The directors present the strategic report for the year ended 31 December 2022.
The group’s financial year ended 31 December 2022 saw a significant increase in revenue of £3,020,148 (20.38%) to £17,835,804, compared to £14,815,656 at 31 December 2021 as supply chains recovered from the impact of the Covid-19 pandemic and Brexit. The directors plan to build on this success with a strong focus on customer satisfaction through ongoing review and improvement of the quality and the range of products offered, together with exceptional service levels.
Exceptionally high freight prices worldwide had an adverse impact on the group’s gross margin during the years ended 31 December 2022 and 2021. Worldwide freight prices have decreased since the third quarter of 2022, and it is widely expected that freight prices, will return to pre-pandemic levels during 2023. This, together with other planned cost control measures will lead to considerable improvement in the group’s gross margin going forward.
During the year ended 31 December 2022, shareholders funds reduced from £2,265,437 to £113,866 primarily as a result of amortisation of goodwill, interest payable on group loans and Exchange Rate losses on translation of foreign currency balances.
Carbon Emissions
During 2022 the group commenced a project to both measure and ultimately reduce its carbon footprint, with the aim of publishing and implementing a Carbon Reduction Plan (CRP) during 2023.
Capital Expenditure
Following set-up of a new Distribution Centre during 2022, the group will carry out a program of improvements to the manufacturing and office facility during 2023.
The directors believe the key business risks to be new regulatory hurdles in respect of the Medical Device Regulation (“MDR”) scheme in Europe, Middle East and Africa (“EMEA”), supply chain interruptions, and industrial action in the National Health Service (“NHS”).
The group has achieved all regulatory compliance to date with respect to MDR.
The directors recognise the potential risk of supply chain interruptions such as those that were caused by the Covid-19 pandemic and continue to hold stock levels that mitigate this risk.
The group’s directors believe identifying key performance indicators is important. The directors use several indicators including revenue growth and earnings before interest, tax, depreciation and amortisation (EBITDA) to monitor and improve the group’s development and performance. Other important non-financial indicators are customer service levels, efficiency, and staff retention.
The results set out in the group profit and loss account show that turnover for the year ended 31 December 2022 was £17,835,804 (2021: £14,815,656).
EBITDA was £-819,967 (2021: £1,356,693) for the year ended 31 December 2022, which included exchange losses of £1,082,101 (2021: Gains of £486,362) incurred in respect of translating foreign currency loans from the group’s parent company.
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 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The directors are optimistic about the company's forthcoming year's performance, as noted in the strategic report.
The group finances its operations from working capital and financial support from other group companies. Obligations under such borrowing arrangements are met out of the group's working capital. The cash flow risk and price risk are therefore considered to be negligible.
The group may also purchase certain raw materials and finished goods in currencies other than its reporting currency, primarily U.S. dollars. Such arrangements may subject the group to fluctuations as a result of exchange rate changes. At this time, the directors do not believe the exposure created by these arrangements to have a material effect on the financial statements.
The auditor Grant Thornton UK LLP is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Aspen UK Acquisitions Limited (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2022, which comprise the Group Profit and Loss Account, Group and Company Balance Sheets, Group and Company Statement of Changes in Equity, Group Statement of Cash Flows and Notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including 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 the 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
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent company’s business model including effects arising from macro-economic uncertainties such as high inflation rates and global supply chain issues, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the group’s and the parent company’s financial resources or ability to continue operations over the going concern period.
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 the 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.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the financial statements’ section of this report.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors’ 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 group’s and 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 group or 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and industry in which it operates through our general commercial and sector experience and discussions with management. We determined the following laws and regulations were most significant: FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ and the Companies Act 2006.
We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur and the risk of management override of controls. Audit procedures performed by the engagement team included:
Identifying and testing journal entries, which focus on large and unusual manual journals, considered by the engagement team to carry a higher risk of fraud;
Assessing the extent of compliance with the relevant laws and regulations as part of our procedures on the related financial statement item;
Making enquiries of management as to whether they were aware of any instances of non-compliance with any knowledge of actual, suspected or alleged fraud;
Obtaining an understanding of certain manual journals and adjustments made to revenues, and corroborating management’s explanations where relevant; and
Assessing management’s key judgements and estimates for indicators of bias or error.
These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it;
The engagement partner's assessment of the appropriateness of the collective competence and capabilities of the engagement team included consideration of the team’s:
Understanding of, and practical experience with audit engagements of a similar nature and complexity through appropriate training and participation;
Knowledge and experience of the industry in which the client operates; and
Understanding of the requirements of FRS 102 and the application of the legal and regulatory requirements to the group and parent company.
