The Directors present the strategic report for the year ended 31 March 2022.
The Company is a global provider of technology services. The main focus remains delivering professional services to businesses operating in Europe, Middle East and Africa regions (“EMEA”) and Managed Services globally.
Our customers are principally IT & Telecom vendors, system integrators and enterprise customers that utilise our vertical areas of specialisation.
Penta group operates throughout the world and has offices in the UK, France, Poland, Germany, Dubai, Abu Dhabi, South Africa, Indonesia and Saudi Arabia. Our services are provided via our local operating companies or long term partners.
Strategy
The Company continues to invest in growth strategies, with the specific aim of building a sustainable business with a diverse set of clients in the EMEA.
The sales strategy comprises four elements;
Maintain and grow our long term relationships with existing key clients, by continuing to provide consistent levels of exceptional service
Identify and work with new clients, where we can deliver value though our candidate network utilising our vertical areas of specialisation.
Grow the Managed Service business globally, which provides legacy support to telecoms network operators.
Evolving our complimentary service offerings to ensure it aligns with the developing needs of our clients.
Turnover in the year decreased by 6% to £32.8m (2021: £35.0m). Trading in the first quarter to June 2021 was particularly difficult and followed on from a challenging end to FY2021. The UK lockdown in December 2020 had a significant adverse impact on the business, particularly in sales activity. It was not until the second quarter ended 31 December 2021 that revenue and gross profit recovered to levels comparable with FY2021.
Turnover to international customers in the year ended 31 March 2022 (FY2022) amounted to 82% (FY2021: 79%). The benefit of focussing on the EMEA region is access to growth markets and economies. The high level of international activity maintains the exposure to currency fluctuations, mainly in Euro and US$, the effects of which are mitigated where possible with appropriate hedging structures.
Gross profit reduced by £1.0m to £6.6 m (2021: £7.6m) and gross margins decreased to 20.2% (2021: 21.8%).
Administrative expenses in FY2022 were £6.6m (FY 2021 £6.6m), an increase of £0.05m (1%).
The exceptional item in FY 2022 relates to a £0.4m increase in the amount recoverable from HMRC in respect of overpaid tax and an impairment charge of £1.2m relating to the Company’s investment in Penta Technology Limited.
Interest payable and similar expenses in the year was £0.1m, compared with £0.1m in 2021.
EBITDA in FY2022 was £0.4m compared with £1.4m in FY2021. The loss before tax was in the year was £0.9m, compared with a profit of £1.3m in FY2021.
The tax charge for the year was £0.1m, a decrease of £0.2m, compared with FY2021. The higher effective tax rate is due to irrecoverable overseas corporate and withholding taxes which reflect the high percentage of overseas sales.
The weakening of sterling versus the US dollar, from $1.37/£1 at March 2021 to $1.31/£1 at March 2022, has had a small positive impact on earnings. During the same period, sterling slightly strengthened against the Euro with the exchange rate increasing from €1.17/£1 at March 2021 to €1.18/£1 at March 2022.
Net cashflow from operating activities was an outflow of £ 1 m, compared with a cash inflow of £ 2 m in 2021. Net borrowings increased from £2.8m to £4.1m as at 31 March 2022. At the year-end cash and cash equivalents amounted to £0.1m (FY2021: £0.2m) and the amount drawn down on invoicing discounting facility was to £3.8m (FY2021: £3.0m). CBIL repayments during the year amounted to £0.1m leaving a loan balance of £0.4m at March 2022.
Impact of Covid 19
As the lockdown restrictions eased during the year, particularly in UK, our staff have been returning to office working with strict COVID 19 safeguards in place. The company has introduced a hybrid working model for its staff.
Going Concern
The Directors have assessed the Group's and Company’s ability to adopt a going concern basis of accounting. In coming to their conclusion, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, being a period of at least 12 months from the date of approval of these financial statements.
The Company has facilities available for the management and maintenance of monthly liquidity levels, which include:
An invoice discounting facility available to the Group to draw down on the majority of its UK-based debtors; and
An overdraft facility amounting to £1.2m which is on an uncommitted basis and subject to a minimum annual review (October 2023 being the next review date).
