Company registration number 07596746 (England and Wales)
SIMON CARVES ENGINEERING LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
SIMON CARVES ENGINEERING LIMITED
COMPANY INFORMATION
Directors
Mr J Flores
Mr C Brock
Mr D L Radford
Mr R Armstrong
Company number
07596746
Registered office
3a & 3b, Second Floor
Manchester International Office Centre
Styal Road, Heald Green
Manchester
M22 5WB
Auditor
Ashfords Chartered Accountants
2 Manor Court
Manor Mill Lane
Leeds
LS11 8LQ
SIMON CARVES ENGINEERING LIMITED
CONTENTS
Page
Strategic report
1 - 4
Directors' report
5 - 6
Directors' responsibilities statement
7
Independent auditor's report
8 - 9
Statement of comprehensive income
10
Statement of financial position
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 29
SIMON CARVES ENGINEERING LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The directors present their report with the financial statements of the Company for the 12 month period ended 31 December 2023.
Review of Business
In 2019 the Company implemented its long-term strategic plan which was targeted to adapt to the changes forecast in the marketplace. The primary objective of this strategic shift was to create long term sustainable business revenue streams and increase the Company’s sphere of influence over the generation of such revenues. To achieve this the Company focused on a strategy of developing and licensing technology in addition to providing its traditional engineering services.
The success of these initiatives has been the driving force in this financial period, delivering strong profit and cashflows and providing a solid platform for generating long term growth, annuity revenues and profits in future years. The Company exited the calendar year with its highest order backlog in decades which has been achieved against the backdrop of global inflation, and economic uncertainty.
The Company recorded sales in the 12-month period of £12,659,312 and a trading profit after tax of £1,773,218 respectively against sales of £10,079,920 and a trading profit after tax of £2,014,222 in the previous 12-month reporting period. The principal reasons for the increase in revenues in the current accounting period are significant work throughout the year on a FEED project awarded in the Middle East, completion of a new build LDPE project in China awarded in 2021, execution of three long-term group licence & design new build projects in China awarded in 2021 through 2023 and completion of a long-term site development project in the UK. This underlying workload has been supplemented by supporting group on a large number of additional worldwide projects. Project profitability improved with gross margins delivered at 49% of revenue up from 45% in the previous year.
Key Highlights
Completion of projects in UK and China, continued work in Europe and supporting group projects in China, Asia, and North America.
The business remains under the ownership of Engineers and Constructors International, Inc. (ECI) of Baton Rouge, LA and Houston, TX.
SIMON CARVES ENGINEERING LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Outlook and Growth Plans
Simon Carves Engineering Limited provides comprehensive engineering and technical services across the global process industry sector, with strong focus on the polyolefins sector. Its expertise and growth lie in the following areas that provide a strong and sustainable pipeline of future investments:
Polymers and Petrochemicals, predominantly LDPE/EVA and High-Pressure Copolymers, LLDPE, HDPE, and PP with significant future growth forecast particularly in emerging markets for new build plants and opportunities for optimisation and de-bottlenecking of existing plants.
Focused shift to Plant Engineering, providing general and specialist engineering services (modifications, upgrades, debottlenecking) to process plants, particularly in the UK and Europe.
A risk the business faces, like all businesses at this time, is the uncertainty created by the unprecedented impacts on global economies as a direct consequence of the Ukraine/Russia conflict which has fuelled significant global inflation. The business currently has a healthy order book providing workload into 2024 and beyond. The risks identified above may have an impact on the supply chain with increased prices and order backlogs potentially impacting the planned completion time of current and future projects. Mitigation strategies focussed on cost control, supply chain management, improvement in effectiveness and efficiency of operational execution of projects and strong cashflow management have been implemented to ensure the business is well positioned to react to any deviation from its current plan.
The core focus of the business remains unchanged as detailed below:
The business's strategic plan is geared to optimisation within these chosen sectors through focus on its;
People, recognising the need to attract, develop and retain highly skilled workforce is fundamental to the success of future business growth. We are developing the skills, capabilities, and services necessary to meet the changing needs of our major customers.
Projects Under Execution
During the last 12 months of trading the Company successfully and profitably completed engineering projects for clients in the UK, China, Middle East, and North America. The Company is currently executing group projects in Europe, Asia, North America, and China for completion during 2024 and 2025.
