INSPIRIT_CARREY_TOPCO_LIM - Accounts
INSPIRIT_CARREY_TOPCO_LIM - Accounts
The directors present the strategic report for the period ended 1 July 2023.
On 13 September 2022 the company's subsidiary Inspirit Carrey Bidco acquired 88.5% of the issued share capital of Alpha 3 Manufacturing Limited and Tekdata Interconnections Limited. This was a strategic investment in order to return the subdidiaries to profitability. Following the change of control, the directors intend to continue to develop the subsidaries existing products and markets.
During the year the business was impacted by customers destocking, with customers having built up large stocks during the year to June 2022, to negate supply chain shortages during COVID. The cost base was aligned to match ongoing demand and the group is now well placed for the future.
The impact of destocking was offset however by some of the continued benfits of the group’s cable harness production and electro-mechanical production being separated into two centres of excellence, which has continued to benefit customers by offering a full suite of products to service their cable harness requirements from one site whilst allowing the group to attract higher qualified staff and offer varied career progression through multiple operational roles.
The group continues to invest in its people and capabilities to further increase efficiency, flexibility, and cost competitiveness to strengthen its electro-mechanical and cable harness design and manufacturing capabilities.
In the electromechanical products and components market, the group's key objective is that of moving away from high volume low margin customers to lower volume but higher margin specialist niche markets. This includes moving into new sectors and offering value added services such as design and engineering support to differentiate its offering from its competitors.
In the specialist cabling market, the group's key objective is to remain focussed upon further developing its presence in aerospace, defence, medical, industrial and space markets.
This focus has resulted in strengthening relationships with key customers in these sectors and a reduction in business conducted with customers that do not meet the strategic objectives of the business. The change in customer mix is beginning to result in an increase in the gross margin profile of the business.
Set out below are the Groups' seven major business risks, together with the systems and initiatives in place to address them:
Market risk
The electro-mechanical products market is subject to fluctuations in demand by customers. These fluctuations are linked to the economic cycle. The Group actively seeks to manage its exposure to these fluctuations by monitoring stock levels, restricting its dependence on large customers and maintaining close relationships with suppliers.
Credit risk
The Group assesses the creditworthiness of new customers before commencing trade with them. Based on this and the customer's capital base, authorised limits of credit are set. A proactive approach to the identification and control of bad and doubtful debts is maintained and significant credit risks are highlighted to the board
Interest Rate Risk
The Group have taken out interest bearing loans with a mixture of fixed and floating interest rates. The proportion of the combined Group's debt subject to fixed rates is 53%.
Operational risk
This relates to the risk of financial loss and damage to reputation resulting from inadequate or failed internal processes and systems and from the actions of people or external events. The Group manages this risk through appropriate controls and loss mitigation actions. Examples include:
Taking out sufficient insurance cover including for business interruption;
Maintaining a detailed disaster recovery plan at each site;
Maintaining rigorous data backup procedures;
Performing regular risk assessments at each of the Group's locations;
Carrying out a regular review of the principal suppliers and customers of the Group, and how each impact on the Group's business;
Regularly reviewing actual performance against budgets and forecasts; and
Establishing clearly defined procedures for the authorisation of major new investments and commitments.
In addition, specialist support functions provide expertise in ensuring the Group adheres to local regulatory and legal requirements.
Liquidity risk
This relates to the risk that the Group is unable to fund its requirements due to insufficient banking facilities. During the period under review the Group funded its day-to-day operations through a mixture of retained profits and inter-company current account facilities, and its long term assets through inter-company financing.
Following the change in control on 13 September 2022, the Group funds its day-to-day operations through a revolving credit facility and its long term assets through a mixture of retained earnings and long term loans.
The Group's policy on liquidity is to ensure that there are sufficient medium and long term committed borrowing facilities to meet funding requirements. It is Group policy not to enter into speculative transactions.
Exchange Rate Risk
The Group sells its products and purchases its material primarily in sterling. In addition, there are some transactions undertaken in US dollars and Euros. The Group manages its exchange exposure through natural hedging and keeps under review further risk mitigation through forward contracts.
Inflation Risk
The Group manages inflation risks through passing on material price increases where possible and by monitoring input costs closely.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that Inspirit Carey Topco Limited and its subsidiary undertakings, (the “Group”), has adequate resources to continue in operational existence for the foreseeable future; hence, they continue to adopt the going concern basis of accounting in preparing the financial statements.
The Group has prepared operating entity forecasts and projections up to 30 June 2025 which cover at least 12 months from the date of approval of the financial statements. The assumptions used in these forecasts are believed to be reasonable and prudent, include cost savings from fully completed restructuring programmes within the Group and show that the Group will be cashflow positive in the near term.
The Group has debt facilities from a third-party lender. Discussions are ongoing with the third party lender to re-set covenants to provide additional liquidity in the event of ongoing trading challenges for the Group. In addition, Inspirit Capital, the ultimate owner of the Group has provided a letter indicating that it remains supportive of the business and that its current intention is to support the Group should additional funding be required (subject to Inspirit Capital Investment committee approval).
The directors have therefore concluded that they have an expectation that the company has adequate resources to continue in the near future. As such, they therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.
The directors focus on two key indicators of financial performance, sales and gross profit margin. These are monitored regularly with explanations sought for variances against budgets, forecasts, and prior year.
| 2023 |
|
Sales | £14,693k |
|
Sales change | N/A |
|
Gross profit | £2,418k |
|
Gross profit margin | 16.5% |
|
In addition, detailed financial statements are reviewed each month by the leadership team and the board of directors. These provide analysis of bookings, sales, cost of sales, gross profit and operating expenses, each measured against budget, forecast and prior year. Working capital is also closely monitored.
