TASCOR_SERVICES_LIMITED - Accounts

The Directors present their Strategic report and financial statements for the year ended 31 December 2022.

Tascor Services Limited (“the Company”) is a wholly owned subsidiary (indirectly held) of Capita plc, which along with all its subsidiaries is hereafter referred as "the Group''. The Company operated within the Portfolio division of the Group during the year ended 31 December 2022, and moved to the Public Service division in the second half of 2023.

The principal activity of the Company continued to be that of the provision of business process outsourcing services to the criminal justice sector. There have not been any significant changes in the Company's principal activities in the year under review. The Directors are not aware, at the date of this report, of any likely major changes in the Company's activities in the next year other than the impact of loss of a material customer contract following the customer entering administration in December 2022 (refer to note 5 and 8 for further details).

As shown in the Company's income statement on page 11, the Company's revenue has decreased from £14,992,545 in 2021 to £12,292,267 in 2022 primarily driven by lower revenues recognised from the contract with the material customer mentioned above and the expiry of another customer contract for facilities maintenance which was not renewed. Operating profit has decreased from £2,878,322 to a loss of £1,586,271 over the same period. Of the total £4,464,593 deterioration in profit, £3,300,038 is attributable to the aforementioned reduction in revenue, an increase in the allowance for doubtful debts, onerous future costs and other related costs in the current year in respect of the material customer referred to above; a further £765,000 is due to a one-off pension gain in the 2021 accounts which does not repeat in 2022.

The balance sheet on pages 12 of the financial statements shows the Company's financial position at the year end. The Company's net assets have decreased from £29,918,150 in 2021 to net liabilities of £1,155,447 in 2022. The reduction is mainly due to the distribution of a dividend in specie to the Company’s parent company in April 2022 and the aforementioned loss for the year, driven by the increase in the allowance for doubtful debts recognised in December 2022. It was the latter that moved the Company into a net liability and net retained loss position. Details of amounts owed by/to its parent company and fellow subsidiary undertakings are shown in notes 8 and 9 to the financial statements.

Key financial performance indicators used by the Group are adjusted profit before tax, adjusted earnings per share, operating margins, free cash flows before business exits and gearing ratio. The Group manages its operations on a divisional basis, so some of these indicators are monitored only at a divisional level. The performance of the Portfolio division of Capita plc is discussed in the Group's annual report which does not form part of this report.

Principal risks and uncertainties

The Company is subject to various risks and uncertainties during the ordinary course of its business, many of which result from factors outside of its control.  The Company’s risk governance framework provides assurance that significant risks are identified and addressed. The Company’s risk management framework provides reasonable (but cannot provide absolute) assurance that significant risks are identified and addressed. An active risk management process identifies, assesses, mitigates and reports on strategic, financial, operational and compliance risk.

The principal themes of risk for the Company are:

• Strategic: changes in economic and market conditions such as contract pricing and competition.

• Financial: significant failures in internal systems of control and lack of corporate stability.

• Operational: including recruitment and retention of staff, maintenance of reputation and strong supplier and customer relationships, operational IT risk, and failures in information security controls.

• Compliance: non-compliance with laws and regulations. The Company must comply with an extensive range of requirements that govern its business.

To mitigate the effect of these risks and uncertainties, the Company adopts a number of systems and procedures, including:

• Regularly reviewing trading conditions to be able to respond quickly to changes in market conditions.

• Applying procedures and controls to manage compliance, financial and operational risks, including adhering to an internal control framework.

Capita plc has also implemented appropriate controls and risk governance techniques across all of its businesses, which are discussed in the Group’s annual report and doesn’t form part of this report.

Section 172 statement

Capita plc’s section 172 statement applies to both the Division and the Company to the extent it relates to the Company’s activities. Common policies and practices are applied across the Group through divisional management teams and a common governance framework. The following disclosure describes how the Directors have regard to the matters set out in section 172(1)(a) to (f) and forms the Directors’ statement as required under section 414CZA of the Companies Act 2006.

Further details of the Group’s approach to each stakeholder are provided in Capita plc’s section 172 statement on pages 47 and 48 of Capita plc’s 2022 Annual Report.

