The directors present the strategic report for the year ended 31 December 2022.
The Group delivered a mixed result in 2022.
In trading, revenue increased to £70.8m (2021: £53.8m) and gross profit decreased to £34.8m (2021: £40.6m). The increase in revenue was largely due to the first full year revenue of the Technicolour Post business, alongside the acquisitions of Formosa Interactive UK Limited (March 22), Formosa Group Trident Limited (July 22). Gross profit decreased largely due to a reclassification of overheads to direct costs to align cost allocations with other group entities; alongside increased costs due to acquisitions and start-up costs for Streamland Media India.
For the second year, the acquisitions continue the strategy of building a broad range of post production specialist businesses to take advantage of the growth in content in the television and film industries.
The year end showed high utilisation in each site and a strong order book into 2023 with strong performances from Ghost A/S, Technicolor Post and the newly acquired Formosa Interactive UK Limited and Formosa Group Trident businesses.
The company’s (loss)/profit before tax was £(6.0)m (2021: £(3.3)m).
The company is exposed to a number of risks and uncertainties. Financial risk management policies are employed to address these, primarily relating to foreign exchange, interest rate, liquidity and credit risks. The Directors understand the importance of these risks and use internal monitoring tools and external resources to manage these, for example the routine review of cash flow forecasts, margin analysis on customers and genres, new supplier performance checks and new client credit checks.
Covid-19
The worst effects of the Coronavirus pandemic appear to be behind us apart from the cost pressures associated with supply chain friction and significant skills shortages. While revenues are projected to be up in 2023, cost pressures will persist. The outlook beyond this is positive with growth in the order book. More broadly, TV and film content will be in significant demand and the company is well placed to take advantage of the opportunity this presents, particularly with the diversification that recent acquisitions will bring.
The directors employ key performance indicators to assess the company’s performance. The KPIs for the 2022 financial year include:
Revenue - £70.8m (2021: £53.8m)
Gross profit - £34.8m (2021: £40.6m)
(Loss)/Profit before tax - £ (6.0)m (2021: £(3.3)m)
Shareholder’s funds - £(1.2)m (2021: £(1.2)m)
The Directors of the Group, as those of all UK companies, must act in accordance with a set of general duties. These duties are detailed in section 172 of the UK Companies Act 2006 which is summarised as follows:
A director of a company must act in the way he/she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
Employees
Diversity and Inclusion
The Company has a diverse employee base which is mirrored in the content we produce. We strongly believe that diversity inspires creativity and innovation in the work we do and helps us attract and retain the best talent; to create images and stories that serve everyone, we believe in including everyone. As an example, we sponsor two apprenticeship places annually to encourage women into technical roles in television though a partnership with WFTV, (https://www.wftv.org.uk/).
Learning and Development
We are committed to supporting employees to develop themselves, providing access to a wide range of on-the-job learning and in-house training programme opportunities, as well as putting people through relevant external technical training and professional qualifications, dependent on the role. By providing these opportunities to gain new skills over time, we invest in the development of our staff, the business subsequently benefits from improved performance of staff in the long term as well as aiding motivation and retention.
Community
We take our social responsibility seriously. We work with platforms whose wide-ranging audiences include those from under-represented communities. We are signed up to the Kickstart scheme, (https://www.gov.uk/government/collections/kickstart-scheme), a scheme designed to employ young people at risk of long-term unemployment.
Environment
The Group is an affiliate of the BAFTA Albert sustainability program. We work with Albert, which measures our energy and advises where there is opportunity to lower our carbon footprint. We have made several commitments that extend to our suppliers in order to achieve becoming carbon neutral by 2030.
Business relationships
The Group is long established in the post production business and is well respected within the broader television and entertainment sector. We strive to maintain the highest standards in our relationships with all our external stakeholders and we believe we are known for doing so.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 10.
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:
The group's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code (copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU).
The group's current policy concerning the payment of trade creditors is to:
settle the terms of payment with suppliers when agreeing the terms of each transaction;
ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
pay in accordance with the group's contractual and other legal obligations.
Trade creditors of the group at the year end were equivalent to 30 day's purchases, based on the average daily amount invoiced by suppliers during the year.
Consultations are held with staff members when required
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
The auditor, Blinkhorns, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The SECR disclosure presents the group's carbon footprint within the United Kingdom across Scope 1, 2 and to some extent scope 3 emissions, an appropriate intensity metric, the total energy use of electricity, gas and transport fuel and an energy efficiency actions summary taken during the relevant financial year.
