Company registration number 05869065 (England and Wales)
SOCHITEL UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
SOCHITEL UK LIMITED
COMPANY INFORMATION
Directors
J Ejikeme
M Fischer
N Ford
S Jonas
F Nwoboshi
Company number
05869065
Registered office
3-4 Devonshire Street
London
W1W 5DT
Auditor
MGI Midgley Snelling LLP
Ibex House
Baker Street
Weybridge
Surrey
KT13 8AH
SOCHITEL UK LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 26
SOCHITEL UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -
The directors present the strategic report and the financial statements of the company for the year ended 31 December 2022.
Financial Review
During the year end 31 December 2022, Sochitel UK Limited (the "Company") continued to carry out its operations selling mobile airtime and data, and electronic gift vouchers. During the year end 31 December 2022, the company showed solid top line growth, increasing turnover by nearly 48.92%. Gross profit margin improved to 13.9% compared to 9.6% in 2021 and 10.8% in 2020.
Administrative Expenses increased by almost 60% in 2022. As in the prior year there were increases in certain expenses where investment was made in the continued growth of the company, notably development of the human capital infrastructure, acquisition of new office space and improvement of the IT infrastructure. In addition, there were some one off costs incurred in 2022 which contributed to this increase.
The net effect of the above movements is a profit before tax of £1,932,081, a significant increase from the £515,326 profit achieved in 2021. The directors are satisfied with the top line performance of the business for the year, and the future outlook for the company, with measures having been put in place to control and reduce the Administrative Expenses, and improve the control environment.
Principal risks and uncertainties
The principal risks and uncertainties facing the company include those that could arise from adverse developments in the following areas:
the ability of the company to attract and retain key customers;
the ability of the company to source appropriate and profitable products;
the level of competition in the company's markets;
the ability of the company to avoid disruption to its key information technology systems;
the protection of intellectual property rights and assets;
changes in foreign exchange rates; and
the ability of the company to manage credit risk arising from customers who are extended credit.
The board regularly monitors all above risks against various measures and key performance indicators and takes appropriate actions to mitigate these risks and to address any potential adverse consequences.
Financial Risk Management
The company maintains adequate reserves of cash in order to ensure they have sufficient working capital to pay their suppliers and other creditors as they fall due. Cash reserves and working capital are reviewed on a weekly basis. The company usually operates on a pre-paid model requiring customers to pay prior to airtime being given to the customer and so credit risk is considered to be appropriately addressed.
Key performance indicators
Our key financial performance indicators were considered to be the following:
Revenue of £30,281k (2021: £20,334k);
Gross profit margin of 13.9% (2021: 9.6%); and
Profit before taxation of £1,932k (2021: Profit of £515k).
The directors do not consider there to be any other key performance indicators.
SOCHITEL UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Outlook
IDT Telecom, Inc (IDT) maintained its shareholding of 74.99% of the issued share capital of Sochitel UK Limited throughout 2022. IDT Corporation Inc (A NYSE listed company) is the 100% owner of IDT Telecom and ultimate parent company.
The investment by IDT combines Sochitel’s strength and depth in the African market with IDT’s distribution capabilities.
Future developments
Looking ahead, the company is well-positioned to capitalise on emerging market trends and technological advancements. Over the next 12 months, we plan to expand our digital vouchers offering.
In line with our growth strategy, we are exploring new opportunities in Pan-African markets. We expect these expansions to contribute to both top-line growth and long-term profitability. Additionally, we are pro-actively seeking new product and market opportunities to complement our existing portfolio, ensuring we remain agile and competitive in an evolving industry landscape.
While we are optimistic about our future, we remain mindful of potential risks, including economic and exchange rate volatility and regulatory changes in our key markets. We will continue to assess and adapt our strategy to mitigate these risks and maintain our commitment to delivering shareholder value.
J Ejikeme
Director
11 September 2024
SOCHITEL UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2022.
Principal activities
The principal activity of the company is the sale of mobile phone airtime.
Results and dividends
The results for the year are set out on page 8. The result for the year was a profit after tax of £1,540,828 (2021: profit £432,689).
