The directors present the strategic report for the year ended 2 April 2023.
Compass continues to enjoy a period of consistent growth going back to August 2020. The rate of growth slowed at the beginning of the period in line with industry peers but continued to be strong and has increased again as we progress into the new year. This shows Compass is not yet fully mature and still has plenty of potential for growth. Turnover has increased by £16,755,568 to £55,291,528.
Compass CE operates in a very competitive industry but has worked consistently to differentiate the brand as business partners (not suppliers) that are reliable and compliant.
The Executive Team have continued to prioritise the development of the back-office team to ensure that we can maintain the high levels of customer service that Compass is known for during this period of growth.
The result of this work is the Compass CE shows a satisfying level of maturity for a business that started trading in November 2019.
Brand
Compass has continued to promote its brand with a focus on service levels, building an honest reputation, and a unique character. Anecdotal evidence suggests that this is a key factor in customer retention, with the Compass brand well-recognised as a brand that stands for honesty, integrity and transparency in the industry.
While most of the data on the Compass brand is anecdotal, we have now established ourselves on Trust Pilot with a combined review score of 4.8 out of 5 stars.
People
As a payroll company, we know that our team are our biggest asset. We continually invest in creating an environment that is enjoyable to work in, with a culture that rewards hard work, and provides many benefits so that people feel like they are taken care of, even when they are not at work.
The Board has invested in the health and wellbeing of our staff through Private Medical Insurance, with an option extended to families as well as employees, and has identified other health and happiness initiatives that we are looking to implement over the next year.
Board
The Compass Executive Team is well-balanced team and aims for integrity, intelligence, and evolution when making decisions. This means that we only make decisions in the board room that we would be comfortable declaring in a public forum, and we aim to drive the industry forward by showing that you can do well by following your moral and ethical Compass.
Using these principles as our guiding light, the Board is committed to taking a long-term perspective on all matters to ensure the ongoing success of Compass and oversee a structured approach to the development of the company’s strategic plan.
The market
Factors in the market that influence our strategy:
a recent government consultation has put forward two legislative options for tackling non-compliance in the umbrella company market: 1) Mandating due diligence, and 2) Transfer of tax debt (similar to IR35); and it appears likely that one or both will be adopted in the near future. While it has been suggested that option 2 could result in agencies removing all their Umbrella contractors from the market, like they did for Limited companies contractors after IR35, we think this is very unlikely given that umbrella services and tax treatment are more generic.
further, as early adopters of new compliance technologies that provide real-time compliance for both contractors and agencies alike, we expect to see a net positive impact from any legislation, as competitors scramble to catch up.
while legislation could go some way to improving the situation, major change could still be some time away. In the meantime, malpractice is still rife and continues to erode trust in the industry. Until compliance standards in the industry improve, we will continue to promote best practise due diligence with our partners, and campaign for a legislative environment that supports compliant umbrella and pro-actively seeks to curb non-compliance.
the incidence of major cyber attacks has decreased but we continue to remain vigilant. Compass continues staff training alongside comprehensive cyber protection systems cyber insurance should the worst happen.
The group maintained its strong growth through the year to 2 April 2023. Comparing our KPIs to the same period a year earlier:
4-Week Rolling Average to 2 April:
Weeks paid increased by 27%
Gross margin increased 36%
Totals for the 12 Months to 2 April:
Weeks paid increased by 42%
Gross margin increased 51%
Future Developments
Looking ahead, we feel the opportunities within the sector are the below:
Economic uncertainty is driving the market
Economic uncertainty is driving the contractor market and it is only getting bigger. If we take our opportunity now, we only need a tiny share of new business to do very well.
Systemisation, Automation and Outsourcing
The launch of our bespoke, automated robotic payroll app has allowed us to add scale to our operations while simultaneously improving the quality of work that we are able to offer our employees and improving the conversations we have with contractors and agencies.
Due to the significant impact this has had on the payroll function, we have seeded an ARP team in other major departments within the business, to find small, repetitive tasks that can be automated. In future, these will be expanded until they link together and across departments.
