engagement with suppliers is via the Group's commercial teams as well as through other functions including Finance, Legal and Compliance.  The Board receives information through Board and other business reports.

Community and Environment

The Group's approach is to use our position of strength to create positive change for the people and communities with which we interact. We want to leverage our expertise and enable colleagues to support the communities around us.

Culture and Values

The Board recognises the importance of having the right corporate culture. Our long-term success depends on achieving our strategic goals in the right way, so we look after the best interests of our clients, people and other stakeholders. Through the use of employee and management workshops, we identified four core values that govern how we act as a business.

Investors

The Board is committed to openly engaging with our investors, as we recognise the importance of a continuing effective dialogue, whether with private investors or employee shareholders. It is important to us that investors understand our strategy and objectives, so these must be explained clearly, feedback heard and any issues or questions raised properly considered.

ON BEHALF OF THE BOARD:

R Pennington - Director

30 March 2022

The directors present their report with the financial statements of the company and the group for the year ended 30 June 2021.

DIVIDENDS

No dividends will be distributed for the year ended 30 June 2021.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 July 2020 to the date of this report.

R Pennington

S Tyrrell

C Malthouse

Other changes in directors holding office are as follows:

M Jervis - resigned 8 June 2021

F Jennings - resigned 8 June 2021

POLITICAL DONATIONS AND EXPENDITURE

During the year the group made charitable donations of £2,170 (2020: £2,193), none of which were for political causes.

DIRECTORS INDEMNITIES

The group has currently made qualifying third party indemnity provisions for the benefit of its directors, which remain in force at the date of this report.

STREAMLINED ENERGY AND CARBON REPORTING

The Group's energy consumption for the year was 131,841.51KWH, resulting in total gross tCO2e emissions of 26.76:

Emissions from purchased electricity, including for the purposes of transport (tCO2e) 18.98

Emissions from the combustion of gas (tCO2e)    7.78

Emissions from the consumption of fuel for the purposes of transport (tCO2e)  n/a

Intensity ratio per employee for scope 1&2 = 0.24

Intensity ration per £1m t/o for scope 1&2 = 0.69

These figures have been compiled in accordance with the 2019 UK Government environmental reporting guidelines and the UK Government 2021 GHG Conversion Factors. The scope includes all sites in the UK.

DISCLOSURE IN THE STRATEGIC REPORT

The directors have decided to disclose s172 statement, engagement with employees, engagement with suppliers, customers and others and corporate governance arrangements in the Strategic Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group Strategic Report, 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 the group and of the profit or loss of the group 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;

-

state whether applicable accounting standards have been followed, subject to any material departures disclosed and

explained in the financial statements;

-

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 and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group 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 the group 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 group's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS

The auditors,  Harold Sharp Limited, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

R Pennington - Director

30 March 2022

Opinion

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 group 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

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 the 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

The directors are responsible for the other information. The other information comprises the information in the Group Strategic Report and 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 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.

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 Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-

the Group Strategic Report and the Report of the Directors have 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 group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-

the parent company 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.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page seven, 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 group's and the parent 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 group or the parent 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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

As part of our planning process:

- We enquired of management the systems and controls the company has in place, the areas of the financial statements that are mostly susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud.

- We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: FRS 102, Companies Act 2006, health and safety, and employment law.

- We considered the incentives and opportunities that exist in the company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.

- Using our knowledge of the company, together with the discussions held with the company at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.

The key procedures we undertook to detect irregularities including fraud during the course of the audit included:

- Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.

- Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.

- Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, in particular in relation to amortisation, depreciation, bad debt provision, stock provision and accrued costs.

- Assessing the extent of compliance, or lack of, with the relevant laws and regulations in particular those that are central to the entities ability to continue in operation.

- Testing key revenue lines, in particular cut-off, for evidence of management bias.

- Performing a physical verification of key assets , including stock.

- Obtaining third-party confirmation of material bank balances.

- Documenting and verifying all significant related party and consolidated balances and transactions.

- Reviewing documentation such as the company board minutes, correspondence with solicitors, for discussions of irregularities including fraud.

- Testing all material consolidation adjustments.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements even though we have properly planned and performed our audit in accordance with auditing standards. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors and management.