The subsidiaries that have not consumed more than 40,000 kWh of energy in this reporting period qualify as low energy users under these regulations and are not required to report on their emissions, energy consumption or energy efficiency activities. Therefore there results have been excluded from the reported figures.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per employee, which will best reflect changes in operation and energy consumption over time.
We have increased video conferencing technology for staff meetings to reduce the need for travel between sites.
We have increased the efficiency of our office lighting by utilising natural light where we have ceiling to floor glass windows. We also have motion sensors which automatically ensure lights are switched off in rooms that are not being used. We have dimmable lights which ensure lights are not at their brightest when not required. This helps reduce electricity cost.
We have temperature controls that ensure heating and air conditioning is timed correctly and according to outdoor air temperatures. This can minimise over heating or cooling. We also ensure that the temperature is minimal during the night to avoid wasting energy.
We are printing less by avoiding printing long contracts and having them signed digitally and when the need to print arises, it is done double sided etc.
We have recycling bins in every kitchen and we use Good Energy supplier for our electricity who support generating renewable electricity.
The directors are responsible for preparing the Annual 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 group and company, and of the profit or loss of the group 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;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of The Farm UK Holdco Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group income statement, 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, the company 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' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The key laws and regulations we have considered in this context included the Companies Act 2006, pensions and tax legislation. In addition, we have considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the company’s ability to operate or to avoid a material penalty. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Using our sector experience and through discussions with the directors and management, we identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements as well as those arising from management’s own assessment of the risks that irregularities may occur either as a result of fraud or error.
We examined the company’s regulatory and legal correspondence and discussed with the directors and management any known or suspected instances of fraud or non-compliance with laws and regulations.
We considered the use of remuneration incentive schemes and performance targets for management and did not identify any additional fraud risks.
The audit team discussed whether there were any areas that were susceptible to misstatement as part of their fraud discussion.
In addressing the risk of management override of controls, we tested the appropriateness of journal entries. We also challenged assumptions and judgements made by management in their significant accounting estimates and judgements.
We incorporated an element of unpredictability in the selection of the nature, timing and extent of our audit procedures.
We reviewed minutes of meetings of those charged with Governance.
We communicated identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Based on the results of our risk assessment we designed our audit procedures to identify non-compliance with such laws and regulations identified above. The engagement partner considers the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations.
Based on the results of our risk assessment we designed our audit procedures to identify and to address material misstatements in relation to fraud, including:
Designing audit procedures to address, for example:
- The possibility of fraudulent or corrupt payments made through third parties.
- The risk of bribery and corruption.
- The opportunity to segregate duties within the entity.
Under ISA 240 (UK) there is a presumed risk that revenue may be misstated due to the improper recognition of revenue. To address this risk, we obtained an understanding of the company’s revenue recognition policies and compared these to the accounting standard, performed a walkthrough to confirm our understanding of the processes and controls through which the business initiates, records, processes and reports revenue transactions. We tested a sample of revenue transactions to supporting evidence and tested, on a sample basis, revenue related balances in the balance sheet.
We considered the extent to which the audit was considered capable of detecting irregularities.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentation, or through 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 company has not presented its own income statement and related notes. The company’s profit for the year was £3,942,266 (2021 - £1,372,875 loss).
The Farm UK Holdco Limited (“the company”) is a private limited company limited by shares and domiciled and incorporated in England and Wales on the 7 June 2019. The registered office is 110 Fetter Lane, London, United Kingdom, EC4A 1AY.
The group consists of The Farm UK Holdco Limited and all of its subsidiaries.
The Farm UK Holdco Limited is a 100% owned subsidiary of The Farm Limited (Cayman). The ultimate parent company is Streamland Media LLC, a company incorporated in Delaware, United States of America. The principal place of business of Streamland Media LLC is 1132 Vine Street, Hollywood, CA 90038.
The principal activities of the group are motion picture, video and television programme post-production.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
Under section 479 of the Companies Act 2006 by obtaining parent guarantee from The Farm UK Holdco Limited, subsidiaries Formosa Group Trident Ltd and Formosa Interactive UK Limited will be audit exempt.
