Company Registration No. 03206355 (England and Wales)
MORGAN PHILIPS UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
MORGAN PHILIPS UK LIMITED
COMPANY INFORMATION
Directors
C H Dumon
F Sallembien
A De Bretteville
A D Mueller
(Appointed 1 September 2022)
P Tour
Company number
03206355
Registered office
Summit House
12 Red Lion Square
LONDON
WC1R 4HQ
Auditor
Johnston Carmichael LLP
227 West George Street
Glasgow
G2 2ND
MORGAN PHILIPS UK LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Directors' responsibilities statement
5
Independent auditor's report
6 - 9
Statement of comprehensive income
10
Balance sheet
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 28
MORGAN PHILIPS UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -
The directors present the strategic report for the year ended 31 December 2022.
Fair review of the business
Morgan Philips UK Limited (“the Company”) provides professional staffing services on a permanent and contract basis and also talent consultancy services to businesses operating in many industries.
The Company has one non-trading branch outside the UK which operates in the Republic of Ireland.
The directors are pleased to report turnover of £22.5 million (2021: £25.0 million), which generated a Gross Profit of £6.9 million (2021: £7.5 million). Moreover, operating profit was £0.1 million in the year (2021: £0.2 million).
The Company plans to further invest in the FYTE (junior to mid-management level), MPES (aka “Executive Search”; Senior management level) and Talent Consulting brands to further raise their profiles in the marketplace.
Overall, the directors are satisfied with the trajectory of the business and its performance.
Principal risks and uncertainties
The future growth of the business depends on the ability of the Company to build strong professional relationships with clients and candidates.
Trading conditions remained challenging in 2022 in a mature and highly competitive marketplace. The directors are confident that the investment in new Morgan Philips brands will result in future growth, improved market share and an upward trajectory in its operating results.
The principal risks and uncertainties affecting the business include the following:
Macro-economic climate
The UK marketplace is improving however remains highly competitive. The Company monitors actual operating performance against forecasts on a regular basis to ensure performance is as expected
Credit risks
The Company maintains strong relationships with each of its key customers and has appropriate credit terms agreed with all customers, which are closely managed. The Company makes a concerted effort to clear queries, reduce older debt and improve its cash flow
Legislative environment
The Company regularly monitors relevant forthcoming and current legislation, including ability of candidates having the right to work, and its potential impact on the Company’s finances and operating procedures
Retention of quality staff
The Company has bi-annual appraisals for all employees and specific progression plans for high performing key individuals. The Company also benchmarks benefits and remuneration to remain competitive in the attraction and retention of high performers.
Data security
The Company has comprehensive data protection policies and procedures in place for management of confidential and personal data. Data security is reviewed on a regular basis as part of the IT strategy where risks and remediation are under constant review.
The Company also undertakes penetration testing to gain assurance that system security cannot be breached by malevolent external parties.
Currency exchange
The Company monitors closely short, medium and long term foreign exchange rates and manages its currency to protect it against adverse currency fluctuations.
MORGAN PHILIPS UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Future outlook
Market conditions remained extremely competitive in 2022. The UK recruitment market is mature with significant competition from both large well established organisations as well as a significant number of niche low-cost competitors. The recruitment market continues to be impacted by improvements in technology, which continues to lower barriers to entry.
The directors’ strategy is to differentiate Morgan Philips' offering to our competitors in the marketplace and to offer added value through its Talent Consulting solutions that smaller competitors are unable to provide.
The business also continues to focus on improving its operating margins by keeping discretionary spend under control and maximising its cash generation.
Key performance indicators
The board consider the following to be key financial performance metrics of the company:
Gross profit % is calculated by dividing gross profit by total turnover.
The current ratio is calculated by dividing total current assets by total current liabilities.
Debtor days are calculated by dividing trade debtors (note 12) by total turnover multiplied by 365 days.
F Sallembien
Director
23 June 2023
MORGAN PHILIPS UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2022.
