Company registration number 06763953 (England and Wales)
SVAROG SHIPPING & TRADING COMPANY LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Faulkner House
Victoria Street
Rayner Essex LLP
St Albans
Chartered Accountants
Hertfordshire
AL1 3SE
SVAROG SHIPPING & TRADING COMPANY LIMITED
COMPANY INFORMATION
Directors
Mr N Savva
Ms C Konstantinou
Company number
06763953
Registered office
Tavistock House South
Tavistock Square
London
WC1H 9LG
Auditor
Rayner Essex LLP
Faulkner House
Victoria Street
St Albans
Hertfordshire
AL1 3SE
SVAROG SHIPPING & TRADING COMPANY LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Profit and loss account
8
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 22
SVAROG SHIPPING & TRADING COMPANY LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 1 -

The directors present the strategic report for the year ended 31 December 2021.

Fair review of the business

The directors are pleased with the performance of the company during the year, reporting operating profit of $3.3m (2020: $4.5m) and net profit of $3.0m (2020: $4.1m). Despite the continued impact and uncertainty from the Covid-19 pandemic, the company benefitted from an increase in freight revenue compared to the previous year. The company has also maintained cash reserves of circa $1.5m.

Principal risks and uncertainties

The principal risks and uncertainties faced by the company in the view of the directors are as follows:

 

Credit risk

Credit risk is managed on an individual basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, management assess the credit risk of the customer, taking into account its financial position, past experience and other factors. Individual credit limits and credit terms are set based on the credit quality of the customer in accordance with set limits set by the board of directors. The utilisation of credit limits is regularly monitored.

 

Interest rate risk

The company is exposed to interest rate risk on its borrowings. Borrowings issued at fixed rates expose the company to fair value interest rate risk. The directors monitor the interest rate fluctuations on a continuous basis and acts accordingly.

 

Liquidity risk

The board manages liquidity risk by a combination of controls such as monitoring gearing levels and ensuring the company has sufficient available funds for its operations.

Cash flow risk

The board continually monitor the cash requirements of the company to ensure that there are the appropriate levels of cover. The company has support from its parent company to meet cash flow requirements if required.

 

Foreign currency risk

The directors are constantly reviewing the company's exposure to limit the adverse effects of such risks on its financial performance. The directors undertake sensitivity analysis to identify foreign currency exposure.

 

Supply chain network uncertainty

The company relies on sourcing of vessels to meet customer demands. The directors use experienced agents to continually source vessels and build relationships with suppliers. The directors seek to ensure that adequate vessels are available to meet the requirements of its customers.

Development and performance

The directors can report that this year was a satisfactory one in view of the challenging conditions arising as a result of the Covid-19 pandemic and general economic uncertainty.

 

The directors are aware that the pandemic and more recently, the conflict in Ukraine continue to cause general economic uncertainty.

SVAROG SHIPPING & TRADING COMPANY LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 2 -
Key performance indicators

The directors review various key performance indicators during the year to measure the performance of the company compared to budget. A summary of these indicators are as follows:-

 

Turnover

The directors review pricing in line with the market. This means the prices offered by the company to its customers remain competitive. Turnover for the period was $45.6m (2020: $39.4m)

 

Gross profit

The directors continually take steps to ensure that the company maintains its gross margin. Gross margin achieved was 10.2% (2020: 14.7%)

On behalf of the board

Mr N Savva
Director
17 August 2022
SVAROG SHIPPING & TRADING COMPANY LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 3 -

The directors present their annual report and financial statements for the year ended 31 December 2021.

Principal activities

The principal activity of the company through it's Cypriot branch is the transportation of heavy fuel products.

Results and dividends

During the year a dividend of $2,000,000 was approved and paid. This dividend was in respect of the year ended 31 December 2020. No dividend has been paid in respect of the results relating to year ended 31 December 2021.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mr N Savva
Ms C Konstantinou
Financial instruments

The company used financial instruments comprising trade receivables and cash together with trade creditors and loans from group companies that arise directly from its operations. It is the objective of the directors to ensure that the company has ready access to the level of funds that the directors deem necessary at any time during the year. The directors review future contracts to highlight any times when requirements may exceed current levels of funding to ensure facilities are in place and available.

The main risks arising from financial instruments used by the company are credit risk, interest rate risk, foreign exchange risk, liquidity risk and cash flow risk.

Post reporting date events

The Board of Directors recommends a dividend of $530 per ordinary share from the profits of 2021 amounting to $5.3m. Subject to shareholders' approval at the forthcoming AGM the dividend will be paid during the year ended 31 December 2022.

 

As a consequence of the imposed Russian sanctions, on 2 March 2022 the company has sold its vessel The Taimyr for $4.6m (EUR 5.5m).

