Company registration number 11434244 (England and Wales)
CUTTING EDGE MUSIC PUBLISHING LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
CUTTING EDGE MUSIC PUBLISHING LIMITED
COMPANY INFORMATION
Directors
T R Hegarty
A D Ross
J F Mighell
A J Smith
(Appointed 29 November 2023)
Secretary
J D Moross
Company number
11434244
Registered office
Westworks
White City Place
London
W12 7FQ
Auditor
Wilson Wright LLP
Chartered Accountants
5 Fleet Place
London
EC4M 7RD
CUTTING EDGE MUSIC PUBLISHING LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Income statement
8
Statement of comprehensive income
9
Statement of financial position
10
Statement of changes in equity
11
Notes to the financial statements
12 - 23
CUTTING EDGE MUSIC PUBLISHING LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
- 1 -
The directors present the strategic report for the year ended 30 June 2023.
Principal activities
The principal activities of the Company continue to be that of music production and music publishing.
Review of the business
A summary of the results of the year's trading is given on page 8 of the financial statements.
During the financial year, Cutting Edge Music Publishing Limited (“CEMP”) has grown by investing in artists and repertoire (A&R), along with sales and marketing initiatives to generate income from their assets, and by executing a "roll up" strategy coupled with organic growth, CEMP should see significant multiple expansion and an increase in the value of CEMP's assets.
There have been substantial financial risks in relation to the recent interest rate rise during the year, which has affected CEMP, but covenants have been met throughout the year as well as within future forecasted results.
The year’s financial results were on budget and given the continuing trends, CEMP remains bullish on this niche sector of the music rights industry.
The Writers and the Screen Actors Guilds have been on strike for months, which has disrupted the industry, affecting the Group’s supervision division, but not to a material amount.
Future developments
The business aims to continue its acquisition strategy in order to achieve not only growth from the acquisitions but further organic growth by achieving profit from strategic synergies between current operations and new acquisitions.
Principal risks and uncertainties
The Company is exposed to a number of business and financial risks from its operating activities. The board of directors is responsible for ensuring that the business risks are actively managed. The business does not trade financial instruments nor does it currently use financial derivatives. The key financial risks are identified below:-
Currency risk - Due to the global nature of the business, with sales and operations in multiple countries, the business is exposed to fluctuations of sterling, against our other trading currencies, namely the Euro and the US Dollar. Currency exposure is managed by matching, as far as possible, income and expenditure in these currencies.
Credit risk - The board manages its credit risk by ensuring that it only engages with counterparties that have high credit ratings. The Company sets and actively monitors credit limits for its counterparties based on reference checks and payment history.
Liquidity (cash flow) risk - The business manages its cash flow to ensure it can meet its obligations and requirements.
CUTTING EDGE MUSIC PUBLISHING LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 2 -
Key performance indicators
The directors consider that the key financial performance indicators are those that communicate the financial performance and strength of the company as a whole, these being revenue and gross profit margin.
Revenue analysed by class of business
2023
2022
£000's
£000's
Royalty income
2,226
2,179
Licensing
17
17
Management recharges
700
700
Supervision income
269
-
3,212
2,896
Revenue analysed by geographical market
2023
2021
£000's
£000's
United Kingdom
777
701
Europe
2,226
2,161
United States
209
34
3,212
2,896
2023
2022
Gross profit margin
72%
41%
A D Ross
Director
14 February 2024
CUTTING EDGE MUSIC PUBLISHING LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2023
- 3 -
The directors present their annual report and financial statements for the year ended 30 June 2023.
Results and dividends
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £150,000. The directors do not recommend payment of a further dividend.
Preference dividends were paid amounting to £49,500.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
D Blumenthal
(Resigned 29 November 2023)
T R Hegarty
A D Ross
J F Mighell
A J Smith
(Appointed 29 November 2023)
Post reporting date events
There have been no significant post reporting date events.
Future developments
There have been no significant changes in the company's principal activities since the date of the statement of financial position.
Auditor
In accordance with the company's articles, a resolution proposing that Wilson Wright LLP be reappointed as auditor of the company will be put at a General Meeting.