This statement is intended by the Directors to set out how they have approached and met their responsibilities under Section 172 of the Companies Act 2006 in the financial period ending 2 April 2023.
The Directors of Compass CE act in accordance with a set of general duties, including those under Section 172 of the Companies Act 2006 to promote the success of the company for the benefit of its members as a whole. In doing so they complied with the below factors:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct,
(f) the need to act fairly as between members of the company.
As a socially responsible company, Compass supports the wider UK community by donating to a wide variety of charity partners, and engaging the local community by supporting efforts to improve the local environment for our employees and neighbours, and the local regulations that support small businesses.
We believe in building long-term relationships within the supply chain, such that our suppliers and customers view us as partners in their business, and they in ours.
Our reputation and the reputation of the industry
Compass aims to lead the campaign to improve the reputation of the industry. Our reputation is tied to that of the wider industry – when one provider is found to be non-compliant, we are all tarred with the same brush. Historically, people have chosen to keep quiet when suspicions have been raised, but we have chosen to call people out where evidence of malpractice has been found. We have a reputation for being outspoken on matters of compliance and due diligence, and we will continue to challenge the status quo until the reputation of the industry is exemplary.
We fully accept that we cannot lead this movement unless our own reputation is beyond reproach and that is why we have adopted SafeRec – industry-leading, real-time, compliance technology – and have maintained our Professional Passport accreditation – the only independent annual accreditation available. Further, we continue to refuse entry to other accreditations until they demonstrate in the long-term that they put the interests of contractors and hirers above their own interests and those of their members.
Greenhouse Gas Emissions
It is deemed that the energy consumed by the group is less than 40,000 kWh, therefore the exemption has been taken not to disclose the energy used during the period.
Summary
In summary, the business has exceeded expectations in many areas but we have identified underperforming areas and put in place development plans. The performance will need to be closely monitored to ensure that we maximise the amazing opportunities we have in front of us and to avoid the common pitfalls of maturing businesses. External factors will play a significant role in the performance of the business over the next 12-24 months as uncertainty will continue to drive the temporary labour industry, as long as the UK avoids a significant downturn in economic activity in the medium term.
On behalf of the board
The directors present their annual report and financial statements for the year ended 2 April 2023.
The results for the year are set out on page 11.
Ordinary dividends were paid amounting to £10,000. 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 Azets Audit Services be reappointed as auditor of the company will be put at a General Meeting.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
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.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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 umbrella payroll industry;
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 the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal 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.
Use of our report
This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 14 to 22 form part of these financial statements.
Compass CE Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 2 Oriel Court, 106 The Green, Twickenham, Middlesex, United Kingdom, TW2 5AG.
Accounting reference date
The company's accounting reference date is 31 March 2023. As permitted by Section 390 of the Companies Act 2006, the company has prepared accounts to 2 April 2023 for operational purposes.
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 £.
This 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:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of RCADA Holdings Limited. These consolidated financial statements are available from its registered office, 2 Oriel Court, 106 The Green, Twickenham, England, TW2 5AG.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
There is no directors' remuneration included within Wages and salaries.
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:
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Engage Technology Partners Limited
(Some directors are directors and/or shareholders of the company)
During the year sales of £nil (2022: £nil) were made to and purchases of £nil (2022: £1,364) were made from Engage Technology Partners Limited.
The company has taken advantage of the exemption available in Section 33.1A of FRS 102 whereby it has not disclosed transactions with its parent company, as it's wholly owned by the group.
Compass (ECS) Limited
(a company with the shareholders in common)
At the balance sheet date the balance due from Compass (ECS) Limited was £nil (2022: £10,596).
The company's ultimate parent company is RCADA Holdings Limited, a company incorporated in England and Wales, by virtue of their 100% share capital of Compass CE Limited.
Consolidated accounts can be found at the RCADA's registered office, 2 Oriel Court, 106 The Green, Twickenham, England, TW2 5AG and also at Companies House.