Future developments

The directors continue to develop the business in accordance with their plans and projections.

 

Since the year end, general economic conditions have deteriorated, with factors including Russia's invasion of Ukraine contributing to significant increases in energy costs, as well as general high cost of inflation. The directors have taken action to mitigate these impacts, including the sale of its vessel and expect the financial performance to remain solid. The directors continue to monitor and evaluate any new developments.

Auditor

In accordance with the company's articles, a resolution proposing that Rayner Essex LLP be reappointed as auditor of the company will be put at a General Meeting.

SVAROG SHIPPING & TRADING COMPANY LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 4 -
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:

 

 

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.

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
Mr N Savva
Director
17 August 2022
SVAROG SHIPPING & TRADING COMPANY LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SVAROG SHIPPING & TRADING COMPANY LIMITED
- 5 -
Opinion

We have audited the financial statements of Svarog Shipping & Trading Company Limited (the 'company') for the year ended 31 December 2021 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

SVAROG SHIPPING & TRADING COMPANY LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SVAROG SHIPPING & TRADING COMPANY 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:

 

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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

The extent to which the audit was considered capable of detecting irregularities including fraud

 

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

 

SVAROG SHIPPING & TRADING COMPANY LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SVAROG SHIPPING & TRADING COMPANY LIMITED
- 7 -

We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

 

 

To address the risk of fraud through management bias and override of controls, we:

 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

 

 

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

 

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Antony Federer FCA FCCA CF (Senior Statutory Auditor)
For and on behalf of Rayner Essex LLP
17 August 2022
Chartered Accountants
Statutory Auditor
Faulkner House
Victoria Street
St Albans
Hertfordshire
AL1 3SE
SVAROG SHIPPING & TRADING COMPANY LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 8 -
2021
2020
Notes
$
$
Turnover
3
45,605,238
39,419,710
Cost of sales
(40,923,844)
(33,606,670)
Gross profit
4,681,394
5,813,040
Administrative expenses
(1,355,555)
(1,313,442)
Operating profit
4
3,325,839
4,499,598
Interest payable and similar expenses
6
(68,142)
(66,689)
Profit before taxation
3,257,697
4,432,909
Tax on profit
7
(205,898)
(308,288)
Profit for the financial year
3,051,799
4,124,621

The profit and loss account has been prepared on the basis that all operations are continuing operations.

SVAROG SHIPPING & TRADING COMPANY LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
- 9 -
2021
2020
$
$
Profit for the year
3,051,799
4,124,621
Other comprehensive income
-
-
Total comprehensive income for the year
3,051,799
4,124,621
SVAROG SHIPPING & TRADING COMPANY LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2021
31 December 2021
- 10 -
2021
2020
Notes
$
$
$
$
Fixed assets
Tangible assets
8
2,538,431
3,193,510
Current assets
Stocks
10
870,074
598,227
Debtors
11
4,078,603
4,354,462
Cash at bank and in hand
1,542,640
1,579,630
6,491,317
6,532,319
Creditors: amounts falling due within one year
12
(3,628,592)
(2,631,668)
Net current assets
2,862,725
3,900,651
Total assets less current liabilities
5,401,156
7,094,161
Creditors: amounts falling due after more than one year
13
-
0
(2,744,804)
Net assets
5,401,156
4,349,357
Capital and reserves
Called up share capital
14
15,159
15,159
Profit and loss reserves
5,385,997
4,334,198
Total equity
5,401,156
4,349,357
The financial statements were approved by the board of directors and authorised for issue on 17 August 2022 and are signed on its behalf by:
Mr N Savva
Ms C Konstantinou
Director
Director
Company Registration No. 06763953
SVAROG SHIPPING & TRADING COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
- 11 -
Share capital
Profit and loss reserves
Total
Notes
$
$
$
Balance at 1 January 2020
15,159
3,209,577
3,224,736
Year ended 31 December 2020:
Profit and total comprehensive income for the year
-
4,124,621
4,124,621
Dividends
-
(3,000,000)
(3,000,000)
Balance at 31 December 2020
15,159
4,334,198
4,349,357
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
3,051,799
3,051,799
Dividends
-
(2,000,000)
(2,000,000)
Balance at 31 December 2021
15,159
5,385,997
5,401,156
SVAROG SHIPPING & TRADING COMPANY LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
- 12 -
2021
2020
Notes
$
$
$
$
Cash flows from operating activities
Cash generated from operations
19
2,384,205
4,277,788
Interest paid
(68,142)
(66,689)
Income taxes paid
(353,053)
(180,675)
Net cash inflow from operating activities
1,963,010
4,030,424
Financing activities
Dividends paid
(2,000,000)
(3,000,000)
Net cash used in financing activities
(2,000,000)
(3,000,000)
Net (decrease)/increase in cash and cash equivalents
(36,990)
1,030,424
Cash and cash equivalents at beginning of year
1,579,630
549,207
Cash and cash equivalents at end of year
1,542,640
1,579,630
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
- 13 -
1
Accounting policies
Company information

Svarog Shipping & Trading Company Limited is a private company limited by shares incorporated in England and Wales. The registered office is Tavistock House South, Tavistock Square, London, WC1H 9LG.

