The directors present their strategic report and the financial statements for Alpha CRC Limited (“the Company”) and the consolidated group of companies (“the Group”) for the year ended 31 December 2022.
Turnover for the year was £27.5 million (2021 - £22.5 million).
The loss for the year after tax amounts to £5.8 million (2021 - £1.5 million profit).
Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) for the year was a profit of £3.7 million (2021 - £3.1 million).
Turnover for the year was the highest in the Group’s history at £27.5 million, a 7% increase from the prior year. This was primarily driven by the full year effect of recent acquisitions - Intertranslations S.A. and its subsidiary Intertranslations Ltd in July 2021 and Chatterbox Voices Ltd in January 2022 – which diversified the Group’s service offering into public sector customers and strengthen its Audio-Visual localisation services capabilities respectively.
However, in January 2023 the Group lost its biggest customer due to a change in their localisation model, and despite organic growth in existing customers and new customer wins it is likely that 2023 revenues will be slightly below 2022.
Gross margin is calculated as revenue less total cost of production, including project management costs. It is primarily influenced by two factors: productivity of internal production and the ability of recruitment to keep pace with revenue, the latter because internal production is cheaper at the margin than outsourcing.
The loss for the year after tax includes £7.3 million of foreign currency hedging losses arising from the effects of extreme volatility in the currency markets brought about by the successive shocks of the war in Ukraine and the political and economic chaos in the UK after the fall of Prime Minister Boris Johnson. As these hedges unwind over 2023 and 2024, the directors are confident that the quantum of the hedging losses will be lower than shown within these financial statements. The directors have since adopted a more traditional rolling layered FX hedging policy.
Future developments
The directors will continue to focus on the Group’s main objective of “Global Scale, Local Experience. Tech-enabled Localization”.
In 2023 the Group initiated a process to secure equity investment and/or debt refinancing to help fund further acquisitions of which there are several under consideration, chosen to fill strategic gaps in the Group’s current service offering. Combined with significant investment into its existing sales and marketing function, the Group is well positioned to pursue its five-year goal of achieving £60 million of revenue and £10 million of EBITDA per annum and anchoring the Group firmly within the top 30 global language service providers.
The principal risks and uncertainties continuing to face the Group are broadly grouped as market, competition and price, and financial and these are reviewed thoroughly and regularly by the board of directors.
Market risk
By closely analysing and monitoring the market and the company’s performance, the directors are able to ensure that new sectors and opportunities are identified early and pursued where appropriate. Continued focus remains on both growing market share in core services whilst diversifying the Group into new services and markets.
Competition and price risk
Competition remains strong. The Group has for more than three decades responded to this risk with its ‘under-one-roof’ philosophy. By providing its customers with constant technological innovation, high levels of customer service (because translators, transcreators, project managers, desktop publishers and QA (quality assurance) staff are all under one roof) together with in-house developments of new products and services, the Group has established a firm and loyal customer base.
Financial risk
The Group’s operations expose it to a variety of financial risks that include liquidity risk, foreign exchange risk, interest rate risk and credit risk. The Group has policies in place to manage such risks and limit the adverse effects on the financial performance of the Group.
The Group’s profitable business continues to generate liquidity and additional funding requirements are managed by long term debt. Prices and costs will be controlled to ensure that liquidity is maintained alongside available finance resources to ensure that sufficient funds are available for operations and planned expansions.
Foreign exchange rate risk arises from transactions when goods and services are bought and sold in currencies other than sterling. Most of the Group’s revenues are invoiced in US dollars whereas the cost base is primarily sterling or euros. The directors manage the resulting foreign exchange risk through a rolling layered hedging policy designed to achieve a large degree of certainty over future foreign exchange rates and therefore profits and cash flows (assuming the underlying financial forecasts of the Group are broadly achieved).
The Group is financed by interest bearing loans and other debt which primarily carry floating rates of interest. The Group has a good degree of cover against its bank covenants, and these are monitored on a monthly basis.
The credit risk is attributable to its trade debtors and the risk of bad debts arising. The risk is spread over a large number of individual customers who tend to be well-known global enterprises and public sector organisations. Debts are closely monitored and are managed by robust collection procedures. The Group does not have a history of significant bad debts and the directors expect this to continue.