Neither of the above facilities are governed by the requirement to prepare or submit financial covenants and therefore compliance with such measures has not needed to be factored into the Directors’ going concern assessment.
As such, the Directors are satisfied that the Group has adequate resources to continue to operate for the foreseeable future. For this reason, they continue to adopt the going concern basis for preparing these financial statements.
Foreign currency risk
The Directors are aware of the foreign currency risks associated with transactions in a number of currencies around the world. These risks are monitored on a regular basis and the Group looks to put in place natural hedges where ever possible and tries to ensure that sales and cost of sales are contracted in the matching currencies to minimise currency exposure risk. The finance facilities are held in Sterling, Euros and US Dollars.
Liquidity risk
The invoice discounting facility and the multi currency overdraft facility provide a flexible source of finance to manage fluctuations in cash flow. The Directors monitor the liquidity and cash flow risk on-going basis to ensure the Group has sufficient liquid resources available to meet the operating requirements of the business and appropriate action would be taken where additional funds are required, for example the invoice discounting facility was recently increased to provide additional working capital to fund the continued growth in turnover.
Credit risk
The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers and to factor the information from these credit ratings into future dealings with the customers. The Group also has credit Insurance to minimise this risk. At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.
Interest rate risk
The Group has interest bearing assets and liabilities. Interest bearing assets include cash balances that only earn interest at a floating rate. Interest bearing liabilities include, bank overdrafts, and invoice discounting facility arrangements. The company has implemented policies to ensure that interest can be paid by the company when it falls due.
T he trading outlook is strong and the Company is experiencing significant growth in revenue and gross profit, which is expected to continue well into the next financial year. The Group has no exposure to the Russian and Ukraine markets. The COVID-19 crisis has clearly demonstrated the need for investment in digital technology and Penta is ideally positioned to benefit from increasing demand for technology based services.
The Company is looking forward to celebrating its 25 th birthday on March 11 th 2023 and after 20 years in Wallington, Surrey, is moving its Head office to Epsom, Surrey in January 2023.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 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 further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with the company's articles, a resolution proposing that CBW Audit Limited be reappointed as auditor of the group will be put at a General Meeting.
We have audited the financial statements of Penta Consulting Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2022 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' r eport 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 identifie d material misstatements in the strategic report or the directors' r eport .
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' r esponsibilities s tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements , the directors are responsible for assessing the parent company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below .
We ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations. The laws and regulations applicable to the company were identified through discussions with directors and other management, and from our commercial knowledge and experience of outsourcing services and IT resources industry. Of these laws and regulations, we focused on those that we considered may have a direct material effect on the financial statements or the operations of the company, including Companies Act 2006, taxation legislation, data protection, anti-bribery, anti-money-laundering, employment, environmental and health and safety legislation. The extent of compliance with these laws and regulations identified above was assessed through making enquiries of management and inspecting legal correspondence. The identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
understanding the design of the company’s remuneration policies.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC, relevant regulators including the company’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s loss for the year was £1,187,069 (2021 - £1,151,449 profit).
Penta Consulting Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales . The registered office is Crosspoint House, 28 Stafford Road, Wallington, Surrey, SM6 9AA.
The group consists of Penta Consulting 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 a mounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Penta Consulting Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates .
All financial statements are made up to 31 March 2022 . Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the g roup.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The consolidated group financial statements consist of the financial statements of the parent company Penta Consulting Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates .
All financial statements are made up to 31 March 2022 . Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the g roup.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
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.
Income from temporary placements is recognised evenly over the period of the placement. Income from permanent placements is recognised at the commencement of the placement when the Group's contractual obligations have been fulfilled.
The Group provides Managed Services to a number of customers – revenue is recognised in line with the performance of contractual obligations.
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 in vest ments 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.
I n 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the g roup’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent c ompany financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities .
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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 m ethod 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 paymen ts 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 th r ough 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 lease d asset are consumed.
Government grants are recognised at the fair value of the asset receive d 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.
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
The results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.
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.
In determining whether there are indicators of impairment of the company's receivable balances the factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the customer/group company.
The group makes judgements in respect of the required impairment of the goodwill recognised on acquisition of the subsidiaries. In doing so, the company assesses the position of the entity and the potential of the business combination - in arriving at a conclusion if the impairment is required.
The group exercises judgement to determine the useful lives and residual values of tangible fixed assets. Assets are then depreciated to their residual values over their useful economic lives. Management may from time to time revise the useful economic lives of certain assets based on past performance or a change in circumstances.
The Group incurred exceptional costs/gains related to:
Gains/losses on termination of Middle East contracts: "nil", (2021: cost £44,863),
Legal cases settlements gains: "nil", (2021: gain £250,202),
Increase in recoverable amount in respect of overpaid tax, net of costs: gain £365,500, (2021: gain £99,178)
Group restructuring costs: "nil" (2021: cost £202,535)
Goodwill write off on acquisition of subsidiary: cost £1,195,805 (2021: "nil")
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2021 - 3).
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:
The Group has not recognised a deferred tax asset of £99,839 (2021: £94,232) due to the directors’ assessment of the Group’s ability to utilise the asset being remote, based on the historic loss position incurred. This will be reviewed on an ongoing basis.
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised as exceptional items in the profit and loss account.
The company made a decision to impair the total goodwill arising on its acquisition of Penta Technology Limited - as , based on the information available to the management at the time of preparation of the financial statements, there are no additional benefits expected to flow to the entity as a result of that business combination.
More information on impairment movements in the year is given in note 11.
Details of the company's subsidiaries at 31 March 2022 are as follows:
Registered office addresses (all UK unless otherwise indicated):
Penta Facilities Management Services LLC is treated as subsidiary as Penta Consulting Limited have control over the company. Penta Consulting Limited control the day to day operations and also dictate the strategic direction of the companies. The shareholders in Dubai have passive roles in the management of the company.
The following subsidiary is exempt from the requirements of the Act relating to the audit of individual accounts by the virtue of s479A:
Penta Consulting Middle East Limited (Company number 11905794)
The company provided guarantees to the above subsidiary for all outstanding liabilities to which the subsidiary is subject at the end of the financial year, until they are satisfied in full. The total amount guaranteed was £169,192 (2021::nil) and related entirely to inter-company debt within the Group.
Amounts owed by group undertakings are interest-free, repayable on demand and unsecured.
The bank overdraft and invoice discounting facility are secured by way of a fixed and floating charge over the Group's present and future assets, including a cross guarantee with the immediate parent company, Penta Consulting Group Limited.
Amounts owed to group undertakings are interest-free, repayable on demand and unsecured.
The bank overdraft and invoice discounting facility (included within Other loans) are secured by way of a fixed and floating charge over the Group's present and future assets.
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.
During the year the company passed a resolution to reclassify the shares categorized as A / B / C and D to ordinary shares .
The share premium account includes the premium on issue of equity shares, net of any issue costs.
The capital redemption reserve contains the nominal value of own shares that have been acquired by the company and cancelled.
In line with Commercial Companies Law in Dubai, the local entities in the jurisdiction must maintain a minimum legal reserve equivalent to 150,000 AED. The other reserve represents the translation of this requited reserve at historical exchange rates at this point of inception.
The profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.
On 24 March 2022 the group acquired 100 percent of the issued capital of Penta Technology Limited.
The goodwill arising on the acquisition of the business is attributable to the anticipated profitability of the distribution of the company's products in new markets and the future operating synergies from the combination.
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:
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
The immediate and ultimate parent company is Penta Consulting Group Limited , a company registered in the United Kingdom, whose registered office is Crosspoint House, 28 Stafford Road, Wallington, SM6 9AA, United Kingdom and the ultimate controlling party is Paul Clark , by virtue of his shareholding in Penta Consulting Group Limited
The smallest group for which consolidated accounts are prepared is that headed by the entity, Penta Consulting Limited. The largest group for which consolidated accounts are prepared is that headed by the ultimate parent company Penta Consulting Group Limited.
Copies of consolidated financial statements can be obtained from Companies House.