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
J Ejikeme
M Fischer
N Ford
S Jonas
F Nwoboshi
Qualifying third party indemnity provisions
The Group maintains appropriate Directors' and Officers' Liability Insurance on behalf of the directors and Company secretary. In addition, individual qualifying third-party indemnity provisions are given to the directors and Company secretary which comply with the provisions of Section 234 of Companies Act 2006, and were in force throughout the year and up until the signing of the Annual Report.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
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.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
SOCHITEL UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
On behalf of the board
J Ejikeme
Director
11 September 2024
SOCHITEL UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SOCHITEL UK LIMITED
- 5 -
Opinion
We have audited the financial statements of Sochitel UK Limited (the 'company') for the year ended 31 December 2022 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2022 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.
SOCHITEL UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SOCHITEL UK 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.
In planning and designing our audit tests, we identify and assess the risks of material misstatements within the financial statements, whether due to fraud or error. Our assessment of these risks includes consideration of the nature of the industry and sector, the control environment and the business performance along with the results of our enquiries of management, about their own identification and assessment of the risks of irregularities. We are also required to perform specific procedures to respond to the risk of management override.
As a result of this assessment, we considered the opportunities and incentives that may exist within the company for fraud and identified that the greatest area of risk was in relation to management override and the completeness of income.
We have obtained an understanding of the legal and regulatory frameworks that the company operates in from discussions with the directors and our knowledge of the company and its industry sector. We have focused on the provisions of those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act and local tax legislation.
SOCHITEL UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SOCHITEL UK LIMITED
- 7 -
We performed the following audit procedures after consideration of the above risks which included the following:
enquiry of management of actual and potential litigation and claims;
reviewing correspondence with HMRC and the company’s legal advisors;
testing sales transaction reports during the year and after the year end to ensure sales are recorded appropriately and correctly in the relevant accounting period;
agreeing customer wallet balances to trading platforms;
reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
The engagement partner has assessed that all engagement team members were made aware of the relevant laws and regulations and potential fraud risks and were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. The risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
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.
Tracey Wickens
Senior Statutory Auditor
For and on behalf of MGI Midgley Snelling LLP
13 September 2024
Chartered Accountants
Statutory Auditor
Ibex House
Baker Street
Weybridge
Surrey
KT13 8AH
SOCHITEL UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 8 -
2022
2021
Notes
£
£
Turnover
3
30,281,362
20,333,740
Cost of sales
(26,066,047)
(18,390,595)
Gross profit
4,215,315
1,943,145
Administrative expenses
(2,299,029)
(1,438,740)
Operating profit
5
1,916,286
504,405
Interest receivable and similar income
9
90,349
10,921
Interest payable and similar expenses
10
(74,554)
Profit before taxation
1,932,081
515,326
Tax on profit
11
(391,253)
(82,637)
Profit for the financial year
1,540,828
432,689
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
SOCHITEL UK LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 9 -
2022
2021
Notes
£
£
£
£
Fixed assets
Intangible assets
12
204,033
176,485
Tangible assets
13
9,335
6,077
Investments
14
2,500
2,500
215,868
185,062
Current assets
Stocks
16
141,804
322,325
Debtors
17
11,741,474
4,807,525
Cash at bank and in hand
37,588
433,542
11,920,866
5,563,392
Creditors: amounts falling due within one year
18
(10,277,535)
(5,430,083)
Net current assets
1,643,331
133,309
Total assets less current liabilities
1,859,199
318,371
Creditors: amounts falling due after more than one year
19
(76,934)
(76,934)
Net assets
1,782,265
241,437
Capital and reserves
Called up share capital
22
568,369
568,369
Share premium account
256,631
256,631
Profit and loss reserves
957,265
(583,563)
Total equity
1,782,265
241,437
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
The financial statements were approved by the board of directors and authorised for issue on 11 September 2024 and are signed on its behalf by:
J Ejikeme
Director
Company registration number 05869065 (England and Wales)
SOCHITEL UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 10 -
Share capital
Share premium account
Profit and loss reserves
Total
£
£
£
£
Balance at 1 January 2021
568,369
256,631
(1,016,252)
(191,252)
Year ended 31 December 2021:
Profit and total comprehensive income
-
-
432,689
432,689
Balance at 31 December 2021
568,369
256,631
(583,563)
241,437
Year ended 31 December 2022:
Profit and total comprehensive income
-
-
1,540,828
1,540,828
Balance at 31 December 2022
568,369
256,631
957,265
1,782,265
SOCHITEL UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 11 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash absorbed by operations
26
(1,176,133)
(1,068,239)
Interest paid
(74,554)
Income taxes refunded
2,777
Net cash outflow from operating activities
(1,247,910)
(1,068,239)
Investing activities
Purchase of intangible assets
(58,848)
(59,121)
Purchase of tangible fixed assets
(5,950)
(842)
Interest received
90,349
10,921
Net cash generated from/(used in) investing activities
25,551
(49,042)
Financing activities
Loan amounts received from parent undertaking
826,405
1,478,033
Net cash generated from financing activities
826,405
1,478,033
Net (decrease)/increase in cash and cash equivalents
(395,954)
360,752
Cash and cash equivalents at beginning of year
433,542
72,790
Cash and cash equivalents at end of year
37,588
433,542
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
1
Accounting policies
Company information
Sochitel UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3-4 Devonshire Street, London, W1W 5DT.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company has taken advantage of the exemption under section 401 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
Sochitel UK Limited is a majority owned subsidiary of IDT Corporation and the results of Sochitel UK Limited are included in the consolidated financial statements of IDT Corporation which are available from 520 Broad Street, Newark, New Jersey, 07102, USA.
