Company No: SC333348 (Scotland)

Contents

• Directors' Report
• Balance Sheet
• Notes to the Financial Statements

The directors present their annual report and the unaudited financial statements of the Company for the financial year ended 31 December 2022.

PRINCIPAL ACTIVITIES

The Company operates globally, providing specialist engineering consultancy, training, software tools, and operational support to organisations drilling complex wells for hydrocarbon extraction, scientific research purposes, and to those delivering challenging renewable energy projects.

Review of the Year

Despite worsening geopolitical tensions, slowing global economic growth, and higher inflationary pressures, demand for hydrocarbons remained strong throughout 2022 with consumption above pre-pandemic levels. The Company’s performance significantly improved on the prior year in which it was still recovering from some pandemic related issues which did not continue into FY 2022. The Company generated record revenues and strong operating profit after £0.4m of EOT beneficiary bonuses. This reflected a positive year in which the Company progressed with planned recruitment, continued to invest in software development, service diversification, and the digitalisation of it’s training offering. These investments have enabled the Company to present the market with more capacity, more capability, and a broader proposition; all aligned to further strengthen the opportunity pipeline and deliver sustainable profitable growth in 2023.

The Company continues to promote a more balanced approach towards people, planet, and profit. During 2022 it paid over £1.2m in taxes and pension contributions across the geographies in which it operated. During 2023 it will progress plans to build more strength into the business through the development of an additional revenue stream within the burgeoning low carbon sector in the UK.

Fiercely independent and almost wholly employee-owned, the Company is well positioned to operate responsibly and to capitalise on global economic growth during 2023.

DIRECTORS

The directors, who served during the financial year and to the date of this report except as noted, were as follows:

N Armstrong	(Resigned 07 September 2022)
J C Anderson
C A Grant
I Hutchison	(Resigned 02 February 2023)
S M McGregor	(Appointed 07 September 2022)
R J Ramage

This Directors' Report has been prepared in accordance with the provisions applicable to companies entitled to the small companies' exemption provided by section 415A of the Companies Act 2006.

Approved by the Board of Directors and signed on its behalf by:

R J Ramage Director

21 March 2023

	Note	2022		2021
		£		£
Fixed assets
Tangible assets	3	93,900		85,638
		93,900		85,638
Current assets
Debtors	4	914,300		965,131
Cash at bank and in hand		1,960,212		1,181,684
		2,874,512		2,146,815
Creditors: amounts falling due within one year	5	( 614,498)		( 448,573)
Net current assets		2,260,014		1,698,242
Total assets less current liabilities		2,353,914		1,783,880
Creditors: amounts falling due after more than one year	6	0		( 220,833)
Provision for liabilities		( 15,136)		( 13,384)
Net assets		2,338,778		1,549,663
Capital and reserves
Called-up share capital	7	102		102
Share premium account		5,248		5,248
Profit and loss account		2,333,428		1,544,313
Total shareholders' funds		2,338,778		1,549,663

For the financial year ending 31 December 2022 the Company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.

Directors' responsibilities:

• The members have not required the Company to obtain an audit of its financial statements for the financial year in accordance with section 476;
• The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of financial statements; and
• These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime and a copy of the Profit and Loss Account has not been delivered.

The financial statements of Merlin ERD Limited (registered number: SC333348) were approved and authorised for issue by the Director on 21 March 2023. They were signed on its behalf by:

R J Ramage Director

1. Accounting policies

The principal accounting policies are summarised below. They have all been applied consistently throughout the financial year and to the preceding financial year, unless otherwise stated.

General information and basis of accounting

Merlin ERD Limited (the Company) is a private company, limited by shares, incorporated in the United Kingdom under the Companies Act 2006 and is registered in Scotland. The address of the Company's registered office is Merlin House, Necessity Brae, Perth, PH2 0PF, United Kingdom.

The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and in accordance with Section 1A of Financial Reporting Standard 102 (FRS 102) ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ issued by the Financial Reporting Council and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime.

The financial statements are presented in pounds sterling which is the functional currency of the company and rounded to the nearest £.

The company has taken advantage of the exemption under section 399 of the Companies Act 2006 not to prepare consolidated accounts, on the basis that the group of which this is the parent qualifies as a small group. The financial statements present information about the company as an individual entity and not about its group.

Foreign currency

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are reported at the rates of exchange prevailing at that date. Exchange differences are recognised in the Profit and Loss Account in the period in which they arise.

Turnover

Turnover represents amounts receivable for professional engineering consultancy services and software licences net of VAT and trade discounts.

Professional services
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.

Software licences
Revenue from software licences is recognised over the period of the underlying licence.

