Company registration number 03044274 (England and Wales)
ATMOS INTERNATIONAL LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
ATMOS INTERNATIONAL LIMITED
COMPANY INFORMATION
Directors
Dr X J Zhang
A D Hoffman
G B Gill
Company number
03044274
Registered office
781 Wilmslow Road
Manchester
M20 2RW
Auditor
JS. Audit Limited
James House
Stonecross Business Park
Yew Tree Way
Warrington
Cheshire
WA3 3JD
Business address
781 Wilmslow Road
Manchester
M20 2RW
Bankers
HSBC Bank plc
760 Wilmslow Road
Didsbury
Manchester
M20 2DP
ATMOS INTERNATIONAL LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of income and retained earnings
8
Balance sheet
9
Notes to the financial statements
10 - 23
ATMOS INTERNATIONAL LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The directors present the strategic report for the year ended 31 December 2023.
Review of the business
The results for the company show a pre-tax loss of £1.2m (2022: £0.9m profit) for the year and turnover of £12.9m (2022: £12.1m).
The performance of the company remains steady despite challenging economic market conditions due to oil price fluctuations and geopolitical conflicts, revenue remains consistent and the company’s range of leak and theft detection and simulation solutions, expert knowledge and wide customer base continue to generate global opportunities.
Strategy
The company’s success is pertained to the track record of its leak and theft detection systems and the company regard continued development and investment in research of new products as the foremost way of maintaining its leading market position.
The company remains focused on achieving its diversification strategy by 2025 and efforts to develop new products and markets are ongoing. The increased investment in research and development throughout 2023 has reduced the profit margin. In addition, to help our staff cope with the cost of living crisis the company has given generous salary increases and bonuses while such cost increases have not been passed to our customers. However the company expects to increase the profit margin by the commercialisation of the new products and services in the near future.
Principal risks and uncertainties
The management of the business and the execution of the company’s strategy are subject to a number of risks. Risks are rigorously monitored and regularly reviewed by the Board and appropriate processes put in place to manage and mitigate them.
The key business risks affecting the company are set out below.
Commodity risk
The commodity price of oil has impacted the investment decisions of the major pipeline organisations, reducing large scale investment prospects significantly. The drive for net zero has also adversely impacted on investments in the oil and gas industry. The company is investing in new product development to ensure that their product portfolio is diverse to adapt to wider markets and industries.
Foreign exchange risk
The company has predominantly international operations so exposure to currency fluctuations are substantial. The company continually monitors the market movements and suitable hedges are used to mitigate this risk.
Key performance indicators
The company monitors progress and the impact of policy adjustments with reference to gross profit margins and PBT growth combined with ongoing monitoring of our liquidity position.
2023 2022
Gross Margin 66.7% 74.3% Gross profit generated as a proportion of revenue
PBT £(1.2)m £0.9m (Loss)/Profit before tax
ATMOS INTERNATIONAL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Dr X J Zhang
Director
18 September 2024
ATMOS INTERNATIONAL LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2023.
Results and dividends
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £4,337,005. 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:
Dr X J Zhang
A D Hoffman
G B Gill
Financial instruments
Liquidity risk
The company manages its cash and borrowing requirements in order to generate interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.
Interest rate risk
The company is exposed to fair value interest rate risk on its floating rate deposits. The company does not consider it necessary to use any financial products to mitigate this risk.
Credit risk
Investments of cash surpluses are made through banks which must fulfil credit rating criteria approved by the Board.
All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.
Research and development
The company continues to invest in the development of its technology and pipeline simulation software and hardware leak detection solutions. The directors regard investment in research and development as essential for maintaining its leading position in the market and for the continued growth and success of the business.
Future developments
The global oil market is expected to remain challenging during 2024 but the directors remain confident that the continued development of the company’s product range, expansion of customer base and global markets will provide opportunities for the next year and beyond.
Auditor
The auditor, JS. Audit Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
ATMOS INTERNATIONAL LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
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.
Strategic report
The company has chosen in accordance with Companies Act 2006, s.414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report.