1.2
Going concern
The company made a significant profit in 2022 and the balance sheet shows the company to be in an improved net asset position. Results from the year end to the date of signing these accounts have remained positive and the forecasts for the next 12 months shows profitability is expected to continue.true
Therefore, at the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. This is further evidenced by support being provided by the group.
Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue is recognised from the provision of mobile airtime. Revenue is recognised when the significant risks and rewards of ownership have transferred to the buyer; the amount of revenue can be measured reliably; it is probable that the associated economic benefits will flow to the entity; and the costs incurred or to be incurred in respect of the transactions can be measured reliably. Revenue from the sale of airtime to wholesale customers is initially deferred and released as end users purchase airtime. Revenue from the sale of prepaid top-up cards and terminal sales vouchers is recognised when redeemed by the end user.
Revenue from the rendering of services relates to platform usage fees charges to other group companies.
1.4
Intangible fixed assets other than goodwill
The IT Platform represents Sochitel's internally developed system for mobile airtime transfers, the cost represents labour time and external costs incurred in developing the system which is an integral part of the business and gives rise to future economic benefit.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 13 -
Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following basis:
IT Platform
10 Years
SMS Platform
10 Years
1.5
Tangible fixed assets
Tangible fixed assets are initially recorded at cost, and are subsequently stated at cost less any accumulated depreciation and impairment losses.
Depreciation is calculated so as to write off the cost or valuation of an asset, less its residual value, over the useful economic life of that asset as follows:
Leasehold improvements
the initial period of the lease
Computers
25% reducing balance
If there is an indication that there has been a significant change in depreciation rate, useful life or residual value of tangible assets, the depreciation is revised prospectively to reflect the new estimates.
1.6
Fixed asset investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
1.7
Stocks
Stocks consists of mobile airtime from different suppliers and is measured at the lower of cost and estimated selling price less costs to sell. Cost includes all costs of purchase and other costs incurred in the transfer of the stock.
1.8
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
1.9
Financial instruments
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
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.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
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.
1.10
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.11
Taxation
The 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.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -
1.12
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 stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.13
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.14
Leases
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.
1.15
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Intercompany transactions relating to the purchase of airtime and data are translated at the parallel rate.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 17 -
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Critical judgements
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Impairment of intangibles
Determine whether there are indicators of impairment of the company's intangible assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset.
Bad debt provisions
A full line by line review is carried out at the end of each month. Whilst every attempt is made to ensure that bad debt provisions are as accurate as possible, there remains a risk that the provisions do not match the level of debts which are ultimately proven to be uncollectable.
Stock valuations
To determine whether any provision is required against slow moving or obsolete stock items. These decisions will depend on an assessment of the latest movements of the items held in stock at the balance sheet date, along with a review of any expired airtime.
Key sources of estimation uncertainty
There are no key accounting estimates.
3
Turnover and other revenue
2022
2021
£
£
Turnover analysed by class of business
Sale of goods
28,372,122
19,618,260
Rendering of services
1,909,240
715,480
30,281,362
20,333,740
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3
Turnover and other revenue
(Continued)
- 18 -
2022
2021
£
£
Turnover analysed by geographical market
Africa
9,968,760
2,380,033
Asia
1,031,492
1,415,622
Europe
7,665,387
5,992,728
United Kingdom
678,835
914,977
United States of America
10,936,888
9,630,380
30,281,362
20,333,740
2022
2021
£
£
Other revenue
Interest income
90,349
10,921
4
Exceptional item
2022
2021
£
£
Expenditure
Exceptional item
162,692
-
During the year £162,962 of cash was misappropriated by an employee. This amount is unrecoverable.