SIMON CARVES ENGINEERING LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Principal Risks and Uncertainties
A number of the major risks and uncertainties facing the business are described below.
Contractual Risk
The Company engages in major engineering design contracts, and is exposed to cost and reputation risk, if it fails to deliver projects on time, within budget and to specification. This risk is mitigated through the Company's project risk management system. Contractual risks are identified and evaluated at the tendering stage before a binding bid is submitted and go through a tiered authorisation procedure which can be up to Board level, depending on the value of the contract. Each project is monitored continually throughout the project execution phase to enable any remedial actions to be identified at an early stage.
Health and Safety Risk
Health and safety in the office and on sites is of paramount importance to the Company. The Company employs suitable qualified Health and Safety professionals to ensure that the Company and clients' safety procedures are adhered to. This includes safety induction for all new employees and for employees who visit or work on sites. Senior management meet on a regular basis to ensure that safety receives priority attention.
Geopolitical Risk
The Company's business is international and there can be geopolitical risk. This can take several forms. There can be exposure for our employees working in certain countries. The Company takes steps to mitigate this particular risk by employing the services of a specialist security Company to provide local monitoring and back up services where appropriate.
Geopolitical risk can also result in credit risk exposure and wherever possible the Company will seek to arrange insurance cover for overseas credit and political risk.
Currency Transaction Exposure
The international nature of the business creates currency risk exposure. The Company manages this risk by taking out forward exchange contracts as appropriate, based on the best available currency cash flows at the time. The currency exposure will continually be monitored throughout the life of the contract.
Liquidity Risk
The Company aims to mitigate liquidity risk by managing cash generation of its operations and through implementation of collection policies. Projects are bid on a cash-positive basis, with advanced payment obtained from the client. Forecasting is done on a rolling 12-month basis, and should a requirement for cash be identified, advance negotiations are held with the bankers to agree a basis of funding.
IT Failure
The Company is dependent on IT systems. The Company believes that its IT infrastructure is well protected and dependable, but the Company recognises the wholesale failure of its systems would have profound consequences and has a business continuity plan in place to mitigate any loss. The Company has robust mitigation plans should access to the office be temporarily restricted due to any reason for example government instruction. These plans enable all staff to work remotely from home with no loss of business operation or efficiency.
Economic Risk
Towards the end of 2021 there was the emergence of economic risk due to the impact on the global economy of the Covid-19 pandemic which has created global inflation as the supply chain struggles to cope with the upward rebound from the pandemic. The risk to the business is that key clients will face increasing prices for raw materials/commodities and a backed-up equipment supply chain causing project completion delays. The directors closely monitor potential impacts to the Company's future workload and put in place mitigation strategies to negate any impact. For example, the diversification of our product offering into the growth area of recycling and further development of new business streams leveraging the Company's core skills and competencies.
The Company ensures all major risks to protect itself from significant unforeseen events.
SIMON CARVES ENGINEERING LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
Mr J Flores
Director
1 May 2024
SIMON CARVES ENGINEERING LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
The directors present their annual report and financial statements for the year ended 31 December 2023.
Principal Activity
The principal activity of the Company in the year under review was that of providing comprehensive engineering services and technology know how across the global process industry sector, focusing on petrochemicals and process-based industries. Since the acquisition in August 2016 the Company’s capabilities have been significantly enhanced particularly in relation to green plant development, plant optimisation, de-bottlenecking, and product offerings.
Within the next financial year, the business expects to execute the completion of the engineering phase for the world’s largest LDPE Plant in China and substantially complete the key engineering works for the lines secured utilising in-house technology ‘know how’; whilst continuing to support the high-pressure engineering needs of our strategic technology partners.
The future pipeline of secured order book and potential orders remains strong and varied providing significant base workload into year 2024 and beyond.
During 2022 and 2023 economic risk has emerged due to the impact on the global effect of the Russia/Ukraine conflict which has created global inflation within the supply chain. Potentially clients will face increasing prices for raw materials/commodities and a backed-up equipment supply chain causing project completion delays. The directors closely monitor potential impacts to the Company’s future workload and put in place mitigation strategies to negate any impact.
Despite the global uncertainty affecting all Companies and economies in these unprecedented times, the Company is expecting to grow and secure further engineering works in the polymer and chemical sectors to be executed during the forthcoming 2024 financial year and build upon its successful entry into the delivery of niche technical driven annuity support services to global polymer clients.
Dividends
No dividends will be distributed for the year ended 31 December 2023.
Research and Development
It is the Company's policy to commit sufficient resources to enable it to keep abreast of all relevant product, process, market, and systems developments in the fields in which it operates.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mrs R Stevenson
(Resigned 7 November 2023)
Mr J Flores
Mr C Brock
Mr D L Radford
Mr R Armstrong
Mr B Singh
(Resigned 7 November 2023)
Financial Instruments
Currency Transaction Exposure
The international nature of the business creates currency risk exposure. The Company manages this risk by taking out contracts in GBP wherever possible mitigating the impact of currency fluctuations on projected returns.
SIMON CARVES ENGINEERING LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
Liquidity Risk
The Company aims to mitigate liquidity risk by managing cash generation of its operations and through implementation of collection policies. Projects are bid on a cash-positive basis, with advanced payment obtained from the client.
Forecasting is done on a rolling 12-month basis, and should a requirement for cash be identified, advanced negotiations are held with bankers.
Company's Policy On Payment of Creditors
It is the Company’s policy that payments to suppliers are made in accordance with those terms and conditions agreed between the Company and its suppliers, provided that all trading terms and conditions have been complied with.
Statement of Disclosure to Auditor
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Company's auditor is unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
On behalf of the board
Mr J Flores
Director
1 May 2024
SIMON CARVES ENGINEERING LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
The directors are responsible for preparing the Report of the Directors 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 International Financial Reporting Standards as adopted by the European Union. 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 situation of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state that the financial statements comply with IFRS; 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 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.
SIMON CARVES ENGINEERING LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SIMON CARVES ENGINEERING LIMITED
- 8 -
Opinion
We have audited the financial statements of Simon Carves Engineering Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the statement of financial position, 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 UK adopted international accounting standards.
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its profit for the year then ended;
have been properly prepared in accordance with UK adopted international accounting standards; 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.
SIMON CARVES ENGINEERING LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SIMON CARVES ENGINEERING LIMITED
- 9 -
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 directors' 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.
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.
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.
Pavanjeet Singh Bagri BA FCA CTA (Senior Statutory Auditor)
For and on behalf of Ashfords Chartered Accountants
1 May 2024
Chartered Accountants
Statutory Auditor
2 Manor Court
Manor Mill Lane
Leeds
LS11 8LQ
SIMON CARVES ENGINEERING LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
2023
2022
Notes
£
£
Revenue
4
12,659,312
10,079,720
Cost of sales
(6,430,518)
(5,565,164)
Gross profit
6,228,794
4,514,556
Other operating expenses
(533,554)
1,015,591
Administrative expenses
(3,320,431)
(2,918,734)
Operating profit
5
2,374,809
2,611,413
Investment revenues
7
27,632
Finance costs
8
(57,208)
(50,462)
Profit before taxation
2,345,233
2,560,951
Income tax expense
9
(572,015)
(546,729)
Profit and total comprehensive income for the year
1,773,218
2,014,222
The income statement has been prepared on the basis that all operations are continuing operations.
The notes on pages 14 to 29 form part of these financial statements.
SIMON CARVES ENGINEERING LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2023
31 December 2023
- 11 -
2023
2022
Notes
£
£
Non-current assets
Property, plant and equipment
10
601,712
726,923
Current assets
Trade and other receivables
11
5,439,529
5,408,761
Cash and cash equivalents
788,457
188,450
6,227,986
5,597,211
Current liabilities
Trade and other payables
13
879,442
2,083,342
Current tax liabilities
292,680
270,228
Lease liabilities
14
85,474
76,671
1,257,596
2,430,241
Net current assets
4,970,390
3,166,970
Non-current liabilities
Lease liabilities
14
418,572
504,046
Deferred tax liabilities
16
21,342
30,877
439,914
534,923
Net assets
5,132,188
3,358,970
Equity
Called up share capital
18
99
99
Retained earnings
5,132,089
3,358,871
Total equity
5,132,188
3,358,970
The notes on pages 14 to 29 form part of these financial statements.
The financial statements were approved by the board of directors and authorised for issue on 1 May 2024 and are signed on its behalf by:
Mr J Flores
Director
Company registration number 07596746
SIMON CARVES ENGINEERING LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
Share capital
Retained earnings
Total
£
£
£
Balance at 1 January 2022
99
1,344,650
1,344,749
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
2,014,222
2,014,222
Balance at 31 December 2022
99
3,358,871
3,358,970
Year ended 31 December 2023:
Profit and total comprehensive income for the year
-
1,773,218
1,773,218
Balance at 31 December 2023
99
5,132,089
5,132,188
The notes on pages 14 to 29 form part of these financial statements.
SIMON CARVES ENGINEERING LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
22
1,285,728
384,579
Interest paid
(57,208)
(2,327)
Income taxes paid
(559,098)
(411,092)
Net cash inflow/(outflow) from operating activities
669,422
(28,840)
Investing activities
Purchase of property, plant and equipment
(20,376)
(133,100)
Interest received
27,632
Net cash generated from/(used in) investing activities
7,256
(133,100)
Financing activities
Payment of lease liabilities
(76,671)
(95,939)
Net cash used in financing activities
(76,671)
(95,939)
Net increase/(decrease) in cash and cash equivalents
600,007
(257,879)
Cash and cash equivalents at beginning of year
188,450
446,329
Cash and cash equivalents at end of year
788,457
188,450
The notes on pages 14 to 29 form part of these financial statements.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
1
Accounting policies
Company information
Simon Carves Engineering Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3a & 3b, Second Floor, Manchester International Office Centre, Styal Road, Heald Green, Manchester, M22 5WB. The company's principal activities and nature of its operations are disclosed in the directors' report.
1.1
Accounting convention
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, except as otherwise stated.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
The directors have at the time of approving the financial statements, a reasonable expectation that the truecompany 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.
Engineers and Constructors International Incorporated (the parent company) is willing to provide immediate financial support to Simon Carves Engineering Limited in case of its financial difficulties provided that the Company's Management Board has submitted a reasoned application for that purpose, and if necessary, invest additional funds essential to ensure that Simon Carves Engineering Limited will continue as a going concern.
1.3
Revenue
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income. Revenue includes the amounts of services provided during the financial period excluding VAT after adjusting for long term contract provisions as required by IFRS15.
Contract revenue associated with long term construction contracts are based on two differing arrangements.
Reimbursable contracts are valued by the stage of completion of a project determined by the valuation of number of hours incurred for the work performed as at the balance sheet date.
Fixed price contracts are valued on an earned value basis, calculated as a percentage of completion of contractual obligations as at the balance sheet date.
Revenue from contracts for the provision of professional services is recognised on the above basis provided costs incurred and costs to complete can be estimated reliably. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. Profit is not recognised unless there is reasonable progress on the contract. If total cost of a contract, based on technical and other estimates, is estimated to exceed the total contract revenue, the foreseeable loss is provided for.
Contract revenue earned in excess of billing has been classified as “Unbilled revenue (work-in-progress)” and billing in excess of contract revenue has been classified as “Other liabilities” in the financial statements.
The Company assesses the carrying value of various claims periodically, and makes provisions for any unrecoverable amount arising from the legal and arbitration proceedings that they may be involved in from time to time. Insurance claims are accounted for on acceptance/settlement with insurers.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -
1.4
Property, plant and equipment
Property, plant and equipment 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:
Leasehold improvements
in accordance with the property
Fixtures and fittings
2 to 6 years
Right-to-use lease
6 years
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.
1.5
Impairment of tangible and intangible assets
At each reporting 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.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.
1.6
Cash and cash equivalents
Cash and cash equivalents include cash in hand and bank balances.
1.7
Financial assets
Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.
At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
Financial assets at fair value through profit or loss
When any of the above-mentioned conditions for classification of financial assets is not met, a financial asset is classified as measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognized initially at fair value and any transaction costs are recognised in profit or loss when incurred. A gain or loss on a financial asset measured at fair value through profit or loss is recognised in profit or loss, and is included within finance income or finance costs in the statement of income for the reporting period in which it arises.
Financial assets held at amortised cost
Financial instruments are classified as financial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash flows, and the contractual cash flows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment where necessary.
Financial assets at fair value through other comprehensive income
Debt instruments are classified as financial assets measured at fair value through other comprehensive income where the financial assets are held within the company’s business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to profit or loss when the debt instrument is derecognised.
The company has made an irrevocable election to recognize changes in fair value of investments in equity instruments through other comprehensive income, not through profit or loss. A gain or loss from fair value changes will be shown in other comprehensive income and will not be reclassified subsequently to profit or loss. Equity instruments measured at fair value through other comprehensive income are recognized initially at fair value plus transaction cost directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognized through other comprehensive income are directly transferred to retained earnings when the equity instrument is derecognized or its fair value substantially decreased. Dividends are recognized as finance income in profit or loss.
The Company does not have any investments or financial assets which are designated at fair value through other comprehensive income.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
1.8
Financial liabilities
The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
Other financial liabilities
Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
1.9
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.10
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary 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 income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.11
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.13
Leases
At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
1.14
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions or at fixed project rates if applicable. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
2
Adoption of new and revised standards and changes in accounting policies
The Company does not apply IFRS's before their effective dates. The nature of the company's activities are such that the current reported results are unlikely to be affected by those IFRS's or amendments thereto, that have been published but not yet come into effect, neither is there anticipated to be any requirement for restatement in the future. The directors consider this to be true as some standards and interpretations are clearly not applicable to the company or are not expected to have a material effect.
In the current year, there have been no new and revised Standards and Interpretations adopted by the company that had an effect on the current period or a prior period or may have an effect on future periods.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Adoption of new and revised standards and changes in accounting policies
(Continued)
- 19 -
Standards which are in issue but not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Company has decided not to adopt early.
The following amendments are effective for the period beginning 1 January 2024:
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1);
Non-current Liabilities with Covenants (Amendments to IAS 1).
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).
The following amendments are effective for the period beginning 1 January 2025:
The Company is currently assessing the impact of these new accounting standards and amendments. The Company does not envisage any changes in accounting policies following the new and revised standards.
The Company has assessed the impact of the final amendments to IAS 1 on classification of its liabilities as issued by the IASB. The Company does not believe that the amendments to IAS 1 have a significant impact on the classification of its liabilities, as the conversion feature in its convertible debt instruments is classified as an equity instrument and therefore, does not affect the classification of its convertible debt as a non-current liability.
The Company has assessed the amendments to IAS 7 and IFRS 7 for Supplier Finance Arrangements (SFAs). The Company does not use SFAs in their operations and as such there would be no change to future disclosures.
The Company has also assessed the application of the amendment to IAS 21 by the IASB. The Company does not believe that the amendments, in their present form, will have an significant impact on the reporting of foreign currencies, as the Company does not operate or transact in a foreign currency that is not exchangeable into another currency.
3
Critical accounting estimates and judgements
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, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.
Useful life of property and equipment
Property and equipment is depreciated over its estimated useful life, which is based on estimates for expected usage of the asset and expected physical wear and tear which are dependent on operational factors. Management has not considered any residual value as it is deemed immaterial.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
3
Critical accounting estimates and judgements
(Continued)
- 20 -
Impairement of property and equipment
The Company reviews its property and equipment to assess impairment, if there is an indication of impairment. In determining whether impairment losses should be recorded in the statement of profit or loss and other comprehensive income, the Company makes judgment as to whether there is any observable data indicating that there is a reduction in the carrying value of property and equipment. Accordingly, provision for impairment is made when there is an identified loss event or condition which, based on previous experience, is evidence of a reduction in the carrying value of property and equipment.
Determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.
Impairment of trade receivables and other receivables
The Company tests for impairment of trade and other receivables when there are indicators that carrying amounts may not be recoverable. The provision for impairment of receivable comprises allowances for doubtful debts in determining the recoverability of trade and other receivables the company consider any change in the credit quality and the recoverable amount of receivable at the reporting date.
Satisfaction of performance obligations
The Company is required to assess each of its contracts with customers to determine whether performance obligations are satisfied over time or at a point in time in order to determine the appropriate method for recognising revenue. The Company has assessed that based on the contracts entered into with customers and the provisions of relevant laws and regulations, the Company recognises revenue point in time from sale of goods. Where revenue is recognised at a point in time, the Company assesses each contract with customers to determine when the performance obligation of the Company under the contract is satisfied.
4
Revenue
2023
2022
£
£
Revenue analysed by class of business
Engineering services
12,659,312
10,079,720
2023
2022
£
£
Revenue analysed by geographical market
USA
8,340,013
5,854,789
China
796,795
2,437,636
Portugal
-
741,035
Canada
(8,357)
4,150
UK
190,314
958,110
Spain
84,000
84,000
KSA
3,256,547
-
12,659,312
10,079,720
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
5
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange losses/(gains)
277,527
(828,507)
Research and development costs
5,000
9,514
Fees payable to the company's auditor for the audit of the company's financial statements
15,000
15,000
Depreciation of property, plant and equipment
145,587
110,790
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Engineers
45
37
Administration
6
6
Total
51
43
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
4,122,782
3,189,555
Social security costs
490,918
376,681
Pension costs
248,375
206,537
4,862,075
3,772,773
7
Investment income
2023
2022
£
£
Interest income
Financial instruments measured at amortised cost:
Bank deposits
27,632
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
8
Finance costs
2023
2022
£
£
Interest on lease liabilities
57,208
48,135
Other interest payable
2,327
Total interest expense
57,208
50,462
9
Income tax expense
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
581,550
517,038
Deferred tax
Origination and reversal of temporary differences
(9,535)
29,691
Total tax charge
572,015
546,729
The charge for the year can be reconciled to the profit per the income statement as follows:
2023
2022
£
£
Profit before taxation
2,345,233
2,560,951
Expected tax charge based on a corporation tax rate of 23.52% (2022: 19.00%)
551,599
486,581
Effect of expenses not deductible in determining taxable profit
1,935
(861)
Permanent capital allowances in excess of depreciation
28,016
(9,896)
Deferred tax adjustments in respect of prior years
(9,535)
29,691
Withholding tax relief
41,214
Taxation charge for the year
572,015
546,729
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
10
Property, plant and equipment
Leasehold improvements
Fixtures and fittings
Right-to-use lease
Total
£
£
£
£
Cost
At 1 January 2022
33,053
991,778
1,024,831
Additions
105,351
656,270
761,621
Disposals
(684,084)
(684,084)
At 31 December 2022
33,053
413,045
656,270
1,102,368
Additions
20,376
20,376
Disposals
(33,053)
(33,053)
At 31 December 2023
433,421
656,270
1,089,691
Accumulated depreciation and impairment
At 1 January 2022
33,053
915,684
948,737
Charge for the year
28,756
82,034
110,790
Eliminated on disposal
(684,082)
(684,082)
At 31 December 2022
33,053
260,358
82,034
375,445
Charge for the year
36,209
109,378
145,587
Eliminated on disposal
(33,053)
(33,053)
At 31 December 2023
296,567
191,412
487,979
Carrying amount
At 31 December 2023
-
136,854
464,858
601,712
At 31 December 2022
-
152,687
574,236
726,923
11
Trade and other receivables
2023
2022
£
£
Trade receivables
119,373
427,977
VAT recoverable
48,365
90,481
Amounts owed by fellow group undertakings
4,997,134
4,568,617
Other receivables
20,129
5,118
Prepayments
254,528
316,568
5,439,529
5,408,761
12
Trade receivables - credit risk
Fair value of trade receivables
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
12
Trade receivables - credit risk
(Continued)
- 24 -
Expected credit loss assessment
Balance
Loss allowance
Trade receivables
£
£
2023
Not past due
86,088
-
1-30 days
33,285
-
119,373
-
Balance
Loss allowance
Trade receivables
£
£
2022
Not past due
408,344
-
No significant receivable balances are impaired at the reporting end date.
13
Trade and other payables
2023
2022
£
£
Trade payables
207,801
207,956
Amounts owed to fellow group undertakings
165,324
686,720
Accruals
361,775
1,058,632
Social security and other taxation
144,542
130,034
879,442
2,083,342
14
Lease liabilities
2023
2022
Maturity analysis
£
£
Within one year
133,879
133,879
In two to five years
502,046
535,516
In over five years
-
100,409
Total undiscounted liabilities
635,925
769,804
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
14
Lease liabilities
(Continued)
- 25 -
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
2023
2022
£
£
Current liabilities
85,474
76,671
Non-current liabilities
418,572
504,046
504,046
580,717
2023
2022
Amounts recognised in profit or loss include the following:
£
£
Interest on lease liabilities
57,208
48,135
The Company's lease comprises space for office buildings for office operations. Periodic rentals are fixed over the 6 years lease term, which is the break date of the lease agreement.
15
Operating lease commitments
Lessee
Amounts recognised in profit or loss as an expense during the period in respect of lease arrangements are as follows:
2023
2022
£
£
Minimum lease payments under operating leases
385
10,758
Set out below are the future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of lease liabilities:
2023
2022
£
£
Within one year
385
8,189
Between two and five years
-
2,569
385
10,758
The company has entered into operating leases on the property in which it carries out it's activities. The leases are negotiated over terms of 10 years and rental are fixed for 1 to 5 years.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
15
Operating lease commitments
(Continued)
- 26 -
Nature of leases
All of the operating leases of the company have been identified either as short term lease or low value asset. The breakdown and amounts recognised in profit or loss as an expense is as follows:
2023
2022
£
£
Short term leases
18,420
42,221
Small value assets
4,620
4,620
16
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
ACAs
£
Asset at 1 January 2022
1,185
Deferred tax movements in prior year
Charge/(credit) to profit or loss
29,692
Liability at 1 January 2023
30,877
Deferred tax movements in current year
Charge/(credit) to profit or loss
(9,535)
Liability at 31 December 2023
21,342
17
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
248,375
206,537
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
Ordinary shares of £1 each
99
99
99
99
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 27 -
19
Capital risk management
Financial instruments - Risk management
In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them.
There have been no substantive changes in the Company's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.
The overall objective of the Company is to set policies that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and flexibility. Further details regarding these policies are set out below:
Capital risk management
The capital is managed by the Company in a way that it is able to continue as a going concern while maximising returns to shareholders.
The capital structure of the Company consists of borrowings, cash and cash equivalents and equity attributable to equity holders, comprising of authorised, issued and paid up capital, shareholder's funds, reserves and retained earnings. As a risk management policy, the Company reviews its cost of capital and risks associated with capital. The Company balances its capital structure based on the above review.
Market risk management
Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).
The Company is primarily exposed to the financial risks of changes in foreign currency exchange rates and interest rates. Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Foreign currency risk management
The international nature of the business creates currency risk exposure when the Company enters into transactions denominated in a currency other than their functional currency. The Company's policy to manage this risk is to take out contracts in GBP wherever possible to mitigate the impact of currency fluctuations on projected returns.
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
19
Capital risk management
(Continued)
- 28 -
Interest rate risk management
The Company is exposed to interest rate risk as the Company borrows funds at fixed and floating rates. Sensitivity analysis of interest rates is as follows:
The Company’s profits will not have a material impact If the interest rates have been 50 base points higher or lower and all other variables were held constant.
Credit risk management
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is potentially exposed to concentration of credit risk from its financial assets which comprise principally, bank balances,trade and other receivables and due from related parties. The Company’s bank accounts are placed with high credit quality financial institutions. The credit risk on trade receivables and due from related parties are subjected to credit evaluations and a credit loss allowance is made if recovery of any receivable is doubtful. Further disclosures regarding trade and other receivables, which are neither past due not impaired, are provided in note 12.
Liquidity risk management
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
The Company has built an appropriate liquidity risk management framework for the management of its short, medium and long term funding and liquidity requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and borrowing facilities by continuously monitoring forecast and actual cashflows.
20
Events after the reporting date
The Company has committed to a lease agreement which has not yet commenced for additional office building space for office operations.
21
Related party transactions
During the year the company entered into the following transactions with related parties:
Sale of services
Purchase of services
2023
2022
2023
2022
£
£
£
£
Engineers and Constructors International Inc
8,536,499
6,486,560
1,986,057
1,528,039
The following amounts were outstanding at the reporting end date:
2023
2022
Amounts due to related parties
£
£
Engineers and Constructors International Inc
165,324
686,720
SIMON CARVES ENGINEERING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
21
Related party transactions
(Continued)
- 29 -
The following amounts were outstanding at the reporting end date:
2023
2022
Amounts due from related parties
£
£
Engineers and Constructors International Inc
4,997,133
4,516,134
International Technical Excellence Centre Inc
52,483
4,997,133
4,568,617
22
Cash generated from operations
2023
2022
£
£
Profit for the year before income tax
2,345,233
2,560,951
Adjustments for:
Finance costs
57,208
50,462
Investment income
(27,632)
Depreciation and impairment of property, plant and equipment
145,587
110,790
Movements in working capital:
Increase in trade and other receivables
(30,768)
(659,493)
Decrease in trade and other payables
(1,203,900)
(1,678,131)
Cash generated from operations
1,285,728
384,579
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