Section 172 Statement (continued)

On behalf of the Board

The Directors present their Directors' report and financial statements for the year ended 31 December 2022.

The results for the year are set out on page 11.

During the year, the Company has paid dividend of £29,826,398 to its parent Company, Capita Business Services Limited (2021: £nil).

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

Capita plc recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by the Group’s activities. The Company operates in accordance with Group policies, which are described in the Group’s annual report and does not form part of this report. Initiatives designed to minimise the Company’s impact on the environment include safe disposal of waste, recycling and reducing energy consumption.

The Company made no political donations and incurred no expenditure during the year (2021: £nil).

Details of number of employees and related costs can be found in note 15 to the financial statements.

KPMG LLP, having indicated its willingness to continue in office, will be deemed to be reappointed as auditor under section 487(2) of the Companies Act 2006.

The directors are responsible for preparing the Strategic report, the Directors’ report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework.

Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and 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 financial statements;

•     assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

•     use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

So far as each person who was a Director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the Company's auditor is unaware. Having made enquiries of fellow directors and the Company's auditor, each director has taken all the steps he/she might reasonably be expected to take as a director in order to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

The Company has granted an indemnity to the Directors of the Company against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the Directors' report.

Strategic Report

In accordance with S414C(11) of the Companies Act, the Company has set out certain information in its Strategic report that is otherwise required to be disclosed in the Directors' report. This includes information regarding results and activities and a description of the principle risks and uncertainties facing the Company.

We have audited the financial statements of Tascor Services Limited (“the Company”) for the year ended 31 December 2022 which comprise the Income statement, Balance Sheet, Statement of Changes in Equity, and related notes, including the accounting policies in note 1.

In our opinion the financial statements:

•     give a true and fair view of the state of the Company’s affairs as at 31 December 2022 and of its loss for the year then ended;

•     have been properly prepared in accordance with UK accounting standards, including FRS 101 and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern from the date of approval of the financial statements to 30 June 2025 (“the going concern period”).

In our evaluation of the directors’ conclusions, we considered the inherent risks to the Company’s business model and analysed how those risks might affect the Company’s financial resources or ability to continue operations over the going concern period.

Our conclusions based on this work:

• we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate;

• we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation.

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

• Enquiring of directors and other management, and inspection of policy documentation as to the Company’s high-level policies and procedures to prevent and detect fraud, as well as whether they have knowledge of any actual, suspected or alleged fraud.

• Reading Board minutes.

• Considering remuneration incentive schemes and performance targets for management and directors.

• Using analytical procedures to identify any unusual or unexpected relationships.

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.

As required by auditing standards, and taking into account possible pressures to meet profit targets and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular:

• the risk that management may be in a position to make inappropriate accounting entries;

• the risk of bias in accounting estimates such as the determination of percentage of completion for certain revenue associated with long term contracts recognised using an input method, which requires management to make estimates of the expected forecast costs; and

• the risk of bias in other accounting estimates and judgements in relation to the material customer that entered administration.

We did not identify any additional fraud risks.

We performed procedures including:

• Identifying journal entries and other adjustments to test based on risk criteria and comparing the identified entries to supporting documentation. These included those posted by senior finance management and those posted to unusual account pairings.

• Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.

• Reviewing a sample of management’s revenue recognition models for long term contracts to evaluate the estimates of revenue recognised. Our procedures included challenging the key assumptions underpinning the forecast costs and inspection of contractual documentation.

• Assessing judgements made in relation to the material customer that entered administration through enquiry with internal and external legal counsel and review of administrators’ reports.

Identifying and responding to risks of material misstatement related to compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the directors and other management (as required by auditing standards), and from inspection of the Company’s legal correspondence and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation, pension legislation, and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Secondly, the Company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: data protection laws, health and safety, anti-bribery, employment law, and certain aspects of company legislation recognising the financial nature of the Company’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. We assessed the legality of the distribution in the period based on our review of the relevant accounts that support the distribution and assessing the impact of any transactions that would adversely affect released profits between the date of the relevant accounts and the date of the distribution.