Statement of directors' responsibilities
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 company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
CUTTING EDGE MUSIC PUBLISHING LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 4 -
Strategic report
The strategic report contains details of the principal activities of the Company and includes a business review which provides information on the development of the Company's business during the year, together with details of the risks and uncertainties that affect the Company's business.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
A D Ross
Director
14 February 2024
CUTTING EDGE MUSIC PUBLISHING LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF CUTTING EDGE MUSIC PUBLISHING LIMITED
- 5 -
Opinion
We have audited the financial statements of Cutting Edge Music Publishing Limited (the 'company') for the year ended 30 June 2023 which comprise the income statement, the statement of comprehensive income, the statement of financial position, the statement of changes in equity 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).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 30 June 2023 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor'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 company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
CUTTING EDGE MUSIC PUBLISHING LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF CUTTING EDGE MUSIC PUBLISHING LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report 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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to the failure to comply with tax regulations, anti-bribery and anti-corruption laws, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. We evaluated management's incentives and opportunities for fraud manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries and management bias in accounting estimates. Audit procedures performed by the auditors included:
discussions with the director, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud.
assessing management's significant judgements and estimates in particular those relating to the impairment of intangibles, accruals of royalties, and recoverability of investments and receivables.
Identifying and testing manual journal entries, in particular any journal entries posted with unclear rationale.
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 resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, 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.
CUTTING EDGE MUSIC PUBLISHING LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF CUTTING EDGE MUSIC PUBLISHING LIMITED
- 7 -
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.
Warren Baker FCA (Senior Statutory Auditor)
For and on behalf of Wilson Wright LLP
25 March 2024
Chartered Accountants and Statutory Auditor
5 Fleet Place
London
EC4M 7RD
CUTTING EDGE MUSIC PUBLISHING LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
- 8 -
2023
2022
Notes
£
£
Revenue
3
3,212,486
2,896,451
Cost of sales
(892,132)
(1,702,319)
Gross profit
2,320,354
1,194,132
Administrative expenses
141,714
(1,678,310)
Operating profit/(loss)
4
2,462,068
(484,178)
Investment income
8
1,388,172
1,367,262
Finance costs
9
(1,603,524)
(764,816)
Profit before taxation
2,246,716
118,268
Tax on profit
10
(88,128)
Profit for the financial year
2,158,588
118,268
CUTTING EDGE MUSIC PUBLISHING LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
- 9 -
2023
2022
£
£
Profit for the year
2,158,588
118,268
Other comprehensive income
-
-
Total comprehensive income for the year
2,158,588
118,268
CUTTING EDGE MUSIC PUBLISHING LIMITED
STATEMENT OF FINANCIAL POSITION
- 10 -
2023
2022
Notes
£
£
£
£
Non-current assets
Intangible assets
12
7,037,955
1,364,070
Investments
13
8,070,365
7,570,365
15,108,320
8,934,435
Current assets
Trade and other receivables
15
19,122,414
18,776,985
Cash and cash equivalents
862,397
770,516
19,984,811
19,547,501
Current liabilities
16
(6,293,824)
(4,786,591)
Net current assets
13,690,987
14,760,910
Total assets less current liabilities
28,799,307
23,695,345
Non-current liabilities
17
(23,737,219)
(20,592,345)
Net assets
5,062,088
3,103,000
Equity
Called up share capital
19
1,330
1,330
Share premium account
3,560,405
3,560,405
Retained earnings
1,500,353
(458,735)
Total equity
5,062,088
3,103,000
The financial statements were approved by the board of directors and authorised for issue on 14 February 2024 and are signed on its behalf by:
A D Ross
Director
Company registration number 11434244 (England and Wales)
CUTTING EDGE MUSIC PUBLISHING LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
- 11 -
Share capital
Share premium account
Retained earnings
Total
Notes
£
£
£
£
Balance at 1 July 2021
1,330
3,560,405
154,950
3,716,685
Year ended 30 June 2022:
Profit and total comprehensive income
-
-
118,268
118,268
Dividends
11
-
-
(731,953)
(731,953)
Balance at 30 June 2022
1,330
3,560,405
(458,735)
3,103,000
Year ended 30 June 2023:
Profit and total comprehensive income
-
-
2,158,588
2,158,588
Dividends
11
-
-
(199,500)
(199,500)
Balance at 30 June 2023
1,330
3,560,405
1,500,353
5,062,088
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
- 12 -
1
Accounting policies
Company information
Cutting Edge Music Publishing Limited is a private company limited by shares incorporated in England and Wales. The registered office is Westworks, White City Place, London, W12 7FQ.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
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 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
Cutting Edge Music Publishing Limited is a subsidiary of Cutting Edge Group Limited and the results of Cutting Edge Music Publishing Limited are included in the consolidated financial statements of Cutting Edge Group Limited. These consolidated financial statements are available from its registered office, Unit 9, First Floor, Westworks, 195 Wood Lane, London, England, W12 7FQ.
