Dragonfly Holdco Limited - Limited company accounts 23.2

REGISTERED NUMBER: SC632878 (Scotland)

Dragonfly Holdco Limited

Group Strategic Report,

Report of the Directors and

Audited

Consolidated Financial Statements

for the Year Ended 31st December 2022

Page

Company information

1

Group strategic report

2

to

3

Report of the directors

4

to

5

Report of the independent auditors

6

to

9

Consolidated income statement

10

Consolidated other comprehensive income

11

Consolidated balance sheet

12

Company balance sheet

13

Consolidated statement of changes in equity

14

Company statement of changes in equity

15

Consolidated cash flow statement

16

Notes to the consolidated cash flow statement

17

Notes to the consolidated financial statements

18

to

25

Directors:

Mrs V K I Grant

A W Bagshaw

Registered office:

4 Stafford Street

Edinburgh

United Kingdom

EH3 7AU

Registered number:

SC632878 (Scotland)

Senior statutory auditor:

Gillian Adamson BSC (Hons) CA CTA

Auditors:

Rennie Welch LLP

Academy House

Shedden Park Road

Kelso

Roxburghshire

TD5 7AL

The directors present their strategic report of the company and the group for the year ended 31st December 2022.

Review of business

The company continued to be an award-winning, boutique direct marketing agency offering creative, print and digital campaigns that are driven be deep data profiling and targeted distribution to literally deliver results for our clients.

Dragonfly's core values remain at the forefront of everything we do every day. These values are:

- Integrity - we're honest, open problem solvers

- Honesty - we're proud champions and cheerleaders

- Promise to our customers - we provide better solutions

- Relationships - we deliver value and memorable moments

2022 was an extremely exciting and busy year for Dragonfly. A few of the highlights from this period are:

2022 saw Dragonflies return to the office post Covid under a new hybrid scheme;

Our staff engagement survey for 2022 ended at a phenomenal engagement score of 78.8, an increase of 1.7 point on the previous survey;

Dragonfly won 2 SMP Awards for Golden Envelope Awards;

We achieved certification of ISO14001: 2015 Environmental management system;

We participated in Giving Tuesday and donated £12,000 to Dragonflies favourite charities across the UK and South Africa

Principal risks and uncertainties

Principal risks and uncertainties

The key business risk affecting the company are:

- Product availability and pricing

- Inflation

- Foreign exchange

- Interest rates

- GDPR and compliance requirements

The Directors regularly review risk strategy and make arrangements to reduce exposure using appropriate financial instruments.

The company manages its cash and borrowing requirements in order to minimise interest expense whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business. The cash reserves are maintained to allow the business to take account of any expansion and investment opportunities that may arise.

Development and performance

The results for the year show a profit on ordinary activities before tax of £3,134,786. The Board are satisfied with the performance for the financial year considering the challenges faced and increased costs in the supply chain.

2022 saw an increase in a number of areas that had specific impact on the direct marketing world. Paper prices increased continually throughout the year resulting in an annual increase of 15% on 2021. Royal Mail's early price increase for all postage services in November 2022 saw some services increased by 20%. These combined with an ink shortage due to the war in Ukraine placed additional pressure on Dragonfly and our customers.

The Board monitor the progress of the company by the following KPIs:

2022

2021

Turnover

£23.6m

£15.2m

Gross profit %

18%

21%

Net profit before tax %

13%

9%

Volume of mail items delivered in UK

53.6m

35.5m

Volume of mail items delivered in South Africa

1.5m

1.6m

On behalf of the board:

Mrs V K I Grant - Director

28th September 2023

The directors present their report with the financial statements of the company and the group for the year ended 31st December 2022.

Principal activity

The principal activity of the group in the year under review was that of marketing consultancy.

Dividends

Interim dividends per share on the A Ordinary 1 shares were paid as follows:

200,000

- 31st March 2022

18,000

- 30th April 2022

18,000

- 30th June 2022

18,000

- 30th September 2022

18,000

- 31st December 2022

272,000

The directors recommend that no final dividend be paid on these shares.

No interim dividend was paid on the B Ordinary 1 shares. The directors recommend that no final dividend be paid on these shares.

The total distribution of dividends for the year ended 31st December 2022 will be £ 272,000 .

Research and development

An R&D claim is currently under review for 2022. At the date of signing the financial statements the claim has not yet been submitted so no provision has been included.

Directors

The directors shown below have held office during the whole of the period from 1st January 2022 to the date of this report.