Context of the ability of the audit to detect fraud or breaches of law or regulation

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. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

Strategic report and directors’ report

The directors are responsible for the strategic report and the directors’ report. Our opinion on the financial statements does not cover those reports and we do not express an audit opinion thereon.

Our responsibility is to read the strategic report and the directors’ report and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work:

• we have not identified material misstatements in the strategic report and the directors’ report;

• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

• in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Matters on which we are required to report by exception

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the 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;

We have nothing to report in these respects.

Directors’ responsibilities

As explained more fully in their statement set out on page 5, the directors are responsible for: the preparation of the financial statements and for being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the 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 they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

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 our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an 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 Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

a) Share capital

The balance classified as share capital is the nominal proceeds on issue of the Company’s equity share capital, comprising 1 ordinary shares of £1 each.

On 8 April 2022, the Company reduced its ordinary share capital to 1 ordinary share of £1 nominal value through the cancellation of 5 ordinary shares of £1 each via special resolution with the reduction credited to Retained Earnings.

b) Share premium

The amount paid to the Company by the shareholders, in cash or other consideration, over and above the nominal value of the shares issued to them.

On 8 April 2022 , the Company reduced its share premium account by £28,499,996 to nil via special resolution with the reduction credited to Retained Earnings.

c) Retained deficit

Represents the accumulated losses of the Company.

*On 26 April 2022, the Company paid a dividend in specie of £29,826,398 by transferring an equivalent amount receivable from its ultimate parent undertaking Capita plc to its immediate parent company, Capita Business Services Limited.

Tascor Services Limited is a company incorporated and domiciled in United Kingdom

In determining the appropriate basis of preparation for the annual report and financial statements for the year ended 31 December 2022, the Company’s Directors (‘the Directors’) are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of at least 12 months following the approval of these financial statements. The Directors have concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, and sensitivities, as set out below.

Accounting standards require that ‘the foreseeable future’ for going concern assessment covers a period of at least twelve months from the date of approval of these financial statements, although those standards do not specify how far beyond twelve months the Directors should consider. In its going concern assessment, the Directors have considered the period from the date of approval of these financial statements to 30 June 2025 (‘the going concern period’) and which aligns to the period considered by the Directors of the ultimate parent company, Capita plc.

Board assessment

The financial forecasts used for the going concern assessment are derived from financial projections for 2024-2025 for the Company which have been subject to review and challenge by management and the Directors. The Directors have approved the projections.

Inter-dependency with Capita plc ('the Group')

The Director’s assessment of going concern has considered the extent to which the Company’s ability to remain a going concern is inter-dependent with that of the Group. The Company has dependency with the Group in respect of the following:

•     provision of certain services, such as administrative support and should the Group be unable to deliver these services, the Company would have difficulty in continuing to trade;

•     participation in the Group’s notional cash pooling arrangements, of which £25,578 was held at 29 February 2024. In the event of the cash being required elsewhere in the Group, the Company may not be able to access its cash balance within the pooling arrangement; and

•     additional funding that may be required if the company suffers potential future losses

Despite the Company being in a net liability and net current liability position and being loss making the ultimate parent undertaking has stated that it will provide continuing financial support as necessary and to the extent it is able to do so.

The financial projections are dependent on the Group providing additional financial support over the period to 30 June 2025 (the “going concern period”). The Group has indicated its intention to provide financial support to the Company in order to meet its liabilities as and when they fall due, but only to the extent that money is not otherwise available to the Company to meet such liabilities.

As with any company placing reliance on other group entities for financial support, the Directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.

Given the reliance the Company has on the Group, the Directors have considered the financial position of the ultimate parent undertaking as disclosed in its most recent consolidated financial statements, being for the year period ended 31 December 2023.

