LBGH_LIMITED - Accounts

The directors present the strategic report for the year ended 31 August 2023.

The Group provides accountancy, audit, taxation, corporate finance, financial services and general business advisory services.false

On the 10th May 2023, Sovereign Capital Partners LLP completed on their Investment in LB Group. As a result the company was acquired by Blue BidCo (Guernsey) Ltd. The Company intends to grow organically and through carefully selected acquisitions.

On the 10th May 2023, LB Group Limited became an associate of LBGH Limited and has been accounted for using the equity method from that date. LBGH Limited retained the 100% economic rights but control was reduced to 49% following a share issue in LB Group. Therefore, from that date, the net profit from LB Group is shown as income from associates in the profit and loss statement. Prior to this date LB Group Limited was a subsidiary and the full profit and loss and balance sheet was consolidated. See note 17 for further information.

On the 10th May 2023, the Company acquired the remaining 50% shareholding of LB Financial Solutions Ltd, a company that acts as an intermediary in the provision of financial services products.

The Group continues to invest in its staff, quality of work, client relationships and reputation. Performance of the Group is monitored regularly throughout the year using a range of Key performance indicators. The main measure of the Group's performance is operating profit from continuing operations before depreciation, interest, intangible asset amortisation and exceptional items ("EBITDAE").

EBITDAE increased by £0.5 million (21.8%) to £3.0 million due to strong organic growth and improved operational performance throughout the business.

After depreciation of £0.1 million (2022: £0.1 million) and interest of £0.4 million (2022: £0.6 million) and amortisation charges of £0.9 million (2022: £0.9 million) and exceptional costs of £0.9 million (2022:£-0.6 million), there was an operating profit for the year of £0.2 million (2022:£1.0 million).

Exceptional items included within operating profit of £0.9m (2022:£-0.6 million) include employment related tax costs of £1.3 million (2022: £nil), and other exceptional costs of £0.1 million (2022:£0.1m), offset by normalised director remuneration of £0.5 million (2022: £0.7 million).

The directors meet frequently throughout the year to monitor risks across the business. The directors review and agree policies for managing each of the risks.

The principal risks and uncertainties facing the Company are those listed below:

Liquidity/cash flow risk

Liquidity and cash flow risk is the risk that cash may not be available to pay obligations when due. The Company maintains significant availability in liquid funds to mitigate against this risk. The Company includes the use of forecasts and budgets to monitor and control its cash flows and working capital requirements.

Credit risk

Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. The main areas where the Company is exposed to credit risk are trade debtors and amounts due under contracts.

The Company mitigates this risk by having a broad customer base and having significant management focus on billing and the recovery of aged debt.

Interest rate risk

The Company's operations and business growth were previously partly financed by external borrowings. Such facilities have been repaid in full during the year. Accordingly, there is currently no exposure risk to interest rate rises.

Inflation risk

The rising rate of inflation is a growing risk to the Company as it will impact staff and other costs within the business. This will continue to be closely monitored within the Company.

Availability of IT systems

The Company has a number of Information Technology (IT) systems in order to carry out its day-to-day business and service its clients' requirements. There is a risk that any of these systems, as part of the overall IT infrastructure, could fail, individually or collectively, with an adverse effect on the Company's operations. The Company regularly monitors this risk and has continuity plans in place.

People risks

The willingness of competitors to offer key staff higher remuneration packages continues to be a risk to the Company's ability to attract and retain key people.

The Company performs periodic benchmarking of salaries to ensure the Company remains competitive.

The group's aim is to continue to achieve growth in terms of market share and profitability in future years.

The group will continue to invest in its staff and premises, to ensure that its service and reputation is maintained and to further increase growth in the following year.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 August 2023.

The principal activity of the company and group continued to be that of the provision of accountancy, audit, taxation, corporate finance, financial services and general business advisory services. The group was able to offer services such as being the intermediary in the provision of financial services products during the year due to a new group company and diversification of group services.

The results for the year are set out on page 8.

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

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

The Group continues to expand and invest in new and existing staff with specialist skills which will allow the Company to improve and grow its service to clients.

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

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the ;

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

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of LBGH Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 August 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including 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 the parent company's affairs as at 31 August 2023 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 Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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 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 other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

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

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations was as follows:

• the engagement principal ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;

• we identified the laws and regulations applicable to the company through enquiry of management, and from our commercial knowledge and experience of the accountancy practice sector;

• we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including taxation legislation and the Companies Act 2006,

• we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management; and

• identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit

We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining how fraud might occur, by:

• making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and

• considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.

To address the risk of fraud through management bias and override of controls, we:

• performed analytical procedures to identify any unusual or unexpected relationships;

• tested journal entries to identify unusual transactions;

• assessed whether judgements and assumptions made in determining the accounting estimates referred to in note 2 were indicative of potential bias; and

• investigated the rationale behind any significant or unusual transactions.

