Company registration number 02059651 (England and Wales)
EUROPA IMPORT EXPORT LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2023
EUROPA IMPORT EXPORT LIMITED
COMPANY INFORMATION
Directors
Ms L A M Malik
Mr Amyn Majid Malik
Secretary
Ms L A M Malik
Company number
02059651
Registered office
3-8 Porchester Gate, Flat 41
Bayswater Road,
London
W2 3HP
Auditor
Goodman Jones LLP
29/30 Fitzroy Square
London
W1T 6LQ
Business address
3-8 Porchester Gate, Flat 41
Bayswater Road
London
W2 3HP
EUROPA IMPORT EXPORT LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Profit and loss account
8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Notes to the financial statements
12 - 24
EUROPA IMPORT EXPORT LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 OCTOBER 2023
- 1 -
The directors present the strategic report for Europa Import Export Limited for the period ended 31 October 2023.
Principal activities
The principal activity of the Company is the trading of iron and steel products globally.
Business review and principal risks and uncertainties
We are satisfied with the performance of the company for the year ending October 2023, although the period has not been without its challenges. In February 2022, the company decided to discontinue buying steel from Russia because of Russia’s invasion of Ukraine which was well in advance of imposition of formal sanction by the UK government. Furthermore, the Indian government imposed an export tax in May 2022 which was not reversed until November 2022 which effected both turnover and profit especially as India became the company’s major sourcing country after ceasing trade with Russia.
Undoubtedly, the company flexible and adaptive steel trading strategy has been instrumental in navigating an extremely difficult period in steel trading.
Turnover has decreased from $370m in 2022 to $52m in 2023 with gross profit decreasing from $6m in 2022 to $1m in 2023. There is a profit for the year of $0.3m compared to a profit of $2.8m in 2022. At the year end, the Company had a net current asset position of $11.1m (2022- $10.8m).
There has been a fall in steel prices world-wide due to the twin threats of inflation and a curtailment of demand precipitated by inflation tackling interest rates hikes. The company was largely unaffected by this as the reversal was not unanticipated, although the company’s risk averse strategy means we have been far more selective in the trades we undertake even at the expense of temporarily reducing our volumes.
Future developments
In recognition of possible disruption to the company’s trading due to similar supply constraints from one country, the directors have decided to widen the company’s sourcing to the Far and Middle East as well. Moreover, the company has decided to enter the scrap trade both as a natural extension of our steel trading activities but also in a conscious effort to reduce our carbon footprint by including recyclables.
Financial risk management
The Company takes a very cautious approach to risk with open stock positions closely monitored. Sales are largely based on letter of credit or on open terms basis with credit insurance cover where such cover is readily available.
When dealing with a new company or supplier, the Company makes independent enquiries regarding the reputation of the counter party both in their ability to perform and to conduct themselves ethically and fairly in business dealings.
Finally, we continually review our risk management criteria to take into account new industry specific information, external shocks such as the COVID-19 pandemic and general macro-economic indicators.
Details of the Company's financial instruments and its policies with regards to financial risk management are given in Note 20 to the financial statements.
EUROPA IMPORT EXPORT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 2 -
This report was approved by the board and signed on its behalf.
Ms L A M Malik
Director
31 July 2024
EUROPA IMPORT EXPORT LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 OCTOBER 2023
- 3 -
The directors present their report and financial statements for the year ended 31 October 2023.
Results and dividends
The profit for the year, after taxation, amounted to $261,382 (2022: $2,788,372).
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who served during the year were:
AM Malik
LAM Malik
Matters covered in the Strategic Report
Where necessary, disclosures relating to future developments have been made in the Strategic Report and have not been repeated here in accordance with section 414C of the Companies Act 2006.
Disclosure of information to auditor
Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware, and
the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
This information is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
Post reporting date events
There have been no significant events affecting the Company since the year end.
Auditor
Goodman Jones LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Energy and carbon report
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
EUROPA IMPORT EXPORT LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 4 -
Statement of directors' responsibilities
The directors are responsible for preparing the Strategic Report, the Directors' 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 for the Company's financial statements and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent; and
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 to 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.
