TENTAMUS_UK_LIMITED - Accounts

The directors present the strategic report for the year ended 31 December 2021.

The Tentamus Group has been operating internationally for a decade and acquired operations within the UK in 2015. Our quality and safety services focus on the testing, auditing, and consulting of products that impact human wellness from within. The Tentamus Group is appreciated by many companies as a true service partner for a wide range of products with a high degree of quality and local understanding.

Today we are a recognised service provider well-known for our quick response times and close collaboration with our customers. We achieve this through specialised equipment, well trained members of staff and a network of specialised laboratories, each of which is a market leader in its own sector.

Through our network of laboratories, we have the capacity to meet the ever-increasing demands of our clients and, our commitment, years of experience, high-tech laboratory facilities and scientific methods enable us to live up to our promise of quality.

The UK Group initially develops inorganically and has then used a mixture of group knowledge and resources to push for organic growth and increasing market share in the Tentamus Group Companies. The Group has a focus on innovation looking to constantly expand the services and the quality we can offer our customers. The group is continuing to increase its market share by investing in services, merger and acquisition activity and expanding geographical reach.

The Covid-19 pandemic has had a wide-reaching effect both nationally and globally, the Tentamus UK Group has managed to remain open and testing through our key staff laboratory workers. The supply chains of a number of our customers have been affected by the pandemic with a difficulty in sourcing goods from China and India being of particular note. The post Covid environment has seen a reduced number of products from our customers as caution over further strains and disruption has been commonplace. As the country moves past the Covid period in 2022 we would expect to see the level of uncertainty continue to diminish and the levels of products and testing increase once again.

The post-Brexit standstill period will impose challenging constraints to the UK market where our customers need to navigate different regulatory regimes for the EU and the UK. The most significant effect will be with our UK pharmaceutical customers where the UK will recognise EU imports without restriction, but this is not reciprocal. However, divergence in regulations from 2023 onwards will see increases in UK testing requirements in all industry sectors. Local markets are expected to change in the wake of Brexit and the pandemic with increasing numbers of UK manufacturers emerging. The majority of our customers operate within the UK but they will have supply chains outside of the country as such there may be some disruption but we foresee no threat to going concern and we will be focussing on targeting the emerging manufacturers within the UK, particularly through our flagship pharmaceutical site in Derby.

Performance is behind the prior year but when reviewed in the context of the wider economy we feel that we managed to the situation well. The factors mentioned above have had overall negative impact on the bottom line of the group which has seen customers increasingly going to tender and trying to negotiate savings whilst suppliers have implemented price rises due shorter supplies and increased import costs.

There has also been costs for development of the business in this financial year with the new flagship pharmaceutical site in Derby opened towards the end of the year. The costs associated with this were substantial but the site offers a near unparalleled pharmaceutical testing service in the country that will allow for growth for years to come. The group were also delighted to welcome Precision Analysis (North West) Limited in March, opening a route to the North of the country to our food testing and BluTest Laboratories Limited in May, to the group. BluTest offering a unique project based service and the group’s first site in Scotland.

The international group continues to offer support to the Tentamus UK Group and acquisitions of additional sites is expected within the UK and international group during 2022 with the international group expecting to reach the 100 lab mark during the year.

Compared to the prior year turnover has risen following the acquisition of two additional subsidiaries during 2021 whilst the two acquisitions from 2019 continued to see turnover growth. This helped increase the overall figure to £13,747,395 from £11,495,227. Net losses (excluding the impairment loss recognised on goodwill) decreased to £1,330,940 from £1,790,216 because of the pound rising in value against the Euro in which the company has a loan from the international group.

Gross profit percentage

This has risen from 36.99% to 39.64% over the course of the financial year as markets and customers started to reopen following the worse of the pandemic.

EBITDA percentage

This fell from 7.9% in 2020 to 1.1% in 2021 (exlcuding goodwill impairment) which is not the level of performance the company is targeting but was influenced by one off costs relating to the site move and the introduction of Covid testing.