 

The company's trading address is 38, Karaiskaki Street, Kanika Alexander Court, Bock 1, 1st Floor, Office 113C/D, PC 3032, Limassol, Cyprus

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 US$, 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 on the historical cost convention.

1.2
Going concern

Atruet 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. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.3
Turnover

Revenues earned by the Company are recognised on the following bases:

Rendering of services

Sales of services are recognised in the accounting period in which the services are rendered by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

Time charter hire revenue

Revenue from time charters represents charter hire earned under time charter agreement and is recorded over the term of the charter as service is provided.

Freight income

All voyage revenues are recognised on a percentage of completion method. The Company used a discharge-to-discharge basis in determining percentage of completion for all voyages.

1.4
Expenditure
Claims for demurrage are recognised in the period to which the cost is invoiced.
1.5
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Plant and machinery
Over 7 years (estimated remaining useful economic life)
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 14 -
1.6
Impairment of fixed assets

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

1.7
Stocks

Stocks are stated at the lower of cost and net realisable value. Fuel stock is valued based on the first in first out method. The other stock categories are valued based on weighted average cost method. The net realisable value is based on estimated selling price less any additional expenses expected to occur by the stock's date of sale. When considered necessary, a specific provision is made for defective and obsolete or slow moving stock which is included in cost of sales.

1.8
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.

1.9
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 balance sheet 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.

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.

SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 15 -
Impairment of financial assets

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.

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, 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.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.10
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.

1.11
Taxation

The company is subject to Cypriot corporation tax. The tax expense represents the sum of the tax currently payable and deferred tax.

SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 16 -
Current 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 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. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, 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.

1.12
Foreign exchange
Items included in the compay's financial statements are measured using the currency of the primary economic environment in which the company operates (the "functional currency"). The financial statements are presented in United States Dollars (US$), which is the company's functional and presentational currency.  

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account.
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 17 -
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.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Vessel life and impairment

The carrying value of the vessel represents its original cost at the time it was acquired less depreciation calculated using an estimated useful life of 30 years from the date the vessel was originally delivered from the shipyard. In the shipping industry, use of life in this range has become standard.

 

The carrying value of the vessel may not represent its fair value at any point in time since the market prices of second hand vessels tends to fluctuate with changes in charter rates and cost of a new build. Historically charter rates and vessel values tend to be cyclical. Impairment losses are recorded only when the directors believe that future cash flows for the vessel will be less than the carrying value and therefore not fully recoverable. In such instance, an impairment charge would be recognised in the P&L.

3
Turnover

An analysis of the company's turnover is as follows:

2021
2020
$
$
Turnover analysed by class of business
Freight income
36,591,420
31,215,326
Time charters
4,653,750
4,666,500
Demurrages
3,691,741
3,512,043
Other ship income
668,327
25,841
45,605,238
39,419,710
2021
2020
$
$
Turnover analysed by geographical market
Rest of the world
45,584,321
39,372,186
Europe
20,917
47,524
45,605,238
39,419,710
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 18 -
4
Operating profit
2021
2020
Operating profit for the year is stated after charging/(crediting):
$
$
Exchange losses/(gains)
103,267
(194,508)
Fees payable to the company's auditor for the audit of the company's financial statements
9,827
12,761
Depreciation of owned tangible fixed assets
655,079
655,078
Cost of stocks recognised as an expense
8,618,443
3,783,150
5
Employees
2021
2020
Number
Number
Total
-
0
-
0
6
Interest payable and similar expenses
2021
2020
$
$
Interest on financial liabilities measured at amortised cost:
Interest payable to group undertakings
68,142
66,689
7
Taxation
2021
2020
$
$
Current tax
Cypriot corporation tax on profits for the current period
205,898
308,288
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
7
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:

2021
2020
$
$
Profit before taxation
3,257,697
4,432,909
Expected tax charge based on the standard rate of corporation tax in the UK of 12.50% (2020: 12.50%)
407,212
554,114
Non deductible expenses
37,013
27,117
Tax effect allowances not subject to tax
(241,688)
(275,088)
Tonnage tax
2,144
2,145
Timing difference
1,217
-
0
Tax expense for the year
205,898
308,288

The company is subject to Cypriot corporation tax and not UK corporation tax.