Principal activities
The principal activity of the company continued to be that of providing professional staffing services on a permanent, contract and consultancy basis.
Branches
The company has one branch outside the UK which operates in the Republic of Ireland.
Results and dividends
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
C H Dumon
F Sallembien
A De Bretteville
A D Mueller
(Appointed 1 September 2022)
P Tour
Future developments
The company has chosen in accordance with Companies Act 2006, s.414C(11) to set out in the company's strategic report information required by Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has been done so in respect of future developments.
Auditor
The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Statement of disclosure to auditor
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 company’s auditor 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 company’s auditor is aware of that information.
MORGAN PHILIPS UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
Going concern
The company has recorded a profit after tax of £43k for the year ended 31 December 2022, has net current assets of £1,482k and net assets of £1,365k as at 31 December 2022. The financial statements have been prepared on a going concern basis by the director’s following a detailed assessment of the company’s ability to meet its financial obligations as they fall due for a minimum period of 12 months from the date of authorising the financial statements.
The directors have prepared detailed trading projections to the end of June 2024 providing the evidence to conclude that the company will have access to sufficient working capital facilities. A key consideration underpinning the trading projections is the continued support of its ultimate parent entity, via an intergroup loan (year end balance £0.7m). The directors recognise the inherent uncertainties of the projections and a downturn in the economic outlook is likely to have an adverse impact on the trading levels of the company. Therefore, a reasonably plausible but worst case scenario would be the requirement for the company to obtain additional funding from the ultimate parent entity to support short term working capital needs. In this regard, the directors have obtained a letter of financial support from the ultimate parent entity confirming they will not seek repayment of the intercompany loan where it would be to the detriment of the company’s ability to meet its financial obligations and that they will provide further financial assistance to the company where required to support the company with meeting its financial obligations.
The directors have assessed the ability of the parent entity to provide the level of support required. The ultimate parent entity has external finance that will mature within 12 months of the date of approving the financial statements. It is expected that the group will seek to re-finance this debt, however, there is no guarantee they will be able to re-finance. The directors are satisfied that this does not give rise to a material uncertainty over the group’s ability to provide continued or any further financial support to the company, on the basis the group is projected to have sufficient headroom within its existing group-wide working capital facility to meet its obligations as they fall due.
On this basis the financial statements are prepared on a going concern basis.
On behalf of the board
F Sallembien
Director
23 June 2023
MORGAN PHILIPS UK LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 5 -
The directors are responsible for preparing the strategic report, directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
MORGAN PHILIPS UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF MORGAN PHILIPS UK LIMITED
- 6 -
Opinion
We have audited the financial statements of Morgan Philips UK Limited (the 'company') for the year ended 31 December 2022 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the 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 FRS 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 company's affairs as at 31 December 2022 and of its 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.
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 responsibilities for the audit of the financial statements section of our report. We are independent of the 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 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.
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.
MORGAN PHILIPS UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MORGAN PHILIPS UK LIMITED
- 7 -
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and 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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the 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 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 company or to cease operations, or have no realistic alternative but to do so.
Auditor responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue 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 for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
MORGAN PHILIPS UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MORGAN PHILIPS UK LIMITED
- 8 -
Extent to which the audit is 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, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of relevant correspondence with regulatory bodies and board meeting minutes. We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Performing audit work procedures over the risk of management 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 judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the Company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events
MORGAN PHILIPS UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MORGAN PHILIPS UK LIMITED
- 9 -
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.