5
Operating profit
2022
2021
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange gains
(553,629)
(83,749)
Depreciation of owned tangible fixed assets
2,692
10,328
Amortisation of intangible assets
31,300
25,175
Operating lease charges
47,090
77,400
Foreign exchange gains of £553,629 (2021:£83,749) is due to the fluctuation of the Nigerian parallel rate during the year.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 19 -
6
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
33,425
16,500
For other services
Other taxation services
1,000
825
7
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Management
3
3
Admin
15
12
Total
18
15
Their aggregate remuneration comprised:
2022
2021
£
£
Wages and salaries
1,100,407
753,358
Social security costs
132,017
89,027
Pension costs
123,039
7,512
1,355,463
849,897
8
Directors' remuneration
2022
2021
£
£
Remuneration for qualifying services
394,489
212,530
Company pension contributions to defined contribution schemes
94,477
4,044
488,966
216,574
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2021:1).
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
8
Directors' remuneration
(Continued)
- 20 -
Remuneration disclosed above include the following amounts paid to the highest paid director:
2022
2021
£
£
Remuneration for qualifying services
298,333
134,784
9
Interest receivable and similar income
2022
2021
£
£
Interest income
Other interest income
90,349
10,921
10
Interest payable and similar expenses
2022
2021
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
73,777
-
Other finance costs:
Other interest
777
74,554
11
Taxation
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
363,252
2,075
Adjustments in respect of prior periods
5,823
Total current tax
369,075
2,075
Deferred tax
Origination and reversal of timing differences
22,178
80,562
Total tax charge
391,253
82,637
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
11
Taxation
(Continued)
- 21 -
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:
2022
2021
£
£
Profit before taxation
1,932,081
515,326
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
367,095
97,912
Tax effect of utilisation of tax losses not previously recognised
(23,029)
(128,014)
Adjustments in respect of prior years
5,823
Permanent capital allowances in excess of depreciation
(966)
1,734
Other non-reversing timing differences
103,590
Other permanent differences
5,826
7,415
Other timing differences
14,326
Deferred tax adjustment
22,178
Taxation charge for the year
391,253
82,637
Factors that may affect future tax charges
Increases in the UK corporation tax rate from 19% to 25%, with marginal relief available for profits between £50,000 and £250,000 (effective 1 April 2023) were substantively enacted on 3 March 2021. This could increase the company's future current tax charge accordingly.
12
Intangible fixed assets
IT Platform
SMS Platform
Total
£
£
£
Cost
At 1 January 2022
370,553
29,530
400,083
Additions - internally developed
47,511
11,337
58,848
At 31 December 2022
418,064
40,867
458,931
Amortisation and impairment
At 1 January 2022
220,097
3,501
223,598
Amortisation charged for the year
27,545
3,755
31,300
At 31 December 2022
247,642
7,256
254,898
Carrying amount
At 31 December 2022
170,422
33,611
204,033
At 31 December 2021
150,456
26,029
176,485
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
13
Tangible fixed assets
Leasehold improvements
Computers
Total
£
£
£
Cost
At 1 January 2022
23,800
46,362
70,162
Additions
5,950
5,950
At 31 December 2022
23,800
52,312
76,112
Depreciation and impairment
At 1 January 2022
23,790
40,295
64,085
Depreciation charged in the year
10
2,682
2,692
At 31 December 2022
23,800
42,977
66,777
Carrying amount
At 31 December 2022
9,335
9,335
At 31 December 2021
10
6,067
6,077
14
Fixed asset investments
2022
2021
Notes
£
£
Investments in subsidiaries
15
2,500
2,500
15
Subsidiaries
Details of the company's subsidiaries at 31 December 2022 are as follows:
Name of undertaking
Registered office
Nature of business
Class of
% Held
shares held
Direct
Nomiworld Limited
Angelina Court 3 Olawale Dawodu Road Ikoyi, Lagos, Nigeria
Sale of mobile phone airtime
Ordinary
99.00
16
Stocks
2022
2021
£
£
Finished goods and goods for resale
141,804
322,325
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
17
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
2,011,835
1,197,846
Amounts owed by group undertakings
9,454,877
3,448,448
Other debtors
269,122
139,053
Prepayments and accrued income
5,640
11,741,474
4,785,347
2022
2021
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 20)
22,178
Total debtors
11,741,474
4,807,525
Amounts owed by group undertakings of £9,545,877 (2021: £3,448,448) are considered to be repayable on demand. This balance is unsecured.