The key indicators used to monitor the financial performance of the Group are as follows:
Turnover for the year was £27.5 million (2021 - £22.5 million).
Gross margin for the year was 37.2% (2021 - 32.9%).
EBITDA for the year was a profit of £3.7 million (2021 - £3.1 million).
The key indicators used to monitor the operational performance of the Group are customer retention rate, new customer acquisition rate and staff turnover rate.
The Group is committed to investing in the skill base of the employees to ensure the Group delivers to the marketplace the most technologically advanced translation and localisation services possible. The Group has for several years operated its own in-house training programme for project managers and salespersons (“Alpha Academy”) and in 2023 established the Alpha Tech Team to share technological developments and further explore how new technologies such as Artificial Technology (“AI”) can drive operational efficiencies across the Group.
Recruitment and retention of key employees remains a critical factor in the Group’s successful delivery of its business plan. This is achieved by offering competitive remuneration packages, training, and career progression.
Going concern
The financial statements have been prepared on a going concern basis.
The going concern of the Company has been considered together with the Group’s going concern assessment. The Group and Company have procedures in place for reviewing future performance including budgeting and forecast trading and profitability.
The directors have prepared a detailed income statement, balance sheet and cash flow projections to 31 December 2024. These include reasonable assumptions and forecasts over assumed customers and turnover and take a prudent view of the costs and cash flows of the business. These forecasts demonstrate adequate headroom on profitability and cash and a continued compliance with bank covenants.
Liquidity is provided through existing cash reserves, shareholder loans and bank loan facilities, as detailed in note 21.
The directors have reviewed these forecasts for the 12 months from the date of this report and as a result of that review, the directors have a reasonable expectation that the Group and Company has adequate resources to continue as a going concern for the foreseeable future and accordingly, the Group and Company continues to adopt the going concern basis in preparing the annual report and financial statements.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Information in relation to the Group’s management of financial risk is disclosed within the strategic report.
The Company recognises the benefit of keeping employees informed of the progress of the business and of involving them in the Company’s performance and, accordingly maintains regular communications with employees and has well established consultation arrangements.
Information in relation to these are contained within the strategic report.
Azets Audit Services were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
As the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
We have audited the financial statements of Alpha CRC Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 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).
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.
Material uncertainty related to going concern
We draw attention to note 1.3 in the financial statements, which indicates that the group incurred a net loss of £5,765,440 during the year ended 31 December 2022 and, as of that date, the group's liabilities exceeded its total assets by £2,496,641. As stated in note 1.3, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and 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.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £5,398,383 (2021 - £1,122,759 profit).
Alpha CRC Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is St. Andrews House, St. Andrews Road, Cambridge, Cambridgeshire, United Kingdom, CB4 1DL.
The group consists of Alpha CRC 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 certain financial instruments at fair value. 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.
These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the group's ability to continue as a going concern.
During the year the group incurred a net loss of £5,765,440 and, as of the balance sheet date, the group's liabilities exceeded its total assets by £2,496,641. The loss for the year after tax includes £7.3 million of foreign currency hedging losses arising from the effects of extreme volatility in the currency markets. As these hedges unwind over 2023 and 2024, the directors are confident that the quantum of the hedging losses will be lower than shown within these financial statements. The directors have since adopted a more traditional rolling layered FX hedging policy.
The directors have prepared a detailed income statement, balance sheet and cash flow projections to 31 December 2024. These include reasonable assumptions and forecasts over assumed customers and turnover and take a prudent view of the costs and cash flows of the business. These forecasts demonstrate adequate headroom on profitability and cash and a continued compliance with bank covenants.
Liquidity is provided through existing cash reserves, shareholder loans and bank loan facilities, as detailed in note 21. The company is working with its bank to re-finance the current facilities.
The directors have reviewed these forecasts for the 12 months from the date of this report and as a result of that review, the directors have a reasonable expectation that the Group and Company has adequate resources to continue as a going concern for the foreseeable future and accordingly, the Group and Company continues to adopt the going concern basis in preparing the annual report and 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.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight line basis over their useful economic life of 10 years.
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 year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
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.
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.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Depreciation and amortisation rates are estimated by the directors based on the economic life and likely residual value of the assets concerned.