James Hamilton (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
23 June 2023
Chartered Accountants
Statutory Auditor
227 West George Street
Glasgow
G2 2ND
MORGAN PHILIPS UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 10 -
2022
2021
£'000
£'000
Turnover
3
22,455
24,966
Cost of sales
(15,544)
(17,503)
Gross profit
6,911
7,463
Administrative expenses
(6,940)
(7,593)
Other operating income
110
130
Exceptional income/(loss)
4
167
Operating profit
5
81
167
Interest payable and similar expenses
9
(21)
(39)
Profit before taxation
60
128
Tax on profit
10
(17)
631
Profit for the financial year
43
759
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
MORGAN PHILIPS UK LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 11 -
2022
2021
Notes
£ 000
£ 000
£ 000
£ 000
Fixed assets
Tangible assets
11
56
7
Current assets
Debtors
12
4,891
5,146
Cash at bank and in hand
537
579
5,428
5,725
Creditors: amounts falling due within one year
13
(3,946)
(4,990)
Net current assets
1,482
735
Total assets less current liabilities
1,538
742
Provisions for liabilities
15
(173)
(160)
Net assets
1,365
582
Capital and reserves
Called up share capital
19
4,238
3,498
Profit and loss reserves
20
(2,873)
(2,916)
Total equity
1,365
582
The financial statements were approved by the board of directors and authorised for issue on 23 June 2023 and are signed on its behalf by:
F Sallembien
Director
Company Registration No. 03206355
MORGAN PHILIPS UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
Share capital
Profit and loss reserves
Total
£'000
£'000
£'000
Balance at 1 January 2021
3,148
(3,675)
(527)
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
759
759
Other movements
350
-
350
Balance at 31 December 2021
3,498
(2,916)
582
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
43
43
Other movements
740
-
740
Balance at 31 December 2022
4,238
(2,873)
1,365
MORGAN PHILIPS UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
2022
2021
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash absorbed by operations
24
(176)
(2,313)
Interest paid
(21)
(39)
Income taxes paid
(10)
Net cash outflow from operating activities
(207)
(2,352)
Investing activities
Purchase of tangible fixed assets
(18)
(16)
Net cash used in investing activities
(18)
(16)
Financing activities
Payment of issued share capital
740
350
Net movement in invoice finance facility
(557)
350
Net cash generated from financing activities
183
700
Net decrease in cash and cash equivalents
(42)
(1,668)
Cash and cash equivalents at beginning of year
579
2,247
Cash and cash equivalents at end of year
537
579
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 14 -
1
Accounting policies
Company information
Morgan Philips UK Limited is a private company limited by shares incorporated in England and Wales. The registered office address is Summit House, Red Lion Square, London, England, WC1R 4HQ.
1.1
Accounting convention
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 £'000.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
Ttruehe company has recorded a profit after tax of £43k for the year ended 31 December 2022, has net current assets of £1,482k and net assets of £1,365k as at 31 December 2022. The financial statements have been prepared on a going concern basis by the director’s following a detailed assessment of the company’s ability to meet its financial obligations as they fall due for a minimum period of 12 months from the date of authorising the financial statements.
The directors have prepared detailed trading projections to the end of June 2024 providing the evidence to conclude that the company will have access to sufficient working capital facilities. A key consideration underpinning the trading projections is the continued support of its ultimate parent entity, via an intergroup loan (year end balance £0.7m). The directors recognise the inherent uncertainties of the projections and a downturn in the economic outlook is likely to have an adverse impact on the trading levels of the company. Therefore, a reasonably plausible but worst case scenario would be the requirement for the company to obtain additional funding from the ultimate parent entity to support short term working capital needs. In this regard, the directors have obtained a letter of financial support from the ultimate parent entity confirming they will not seek repayment of the intercompany loan where it would be to the detriment of the company’s ability to meet its financial obligations and that they will provide further financial assistance to the company where required to support the company with meeting its financial obligations.
The directors have assessed the ability of the parent entity to provide the level of support required. The ultimate parent entity has external finance that will mature within 12 months of the date of approving the financial statements. It is expected that the group will seek to re-finance this debt, however, there is no guarantee they will be able to re-finance. The directors are satisfied that this does not give rise to a material uncertainty over the group’s ability to provide continued or any further financial support to the company, on the basis the group is projected to have sufficient headroom within its existing group-wide working capital facility to meet its obligations as they fall due.
On this basis the financial statements are prepared on a going concern basis.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -
1.3
Turnover
Turnover represents fees and expenses chargeable to clients, excluding VAT.