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
1.2
Going concern
The Company's business activities, together with factors likely to affect its future development, performance and position are set out in the strategic report on pages 1 and 2.true
At the time of approving the financial statements, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.
1.3
Revenue
Revenue comprises royalties receivable and licensing income. Revenue is recognised at the fair value of the consideration received or receivable for rights and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 13 -
1.4
Intangible fixed assets other than goodwill
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.
Amortisation is provided at the following rate:
Music copyrights
5% straight line commencing on the first anniversary of the first royalty income being receivable for copyrights created in-house and from the date of acquisition for copyrights that are acquired
Intellectual Property
5% straight line on first use of the Intellectual Property
1.5
Non-current investments
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in the income statement.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
1.6
Impairment of non-current assets
At each reporting period end date, the company reviews the carrying amounts of its investments 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.
1.7
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.8
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 14 -
Basic financial assets
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
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.
Impairment of financial assets
Financial assets, other than those held at fair value through the statement of income, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the statement of income.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the statement of income.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including trade and other payables, bank loans 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 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.
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 15 -
Other financial liabilities
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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.9
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.10
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
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 when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.11
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 16 -
1.12
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:
Estimated useful lives of intangible assets
Intangible assets (copyrights) are amortised over their estimated useful lives of 20 years.
Recoverability of debtors and other receivables
When assessing provisions against trade and other receivables, management consider a number of factors including the ageing profile of the receivables and historical information.
Accrued royalties payable
When estimating accrued royalties payable, management consider a number of factors including historical information and management's experience of such costs.
Recoverability of investments
When assessing provisions against investments, management consider a number of factors including the net assets or liabilities of the investment and analysis of future profitability.
3
Revenue
2023
2022
£
£
Revenue analysed by class of business
Royalty income
2,226,138
2,178,976
Licensing
17,589
17,475
Management recharges
700,000
700,000
Supervision Income
268,759
-
3,212,486
2,896,451
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
3
Revenue
(Continued)
- 17 -
2023
2022
£
£
Revenue analysed by geographical market
United Kingdon
776,899
701,244
Europe
2,226,138
2,161,203
United States
209,449
34,004
3,212,486
2,896,451
2023
2022
£
£
Other revenue
Interest income
990,043
534,933
Dividends received
398,129
832,329
4
Operating profit/(loss)
2023
2022
Operating profit/(loss) for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(1,110,363)
1,031,759
Amortisation of intangible assets
285,769
84,307
Operating lease charges
14,690
14,690
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
39,817
27,800
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Administration
6
5
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
6
Employees
(Continued)
- 18 -
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
126,465
37,236
Social security costs
5,272
-
131,737
37,236
7
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
10,000
10,000
8
Investment income
2023
2022
£
£
Interest income
Interest receivable from group companies
271,189
195,321
Other interest income
718,854
339,612
Total interest revenue
990,043
534,933
Income from fixed asset investments
Income from shares in group undertakings
398,129
832,329
Total income
1,388,172
1,367,262
9
Finance costs
2023
2022
£
£
Interest on bank overdrafts and loans
1,603,524
764,816
10
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
88,128
From 1 April 2023, the UK corporation tax rate increased from 19% to 25%.
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
10
Taxation
(Continued)
- 19 -
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:
2023
2022
£
£
Profit before taxation
2,246,716
118,268
Expected tax charge based on the standard rate of corporation tax in the UK of 25.00% (2022: 19.00%)
561,679
22,471
Tax effect of expenses that are not deductible in determining taxable profit
9,240
729
Tax effect of income not taxable in determining taxable profit
(99,531)
(158,142)
Group relief
(363,893)
134,942
Transition adjustment
(19,367)
Taxation charge for the year
88,128
-
11
Dividends
2023
2022
£
£
Final paid
199,500
731,953
12
Intangible fixed assets
Music copyrights
Intellectual Property
Total
£
£
£
Cost
At 1 July 2022
1,632,163
1,632,163
Additions
5,945,318
14,336
5,959,654
At 30 June 2023
7,577,481
14,336
7,591,817
Amortisation and impairment
At 1 July 2022
268,093
268,093
Amortisation charged for the year
285,769
285,769
At 30 June 2023
553,862
553,862
Carrying amount
At 30 June 2023
7,023,619
14,336
7,037,955
At 30 June 2022
1,364,070
1,364,070
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 20 -
13
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
14
8,070,365
7,570,365
Movements in non-current investments
Shares in subsidiaries
£
Cost or valuation
At 1 July 2022
7,570,365
Additions
500,000
At 30 June 2023
8,070,365
Carrying amount
At 30 June 2023
8,070,365
At 30 June 2022
7,570,365
14
Subsidiaries
Details of the company's subsidiaries at 30 June 2023 are as follows:
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Indirect
White Stork Music Ltd
UK
A Ordinary
75.00
-
Cutting Edge Media Music Limited
UK
Ordinary
100.00
-
Soundtrack Records Inc
US
Ordinary
100.00
-
Broadway Records Inc
US
Ordinary
100.00
-
Broadway Records LLC
US
Ordinary
-
100.00
Real Music Acquisitions Inc
US
Ordinary
100.00
-
Earthsea Management Inc
US
Ordinary
-
100.00
The UK subsidiaries have the same registered office as the parent company.