Revenue includes estimates in relation to accrued income arising from work in progress. This includes amounts which are yet to be invoiced but where work has been carried out in respect of projects.
Turnover includes accrued and deferred revenue. Accrued revenue relates to income that is earned, but not yet invoiced. Deferred revenue relates to income that is received but not yet earned.
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 (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
There was a material impairment loss in the period in relation to the software acquired with the acquisition of SQA Partners and building improvements made to the office in France. During the annual test for impairment, it was deemed that the assets would not generate future economic benefits through use or sale and therefore they were impaired fully to nil value.
More information on impairment movements in the year is given in note 12.
Computer software was revalued during 2015, if the assets were stated on a historical cost basis rather than a fair value basis, the total amounts included would have been as follows:
Development costs represent the cost of designing technology being used by the company in rendering its services. The expenditure is amortised on a straight line basis over a period of 10 years.
More information on impairment movements in the year is given in note 12.
Details of the company's subsidiaries at 31 December 2022 are as follows:
All of the above subsidiaries are accounted for in these consolidated group accounts.
Chatterbox Voices Limited was acquired during the period. The net assets acquired were represented by tangible fixed assets of £7,679, current assets of £494,940, current liabilities of £(321,211), non-current liabilities of £(175,961) and goodwill of £463,273.
The revolving credit facility is secured by a fixed and floating charge over the assets of the group and supported by personal guarantees from the directors of the company. Amounts owed to group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable upon demand.
Bank loans
The Company’s bank loans consist of three term loans. Facility A for £3,800,000 is accruing interest at rates of the Bank of England’s Base Rate plus 5.7% with repayments made monthly and the final repayment due July 2025. Facility B for £2,700,000 is accruing interest at rates of the Bank of England’s Base Rate plus 6.55% with repayments due July 2025. Facility C for £1,350,000, taken out during the year, is accruing interest at rates of the Bank of England’s Base Rate plus 10.0% with monthly repayments and the final repayment due September 2023. The bank loans are secured on Company and Group assets with a cross guarantee in place between the Company, Language Technology Centre Limited and Chatterbox Voices Limited and £600,000 in personal guarantees from P Nash and I Weiss. Any debt interest payable is recognised within other creditors.
The Group’s bank loans consist of term loans totalling £777,006 from Greek banks, all accruing interest at rates of Euribor 6 months plus 3.9% with repayments made monthly, and Coronavirus Business Interruption Loan Scheme (CBILS) accruing interest at rate of 8.9% with repayments made monthly and the final repayment due July 2025. Any debt interest payable is recognised within other creditors.
Bank overdrafts
Intertranslations S.A. has a bank overdraft facility of €300,000 with the Piraeus Bank.
Other loans
Consists of Covid-19 support provided by the French government.
Revolving facility
The Company has a revolving credit facility provided in conjunction with its bank loans.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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 share premium account includes the premium on issue of equity shares, net of any issue costs.
This reserve includes all current and prior period surpluses and deficits on the revaluation of fixed assets.
The capital redemption reserve includes amounts transferred following the redemption or purchase of own shares.
The treasury reserve includes amounts transferred following the transfer of shares from a shareholder into treasury.
This reserve includes any premiums received on acquisition of subsidiary companies.
The profit and loss account is the cumulative profit and losses, net of dividends paid and other adjustments.
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:
Following the end of the accounting period, at the request of the bank, the company has been working towards re-financing the banking facilities.
The remuneration of key management personnel is as follows.
All transactions and balances with Alpha CRC Limited’s wholly owned subsidiaries have been eliminated upon consolidation. The Company has taken advantage of the exemption under Financial Reporting Standard 102 from disclosing transactions with other wholly owned group companies.
The directors P Nash and I Weiss have given personal guarantees to the company's bankers of £250,000 in support of banking facilities and a further £600,000 in support of loan facilities.
At the balance sheet date directors loans, which are unsecured, interest-free, have no fixed date of repayment and are repayable on demand, consist of £1,111,225 owed to I Weiss by the company (2021: £353,043) and £153,824 owed to P Nash by the company (2021: £106,823 was owed by P Nash to the company).
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual financial statements by virtue of s479A: