The directors present the strategic report for the year ended 31 December 2021.
The group made a profit after tax of £ 7,667,945 (20 20 : £ 5,520,425 ) during the year ended 31 st December 202 1 and at that date had net assets of £4 8 , 824 , 825 (20 20 : £ 41,396,534 ) and liabilities of £4, 903,883 (20 20 : £4, 740 , 374 ).
The reason for the increase in profit is that the group close d more deals when compared to 20 20 . This is due in the main to timing differences on deal transactions and in what period they close. The results for the year end and the financial position of the group are considered satisfactory by the directors.
The group ' s principal financial instruments comprise bank balances, trade creditors and trade debtors. The main purpose of these instruments is to raise funds for the group’s operations.
Due to the nature of the instruments used by the group there is no e x posure to price risk. However success fees are dependent on the value of the Lone Star Funds.
The group’s approach to managing the other risks applicable to the other financial instruments concerned is shown below:
Liquidity risk is monitored on an ongoing basis and positive cash reserves were held at the year end.
Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet the funds due.
Due to COVID-19 pandemic the year of 2022 has seen an impact to both private equity markets, asset pricing and the day to day operational working of the business. With regards to private equity markets, there has been a noticeable sharp increase in volatility, the Company is actively monitoring and continues to manage assets within the investment and risk parameters that have been established at the Fund level.
With regards to day to day operations, the Company and many of its key service providers have evoked business continuity procedures, including a high proportion of remote working, which from beginning of 2022 has eased considerable, to ensure the safety of staff and to enable the business to operate with minimal impact. The financial impact of the outbreak to the date of signing these accounts, has no material affect on business operations, apart from the adoption of differing working practices to ensure the business continues to operate at acceptable operating level. It follows, given the nature of this business, management have a positive outlook for future transactions.
During the year and in the lead up to Brexit, the company had a working party of internal and external advisors maintain a corporate oversight on the impact of Brexit negotiations on the business. At the date of signing of these accounts the company has had no material effect in the post-Brexit environment and has adapted operations to maintain service standards such as alignment to new visa and customs regulations as appropriate.
Brexit business risks that the Market had identified included the following factors to be potential risks that may affect the business in a post Brexit environment:
- Macro-economic uncertainty or downturn in the UK economy
- Global political uncertainty
- Exchange rate volatility and the devaluation of sterling
- The availability of markets and market access rights
- Impact on strategy and operations
- Increases in import and labour costs
- The retention of skilled labour and recruitment concerns
The business currently maintains a UK (FCA) regulatory licence to provide regulated financial services in the UK. For European exposures it is able to comply by using approved routes and by applying for appropriate licences in other European jurisdictions.
There remains yet to be an announcement on how UK financial services post Brexit will be treated in relation to service provisions cross-border into Europe.
Regulated Services
In summary, the affected regulated services for business relate to the activities of marketing and fundraising.
Advisory and origination services undertaken by Lone Star’s European personnel are provided to other group entities and are therefore not provided to an EU-27 entity. Measures have been prepared to ensure that the group maintains a position that Lone Star’s European entities do not contract with third parties for any investment purposes.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2021.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 9.
The directors do not recommend payment of a dividend (2020: £Nil).
We have audited the financial statements of Lone Star Europe Acquisitions Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, 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 a summary of 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).
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 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 its environment obtained in the course of the audit, we have not identifie d material misstatements in the strategic report and the directors' r eport .
We have nothing to report in respect of the following matters where 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 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 .
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 .
The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the financial services sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company including, but not limited to, the Companies Act 2006, FCA legislation and taxation legislation.
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
understanding the business model as part of the control and business environment;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations and;
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud.
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 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
Through these procedures, we did not identify any material actual or suspected incidents of fraud .
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;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence and enquiring with the company of actual and potential non-compliance with laws and regulations.
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 profit for the year was £7,542,053 (2020 - £5,462,029 profit).
Lone Star Europe Acquisitions Limited is a private limited company domiciled and incorporated in England and Wales . The registered office and principal place of business is 12 Queen Anne Street, London, W1G 9LF.
The Group consists of Lone Star Europe Acquisitions Limited and its subsidiaries Lone Star Germany Acquisitions GmbH, Lone Star France Acquisitions SARL, Lone Star Spain Acquisitions S.L.U., Lone Star Netherlands Acquisitions B.V., L Star Portugal Acquisitions S.A., Lone Star Switzerland Acquisitions GmbH.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
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 company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash f low and related notes and disclosures;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
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 represents the amounts receivable for management fees and success fees net of VAT and is recognised to the extent that it is probable that the economic benefits will flow to the group and it can be reliably measured.
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 income statement .
The assets’ residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period. The effect of any change is accounted for prospectively.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
At each reporting period end date, the group 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.
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) prior years. A reversal of an impairment loss is recognised immediately in profit or loss .
The g roup has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's statement of financial position 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.
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 and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future 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.
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 .
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement 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.
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.
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.
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 are included in the income statement for the period.
Exchange differences arising on translation of subsidiary companies on consolidation, are recognised in other comprehensive income and accumulated in equity.
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.
Critical judgements
There are no judgements or estimates which have had a significant effect on the amounts recognised in the financial statements.
The total turnover of the group for the year has been derived from its principal activity wholly undertaken outside the United Kingdom.
An analysis of the group's turnover is as follows:
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2021 are as follows:
Registered Office addresses:
1 5 Rue de Castiglione - 20 rue du Mont-Thabor - 75001 Paris, France.
2 Hamburger Alee 14, 60486 Frankfurt am Main, Germany.
3 la Avenida de Aragon, 330, PE Las Mercedes, Edifico 5, Planta 3, Madrid, Spain.
4 Strawinskylaan 615, 1077 XX Amsterdam, Netherlands.
5 Av. Joao II no. 46, 4A, 1990-095, Lisboa, Portugal.
6 c/o TMF Services SA, Talstresse 83, 8001 Zurich, Switzerland.
Included within amounts owed by group undertakings are trade receivable balances that are unsecured, interest free and repayable on demand.
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.
Other reserves represent a merger reserve.
Profit and loss reserves represent accumulated comprehensive income for the year and prior periods less dividends paid.
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:
All directors of the company and management of the subsidiaries who have authority and responsibility for planning, directing and controlling the activities of the group are considered to be key management personnel. Total remuneration in respect of these individuals is 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 intermediate parent company is Lone Star Global Acquisitions Limited, a company registered in Bermuda.
The ultimate parent company is LSGA Holdings Limited, a company registered in Bermuda. LSGA Holdings Limited is the largest group for which consolidated accounts, including Lone Star Europe Acquisitions Limited and its subsidiaries, are prepared.