The directors anticipate that the business environment will remain competitive. However, the focus on developing its presence in aerospace, defence, medical, industrial and space markets is beginning to deliver margin benefits. This focus, combined with improving operation performance, underpins the board’s confidence in improved business performance in the medium term.
On behalf of the board
The directors present their annual report and financial statements for the period ended 1 July 2023.
The results for the period are set out on page 10.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
Azets Audit Services Limited were appointed as auditor to the company in accordance with section 485 of the Companies Act 2006, and is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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.
We have audited the financial statements of Inspirit Carrey Topco Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 1 July 2023 which comprise 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 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).
give a true and fair view of the state of the group's and the parent company's affairs as at 1 July 2023 and of the group's loss for the period 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 period 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.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias; and
Performing audit work over the timing and recognition of revenue and in particular whether it has been recorded in the correct accounting period.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Use of our report
This report is made solely to the 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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 16 to 32 form part of these financial statements.
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 period was £132,000.
Inspirit Carrey Topco Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office 105 Piccadilly, London, W1J 7NJ.
The group consists of Inspirit Carrey Topco Limited and all of its subsidiaries.
The parent company was incorporated on 28 April 2022 therefore the financial statements present the 14 months to 1 July 2023 and hence there is no comparative period.
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 £1,000.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Inspirit Carrey Topco Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 1 July 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.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
The directors have, at the time of approving the financial statements, a reasonable expectation that Inspirit Carey Topco Limited and its subsidiary undertakings, (the “Group”), has adequate resources to continue in operational existence for the foreseeable future; hence, they continue to adopt the going concern basis of accounting in preparing the financial statements.
The Group has prepared operating entity forecasts and projections up to 30 June 2025 which cover at least 12 months from the date of approval of the financial statements. The assumptions used in these forecasts are believed to be reasonable and prudent, include cost savings from fully completed restructuring programmes within the Group and show that the Group will be cashflow positive in the near term.
The Group has debt facilities from a third-party lender. Discussions are ongoing with the third party lender to re-set covenants to provide additional liquidity in the event of ongoing trading challenges for the Group. In addition, Inspirit Capital, the ultimate owner of the Group has provided a letter indicating that it remains supportive of the business and that its current intention is to support the Group should additional funding be required (subject to Inspirit Capital Investment committee approval).
The directors have therefore concluded that they have an expectation that the company has adequate resources to continue in the near future. As such, they therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.
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. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of turnover can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities 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.
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.
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, loans from fellow group companies and preference shares that are classified as debt, 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
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 period. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
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.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Interest income
Interest income is recognised in the profit or loss using the effective interest method.
Finance costs
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Borrowing costs
All borrowing costs are recognised in profit or loss in the period in which they are incurred.
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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Investments are assessed each year for indicators of impairment against the carrying value of the investment. Where indicators are identified the discounted future cash flows of the investments are considered in assessing whether the valuation of the investment is supported or whether impairment is required. Future cash flows and the discount rate used are significant estimates in this situation.
Management estimation is required to determine any potential impairment of inventory, as well as estimating the magnitude of the impairment.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The group establishes a provision for stocks that are estimated not to be recoverable. When assessing recoverability the directors have considered factors such as the aging of the stocks, damaged and or obsolete stocks and past experience of recoverability.
In order to carry out the group's principal activities, a labour intesive process is required to raw materials to finished goods. Stock values include any cost of such labour and overheards attributable to generating finished goods, as management believe this is the most suitable costing method to take into account the matching concept of accounting.
Turnover is wholly attributable to the principal activities for the group.
The group incurred redundancy costs during the period as part of a strategic review of the business' underlying performance and fixed operating costs.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
No remuneration was paid to the directors.
The actual charge for the period can be reconciled to the expected credit for the period based on the profit or loss and the standard rate of tax as follows:
A deferred tax asset for accumulated tax losses has not been recognised due to uncertainty of when this will be utilised, and therefore gives rise to an unrecognised deferred tax asset of £872,000.
The long-term loans are secured by way of fixed and floating charges over the assets of the group.
The long-term loans are secured by way of fixed and floating charges over the assets of the group.
Bank loans comprise a receivables facility, an inventory facility and terms loans, each bearing interest rates between 2.85% and 5.75% above the Bank of England base rate. Term loans have been subject to capital repayments from April 2023.
Loans from related parties include an interest bearing loan from Avnet Bidco Limited. Interest rates are fixed stepped rates of between 1% and 5%. Interest accrues on a compound basis and is repayable with capital in 2027.
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.
Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights. They do not confer any rights on redemption.
Preference shares have attached to them full rights in the company with respect to voting, dividends and distributions. Preferential dividends are recognised at a rate of 10% of the issue price per preference share to the extent that the company has available profits. Preference dividends accrue on a day to day basis and shall compound annually on the anniversary of the date of issue. The preference dividend shall be paid upon the winding up of the company or an exit event.
At 1 July 2023 cumulative dividend arrears due for the period were £119,000.
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:
On 14 September 2022 the group acquired 88.5% percent of the issued capital of Alpha 3 Manufacturing Limited and Tekdata Interconnections Limited.
Details of the company's subsidiaries at 1 July 2023 are as follows:
The ultimate controlling party is Inspirit Gp LLP by virtue of majority shareholding in the group.