Ultimate parent undertaking – Capita plc

The Capita plc Board (‘the Board’) concluded that it was appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, sensitivities, and mitigations when preparing the Group’s consolidated financial statements at 31 December 2023. These consolidated financial statements were approved by the Board on 5 March 2024 and are available on the Group’s website (www.capita.com/investors). Below is a summary of the position at 5 March 2024:

Accounting standards require that ‘the foreseeable future’ for going concern assessment covers a period of at least twelve months from the date of approval of these consolidated financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these consolidated financial statements to 30 June 2025, which aligns with a period end and covenant test date for the Group, and has also allowed the Board to assess the liquidity impact of the borrowings that mature in January 2025 and April 2025. There are no other debt maturities in the period to 30 June 2025.

The base case financial forecasts used in the going concern assessment are derived from financial projections for 2024-2025 business plans as approved by the Board in December 2023.

Under the base case scenario, the Group’s transformation programme and completion of the Portfolio non-core business disposal programme in January 2024 has simplified and strengthened the business and facilitates further efficiency savings enabling sustainable growth in revenue, profit and cash flow over the medium term.

The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these financial statements. The liquidity headroom assessment in the base case projections reflects the Group’s existing committed financing facilities and debt redemptions and does not reflect any potential future refinancing. The base case financial forecasts demonstrate liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 30 June 2025.

In considering severe but plausible downside scenarios, the Board has taken account of the potential adverse financial impacts resulting from the following risks:

• revenue growth falling materially short of plan;

• operating profit margin expansion not being achieved;

• targeted cost savings delayed and/or not delivered;

• additional inflationary cost impacts which cannot be passed on to customers;

• unforeseen operational issues leading to contract losses and cash outflows;

• volatility in interest rates;

• non-availability of the Group’s non-recourse receivables financing facility; and

• unexpected financial costs linked to incidents such as data breaches and/or cyber-attacks.

The likelihood of simultaneous crystallisation of the above risks is considered by the directors to be low. Nevertheless, in the event that simultaneous crystallisation were to occur, the Group would need to take action to mitigate the risk of insufficient liquidity and covenant headroom. In its assessment of going concern, the Board has considered the mitigations, under the direct control of the Group, that could be implemented including reductions or delays in capital investment, substantially reducing (or removing in full) bonus and incentive payments. Taking these mitigations into account, the Group’s financial forecasts, in a severe but plausible downside scenario, demonstrate sufficient liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 30 June 2025.

Adoption of going concern basis by the Group:

Reflecting the continued benefits from the transformation programme delivered over the last few years and the Portfolio non-core business disposal programme completed in January 2024, coupled with the Board’s ability to implement appropriate mitigations should the severe but plausible downside materialise, the Group continues to adopt the going concern basis in preparing these consolidated financial statements. The Board has concluded that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to 30 June 2025.

Conclusion

Although the Company has a reliance on the Group as detailed above, even in a severe but plausible downside for both the Company and the Group, the Directors are confident the Company will continue to have adequate financial resources to continue in operation and discharge its liabilities as they fall due over the period to 30 June 2025 (the ‘going concern period’). Consequently, the annual report and financial statements have been prepared on the going concern basis.

The Company has applied FRS101 – Reduced Disclosure Framework in the preparation of its financial statements. The Company has prepared and presented these financial statements by applying the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006.

The Company's ultimate parent company , Capita plc, includes the Company in its consolidated statements. The consolidated financial statements are prepared in accordance with UK-adopted International Financial Reporting Standards (IFRSs) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. These are available to the public and may be obtained from Capita plc’s website on https://www.capita.com/investors .

In these financial statements, the Company has applied the disclosure exemptions available under FRS 101 in respect of the following disclosures:

• A cash flow statement and related notes;

• Disclosures in respect of transactions with wholly owned subsidiaries;

• Disclosures in respect of capital management;

• The effects of new but not yet effective IFRSs;

• Certain disclosures regarding IFRS 15 Revenue from Contracts with a Customers; and

• Disclosures in respect of the compensation of key management personnel.

As the consolidated financial statements of Capita plc include equivalent disclosures, the Company has also taken the disclosure exemptions under FRS 101 available in respect of the following disclosure:

• Certain disclosures required by IAS 36 Impairments of assets in respect of the impairment of goodwill and indefinite life intangible assets;

• Certain disclosures required by IFRS 13 Fair Value Measurement; and

• The disclosures required by IFRS 7 Financial Instrument Disclosures.

The Company has adopted the new amendments to standards detailed below but they do not have a material effect on the Company’s financial statements:

Revenue is earned within the United Kingdom.

The Company operates a small number of long-term customer contracts and recognises revenue based on the principles set out in IFRS 15. The contracts entered are long term and complex in nature.

The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer.

In determining the amount of revenue and profits to record, and related balance sheet items (such as trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions. These judgements are inherently subjective and may cover future events such as the achievement of contractual milestones, performance KPIs and timing of additional project work.

Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.

For all contracts, the Company determines if the arrangement with a customer creates enforceable rights and obligations.

For contracts with multiple components to be delivered such as transformation, transitions and the delivery of outsourced services, management applies judgement to consider whether those promised goods and services are (i) distinct - to be accounted for as two separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.

At contract inception the total transaction price is estimated, being the amount to which the Company expects to

be entitled and has rights to under the present contract. This includes an assessment of any variable consideration where the Company's performance may result in additional revenues based on the achievement of agreed KPIs. Such amounts are only included based on the expected value or the most likely outcome method, and only to the extent that it is highly probable that no revenue reversal will occur.

The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are agreed.

Once the total transaction price is determined, the Company allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied. The Company infrequently sells standard products with observable standalone prices due to the specialised services required by customers and therefore the Company applies judgement to determine an appropriate standalone selling price. More frequently, the Company sells a customer bespoke solution, and in these cases the Company typically uses the expected cost-plus margin or a contractually stated price approach to estimate the standalone selling price of each performance obligation.

For each performance obligation, the Company determines if revenue will be recognised over time or at a point in time. Where the Company recognises revenue over time for long term contracts, this is in general due to the Company performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract.

For each performance obligation to be recognised over time, the Company applies a revenue recognition method that faithfully depicts the Company’s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Company has promised to transfer to the customer. The Company applies the relevant output or input method consistently to similar performance obligations in other contracts.

When using the output method, the Company recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. Where the output method is used, for long term service contracts where the series guidance is applied (see below for further details), the Company often uses a method of time elapsed which requires minimal estimation. Certain long-term contracts use output methods based upon estimation of number of users, level of service activity or fees collected.

If performance obligations in a contract do not meet the overtime criteria, the Company recognises revenue at a point in time (see below for further details).

The Company disaggregates revenue from contracts with customers by contract type, as management believe this best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors.

Long term contractual - greater than two years

The Company provides its services under customer contracts with a duration of more than two years. The nature of contracts or performance obligations categorised within this revenue type relates to long term outsourced service arrangements in the public sector.

The Company considers that the services provided meet the definition of a series of distinct goods and services as they are (i) substantially the same and (ii) have the same pattern of transfer (as the series constitutes services provided in distinct time increments (e.g., daily, monthly, quarterly or annual services)) and therefore treats the series as one performance obligation. Even if the underlying activities performed by the Company to satisfy a promise vary significantly throughout the day and from day to day, that fact, by itself, does not mean the distinct goods or services are not substantially the same.

For the majority of long service contracts with customers in this category, the Company recognises revenue using the output method as it best reflects the nature in which the Company is transferring control of the goods or services to the customer.

Contract modifications

The Company’s contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new or changes the existing enforceable rights and obligations.

The effect of a contract modification on the transaction price and the Company’s measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways:

1. prospectively as an additional separate contract;

2. prospectively as a termination of the existing contract and creation of a new contract;

3. as part of the original contract using a cumulative catch up; or

4. as a combination of (b) and (c).

For contracts for which the Company has decided there is a series of distinct goods and services that are substantially the same and have the same pattern of transfer where revenue is recognised over time, the modification will always be treated under either (a) or (b); (d) may arise when a contract has a part termination and a modification of the remaining performance obligations.

The facts and circumstances of any contract modification are considered individually as the types of modifications will vary contract by contract and may result in different accounting outcomes.