Debtor days

In 2020 this was at 63 days and in 2021 this was at 77 days, as a group we aim for 60 days. Despite the various challenges in the UK Economy we have managed to maintain good working relationships with our customers and manage our risk with credit terms satisfactorily. The increase in the number of days is mainly down to the method by which invoicing takes place at our project testing site.

Gross profit percentage – this is the percentage of turnover that remains after taking away the costs of sales in the business.

EBITDA percentage - earnings before interest, tax, impairments, depreciation and amortisation shown as a percentage as turnover. This is used to show the underlying performance of the company without considerations of capital and financing.

Debtor days - this ratio is used to show the length of time required to collect trading debt owed to the company.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2021.

The principal activity of the company and group continued to be that of scientific testing laboratories.

The results for the year are set out on page 9.

No interim dividends were paid. The directors do not recommend payment of a further dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.

Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.

There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.

Azets Audit Services were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

The directors are responsible for preparing the Annual 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 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 group and company, 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 UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the ;

•     prepare the on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Tentamus UK Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 group's and the parent company's affairs as at 31 December 2021 and of the group's loss 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 Auditor's 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.

Material uncertainty related to going concern

We draw attention to note 1.4 in the financial statements, which indicates that the group incurred a net loss of £5,563,048 (including impairment losses) during the year ended 31 December 2021 and, as of that date, the group’s current liabilities exceeded its total assets by £9,064,257. As stated in note 1.4, these events or conditions, along with other matters as set forth in note 1.4, indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's 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.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our 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 group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

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.

As explained more fully in the directors' responsibilities statement, 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 is 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 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 company or to cease operations, or have no realistic alternative but to do so.

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 auditor's 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.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Reviewing minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection; 

• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

• Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias. 

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 of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Use of our report

This report is made solely to the parent 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 parent 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 parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £10,213,948 (2020 - £1,024,262 loss).

Tentamus UK Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Building 170, Abbott Drive, Kent Science Park, Sittingbourne, Kent, United Kingdom, ME9 8AZ.

The group consists of Tentamus UK Limited and all of its subsidiaries.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

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 £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

The consolidated group financial statements consist of the financial statements of the parent company Tentamus UK Limited together with all entities controlled by the parent company (its subsidiaries).

All financial statements are made up to 31 December 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

At the time of approving the financial statements, the directors acknowledge a significant uncertainty in respect of going concern as the group, at the year end date, had net liabilities of £9,064,257 (2020 - £3,501,209). The directors have received confirmation that the ultimate parent company, Tentamus Group GmbH, a company incorporated in Germany, has committed to provide financial support for the 12 months following the date of the approval of the statutory accounts. On this basis, in the view of the Directors, after considering profit and cashflow forecasts for the same period of 12 months which consider the pervasive impact of Covid-19 on the company and the wider economy, deem it appropriate to continue to prepare these financial statements on a going concern basis, which assumes that the company will continue in operational existence for a period of at least 12 months from the date these financial statements were approved.

Turnover represents revenue from the provision of specialist laboratory analytical services and is recognised in full at the point at which the final test results are reported to the customer.

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Assets under construction represent equipment being installed at the company’s new site. Once in use they will be transferred to Plant and equipment and will be depreciated over the useful economic life of each asset.

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 recognised in the profit and loss account.

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

At each reporting period end date, the group 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). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

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 group after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

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 and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

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.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

The amounts shown in grant income in the profit and loss account represent the amounts receivable under the UK Government’s Job Retention Scheme.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

The group considers whether goodwill is impaired. Where an indication of impairment is identified the estimation of recoverable value requires estimation of the recoverable value of the cash generating units (CGUs).

This requires estimation of the future cash flows from the CGUs and also the selection of appropriate discount rates in order to calculate the net present value of those cash flows.

The amounts shown in grant income represent the amounts receivable under the UK Government’s Job Retention Scheme.