Fee income on retained assignments is recognised on completion of defined stages of work. Income on non-retained assignments (which is dependent upon the successful completion of the assignment) is recognised when the position of employment is accepted by the candidate and the client. Fee income will be recognised with an approximated start date and invoiced after confirmation the candidate has started their new role. Fee income recognised before the candidate’s start date will be included in accrued income in the balance sheet until invoicing. These amounts are included in accrued income in the balance sheet. Provision is made for withdrawals prior to, or shortly after, the commencement of employment.
Fee income on temporary placements is recognised following successful processing of the contractors' authorised timesheets.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Leasehold land and buildings
Over the shorter of the lease term and their useful life
Fixtures and fittings
20% straight line
Computers and office equipment
25% to 33% straight line
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 credited or charged to the statement of comprehensive income.
1.5
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible 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.
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 the statement of comprehensive income.
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 the statement of comprehensive income.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -
1.6
Cash at bank and in hand
Cash and cash equivalents are basic financial assets and include cash in hand and deposits held at call with banks.
1.7
Financial instruments
The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
Basic financial assets, which include certain 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. Financial assets classified as receivable within one year are not amortised.
Impairment of financial assets
Financial assets 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 the statement of comprehensive income.
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 the statement of comprehensive income.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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.
Classification of financial liabilities
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 company after deducting all of its liabilities.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
Basic financial liabilities
Basic financial liabilities, including certain creditors and loans from fellow group companies are initially recognised at transaction price. 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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.8
Equity instruments
Equity instruments issued by the company 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 company.
1.9
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
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 taxable 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 when the company has 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.
1.10
Provisions
Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company 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.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 18 -
1.11
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense.
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.
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.13
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to the statement of comprehensive income 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 leases asset are consumed.
1.14
Government grants
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.
1.15
Foreign exchange
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 the statement of comprehensive income.
1.16
Exceptional costs relate to non-recurring expenditure possessing a high degree of abnormality or costs which fall outside of usual business operational costs which are not expected to recur. The company's policy is to present such costs separately on the face of the profit and loss account.
2
Judgements and key sources of estimation uncertainty
In the application of the company’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.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2
Judgements and key sources of estimation uncertainty
(Continued)
- 19 -
Key sources of estimation uncertainty
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:
Deferred tax asset (2022: £624k (2021: £631k)
The company recognises a deferred tax asset in relation to fixed asset timing differences. The timing and realisation of the asset requires an element of estimation.
Onerous lease and dilapidation provision (2022: £128k (2021: £142k))
The company has onerous operating property leases in relation to office space which was previously utilised by the company but is now vacant or sublet to third parties. Provisions were made when the company vacated the properties based on likelihood of sublet, market rate rental income, term of sublet and dilapidation costs incurred upon expiry of each lease agreement. Management periodically review the underlying assumptions and adjust the provision accordingly.
Exceptional items (2022: £nil (2021: £-167k))
Exceptional items are income and costs incurred during the re-structure of the company. This includes redundancy costs, professional fees and onerous lease charges. In the prior year to 31 December 2021, this was net income which relates to release of provisions in place. This has been deemed a key source of estimation uncertainty since 'exceptional items' are not defined by the FRS 102 accounting standard.
3
Turnover and other revenue
2022
2021
£'000
£'000
Turnover analysed by class of business
Permanent placements
3,769
4,344
Temporary labour
17,070
19,402
Advertising
392
54
Other
1,224
1,166
22,455
24,966
2022
2021
£'000
£'000
Other significant revenue
Grants received
82
Management fee income
38
10
Other income
72
38
Grants received above represent amounts received by the company under the Government's coronavirus job retention scheme.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 20 -
4
Exceptional income/(costs)
2022
2021
£'000
£'000
Exceptional income
-
259
Exceptional costs
-
(92)
-
167
Exceptional costs incurred during the prior year to 31 December 2021 were in respect of the re-structuring of the company. These include redundancy costs, professional fees and onerous lease charges. Exceptional income for the prior year related to the release of onerous and dilapidation lease provisions.