Judgement is applied in relation to the accounting for such modifications where the final terms or legal contracts have not been agreed prior to the period end as management need to determine if a modification has been approved and if it either creates new or changes existing enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount of revenue recognised may be different in the relevant accounting periods. Modification and amendments to contracts are undertaken via an agreed formal process. For example, if a change in scope has been approved but the corresponding change in price is still being negotiated, management use their judgement to estimate the change to the total transaction price. Importantly any variable consideration is only recognised to the extent that it is highly probably that no revenue reversal will occur.

Deferred and accrued income

The Company’s customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and services being provided. The Company often agrees payment schedules at the inception of long term contracts under which it receives payments throughout the term of the contracts. These payment schedules may include performance-based payments or progress payments as well as regular monthly or quarterly payments for ongoing service delivery. Payments for transactional goods and services may be at delivery date, in arrears or part payment in advance. Where payments made are greater than the revenue recognised at the period end date, the Company recognises a deferred income contract liability for this difference. Where payments made are less than the revenue recognised at the period end date, the Company recognises an accrued income contract asset for this difference.

The Company participates in a defined contribution pension scheme where contributions are charged to the profit and loss account in the year in which they are due. This scheme is funded and contributions are paid to a separately administered fund. The assets of this scheme are held separately from the Company. The Company remits monthly pension contributions to Capita Business Services Ltd (“CBSL”), a fellow subsidiary undertaking, which pays the Group liability centrally. Any unpaid contributions at the year-end have been accrued in the accounts of CBSL.

In addition, the Company participates in a number of public sector defined benefit pension schemes which require contributions to be made to separate trustee-administered funds. Where the Company participates in these schemes, the participation is for a finite period and there are contractual protections in place to limit the financial risks to the Company of these schemes and as such are reported on a defined contribution basis recognising a cost equal to its contribution payable during the period. (See note 14.)

One of these schemes the Company participated in, is the Kent County Council Pension Fund (“Kent Fund”) which is part of the national Local Government Pension Scheme, a defined benefits pension arrangement. The Company’s participation in the Kent Fund ceased when the last remaining active member left on 28 January 2022. Under the terms of participation, when the Company ceased to employ any active members it triggered an assessment of the Company’s notional section in the Kent Fund. This assessment has regard to any contractual protections in place. The Kent Fund is currently in surplus; however, due to the contractual protections the Company benefitted from, it was confirmed in early 2024 that no surplus will be passed back to the Company. Nothing has been recognised in the accounts.

Finally, the Company participated in the West Sussex County Council Pension Fund (“West Sussex Fund”), also part of the national Local Government Pension Scheme. The Company’s participation in the West Sussex Fund ceased when the contract expired on 16 January 2020. Under the terms of participation, when the Company ceased to employ any active members it triggered an assessment of the Company’s notional section in the West Sussex Fund. On 2 February 2022 the West Sussex Fund confirmed that, in accordance with their funding strategy statement, a cessation valuation as at 16 January 2020 had been carried out and an exit credit payment of £192,587 was due from the West Sussex Fund to the Company. The amount was fixed and not subject to change. The West Sussex Fund made the payment to the Company on 17 March 2022. No further amounts will be due to the Company and the West Sussex Fund's assessed liability to the Company has been settled. See note 14 for further information on the treatment in the accounts.

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Investments and other financial assets

Classification

The Company classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through OCI or through profit or loss); and

• those to be measured at amortised cost.

The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows.

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade date (that is, the date on which the Company commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.

Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Impairment

The Company assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Trade and other receivables

The Company assesses on a forward-looking basis the expected credit losses associated with its receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with original maturities of three months or less. Bank overdrafts are shown within current financial liabilities.

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when recovery is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. The Company provides, on a discounted basis, for the future rent expense and related cost of leasehold property (net of estimated sub-lease income) where the space is vacant or currently not planned to be used for ongoing operations.

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to income statement.