On behalf of the board
Ms L A M Malik
Director
31 July 2024
EUROPA IMPORT EXPORT LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF EUROPA IMPORT EXPORT LIMITED
- 5 -
Opinion
We have audited the financial statements of Europa Import Export Limited (the 'company') for the year ended 31 October 2023 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, 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 31 October 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.
EUROPA IMPORT EXPORT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF EUROPA IMPORT EXPORT 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 industry sector regulations and unethical and prohibited business practices, and we considered the extent to which noncompliance 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 and UK Tax Legislation. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls). Appropriate audit procedures in response to these risks were carried out. These procedures included:
Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;
Reading minutes of meetings of those charged with governance;
Obtaining and reading correspondence from legal and regulatory bodies including HMRC;
Identifying and testing journal entries;
Challenging assumptions and judgements made by management in their significant accounting estimates.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members; and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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 misrepresentation, or through collusion.
EUROPA IMPORT EXPORT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF EUROPA IMPORT EXPORT LIMITED
- 7 -
A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's 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.
Amit Sharma
Senior Statutory Auditor
For and on behalf of Goodman Jones LLP
31 July 2024
Chartered Accountants
Statutory Auditor
29/30 Fitzroy Square
London
W1T 6LQ
EUROPA IMPORT EXPORT LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 2023
- 8 -
Year
Period
ended
ended
31 October
31 October
2023
2022
Notes
$
$
Turnover
3
51,860,871
369,976,613
Cost of sales
(50,863,569)
(363,928,561)
Gross profit
997,302
6,048,052
Administrative expenses
(964,308)
(1,810,068)
Other operating income/(expenses)
764,200
(349,059)
Operating profit
4
797,194
3,888,925
Interest receivable and similar income
9
587,704
77,520
Interest payable and similar expenses
8
(1,268,758)
(616,950)
Fair value gains and losses on foreign exchange contracts
180,457
-
Profit before taxation
296,597
3,349,495
Tax on profit
10
(35,215)
(561,123)
Profit for the financial year
261,382
2,788,372
The profit and loss account has been prepared on the basis that all operations are continuing operations.
There was no other comprehensive income for 2023 (2022: $Nil).
The notes on pages 12 to 24 form part of these financial statements.
EUROPA IMPORT EXPORT LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 OCTOBER 2023
- 9 -
Year
Period
ended
ended
2023
2022
$
$
Profit for the year
261,382
2,788,372
Other comprehensive income
-
-
Total comprehensive income for the year
261,382
2,788,372
The notes on pages 12 to 24 form part of these financial statements.
EUROPA IMPORT EXPORT LIMITED
BALANCE SHEET
AS AT
31 OCTOBER 2023
31 October 2023
- 10 -
2023
2022
Notes
$
$
$
$
Fixed assets
Tangible assets
11
14,915
9,657
Current assets
Stocks
12
6,416,677
-
Debtors
14
3,982,940
8,522,006
Cash at bank and in hand
30,063,784
28,249,250
40,463,401
36,771,256
Creditors: amounts falling due within one year
15
(15,332,942)
(11,896,921)
Net current assets
25,130,459
24,874,335
Total assets less current liabilities
25,145,374
24,883,992
Creditors: amounts falling due after more than one year
16
(14,000,000)
(14,000,000)
Net assets
11,145,374
10,883,992
Capital and reserves
Called up share capital
18
24
24
Capital contribution reserve
592,060
592,060
Profit and loss reserves
10,553,290
10,291,908
Total equity
11,145,374
10,883,992
The notes on pages 12 to 24 form part of these financial statements.
The financial statements were approved by the board of directors and authorised for issue on 31 July 2024 and are signed on its behalf by:
Ms L A M Malik
Director
Company Registration No. 02059651
EUROPA IMPORT EXPORT LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 OCTOBER 2023
- 11 -
Share capital
Capital contribution reserve
Profit and loss reserves
Total
$
$
$
$
Balance at 1 May 2021
24
592,060
7,503,536
8,095,620
Period ended 31 October 2022:
Profit and total comprehensive income for the period
-
-
2,788,372
2,788,372
Balance at 31 October 2022
24
592,060
10,291,908
10,883,992
Year ended 31 October 2023:
Profit and total comprehensive income for the year
-
-
261,382
261,382
Balance at 31 October 2023
24
592,060
10,553,290
11,145,374
The notes on pages 12 to 24 form part of these financial statements.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2023
- 12 -
1
Accounting policies
Company information
Europa Import Export Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3-8 Porchester Gate, Flat 41, Bayswater Road, London, W2 3HP.
1.1
Reporting period
The company’s financial statements are prepared for the 12 month period to 31 October 2023. The comparative period relates to the 18 month period ending 31 October 2022. Therefore the comparative amounts presented in the financial statements (including the related notes) are not entirely comparable.
1.2
Accounting convention
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see Note 2).
The following principal accounting policies have been applied:
The financial statements are prepared in USD, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest $.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
Section 3 Financial Statement Presentation paragraph 3.17 (d).
This information is included in the consolidated financial statements of Eurocom Investments Limited as at 31 October 2023 and these financial statements may be obtained from Companies House.
1.3
Going concern
The directors have carefully reviewed the future prospects of the Company and its future cash flows, including an assessment trueof the trade policies of the countries and markets in which the Company is active. Having assessed this, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future being at least the next 12 months from signing of these financial statements. This is based on their assessment of current trading, the structure of any deals undertaken, strong cash reserves and a sensitivity analysis conducted on costs to the business. In addition the directors continue to monitor their exposure to inventory risk to ensure they are not subjected to any going concern threats.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
1
Accounting policies
(Continued)
- 13 -
1.4
Turnover
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.
Revenue is recognised on the shipment date of goods, being when the risks and rewards of ownership are transferred to the buyer. As the substance of the transaction is that the Company is acting as principal, revenue is recognised as the gross amount received or receivable in respect of its performance under sales contracts with the customer.
1.5
Tangible fixed assets
Tangible fixed assets comprise fixtures, fittings and equipment and are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
Fixtures and fittings
Over 4 years
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
1.6
Stocks
Stock is stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first-in, first-out basis.
At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
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.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
1
Accounting policies
(Continued)
- 14 -
1.8
Financial instruments
Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument.
Trade and other debtors and creditors are classified as basic financial instruments and measured at initial recognition at transaction price. A provision is established when there is objective evidence that the Company will not be able to collect all amounts due.
Cash and cash equivalents are classified as basic financial instruments and comprise of cash in hand and at bank, short-term bank deposits with an original maturity of three months or less and bank overdrafts which are an integral part of the Company's cash management.
Derivative financial instruments are classified as other financial instruments. They are measured at fair value on initial recognition and at the end of each reporting period, with changes in fair value recognised in profit or loss.
Financial liabilities and equity instruments issued by the Company are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Interest bearing bank loans, overdrafts and other loans which meet the criteria to be classified as basic financial instruments are initially recorded at the present value of cash payable to the bank, which is ordinarily equal to the proceeds received net of direct issue costs. These liabilities are subsequently measured at amortised cost, using the effective interest rate method.
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 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.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 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
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 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.
1.10
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.11
Leases
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
1
Accounting policies
(Continued)
- 16 -
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.
1.12
Foreign exchange
Functional and presentation currency
The Company's functional and presentational currency is USD.
Transactions and balances
Foreign currency transactions are translated into the functional currency at the average rate ruling in the month of the transaction according to HMRC guidance. The directors have considered this against using the spot exchange rates at the date of transactions noting an immaterial difference.
At each period end foreign currency monetary items are translated using the closing rate. Non monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
The average sterling exchange rate for the period used by the Company was $1.2367= £1 (2022 - $1.3167). The sterling exchange rate at the period end used by the Company was $1.2134 = £1 (2022 - $1.1514). The average euro exchange rate for the period used by the Company was $1.0827 = €1 (2022 - $1.1190). The euro exchange rate at the period end used by the Company was $1.0567 = €1 (2022 - $0.9885).
1.13
Interest income is recognised in profit or loss using the effective interest method.
1.14
Current asset investments relate to US treasury notes. These are classified as basic financial instruments and measured on initial recognition at transaction price. They are subsequently measured at amortised cost using the effective interest rate method.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 17 -
2
Judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the statement of financial position date and the reported amounts of revenues and expenses during the reporting period.
Judgements
Revenue recognition
The directors consider that the Company is acting as "principal" for all trades completed. As a result, the associated sales and cost of sales are recognised gross in profit or loss. FRS 102 provides limited guidance regarding such considerations. Accordingly, we have considered previous UK GAAP guidance and IFRS guidance, and given the Company has credit risk on its sale to the buyer with letters of credit being in the Company's name, the Company has price risk, and the Company has stock risk on its purchase the directors consider that the Company has exposure to significant risks and rewards.
Bad debt provisions
The trade debtor balances of $2,532,363 (2022 - $7,575,867) recorded in the Company's Statement of Financial Position comprise a relatively small number of large balances. A full line by line review of trade debtors is carried out at the end of each month. Whilst every attempt is made to ensure that the bad debt provisions are as accurate as possible, there remains a risk that the provisions do not match the level of debts which ultimately prove to be uncollectible.
Financial instruments classification
The classification of financial instruments as "basic" or "other" requires judgement as to whether all the applicable conditions for classification as basic are met. This includes consideration of the form of the instrument and its return.
Key sources of estimation uncertainty
Determination of market rate of interest
Interest on the $14,000,000 loan from the parent company (included within creditors due in more than one year) is charged at 2% above 90-day US Dollar LIBOR rate. This has been deemed to represent a market rate of interest by management on the basis that this is the rate that the Company would be able to borrow at on the open market. This takes into account the financial position of the entity and the assets which can be held as security, including cash. It is also based on rates made available to the Company by current lenders.
3
Turnover and other revenue
2023
2022
$
$
Turnover analysed by class of business
Sale of goods
51,860,872
369,976,613
Analysis per statutory database
51,860,872
369,976,613
Statutory database analysis does not agree to the trial balance by:
1
-
2023
2022
$
$
Other revenue
Interest income
587,704
56,270
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
3
Turnover and other revenue
(Continued)
- 18 -
In the opinion of the directors, the disclosure of analysis of turnover information would be seriously prejudicial to the interests of the Company.
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
$
$
Exchange (gains)/losses
(726,529)
349,059
Depreciation of owned tangible fixed assets
7,523
8,386
Operating lease charges
44,323
69,800
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Sales
3
3
Administration
2
2
Total
5
5
Their aggregate remuneration comprised:
2023
2022
$
$
Wages and salaries
84,941
187,551
Social security costs
3,187
6,998
Pension costs
857
914
88,985
195,463
6
Directors' remuneration
2023
2022
$
$
Remuneration for qualifying services
42,869
50,536
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 19 -
7
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
26,031
36,344
Other services relating to taxation
1,717
-
27,748
36,344
8
Interest payable and similar expenses
2023
2022
$
$
Interest payable to group undertakings
1,141,050
594,422
Other interest
127,708
22,528
1,268,758
616,950
The loan from the parent company, Eurocom Investments Limited, is for a fixed term of five years which expires on 1 July 2025 with interest charged at 2% above 90-day US Dollar LIBOR. In the year ended 30 April 2020 the interest on the loan was waived. As this was provided at an interest rate which was below market rate, a capital contribution was recognised in the capital contribution reserve of $592,060 (2022 - $592,060). Security is provided for the loan in the form of a debenture with a fixed and floating charge in place. The parent company has the ability to secure the loan over the assets of the Company at any time. The imputed interest charge is at an estimated market rate of interest as set out in Note 2.
9
Interest receivable and similar income
2023
2022
$
$
Interest income
Interest on bank deposits
587,704
56,270
Income from fixed asset investments
Income from other fixed asset investments
21,250
Total income
587,704
77,520
10
Taxation
2023
2022
$
$
Current tax
UK corporation tax on profits for the current period
35,215
561,123
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
10
Taxation
(Continued)
- 20 -
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
296,597
3,349,495
Expected tax charge based on the standard rate of corporation tax in the UK of 22.50% (2022: 19.00%)
66,734
636,404
Tax effect of expenses that are not deductible in determining taxable profit
25,684
5,826
Adjustments in respect of prior years
16,401
Double tax relief
(72,495)
(1,790)
Foreign exchange differences
(1,109)
Current tax (current period) exchange difference arising on movement between opening and closing spot rates
(79,317)
Taxation charge for the year
35,215
561,123
11
Tangible fixed assets
Fixtures and fittings
$
Cost
At 1 November 2022
189,650
Additions
12,781
At 31 October 2023
202,431
Depreciation and impairment
At 1 November 2022
179,993
Depreciation charged in the year
7,523
At 31 October 2023
187,516
Carrying amount
At 31 October 2023
14,915
At 31 October 2022
9,657
12
Stocks
2023
2022
$
$
Raw materials and consumables
6,416,677
-
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 21 -
13
Financial instruments
2023
2022
$
$
Carrying amount of financial assets
Instruments measured at fair value through profit or loss
180,457
-
Financial assets and liabilities measured at fair value through profit or loss comprise forward rate contracts. These are measured at fair value, which is determined using valuation techniques that utilise observable inputs.
The Company's financial instruments comprise cash and cash equivalents, borrowings and items such as trade creditors and trade debtors which arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Company's operations.
The Company's operations expose it to a variety of financial risks including credit risk, liquidity risk, interest rate risk and foreign currency exchange risk. Given the size of the Company, the directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the board of directors are implemented by the Company's finance department.
Credit risk
The Company's credit risk is primarily attributable to its trade debtors. The Company has implemented policies that require appropriate credit checks on potential customers before sales are made.
The Company extends credit to a limited number of customers who are well known to the directors and with whom the Company has been doing business for a number of years. Furthermore, the amount of credit extended is carefully monitored so that it does not exceed a pre-set amount, determined according to the customer's ability to repay.
The carrying amount of financial assets represents the maximum credit exposure.
Amounts lent to related parties are detailed in Note 22. There is not deemed to be any significant credit risk from these entities.
Liquidity risk
The Company actively monitors its cash balances to ensure it has sufficient available funds for operations and planned expansions.
The Company's financial liabilities comprise trade and other creditors which are measured at amortised cost. The trade creditors are all payable within six months.
The Company will continue to monitor availability of funds from banks as required. However, there is no such reliance on the banks and if this support was to be reduced the Company has the ability to self-finance their activities.
Interest rate risk
The Company has interest bearing assets and interest bearing liabilities. Interest bearing assets comprise cash and cash equivalents which earn interest at a variable rate and US treasury notes which earn interest at both fixed and variable rates.
The interest bearing liabilities relate to amounts due on the intercompany loans and are subject to the interest rates agreed with Eurocom Investments Limited. The loan is at a variable rate based on a 90 day US Dollar LIBOR rate plus 2%.
Foreign currency exchange rate risk
The Company holds cash denoted in other currencies and conducts trade in other currencies from time to time and either hedges the exchange rate risk or holds the currency if the management decide that there may be advantage to do so, or if the Company has perceived the need for the other currency in the short term.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
13
Financial instruments
(Continued)
- 22 -
14
Debtors
2023
2022
Amounts falling due within one year:
$
$
Trade debtors
2,532,363
7,575,868
Derivative financial instruments
180,457
-
Other debtors
1,223,406
849,957
Prepayments and accrued income
46,714
96,181
3,982,940
8,522,006
15
Creditors: amounts falling due within one year
2023
2022
$
$
Trade creditors
4,933,044
3,591,245
Amounts owed to group undertakings
3,232,994
138,572
Corporation tax
34,760
561,123
Other taxation and social security
957
864
Other creditors
4,892,389
4,888,446
Accruals and deferred income
2,238,798
2,716,671
15,332,942
11,896,921
16
Creditors: amounts falling due after more than one year
2023
2022
Notes
$
$
Amounts owed to parent undertaking
14,000,000
14,000,000
The loan of $14,000,000 due to the parent undertaking, Eurocom Investment Limited, is due to be repaid on 1 July 2025. The loan attracts interest at a rate of 2% above 90-day US Dollar LIBOR. Security is provided for the loan in the form of a debenture with a fixed and floating charge in place. The parent company has the ability to secure the loan over the assets of the Company at any time. The imputed interest charge is at an estimated market rate of interest as set out in Note 2.
During the year, an additional loan of $2,500,000 was provided from the parent undertaking, Eurocom Investments Limited. This amount is repayable on demand at a rate of 2% above 90-day US Dollar LIBOR and is included with amounts falling due within one year.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 23 -
17
Retirement benefit schemes
2023
2022
Defined contribution schemes
$
$
Charge to profit or loss in respect of defined contribution schemes
857
914
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
18
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
$
$
Issued and fully paid
of $2 each
12
12
24
24
19
Reserves
Capital contribution reserve
This reserve relates to the equity element of the interest free loan.
Profit and loss account
This account relates to the cumulative profit and losses less amounts distributed to shareholders.
20
Operating lease commitments
Lessor
At 31 October the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
2023
2022
$
$
Within one year
3,702
3,454
21
Other financial commitments
At the year end, the Company was committed to sell €6,075,086 (2022 - €Nil) under forward exchange contracts.
EUROPA IMPORT EXPORT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2023
- 24 -
22
Related party transactions
There is a company with whom it has directors in common. During the period ended 31 October 2023, the Company did a currency exchange with the company at market exchange rates at a value of $443,607 (2022: $134,107). During the period ended 31 October 2023, the Company made sales of $320,242 (2022 - $10,560,440) to the company and purchased stock of $1,109,813 (2022 - $951,419) from the company. At the period end, $765,887 (2022 - $2,038) was owed from the company and $Nil (2022 - $506,802) was owed to the company.
During the period, the Company paid rent of $44,323 representing an underlying rent charge of £36,000 (2022 - $69,800 representing an underlying rent charge of £54,000) to a director of the Company.
During 2015, the Company made a loan to a company with whom it has directors in common. $Nil (2022 - $Nil) was repaid during the period. The loan balance at the period end was $725,429 representing an underlying balance of £597,848 (2022 - $688,362, representing an underlying balance of £597,848). No interest is charged on this balance. The Company also rented one floor of a property from the same company on a rent free basis during the year.
There is a company of which one of the persons with significant control is also a director. During the year ended 31 October 2023, the Company made purchases of $90,784 (2022: $88,819). At the period end, $567 (2022: $76,548) was owed to the company.
Loans due to former directors totalled $62,810 representing an underlying value of £52,439 (2022: $59,601 representing an underlying value of £52,439). Interest on these loans was charged at 6% per annum (2022: 6% per annum), amounting to a total charge of $3,807 representing interest of £3,146 (2022: $6,117 representing interest of £4,720) for the year which remains unpaid at the year end.
Remuneration to close family members for their services provided to the company during the year totalled $17,206 representing an underlying balance of £13,943 (2022: $26,173 representing an underlying balance of £20,190).
Remuneration to key management personnel during the year totalled $31,511 (2022: $50,536) and benefits paid to key management personnel totalled $11,358.
All transactions have been translated in line with the group's foreign currencies accounting policy.
23
Ultimate controlling party
The immediate and ultimate parent undertaking is Eurocom Investments Limited, a company registered in England and Wales.
The largest and smallest group of undertakings for which group accounts for the year ended 31 October 2023 have been drawn up, is that headed by Eurocom Investments Limited. The registered office address of Eurocom Investments Limited is 3-8 Porchester Gate, Flat 41, Bayswater Road, London, W2 3HP. Copies of the group accounts are available from Companies House
The ultimate controlling party are the directors, by virtue of their shareholding and directorship in the ultimate parent undertaking.
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