5
Operating profit
2022
2021
Operating profit for the year is stated after charging/(crediting):
£'000
£'000
Government grants
(82)
Depreciation of owned tangible fixed assets
16
17
Operating lease charges
440
396
6
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
£'000
£'000
For audit services
Audit of the financial statements of the company
36
34
For other services
Other taxation services
5
5
7
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Management, administration and selling
61
64
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
7
Employees
(Continued)
- 21 -
Their aggregate remuneration comprised:
2022
2021
£'000
£'000
Wages and salaries
4,928
4,857
Social security costs
566
547
Pension costs
156
172
5,650
5,576
8
Directors' remuneration
2022
2021
£'000
£'000
Remuneration for qualifying services
390
Company pension contributions to defined contribution schemes
8
398
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2021 - 0).
Remuneration disclosed above include the following amounts paid to the highest paid director:
2022
2021
£'000
£'000
Remuneration for qualifying services
99,325
-
Company pension contributions to defined contribution schemes
8,011
-
9
Interest payable and similar expenses
2022
2021
£'000
£'000
Other finance costs:
Net foreign exchange loss
21
39
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
10
Taxation
2022
2021
£'000
£'000
Current tax
Other taxes
10
Deferred tax
Origination and reversal of timing differences
7
(631)
Total tax charge/(credit)
17
(631)
The actual charge/(credit) 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:
2022
2021
£'000
£'000
Profit before taxation
60
128
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
11
24
Tax effect of expenses that are not deductible in determining taxable profit
6
3
Effect of overseas tax rates
10
Remeasurement of deferred tax for changes in tax rates
2
(881)
Deferred tax not recognised movement
(10)
223
Fixed asset differences
(2)
Taxation charge/(credit) for the year
17
(631)
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
11
Tangible fixed assets
Leasehold land and buildings
Fixtures and fittings
Computers and office equipment
Total
£'000
£'000
£'000
£'000
Cost
At 1 January 2022
756
1
2,214
2,971
Additions
65
65
Disposals
(66)
(66)
Transfers
(688)
(1)
689
At 31 December 2022
2
2,968
2,970
Depreciation and impairment
At 1 January 2022
756
1
2,207
2,964
Depreciation charged in the year
16
16
Eliminated in respect of disposals
(66)
(66)
Transfers
(688)
(1)
689
At 31 December 2022
2
2,912
2,914
Carrying amount
At 31 December 2022
56
56
At 31 December 2021
7
7
12
Debtors
2022
2021
Amounts falling due within one year:
£'000
£'000
Trade debtors
1,887
2,738
Amounts owed by group undertakings
1,400
823
Other debtors
268
252
Prepayments and accrued income
712
702
4,267
4,515
2022
2021
Amounts falling due after more than one year:
£'000
£'000
Deferred tax asset (note 16)
624
631
Total debtors
4,891
5,146
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
12
Debtors
(Continued)
- 24 -
Amounts owed by group undertakings are interest free and repayable on demand.
Other debtors include corporation withholding tax totalling £10k (2021: £nil) and property deposits totalling £63k (2021: £60k) due after more than one year.
At the year end, the value of trade debt subject to an invoice finance agreement was £1,885k (2021: £2,677k).
13
Creditors: amounts falling due within one year
2022
2021
£'000
£'000
Bank loans, overdrafts and invoice finance facilities
14
1,556
2,113
Trade creditors
203
230
Amounts owed to group undertakings
709
779
Other taxation and social security
357
475
Deferred income
17
85
101
Accruals
1,036
1,292
3,946
4,990
Amounts owed to group undertakings are interest free and repayable on demand.
Included within bank loans, overdrafts and invoice finance facilities is a debt facility which bears interest at normal commercial rates. As at 31 December 2022 £1,556k (2021: £2,113k) was drawn on this facility.