The preparation of financial statements in conformity with generally accepted accounting principles requires the Directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the reported periods. Although these judgements and assumptions are based on the Directors' best knowledge of the amount, events or actions, actual results may differ.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of revenue and profit recognition on certain contractual arrangements. There are judgments to be applied to the measurement of revenue and resulting profit recognition, including the timing of revenue recognition and the recognition of assets and liabilities (for example, an assessment of onerous contracts) that result from the performance of the contracts.

Significant judgements and estimates made in these financial statements include those in relation to a material customer that entered administration during the year (refer to note 19). These include:

- the estimate of the allowance for expected credit losses against trade receivables and accrued income due from the customer (refer to note 8);

- the amount of revenue to be recognised under IFRS 15, due to amounts disputed and not paid by the customer, and assessment of whether it is was probable that consideration would be collected once the company became aware of the customer's financial difficulties; and

- the assessment of whether this now constitutes an onerous contract.

All assets such as trade receivables or accrued income in relation to the customer in administration referenced above have been impaired in full in these accounts. The Directors have since received representations from the administrator that costs legitimately incurred on the contract from February 2023 onwards will be treated as a cost of the administration, however as provision for an onerous contract has been booked in these accounts based on actual net cost incurred in existing the contract during 2023.

The company continues to engage constructively with legal action being pursued by the administrator against the end client and the Directors are comfortable that any future claims against the Company would be netted off against unpaid amounts owed by the customer.

The total revenue of the Company for the year has been derived from its principal activity wholly undertaken in the United Kingdom.

Audit fees are borne by the ultimate parent undertaking, Capita plc. The audit fee for the current period was £9,000 (2021: £12,600). The Company has taken advantage of the exemption provided by regulations 6(2)(b) of The Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 not to provide information in respect of fees for other (non-audit) services as this information is required to be given in the Group accounts of the ultimate parent undertaking, which it is required to prepare in accordance with the Companies Act 2006.

In 2022, the Company has written off receivables of £1,763,670 from the material customer referred to in note 19.

The reconciliation between tax charge and the accounting profit multiplied by the UK corporation tax rate for the years ended 31 December 2022 and 2021 is as follows:

A change to the main UK corporation tax rate was substantively enacted on 24 May 2021. The rate applicable from 1 April 2023 increases from 19% to 25%. The deferred tax asset at 31 December 2022 has been calculated based on this rate.

*Trade receivables at 31 December 2022 is presented net of a £2,116,404 provision for credit losses in respect of the material customer referred to in note 19.

**Amounts due from parent undertakings includes balances receivable from Capita plc (2022: £253,126; 2021: £30,039,711) which are receivable on demand and chargeable with interest as per the prevailing Bank of England rates.

The Company has recorded onerous contract provisions for contract with a material customer referred in note 19 where the expected economic benefits to be received are less than the unavoidable costs of meeting the obligations under the contract.

Property provisions (dilapidations) are made where the Company is required to perform repairs on leased properties prior to the properties being vacated at the end of their lease term. Provisions for such costs are made where a legal obligation is identified and the liability can be reasonably quantified.

Other provisions of £42,011 are mainly made up of provisions for expenses incurred on contracts which have already ended, including dilapidations on leased vehicles.

On 8 April 2022, the Company reduced its ordinary share capital to 1 ordinary share of £1 nominal value through the cancellation of 5 ordinary shares of £1 each via special resolution with the reduction credited to Retained Earnings.

The Company participates in both defined benefit and defined contribution pension schemes.

Contributions in respect of defined contribution pension schemes payable by the Company during the year amounted to £105,573 (Represented 2021*: £105,253).

*The pension charge excludes pension contributions paid by the Company on behalf of employees via a salary sacrifice arrangement. The 2021 comparative figure has also been re-presented to reflect this.

Where the Company participates in public sector defined benefit pension schemes (other than its former participation in the West Sussex County Council Pension Fund, see below), this is for a finite period and there are contractual protections in place allowing actuarial and investment risk to be passed on to the end customer via recoveries for contributions paid. The nature of these arrangements vary from contract to contract but typically allows for the majority of contributions payable to the schemes in excess of an initial rate agreed at the inception to be recovered from the end customer, as well as exit payments payable to the schemes at the cessation of the contract (where applicable), such that the Company’s net exposure to actuarial and investment risk is immaterial. Therefore the costs in relation to these schemes are reported on a defined contribution basis recognising a cost equal to its contribution payable during the period. No amounts are recognised on the Company’s balance sheet.