£1,751,656 (2021: £nil) of amounts owed by group undertakings earns interest of 5% per annum.
18
Creditors: amounts falling due within one year
2022
2021
£
£
Trade creditors
1,458,520
264,836
Amounts owed to parent undertaking
2,878,808
1,660,950
Amounts owed to group undertakings
4,892,270
2,315,336
Corporation tax
375,912
4,060
Other taxation and social security
112,950
93,211
Other creditors
509,075
1,058,615
Accruals and deferred income
50,000
33,075
10,277,535
5,430,083
Amounts owed to group undertakings of £4,892,270 (2021: £2,315,336) are considered to be repayable on demand and have no annual interest. This balance is unsecured.
Amounts owed to parent undertakings includes a loan of £1,740,596 (2021: £1,478,033 ) which is considered to be repayable on demand and has annual interest of 4% and another loan for working capital requirements of £826,405 (2021: £nil). These amounts are unsecured
The remaining balance of £311,807 (2021: £214,275) due to parent undertakings is considered to be repayable on demand and has no annual interest. This balance is unsecured.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 24 -
19
Creditors: amounts falling due after more than one year
2022
2021
£
£
Amounts owed to parent undertakings
76,934
76,934
£76,934 (2021: £76,934) due to parent undertakings is due in greater than one year and has no annual interest. This balance is unsecured.
20
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Assets
Assets
2022
2021
Balances:
£
£
Accelerated capital allowances
-
(850)
Tax losses
-
23,028
-
22,178
2022
Movements in the year:
£
Asset at 1 January 2022
(22,178)
Charge to profit or loss
22,178
Liability at 31 December 2022
-
21
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
123,039
7,512
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.
The amount outstanding at year end to pay over to the pension provider was £45,893 (2021: £nil).
22
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
568,369
568,369
568,369
568,369
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 25 -
23
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2022
2021
£
£
Within one year
80,175
52,500
24
Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
2022
2021
£
£
Aggregate compensation
609,118
428,170
Consultancy services are provided to the company for key management personnel. Consultancy fees of £120,000 (2021:nil) were incurred and are not included in the amount above.
Transactions with related parties
During the year the company entered into the following transactions with related parties:
Sales
Sales
Purchases
Purchases
2022
2021
2022
2021
£
£
£
£
Entities with control, joint control or significant influence over the company
13,471,928
9,621,703
Entities over which the entity has control, joint control or significant influence
5,993,089
1,059,961
10,974,273
6,609,721
25
Ultimate controlling party
The immediate parent is IDT International Telecom Inc, a company registered and domiciled in the United States of America.
The ultimate parent undertaking and controlling party is IDT Corporation Inc, a company listed on the New York Stock Exchange. The results for Sochitel UK Ltd have been included in the consolidation of the ultimate parent financial statements.
SOCHITEL UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 26 -
26
Cash absorbed by operations
2022
2021
£
£
Profit for the year after tax
1,540,828
432,689
Adjustments for:
Taxation charged
391,253
82,637
Finance costs
74,554
Investment income
(90,349)
(10,921)
Amortisation and impairment of intangible assets
31,300
25,175
Depreciation and impairment of tangible fixed assets
2,692
10,328
Foreign exchange losses on loan received from parent undertaking
262,563
-
Movements in working capital:
Decrease/(increase) in stocks
180,521
(165,237)
Increase in debtors
(6,956,127)
(4,231,153)
Increase in creditors
3,386,632
2,788,243
Cash absorbed by operations
(1,176,133)
(1,068,239)
27
Analysis of changes in net debt
1 January 2022
Cash flows
Exchange rate movements
31 December 2022
£
£
£
£
Cash at bank and in hand
433,542
(395,954)
-
37,588
Borrowings excluding overdrafts
(1,478,033)
(826,405)
(262,563)
(2,567,001)
(1,044,491)
(1,222,359)
(262,563)
(2,529,413)
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