In response to the risk of irregularities and non-compliance with laws and regulations , we designed procedure which included, but were not limited to:

• agreeing financial statement disclosures to underlying supporting documentation; and

• enquiring of management as to the actual and potential risk of litigation and claims;

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing Standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

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

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 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.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £496,184 (2022 - £1,848,450 profit).

LBGH Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is The Octagon Suite E2, 2nd Floor Middleborough, Colchester, Essex, CO1 1TG.

The group consists of LBGH Limited and all of its subsidiaries.

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

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, modified to include include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date.

Merger relief has been applied and the investment in the subsidiary LB Group Ltd is recorded at fair value. All other subsidiaries, joint ventures and associates are accounted for at cost less impairment.

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

The consolidated group financial statements consist of the financial statements of the parent company LBGH Limited together with entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates. More information on the consolidation of the company's subsidaries is provided in note 16.

All financial statements are made up to 31 August 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

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

Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.

The Group investment in associate is accounted for using the equity method. Under the equity method, the investment is initially measured at cost. Subsequently, the carrying amount is adjusted to recognise changes in the Group's share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment separately. The income statement reflects the Group's share of the associate's profit or loss after tax and any non-controlling interests in the subsidiaries of the associate.

The aggregate of the Group's share of profit or loss of the associate is shown on the face of the income statement within operating profit. The financial statements of the associate are prepared for the same reporting period as the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment. At each reporting date, the Group determines whether there is objective evidence that the investment is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss in the income statement.

At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.The net current liabilities of the group are supported its parent company.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.

Accountancy Services

Revenue from contracts for the provision of professional services represents amounts chargeable for professional services provided during the year, inclusive of direct expenses incurred on client assignments net of VAT. Revenue is recognised when a right to consideration has been obtained through performance under each contract. Consideration accrues as contract activity progresses by reference to the value of the work performed.

Unbilled revenue is included in debtors as 'amounts due under contracts'

Financial Services

Turnover comprises advice charges paid by clients who receive advice with their mortgage application process. It also includes third party fee and commission income, due from a third-party products provider in respect of products sold on their behalf. Turnover is exempt from VAT.

The provision of initial advice is a distinct performance obligation. As a result, initial advice charges are recognised in full on acceptance and inception of the associated policy by the relevant product provider.

Third party fee and commission income is recognised in full on acceptance and inception of the associated policy by the relevant third party product, hence it is appropriate that this revenue stream is recognised on the same basis as initial advice charges. The third-party product provider retains the right to clawback of commission on an indemnity basis, revenue on the sale of these products is recognised to the extent that it is highly probable the revenue will not be clawed back. Separately, a provision is recognised for amounts received by the Company which are expected to be clawed back.

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Goodwill arising upon consolidation for the acquisition of LB Group Limited is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.

Post acquisition of LB Group, the subsidiary acquired another business which is amortised on a systematic basis over its expected life of 5 years.

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

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

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

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

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.

The investment in LB Group Limited is measured at fair value as merger relief has been applied.

All other investments in subsidiaries, associates and jointly controlled entitles are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

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

An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.

Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.

In the parent company financial statements, investments in associates are accounted for at cost less impairment.

Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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

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

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

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

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

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

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

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

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

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

Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event, it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

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

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

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

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

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

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

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

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

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

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

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

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value.

The investment in the LB Group is stated at estimated fair value. The company has an annual process of reviewing its fixed asset investments for indicators of impairment. Areas of critical judgement include estimates of future earnings and consideration of whether there is a willing buyer in the market for these investments.

Provision is made based upon actual recovery statistics in respect of any anticipated under recovery of unbilled completed work.

Exceptional costs total £1,255,729 in the year, of which £551,740 is included in administrative expenses and £703,989 is included in Interest payable and similar expenses.

The exceptional costs during the year related to the settlement of employment costs related to a tax scheme that some of the employed company directors were part of.

The amortisation of intangible assets is included within administration expenses.

The audit fee attributable to the Company is £4,750 (2022 £5,000). No other services were provided to the Company by the Company’s auditor in either year.

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

Their aggregate remuneration comprised:

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

Details of the company's subsidiaries at 31 August 2023 are as follows:

LB Corporate Finance Ltd is a dormant subsidiary that generated neither a profit or loss has been excluded from the consolidation.

This note presents information about the Group's investment in its associates, which is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. The Group determines whether it has significant influence based on the voting and any other rights it holds as a result of its investment and also any contractual arrangements in place. Normally, if the Group holds over 20% of the voting rights of an entity without having control or joint control of that entity, the investment will be treated as an associate unless it can be clearly demonstrated that this is not the case.

Regarding the investment in LB Group Limited, the Group has 100% economic interest in its associate but does not have a controlling interest because it holds more than 20% but less than 50% of the voting rights. The remaining voting rights in the associate are shared equally by two individuals. As a result of its economic interest, the Group equity accounts 100% of revenue, expenditure and net assets of this associate.