Team communications in respect of potential non-compliance with laws and regulations and fraud included the possibility of management override of controls, unusual posting patterns in respect of revenue and revenue recognised near the end of the year.
In assessing the potential risk of material misstatement, we obtained an understanding of:
The group's operations, including the nature of its revenue sources, to understand the classes of transactions, account balances, expected financial statement disclosures and business risks that may result in risk of material misstatement; and
The group's and parent company's control environment, including management's knowledge of relevant laws and regulations and how the group and parent company is complying with those laws and regulations, the adequacy of procedures surrounding authorisation of transactions, and procedures to ensure that any possible breaches of laws and regulations are appropriately investigated and reported.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: 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 profit and loss account and related notes. The company's loss for the year ended 31 December 2022 was £1,367,080.
Aspen UK Acquisitions Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Eastcastle House, 27/28 Eastcastle Street, London, United Kingdom, W1W 8DH.
The group consists of Aspen UK Acquisitions Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The company's subsidiaries as listed in Note 14 have not been individually audited, and have taken an exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies under parental guarantee.
The company has taken advantage of FRS 102 paragraph 33.1A, in respect of not disclosing related party transactions between wholly owned group companies.
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 within its own financial statements:
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Aspen UK Acquisitions Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 2022.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The directors have not identified any material uncertainties related to events or conditions that may cast significant doubt about the group's ability to continue as a going concern. In reviewing the results from 2022 and preparing forecasts of future performance of the group, the directors have concluded that while both Brexit and Covid-19 negatively impacted the business, they believe that the group will generate positive cash flows and recover from these impacts.
The company is dependent upon the ongoing financial support of connected company Aspen Holding, LLC. The directors of Aspen Holding, LLC have indicated that these companies will continue to provide financial support to the company for the foreseeable future.
Therefore the directors have adopted the going concern basis of preparation in these financial statements, which assumes that liabilities will be discharged in the normal course of business.
Turnover represents amounts receivable for goods net of VAT and trade discounts and has been wholly derived from the group's principal activity.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off to profit or loss in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity 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.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest 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.
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 liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors and loans from fellow group companies are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future 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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
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.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Government grants relating to proceeds received or receivable under the UK Government's Coronavirus Job Retention Scheme are recognised in Other operating income.
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. Gains and losses arising on foreign exchange in respect of sales and purchases are recognised in cost of sales, whereas gains and losses arising on foreign exchange in respect of retranslation of financial liabilities are not considered to be part of operating activities and are presented separately.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The group has no material judgements or estimates in the current year.
The average monthly number of persons employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 0 (2021 - 0).
The actual tax (credit) for the year was lower than the standard rate of tax in the UK of 19%, explained by the reconciliation below.
The actual (credit)/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:
On 5 March 2020 the company generated goodwill of £7,465,724, arising on the acquisition of Yorkmarsh Limited. The goodwill represents the excess of the consideration price over the fair value of the net assets acquired. Additional goodwill of £418,000 was recognised to reflect the calculation of the deferred tax liability on business combinations.
On 5 March 2020 the company acquired trademarks valued at £2,200,000 as part of the acquisition of Yorkmarsh Limited. The trademarks are critical to the success of the brand given the customers' name recognition of its products.
Details of the company's subsidiaries at 31 December 2022 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The following subsidiaries are exempt from audit under section 479A of the Companies Act 2006 as the parent company has given a guarantee in respect of all outstanding liabilities at the subsidiaries' financial year ends:
Yorkmarsh Limited 06450241
Promedics Orthopaedics Limited 06455477
Kare Limited SC155046
Loans from group undertakings comprise a loan of £10,893,566 (2021 - £9,254,873) advanced from the group's ultimate controlling party. The balance is comprised of the principal loan of £9,098,428 (2021 - £8,553,985) and accrued interest of £1,795,138 (2021 - £700,888).
The rate of interest charged on the loan is 7.5% per annum.
The loan and any interest accrued thereon is fully repayable on the 10th December 2025.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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 remuneration of key management personnel, is as follows.
The company has taken an exemption from disclosing related party transactions with entities that are within the same wholly owned group.
In the prior year, sales made to customers in Switzerland were included within sales made to Rest of Europe in the breakdown of revenue by geographical market in Note 3. The results for the prior year have been restated to more accurately reflect sales made to customers in Switzerland. Sales to Rest of Europe of £2,014,503 have been restated as £1,258,337, and sales to Switzerland of £756,166 have now been reflected.