The Company ceased to participate in one of these schemes during 2022 (the Kent Fund). See below for further information.

The pension charge for these public sector defined benefit pension schemes is included in the above defined contribution amount.

Kent County Council Pension Fund (“Kent Fund”)

The Company participated in the Kent Fund which is part of the national Local Government Pension Scheme, a defined benefits pension arrangement.

The Company’s participation in the Kent Fund ceased when the last remaining active member left on 28 January 2022. Under the terms of participation, when the Company ceased to employ any active members it triggered an assessment of the Company’s notional section in the Kent Fund. This assessment has regard to any contractual protections in place. The Kent Fund is currently in surplus; however, due to the contractual protections the Company benefitted from, it was confirmed in early 2024 that no surplus will be passed back to the Company and nothing has been recognised in the accounts.

West Sussex County Council Pension Fund ("West Sussex Fund")

The Company participated in the West Sussex Fund which is also part of the national Local Government Pension Scheme, a defined benefits pension arrangement.

The Company’s participation in the West Sussex Fund ceased when the contract expired on 16 January 2020. Under the terms of participation, when the Company ceased to employ any active members it triggered an assessment of the Company’s notional section in the West Sussex Fund. On 2 February 2022 the West Sussex Fund confirmed that, in accordance with their funding strategy statement, a cessation valuation as at 16 January 2020 had been carried out and an exit credit payment of £192,587 was due from the West Sussex Fund to the Company. The amount was fixed and not subject to change. The Company previously expected that an exit deficit amount would be payable by the Company to the West Sussex Fund, and for which the Company was carrying a sufficient level of provision in the financial statements. The difference between the Company’s previous expectation (a payment to the West Sussex Fund of up to £0.56m) and the actual amount receivable by the Company - a gain of £0.765m - was treated as a credit to Admin Expenses in the Income Statement and included in Trade and Other Receivables on the balance sheet in 2021. The West Sussex Fund made the payment to the Company on 17 March 2022. This amount, received after 31 December 2021, was considered as an adjusting event and reclassified as a receivable in 2021's accounts. No further amounts will be due to the Company and the West Sussex Fund's assessed liability to the Company has been settled.

The average monthly number of employees (including non-executive directors) were:

Their aggregate remuneration comprised:

*The 2021 comparative figures have been re-presented to reflect the reclassification of employee contributions from pensions costs to wages and salaries. This has resulted in increase in wages and salaries by £107k and decrease in pension costs by the same amount. There is no impact on net assets, total profit or retained earnings as a result of this reclassification.

The number of Directors for whom retirement benefits are accruing under defined benefit schemes amounted to 2 (2021: 2). No Directors exercised their share options during the year (2021: nil).

The Company has provided in the normal course of its business performance bonds and bank guarantees of £344,000 (2021: £344,000). These are guaranteed by the Company's ultimate parent undertaking Capita plc.

The Company's immediate parent undertaking is Capita Business Services Ltd, a company incorporated in England and Wales.

The Company's ultimate parent undertaking is Capita plc, a company incorporated in England and Wales. The accounts of Capita plc are available from the registered office at 65 Gresham Street, London, England, EC2V 7NQ.

In December 2022, a material customer of the Company entered administration. Under the terms of the Company’s contract with the customer, the Company was obliged to continue to provide services regardless of the uncertainty with respect to payment for such services.

In February 2023, the Company entered into an agreement with the administrators of the customer such that the services it provided would be treated as an expense of the administration and payments made by the administrator. The directors of the Company expect these services to be settled in full by the administrators.

In October 2023, the customer contract was terminated, and the services being provided by the Company ceased.

The above has been taken into account when preparing these accounts, and in particular has informed the Directors’ judgement of the value of credit loss recognised in relation to the contract and whether the contract should be considered onerous.