8
Tangible fixed assets
Plant and machinery
$
Cost
At 1 January 2021 and 31 December 2021
4,585,552
Depreciation and impairment
At 1 January 2021
1,392,042
Depreciation charged in the year
655,079
At 31 December 2021
2,047,121
Carrying amount
At 31 December 2021
2,538,431
At 31 December 2020
3,193,510
9
Financial instruments
2021
2020
$
$
Carrying amount of financial assets
Debt instruments measured at amortised cost
2,394,934
3,077,236
Carrying amount of financial liabilities
Measured at amortised cost
3,592,554
5,194,769
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 20 -
10
Stocks
2021
2020
$
$
Finished goods and goods for resale
870,074
598,227
11
Debtors
2021
2020
Amounts falling due within one year:
$
$
Trade debtors
2,379,775
2,937,948
Corporation tax recoverable
1,490
-
0
Amounts owed by group undertakings
15,159
15,159
Other debtors
48,550
44,897
Prepayments and accrued income
1,633,629
1,356,458
4,078,603
4,354,462
12
Creditors: amounts falling due within one year
2021
2020
$
$
Trade creditors
1,907,035
1,127,574
Amount due to parent undertaking
846,050
-
0
Corporation tax
36,038
181,703
Accruals
839,469
1,322,391
3,628,592
2,631,668
13
Creditors: amounts falling due after more than one year
2021
2020
$
$
Amounts owed to group undertakings
-
0
2,744,804

Included in amounts due to group undertakings is a loan of $nil (2020: $630,922 and $1,600,000) along with accumulated interest for the period from its ultimate controlling party Huntspoint Limited. Interest is charged at a rate of 1 year EURIBOR + 3% per annum. The loan was repayable on or before 31 December 2021 and was fully repaid during the year.

14
Share capital
2021
2020
$
$
Ordinary share capital
Issued and fully paid
10,000 Ordinary of $1.5159 each
15,159
15,159
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 21 -
15
Dividends

At year end a dividend of $2,000,000 (2020: $3,000,000) was approved and paid to the ultimate controlling party Huntspoint Limited.

16
Related party transactions

During the year the company rendered services on commercial terms to Lia Oil S.A, a fellow group company of $nil (2020: $185,000). Further to this, a credit note was raised for $nil (2020: $460,000) & $nil was written off (2020: $29,086) after an ongoing dispute was settled.

 

At the year end $nil (2020: $2,744,804) was owed from the company to Huntspoint, the ultimate parent company and $68,142 (2020: $66,689) interest was recognised on this loan. At the year end $846,050 (2020: $nil) was owed to Huntspoint by the company in respect of an unpaid dividend at year end.

 

17
Ultimate controlling party

The ultimate controlling party by way of shareholding is Huntspoint Ltd, a company incorporated in the British Virgin Islands. Its registered office is Tortola Pier Park, Building 1, Second Floor, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

18
Events after the reporting period

Sale of vessel

Following the escalation of the geopolitical solution in eastern Europe in the first quarter of 2022, new sanctions have been imposed on Russia by the US, the EU and other countries. Russia has responded with counter sanctions. The Branch is involved in the transportation of Russian oil to the Far East and has not been affected by any sanctions during this year end.

 

The Branch's management continuously monitors and evaluates the development in order to secure that business operations are compliant with relevant legislation and that relevant actions are taken to efficiently and timely mitigate the effects of the financial volatility.

 

On 2 March 2022, the vessel owned by the Branch was sold to its charterer for $4.6m (EUR 5.5m).

 

Dividends

The Board of Directors recommends a dividend of $530 per ordinary share from the profits of 2021 amounting to $5.3m. Subject to shareholders' approval at the forthcoming AGM the dividend will be paid in 2022.

 

SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE  FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 22 -
19
Cash generated from operations
2021
2020
$
$
Profit for the year after tax
3,051,799
4,124,621
Adjustments for:
Taxation charged
205,898
308,288
Finance costs
68,142
66,689
Depreciation and impairment of tangible fixed assets
655,079
655,079
Movements in working capital:
Increase in stocks
(271,847)
(379,943)
Decrease/(increase) in debtors
277,349
(2,739,881)
(Decrease)/increase in creditors
(1,602,215)
2,242,935
Cash generated from operations
2,384,205
4,277,788
20
Analysis of changes in net funds
1 January 2021
Cash flows
31 December 2021
$
$
$
Cash at bank and in hand
1,579,630
(36,990)
1,542,640
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