Employee benefits

Short term benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Defined contribution schemes
The Company operates a defined contribution scheme. The amount charged to the Profit and Loss Account in respect of pension costs and other post-retirement benefits is the contributions payable in the financial year. Differences between contributions payable in the financial year and contributions actually paid are included as either accruals or prepayments in the Balance Sheet.

Taxation

Current tax
Current tax is provided at amounts expected to be paid (or recoverable) using the tax rates and laws that have been enacted or substantively enacted at the Balance Sheet date.

Deferred tax
Deferred tax arises as a result of including items of income and expenditure in taxation computations in periods different from those in which they are included in the Company's financial statements. Deferred tax is provided in full on timing differences which result in an obligation to pay more or less tax at a future date, at the average tax rates that are expected to apply when the timing differences reverse, based on current tax rates and laws. Deferred tax assets and liabilities are not discounted.

Tangible fixed assets

Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, other than investment property and freehold land, at rates calculated to write off the cost or valuation, of each asset on a straight-line or reducing balance basis over its expected useful life, as follows:

Leasehold improvements	15 % reducing balance
Other property, plant and equipment	15 % reducing balance

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Leases

The Company as lessee
Rentals under operating leases are charged on a straight-line basis over the lease term.

Impairment of assets

Assets, other than those measured at fair value, are assessed for indicators of impairment at each Balance Sheet date. If there is objective evidence of impairment, an impairment loss is recognised in the Profit and Loss Account as described below.

Non-financial assets
At each balance sheet date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks.

Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

Financial assets and liabilities are only offset in the Balance Sheet when, and only when there exists a legally enforceable right to set off the recognised amounts and the Company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs.

Financial assets are derecognised when and only when the contractual rights to the cash flows from the financial asset expire or are settled, or the Company transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or the Company, despite having retained some, but not all, significant risks and rewards of ownership, has transferred control of the asset to another party.

Basic financial liabilities
Basic financial liabilities, including creditors and bank loans are initially recognised at transaction price.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments
Equity instruments issued by the Company are recorded at the fair value of cash or other resources received or receivable, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Company.

Government grants

Government grants are recognised based on the accrual model and are measured at the fair value of the asset received or receivable. Grants are classified as relating either to revenue or to assets. Grants relating to revenue are recognised in income over the period in which the related costs are recognised. Grants relating to assets are recognised over the expected useful life of the asset. Where part of a grant relating to an asset is deferred, it is recognised as deferred income.

2. Employees

	2022		2021
	Number		Number
Monthly average number of persons employed by the Company during the year, including directors	22		20

3. Tangible assets

	Leasehold improve- ments		Other property, plant and equipment		Total
	£		£		£
Cost
At 01 January 2022	22,004		162,301		184,305
Additions	0		33,724		33,724
Disposals	0		( 36,697)		( 36,697)
At 31 December 2022	22,004		159,328		181,332
Accumulated depreciation
At 01 January 2022	6,027		92,640		98,667
Charge for the financial year	2,509		15,297		17,806
Disposals	0		( 29,041)		( 29,041)
At 31 December 2022	8,536		78,896		87,432
Net book value
At 31 December 2022	13,468		80,432		93,900
At 31 December 2021	15,977		69,661		85,638

4. Debtors

	2022		2021
	£		£
Trade debtors	648,218		534,460
Other debtors	266,082		430,671
	914,300		965,131

5. Creditors: amounts falling due within one year

	2022		2021
	£		£
Bank loans	0		29,167
Trade creditors	116,343		128,278
Corporation tax	105,294		32,425
Other taxation and social security	9,139		46,100
Other creditors	383,722		212,603
	614,498		448,573

6. Creditors: amounts falling due after more than one year

	2022		2021
	£		£
Bank loans	0		220,833

7. Called-up share capital

	2022		2021
	£		£
Allotted, called-up and fully-paid
1,018,797 Ordinary shares of £ 0.0001 each	102		102

8. Financial commitments

Other financial commitments

	2022		2021
	£		£
Total commitments under non-cancellable operating leases not provided for in the accounts	1,677,600		1,782,600

The leasing commitment represents the lease of the company's business premises which runs to 2039.

9. Related party transactions

In 2017 an Employee Ownership Trust was formed and acquired a controlling interest of 721,000 shares from the existing shareholders. Contributions of £Nil (2021 - £6,480) were made to the trust in the year ended 31 December 2022.

At the year end, there was a balance of £139,909 due from an employee share incentive plan trust. The directors assessed the recoverability of the loan and confirmed this was not expected to be repaid so the loan was impaired in the year to £Nil (2021 - £174,063).