Details of associates at 31 August 2023 are as follows:

LB Group Limited has issued share capital and holdings as follows:

3,951 Ordinary @ £0.10 per share - all held by LBGH Limited (19.2%)
4,626 Ordinary A @ £0.10 per share - all held by LBGH Limited (22.4%)
1,517 Ordinary B @ £0.10 per share - all held by LBGH Limited (7.4%)
10,506 Ordinary C @ £0.10 per share - all jointly held by two shareholders (51.0%)

As at 31 August 2023, LB Group Limited had aggregate capital and reserves of £5,240,822. For the year ending 31 August 2023, LB Group Limited made a profit of £539,187, £63,318 of which was consolidated as a subsidiary prior to the transfer to an associate.

The group also has significant holdings in undertakings which are not consolidated:

The company loan previously held by LBGH Limited carried a fixed interest rate of 10% but has been repaid in full during the year.

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

The deferred tax liability set out above was previously consolidated from LB Group Limited, as a result of this subsidiary becoming an associate during the year, the deferred tax balance has been adjusted.

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

The ordinary, ordinary A and ordinary B shares are each noted to have separate rights, so that a dividend may be declared on each class of share, independently of any dividend declared on any other class of shares. Each share is entitled to one vote per share.

On the 10th May 2023, Sovereign Capital Partners LLP completed on their Investment in LB Group. As a result of this transaction the ordinary A and ordinary B shares are now owned by Blue BidCo (Guernsey) Ltd.

On 24th February 2021, the company acquired a 92.53% interest in LB Group Limited by way of cash and deferred consideration as well as a share for share exchange, such that merger relief under the Companies Act 2006 applied. However, given that the investment in LB Group Limited has been recognised on a fair value basis, a merger relief reserve arises.

On 10th May 2023, the company purchased the remaining 7.47% interest in LB Group Limited for £1.

Subsequently, LB Group Limited issued shares to directors which resulted in a reduction in the voting rights to 49% but no change in economic rights. As a result of no change in the economic interest of LB Group the Merger relief reserve is retained.

The profit and loss reserve includes all current and prior retained profits and losses.

On 10 May 2023 the group acquired the remaining 50% percent of the issued capital of LB Financial Solutions Ltd. At this date, LB Financial Solutions Ltd became a wholly owned subsidiary. As a result of the 100% shareholding held by LB Financial Solutions Ltd, LB Wealth Partners Ltd also became a wholly owned subsidiary on this date and has been accounted for using the acquisition method of accounting.

The negative goodwill arising on the acquisition is credited to administrative expenses in the profit and loss account

On 10 May 2023 LB Group Limited issued additional share capital in order to comply with the control requirements within the Audit Regulations and Guidance issued by the ICAEW, section 2.03.

As a result of this share issue, LBGH now holds 49% of the issued share capital, down from the 100% holding prior to 10 May 2023.

Therefore LB Group Limited has been treated as a subsidiary disposal, with the net consideration matching the net asset value on transfer in order to be accounted for as an associate with 100% economic interest. See note 17 for further information.

Included in these financial statements are profits of £234,045 arising from the company's interests in LB Group Limited up to the date of it's transfer from subsidiary to associate.

HM Revenue and Customs (HMRC) have enquired into tax arrangements entered into by the Company. The directors and the Company have voluntarily settled the tax and national insurance liabilities that arose from the arrangements. At the date of approval of these financial statements, the final outcome of the enquiry cannot be predicted.

Operating lease payments represent rentals payable by the company for certain of its office properties. Leases are negotiated for an average term of 14 years.

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

In the normal course of business, the Company has a number of transactions with LB Group Ltd, a related party as LBGH Ltd is a 49% shareholder in the business and there are common directors. This principally comprises management charges under the service agreement.

During the year, the company provided management services to LB Group Ltd totalling £1,000,000 (2022: £1,000,000).

The company has the following payable balance within other creditors.

Amounts due to related parties:

LB Group Ltd £3,949,852 (2022 £2,201,646)

Included in other debtors/creditors for the group and the company, are aggregate amounts due by/to directors of £nil (2022 - £108,307 and £248,801 respectively), these balances are interest free.

Dividends totalling £0 (2022 - £450,000) were paid in the year in respect of shares held by the company's directors.

Various costs relating to staff and director salaries and pension costs have been reclassified from administrative expenses to cost of sales in LB Group Limited. This is to portray a more accurate representation of the split of staff throughout the business.

The impact on 2022 is as follows:

Increases to cost of sales/decreases to administrative expenses:

Wages and salaries    £3,847,393

Staff pension costs    £161,417

Directors' remuneration     £513,352

Directors' pension costs    £50,304

The Company's immediate parent company is Blue BidCo (Guernsey) Limited, registered in Guernsey.

The smallest and largest group in which the results of LBGH Limited are consolidated is that headed by LBGH Limited. The consolidated financial statements of LBGH Limited are available to the public and may be obtained from:

Companies House,

Crown Way,

Cardiff,

CF14 3UZ

and also from:

LGBH Limited

The Octagon, Suite E2

2nd Floor Middleborough

Colchester

Essex

CO1 1TG

The Company's ultimate parent company is Blue TopCo (Guernsey) Limited, registered in Guernsey.