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 a Report of the Auditors 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.

Karen Dent (Senior Statutory Auditor)

for and on behalf of Harold Sharp Limited

Statutory Auditors and Chartered Accountants

5 Brooklands Place

Brooklands Road

Sale

Cheshire

M33 3SD

30 March 2022

TURNOVER

4

39,097,127

32,086,492

Cost of sales

24,980,044

19,389,538

GROSS PROFIT

14,117,083

12,696,954

Administrative expenses

12,724,876

11,597,574

1,392,207

1,099,380

Other operating income

22,989

-

OPERATING PROFIT

6

1,415,196

1,099,380

Interest receivable and similar income

650

7,129

1,415,846

1,106,509

Interest payable and similar expenses

7

834,226

389,447

PROFIT BEFORE TAXATION

581,620

717,062

Tax on profit

8

632,482

22,728

(LOSS)/PROFIT FOR THE FINANCIAL

YEAR

(50,862

)

694,334

FIXED ASSETS

Intangible assets

10

2,291,190

3,962,382

Tangible assets

11

615,019

638,931

Investments

12

-

-

2,906,209

4,601,313

CURRENT ASSETS

Stocks

13

248,996

560,378

Debtors

14

14,736,938

13,087,021

Cash at bank and in hand

1,838,528

10,024,285

16,824,462

23,671,684

CREDITORS

Amounts falling due within one year

15

15,727,516

20,767,437

NET CURRENT ASSETS

1,096,946

2,904,247

TOTAL ASSETS LESS CURRENT

LIABILITIES

4,003,155

7,505,560

CREDITORS

Amounts falling due after more than one

year

16

-

(4,390,940

)

PROVISIONS FOR LIABILITIES

21

(107,474

)

(110,981

)

NET ASSETS

3,895,681

3,003,639

CAPITAL AND RESERVES

Called up share capital

22

2,914

2,632

Share premium

23

5,309,990

4,367,368

Retained earnings

23

(1,417,223

)

(1,366,361

)

SHAREHOLDERS' FUNDS

3,895,681

3,003,639

The financial statements were approved by the Board of Directors and authorised for issue on 30 March 2022 and were signed on its behalf by:

R Pennington - Director

FIXED ASSETS

Intangible assets

10

-

-

Tangible assets

11

-

-

Investments

12

9,975,397

9,820,397

9,975,397

9,820,397

CURRENT ASSETS

Debtors

14

2,967,992

-

CREDITORS

Amounts falling due within one year

15

10,292,970

2,481,046

NET CURRENT LIABILITIES

(7,324,978

)

(2,481,046

)

TOTAL ASSETS LESS CURRENT

LIABILITIES

2,650,419

7,339,351

CREDITORS

Amounts falling due after more than one

year

16

-

4,390,940

NET ASSETS

2,650,419

2,948,411

CAPITAL AND RESERVES

Called up share capital

22

2,914

2,632

Share premium

23

5,309,990

4,367,368

Retained earnings

23

(2,662,485

)

(1,421,589

)

SHAREHOLDERS' FUNDS

2,650,419

2,948,411

Company's loss for the financial year

(1,240,896

)

(444,821

)

The financial statements were approved by the Board of Directors and authorised for issue on 30 March 2022 and were signed on its behalf by:

R Pennington - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£   

£   

£   

£   

Balance at 1 July 2019

2,632

(2,060,695

)

4,367,368

2,309,305

Changes in equity

Total comprehensive income

-

694,334

-

694,334

Balance at 30 June 2020

2,632

(1,366,361

)

4,367,368

3,003,639

Changes in equity

Issue of share capital

282

-

942,622

942,904

Total comprehensive income

-

(50,862

)

-

(50,862

)

Balance at 30 June 2021

2,914

(1,417,223

)

5,309,990

3,895,681

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£   

£   

£   

£   

Balance at 1 July 2019

2,632

(976,768

)

4,367,368

3,393,232

Changes in equity

Total comprehensive income

-

(444,821

)

-

(444,821

)

Balance at 30 June 2020

2,632

(1,421,589

)

4,367,368

2,948,411

Changes in equity