Mrs V K I Grant

A W Bagshaw

Political donations and expenditure

During the year the company made various small donations totalling £9,097 (2021 - £13,327).

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;

-	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 or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

Auditors

The auditors, Rennie Welch LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

On behalf of the board:

Mrs V K I Grant - Director

28th September 2023

Opinion

We have audited the financial statements of Dragonfly Holdco Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31st December 2022 which comprise the Consolidated income statement, Consolidated other comprehensive income, Consolidated balance sheet, Company balance sheet, Consolidated statement of changes in equity, Company statement of changes in equity, Consolidated cash flow statement and Notes to the consolidated cash flow statement, Notes to the financial statements, 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).

In our opinion the financial statements:

-	give a true and fair view of the state of the group's and of the parent company affairs as at 31st December 2022 and of the group's profit 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 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 pages four and five, 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:

We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.

Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:

Audit response to risks identified

- The nature of the industry and sector, control environment and business performance.

- Any matters we identified having obtained and reviewed the company's documentation of their policies and

procedures relating to:

-- Identifying, evaluating and complying with laws and regulations and whether they were aware of any

instances of non-compliance.

-- Detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected

or alleged fraud.

-- The internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.

- The matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and have not identified any significant areas with potential fraud to occur. We hold this basis on that the company is classified under the Companies Act 2006 as a medium company for reporting anomalies would be detected.

Further to this no non-routine financial accounting has taken place from which we would expect an increase of fraud or error to occur.

In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act and local tax legislation.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the Company's ability to operate or to avoid a material penalty.

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.

Gillian Adamson BSC (Hons) CA CTA (Senior Statutory Auditor)

for and on behalf of Rennie Welch LLP

Academy House

Shedden Park Road

Kelso

Roxburghshire

TD5 7AL

28th September 2023

Turnover

3

23,614,054

15,225,170

Cost of sales

(19,343,125

)

(12,060,739

)

Gross profit

4,270,929

3,164,431

Administrative expenses

(1,147,418

)

(1,781,564

)

Operating profit

5

3,123,511

1,382,867

Interest receivable and similar income

9,387

113

3,132,898

1,382,980

Interest payable and similar expenses

7

1,888

(17

)

Profit before taxation

3,134,786

1,382,963

Tax on profit

8

(587,433

)

(430,124

)

Profit for the financial year

2,547,353

952,839

Profit attributable to:

Owners of the parent

2,547,353

952,839

Profit for the year

2,547,353

952,839

Other comprehensive income

-

-

Total comprehensive income for the year

2,547,353

952,839

Total comprehensive income attributable to:

Owners of the parent

2,547,353

952,839

Fixed assets

Intangible assets

11

93,060

-

Tangible assets

12

21,626

24,933

Investments

13

4,067,470

4,067,470

4,182,156

4,092,403

Current assets

Debtors

14

3,080,376

2,602,164

Cash at bank and in hand

5,623,699

3,720,500

8,704,075

6,322,664

Creditors

Amounts falling due within one year

15

3,204,496

3,008,191

Net current assets

5,499,579

3,314,473

Total assets less current liabilities

9,681,735

7,406,876

Provisions for liabilities

16

3,903

4,397

Net assets

9,677,832

7,402,479

Capital and reserves

Called up share capital

17

1,000

1,000

Share premium

18

2,999,000

2,999,000

Retained earnings

18

6,677,832

4,402,479

Shareholders' funds

9,677,832

7,402,479

The financial statements were approved by the Board of Directors and authorised for issue on 28th September 2023 and were signed on its behalf by:

Mrs V K I Grant - Director

Fixed assets

Intangible assets

11

-

-

Tangible assets

12

-

-

Investments

13

4,067,472

4,067,472

4,067,472

4,067,472

Creditors

Amounts falling due within one year

15

67,472

67,472

Net current liabilities

(67,472

)

(67,472

)

Total assets less current liabilities

4,000,000

4,000,000

Capital and reserves

Called up share capital

17

1,000

1,000

Share premium

2,999,000

2,999,000

Retained earnings

1,000,000

1,000,000

Shareholders' funds

4,000,000

4,000,000

Company's profit for the financial year

272,000

480,333

The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the Board of Directors and authorised for issue on 28th September 2023 and were signed on its behalf by:

Mrs V K I Grant - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1st January 2021

1,000

3,729,973

2,999,000

6,729,973

Changes in equity

Dividends

-

(280,333

)

-

(280,333

)

Total comprehensive income

-

952,839

-

952,839

Balance at 31st December 2021

1,000

4,402,479

2,999,000

7,402,479

Changes in equity

Dividends

-

(272,000

)