14
Loans and overdrafts
2022
2021
£'000
£'000
Bank loans, overdrafts and invoice finance facilities
1,556
2,113
Payable within one year
1,556
2,113
Included within bank loans, overdrafts and invoice finance facilities is a debt facility which bears interest at normal commercial rates. As at 31 December 2022 £1,556k (2021: £2,113k) was drawn on this facility.
15
Provisions for liabilities
2022
2021
£'000
£'000
Dilapidation and onerous lease provision
173
160
The closing balance represents provision for rental costs and dilapidations for leasehold properties. These costs will be incurred upon expiry of individual lease agreements between 2022 and 2027.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
15
Provisions for liabilities
(Continued)
- 25 -
Movements on provisions:
Dilapidation and onerous lease provision
£'000
At 1 January 2022
160
Additional provisions in the year
45
Utilisation of provision
(32)
At 31 December 2022
173
16
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Assets
Assets
2022
2021
Balances:
£'000
£'000
Fixed asset timing differences
504
617
Short term timing differences
120
14
624
631
2022
Movements in the year:
£'000
Asset at 1 January 2022
(631)
Charge to profit or loss
7
Asset at 31 December 2022
(624)
Deferred tax is not recognised in respect of tax losses of £3,028k (2021: £3,041k) due to the uncertainty around the timing of realisation against future profits.
17
Deferred income
2022
2021
£'000
£'000
Other deferred income
85
101
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 26 -
18
Retirement benefit schemes
2022
2021
Defined contribution schemes
£'000
£'000
Charge to profit or loss in respect of defined contribution schemes
156
172
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
Contributions from employees and the company amounting to £38k (2021: £45k) were payable to the scheme and are included in creditors.
19
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£'000
£'000
Issued and fully paid
Ordinary shares of 1p each
423,717,350
349,717,350
4,237
3,497
A Ordinary shares of £1 each
750
750
1
1
423,718,100
349,718,100
4,238
3,498
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company.
During the current year the company received £740,000 (2021: £350,000) towards the company's unpaid Ordinary share capital. As at 31 December 2022, the remaining unpaid share capital totalled 141,000,000 (2021: 215,000,000) Ordinary shares of 1p each.
20
Reserves
Profit and loss reserves
Profit and loss reserves represent total comprehensive income for the year and prior periods, less dividends paid.
21
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2022
2021
£'000
£'000
Within one year
426
384
Between two and five years
383
489
In over five years
63
809
936
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 27 -
22
Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
2022
2021
£'000
£'000
Aggregate compensation
874
913
Transactions with related parties
During the year the company entered into the following transactions with related parties:
Sales
Purchases
2022
2021
2022
2021
£'000
£'000
£'000
£'000
Entities with control, joint control or significant influence over the company
1,389
1,070
669
1,194
Other related parties
30
41
102
118
The following amounts were outstanding at the reporting end date:
2022
2021
Amounts due to related parties
£'000
£'000
Entities with control, joint control or significant influence over the company
709
779
The following amounts were outstanding at the reporting end date:
2022
2021
Amounts due from related parties
£'000
£'000
Entities with control, joint control or significant influence over the company
1,400
823
23
Ultimate controlling party
Morgan Philips Group SA, a company incorporated in Luxembourg, is the parent company and ultimate controlling party.
MORGAN PHILIPS UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 28 -
24
Cash absorbed by operations
2022
2021
£'000
£
Profit for the year after tax
43
759
Adjustments for:
Taxation charged/(credited)
17
(631)
Finance costs
21
39
Depreciation and impairment of tangible fixed assets
16
17
Increase/(decrease) in provisions
13
(735)
Movements in working capital:
Decrease in debtors
248
422
Decrease in creditors
(534)
(2,184)
Cash absorbed by operations
(176)
(2,313)
25
Analysis of changes in net debt
1 January 2022
Cash flows
31 December 2022
£'000
£'000
£'000
Cash at bank and in hand
579
(42)
537
Borrowings excluding overdrafts
(2,113)
557
(1,556)
(1,534)
515
(1,019)
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