The average monthly number of persons (including directors) employed by the group and company during the year was:

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2020 - 0).

The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.

An impairment review was undertaken in relation to goodwill acquired through business combinations following a deterioration in results for the year ended 31 December 2021 and forecast results for future periods. This impairment review was undertaken at the Cash Generating Unit (CGU) level and has resulted in a total impairment loss in the year ended 31 December 2021 of £4,232,108.

The amount of the impairment loss is the excess of the carrying amount of the goodwill allocated to each CGU at the balance sheet date over its recoverable amount - recoverable amount being the higher of fair value less costs to sell and the value in use of each CGU. Recoverable amount has been determined from value in use calculations based on a multiple of ten times the weighted average EBITDA for the following four years, and are based on management's most recent assessment of each CGUs trading prospects.

More information on impairment movements in the year is given in note 10.

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Freehold land and buildings with a carrying amount of £511,576 (2020 - £544,608) have been pledged to secure borrowings of the company.

Details of the company's subsidiaries at 31 December 2021 are as follows:

Registered office addresses (all UK unless otherwise indicated):

Amounts owed to group undertakings are all interest only (currently charged at 6% per annum) with capital repayments only due at the end of the loan terms unless both parties agree to extend the capital repayment date.

The bank loans due within one year are secured by a first legal mortgage over the freehold property of Minerva Scientific Limited known as Unit 2, Stoneygate Road, Spondon, Derby, DE24 8QR.

The bank loans due over one year are Coronavirus Business Bounce Back Loan provided to one member of the group.

Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 2 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

The deferred tax liability set out above relates to accelerated capital allowances.

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

The ordinary shares are non redeemable and hold full rights in respect of dividends, voting and participation in the event of winding up.

On 11 March 2021 the group acquired 100 percent of the issued capital of Precision Analysis (North West) Limited.

On 1 June 2021 the group acquired 100 percent of the issued capital of BluTest Laboratories Limited.

Glas Trust Corporation Limited holds a debenture, as security agent, dated 19 August 2016 over the assets of the company. This debenture is part of a cross corporate guarantee provided for a facility granted to Tentamus Group GmbH.

At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Amounts contracted for but not provided in the financial statements:

The intermediate parent undertaking is Tentamus Group GmbH and Aqua Investment s S.a.r.l. is the ultimate parent undertaking.

All related party transactions with the UK group are undertaken at normal commercial rates, including those with One Scientific Limited (a 60% subsidiary). During the year the group undertook the following transactions with One Scientific Limited:

- Sales to £111,963 (2020: £63,233)

- Purchases from £113,269 (2020: £38,188)

- Amounts due to £10,433 (2020: £9,503)

- Amounts due from £58,013 (2020: £24,921)

As noted in the accounting policies no disclosures are necessary for transactions with 100% owned subsidiaries.

The parent of the smallest group for which consolidated financial statements are drawn up, and of which the company is a member, is Tentamus Group GmbH (incorporated in Germany), with its registered office at An der Industriebahn 5,13088 Berlin, Germany.

The parent of the largest group for which consolidated financial statements are drawn up, and of which the company is a member, is Tentamus Holdco GmbH (formerly Aqua Investment S.a.r.l.) (incorporated in Luxembourg),

BC Partners Fund XI Guernsey and Luxemburg is regarded by the directors as being the company's ultimate holding company.

The directors consider the ultimate controlling party to be BC Partners LLP.

Group accounts are prepared for the group headed by Tentamus Group GmbH whose registered office is as disclosed above.

Historic amortisation charges associated with the cost of goodwill on acquisition of the groups subsidiaries had not been calculated from the date of acquisition. This resulted in the accumulated amortisation charges at 1 January 2020 and 31 December 2020 being understated by £978,432, along with the value of goodwill and retained earnings being overstated by the same amount. This does not impact the amortisation charges or the retained loss for either the previous or current periods.