-

(272,000

)

Total comprehensive income

-

2,547,353

-

2,547,353

Balance at 31st December 2022

1,000

6,677,832

2,999,000

9,677,832

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1st January 2021

1,000

800,000

2,999,000

3,800,000

Changes in equity

Dividends

-

(280,333

)

-

(280,333

)

Total comprehensive income

-

480,333

-

480,333

Balance at 31st December 2021

1,000

1,000,000

2,999,000

4,000,000

Changes in equity

Dividends

-

(272,000

)

-

(272,000

)

Total comprehensive income

-

272,000

-

272,000

Balance at 31st December 2022

1,000

1,000,000

2,999,000

4,000,000

Cash flows from operating activities

Cash generated from operations

1

3,118,617

2,640,634

Interest paid

1,888

(17

)

Tax paid

(395,370

)

(284,883

)

Net cash from operating activities

2,725,135

2,355,734

Cash flows from investing activities

Purchase of intangible fixed assets

(93,060

)

-

Purchase of tangible fixed assets

(5,329

)

(7,522

)

Sale of tangible fixed assets

442

-

Interest received

9,387

113

Net cash from investing activities

(88,560

)

(7,409

)

Cash flows from financing activities

Amount introduced by directors

-

170,001

Amount withdrawn by directors

(461,376

)

(374,709

)

Equity dividends paid

(272,000

)

(280,333

)

Net cash from financing activities

(733,376

)

(485,041

)

Increase in cash and cash equivalents

1,903,199

1,863,284

Cash and cash equivalents at beginning of year

2

3,720,500

1,857,216

Cash and cash equivalents at end of year

2

5,623,699

3,720,500

1.	Reconciliation of profit before taxation to cash generated from operations

2022

2021

£

£

Profit before taxation

3,134,786

1,382,963

Depreciation charges

8,635

12,513

Profit on disposal of fixed assets

(442

)

-

Finance costs

(1,888

)

17

Finance income

(9,387

)

(113

)

3,131,704

1,395,380

Decrease/(increase) in trade and other debtors

12,240

(209,731

)

(Decrease)/increase in trade and other creditors

(25,327

)

1,454,985

Cash generated from operations

3,118,617

2,640,634

2.	Cash and cash equivalents

The amounts disclosed on the Cash flow statement in respect of cash and cash equivalents are in respect of these Balance sheet amounts:

Year ended 31st December 2022

31.12.22

1.1.22

£

£

Cash and cash equivalents

5,623,699

3,720,500

Year ended 31st December 2021

31.12.21

1.1.21

£

£

Cash and cash equivalents

3,720,500

1,857,216

3.	Analysis of changes in net funds

At 1.1.22

Cash flow

At 31.12.22

£

£

£

Net cash

Cash at bank and in hand

3,720,500

1,903,199

5,623,699

3,720,500

1,903,199

5,623,699

Total

3,720,500

1,903,199

5,623,699

1.	Statutory information

Dragonfly Holdco Limited is a private company, limited by shares , registered in Scotland. The company's registered number and registered office address can be found on the General Information page.

2.	Accounting policies

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Computer software is being amortised evenly over its estimated useful life of nil years.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life.

Fixtures and fittings

-

20% on cost

Office equipment

-

20% on cost

Tangible fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses.

Investments in subsidiaries

Investments in subsidiary undertakings are recognised at cost.

Financial instruments

The following assets and liabilities are classified as financial instruments - trade debtors, trade creditors, bank loans and directors' loans.

Bank loans are initially measured at the present value of future payments, discounted at a market rate of interest, and subsequently at amortised cost using the effective interest method.

Directors' loans (being repayable on demand), trade debtors and trade creditors are measured at the undiscounted amount of the cash or other consideration expected to be paid or received.

Financial assets that are measured at amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Income and Retained Earnings.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Income and Retained Earnings, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to profit or loss in the period to which they relate.

Provisions

Provisions are set up only where it is probable that a present obligation exists as a result of an event prior to the balance sheet date and that a payment will be required in settlement that can be estimated reliably. Where material, provisions are calculated on a discounted basis.

Employee benefits

Short term employee benefits, including holiday pay, are recognised as an expense in the Statement of Income and Retained Earnings in the period in which they are incurred.

Going concern

The directors have considered the company's financial position for a period of 12 months from the date of signing these financial statements and have reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

3.

Turnover

The turnover and profit before taxation are attributable to the one principal activity of the group.