The consolidated group financial statements consist of the financial statements of the parent company, The Farm UK Holdco Limited, together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 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 group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Streamland Media UK Limited has been included in the group financial statements using the acquisition method of accounting. Accordingly, the group income statement and statement of cash flows include the results and cash flows of Streamland Media UK Limited for the period from its acquisition on 19 June 2019. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
Ghost Holding ApS has been included in the group financial statements using the acquisition method of accounting. Accordingly, the group income statement and statement of cash flows include the results and cash flows of Ghost Holding ApS for the period from its acquisition on 1 January 2020. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
Ghost Holding AS has been included in the group financial statements using the acquisition method of accounting. Accordingly, the group income statement and statement of cash flows include the results and cash flows of Ghost Holding AS for the period from its acquisition on 1 January 2020. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
Technicolor has been included in the group financial statements using the acquisition method of accounting. Accordingly, the group income statement and statement of cash flows include the results and cash flows of Technicolor for the period from its acquisition on 30 April 2021. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
Formosa Group Trident Ltd has been included in the group financial statements using the acquisition method of accounting. Accordingly, the group income statement and statement of cash flows include the results and cash flows of Formosa Group Trident Ltd for the period from its acquisition on 29 July 2022. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
Formosa Interactive UK Limited has been included in the group financial statements using the acquisition method of accounting. Accordingly, the group income statement and statement of cash flows include the results and cash flows of Formosa Interactive UK Limited for the period from its acquisition on 7 March 2022. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.
Streamland Media India Private Limited has been included in the group financial statements. Accordingly, the group income statement and statement of cash flows include the results and cash flows of Streamland Media India Limited for the period from its incorporation on 1 July 2022.
The financial statements have been prepared on a going concern basis after due consideration of the principal risks and uncertainties disclosed in the Directors' Report and Strategic Report. In reaching their conclusion the Company's directors have considered the financial position of the Company and the Group to which it belongs and concluded it has adequate resources to continue in operational existence for the foreseeable future and therefore the going concern basis continues to be adopted in preparing the financial statements.
The Company's Board has given regard to the forecasts produced by management. These forecasts have been sensitised to reflect plausible downside scenarios.
The forecasts demonstrate that the Company is projected to generate profits and cash inflows and that the Company has sufficient liquidity to enable it to meet its obligations as they fall due for a period of at least twelve months from the date of signing these financial statements.
In considering these forecasts the Directors have taken into account the Group's borrowing facilities (which are in place until June 2028) and the related leverage covenants. The directors are confident that the Group has adequate liquidity headroom, there is no material risk of breaching leverage covenants over the next twelve months.
As such, the directors of the Company are satisfied that the Company has adequate resources to continue to operate for the foreseeable future (and not for less than twelve months from the date of signing these financial statements). For this reason they continue to adopt the going concern basis for preparing these financial statements.
Revenue 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.
Revenue from a contract to provide services is recognised by reference to the stage of completion of the
contract.
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.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Basic financial liabilities, including trade and other payables, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade payables 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 payables 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 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 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.
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 income statement, 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 non-current 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.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
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.
There were no critical judgements or sources of estimation uncertainty that the directors have made in the process of applying the accounting policies and that the most significant effect on the amounts recognised in the financial statements.
Transactions costs incurred in the year relate to legal and professional fees for the acquisition of Formosa Interactive UK Limited, Formosa Group Trident Limited, and Streamland Media India and ongoing telecommunication set up costs from the acquisition of Technicolour in 2021.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Change in tax rates
The Finance Bill 2021 stated the main corporation tax rate of 19% will increase to 25%, effective I April 2023. As the 25% tax rate was substantively enacted at the balance sheet date, the relevant rate increases have been reflected in the calculation of deferred tax.
Details of the company's subsidiaries at 31 December 2022 are as follows:
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
On 7 March 2022 the group acquired 100 percent of the issued capital of Formosa Interactive UK Limited.
On 29 July 2022 the group acquired 100 percent of the issued capital of Formosa Group Trident Ltd.
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:
The following amounts were outstanding at the reporting end date:
On the 19 June 2019 The Farm UK Holdco Limited entered into a loan arrangement with The Farm Ltd. (Cayman), parent company of the The Farm UK Holdco Limited.
This was for the issue of £30m in loan notes repayable on the 31 August 2023.
During the year interest at a rate of 7% was charged on the loan giving a balance of £50,135,221 due to the Farm Ltd. (Cayman) at 31 December 2022.
The following amounts were outstanding at the reporting end date:
At the balance sheet date the parent company was The Farm Ltd, Cayman. The ultimate controlling party was Streamland Media LLC, a company incorporated in Delaware, United States of America.
The principal place of business of Streamland Media LLC is 1132 Vine Street, Hollywood, CA 90038. The results of the group are available at this address.