The registered office of the US subsidiaries is 9100 Wilshire Boulevard, 455E, Beverley Hills, California, 90212, USA.
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 21 -
15
Trade and other receivables
2023
2022
Amounts falling due within one year:
£
£
Trade receivables
913,001
541,309
Amounts owed by group undertakings
10,661,173
11,508,910
Other receivables
1,233,800
1,151,717
Prepayments and accrued income
607,090
692,027
13,415,064
13,893,963
2023
2022
Amounts falling due after more than one year:
£
£
Other receivables
5,707,350
4,883,022
Total debtors
19,122,414
18,776,985
16
Current liabilities
2023
2022
Notes
£
£
Bank loans
18
890,154
773,167
Trade payables
49,137
19,664
Amounts owed to group undertakings
4,495,052
2,917,199
Corporation tax
88,128
Other taxation and social security
615
Other payables
1,233
650
Accruals and deferred income
770,120
1,075,296
6,293,824
4,786,591
17
Non-current liabilities
2023
2022
Notes
£
£
Bank loans
18
23,737,219
20,592,345
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 22 -
18
Borrowings
2023
2022
£
£
Bank loans
24,627,373
21,365,512
Payable within one year
890,154
773,167
Payable after one year
23,737,219
20,592,345
At the balance sheet date Cutting Edge Music Publishing Limited had 2 loans with Pinnacle Bank. The 'Principal' loan of $6,600,000 is repayable over the period until 9 June 2025. The 'Revolving' loan of $24,356,790 is repayable on 9 June 2025.
The rate of interest on the loans is the greater of the Prime Rate (Wall Street Journal) or 3.5%.
The loan is secured over the assets of Cutting Edge Music Publishing Limited and its subsidiaries by way of a fixed and floating charge over the companies' assets.
At the reporting date, the loan facility with Pinnacle Bank remained at $40,000,000 which is comprised of $8,000,000 for the 'Principal' loan and $32,000,000 for the 'Revolving' loan.
19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
1,000
1,000
1,000
1,000
2023
2022
2023
2022
Preference share capital
Number
Number
£
£
Issued and fully paid
Preference Shares of £1 each
330
330
330
330
Preference shares classified as equity
330
330
Total equity share capital
1,330
1,330
All shares have attached to them full voting rights and rights to a dividend distribution; they do not confer any rights of redemption.
CUTTING EDGE MUSIC PUBLISHING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 23 -
20
Related party transactions
At the reporting date £2,536,774 (2022 - £1,492,486) was due from the parent company.
At the reporting date £1,247,319 (2022 - £949,863) was due from its subsidiary company which is not a wholly owned subsidiary.
At the reporting date £100,559 (2022 - £508) was due from fellow group companies.
At the reporting date £908,776 (2022 - £440,655) was due to fellow group companies which are not wholly owned subsidiaries.
At the reporting date £5,707,350 (2022 - £5,222,633) was due from a company in which Cutting Edge Group Limited has a minority interest.
During the year fees amounting to £350,000 (2022 - £350,000) were charged in the normal course of business to a subsidiary company, which is not a wholly owned subsidiary.
During the year fees amounting to £250,499 (2022 - £nil) were charged in the normal course of business from a fellow group company.
An amount of £45,833 (2022 - £16,667) was payable to a company in which a shareholder has a material interest.
The company has taken advantage of the exemption available in accordance with Section 33.1A of Financial Reporting Standard 102 whereby it has not disclosed transactions entered into between two or more members of a group, as the company is a wholly owned subsidiary undertaking of the group to which it is party to the transactions.
21
Ultimate controlling party
The directors consider the immediate and ultimate parent undertaking to be Cutting Edge Group Limited. Cutting Edge Group Limited is the smallest and largest group for which consolidated accounts including Cutting Edge Music Publishing Limited are prepared. These consolidated financial statements are available from its registered office, Unit 9, First Floor, Westworks, 195 Wood Lane, London, England, W12 7FQ.
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