Statement of disclosure to auditor
Each of the directors in office at the date of approval of this annual report confirms that:
so far as the director is aware, there is no relevant audit information of which the company's auditors are unaware, and
the director has taken all the steps that he / she ought to have taken as a director in order to make himself / herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.
On behalf of the board
Dr X J Zhang
Director
18 September 2024
ATMOS INTERNATIONAL LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ATMOS INTERNATIONAL LIMITED
- 5 -
Opinion
We have audited the financial statements of Atmos International Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of income and retained earnings, the balance sheet 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 2023 and of its loss 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.
ATMOS INTERNATIONAL LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ATMOS INTERNATIONAL 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 included within the directors' report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities and fraud are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities including fraud is detailed below.
Based on our understanding of the company and sector, we identified that the principal risks of non-compliance with laws and regulations related to, but were not limited to, the Companies Act 2006, UK tax, employment and pension law and Health & Safety regulations and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to management bias in accounting estimates and judgements and risk of fraudulent revenue recognition.
ATMOS INTERNATIONAL LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ATMOS INTERNATIONAL LIMITED
- 7 -
Our procedures to respond to risks identified included the following:
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
enquiring of management about actual and potential litigation and claims and their policies and procedures to detect fraud, as well as whether they have knowledge of any actual, suspected or alleged fraud;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
obtaining an understanding of provisions and holding discussions with management to understand the basis of recognition or non-recognition of tax provisions; and
in addressing the risk of fraud through management override of controls: testing the appropriateness of journal entries; assessing whether the accounting estimates, judgements and decisions made by management 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.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
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.
Christopher Moss BSc F.C.A. (Senior Statutory Auditor)
For and on behalf of JS. Audit Limited
26 September 2024
Chartered Accountants
Statutory Auditor
James House
Stonecross Business Park
Yew Tree Way
Warrington
Cheshire
WA3 3JD
ATMOS INTERNATIONAL LIMITED
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£
£
Turnover
3
12,876,904
12,118,171
Cost of sales
(4,282,882)
(3,117,200)
Gross profit
8,594,022
9,000,971
Administrative expenses
(10,110,718)
(8,397,817)
Other operating income
8,854
140,024
Operating (loss)/profit
4
(1,507,842)
743,178
Interest receivable and similar income
7
303,305
122,427
(Loss)/profit before taxation
(1,204,537)
865,605
Tax on (loss)/profit
8
526,497
303,285
(Loss)/profit for the financial year
(678,040)
1,168,890
Retained earnings brought forward
17,531,600
21,002,991
Dividends
9
(4,337,005)
(4,640,281)
Retained earnings carried forward
12,516,555
17,531,600
The statement of income and retained earnings has been prepared on the basis that all operations are continuing operations.
ATMOS INTERNATIONAL LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
10
167,126
240,102
Investments
11
571,874
571,874
739,000
811,976
Current assets
Stocks
13
179,864
156,819
Debtors falling due after more than one year
14
6,251,346
6,176,759
Debtors falling due within one year
14
6,854,283
6,953,878
Cash at bank and in hand
7,671,680
11,251,600
20,957,173
24,539,056
Creditors: amounts falling due within one year
15
(9,065,218)
(7,705,032)
Net current assets
11,891,955
16,834,024
Net assets
12,630,955
17,646,000
Capital and reserves
Called up share capital
19
100,000
100,000
Share premium account
20
8,400
8,400
Capital redemption reserve
21
6,000
6,000
Profit and loss reserves
22
12,516,555
17,531,600
Total equity
12,630,955
17,646,000
The financial statements were approved by the board of directors and authorised for issue on 18 September 2024 and are signed on its behalf by:
Dr X J Zhang
Director
Company registration number 03044274 (England and Wales)
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
1
Accounting policies
Company information
Atmos International Limited is a limited company domiciled and incorporated in England and Wales. The registered office and principal place of business is 781 Wilmslow Road, Manchester, M20 2RW.
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 on the historical cost convention. The principal accounting policies adopted are set out below.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
Atmos International Limited is a wholly owned subsidiary of Reverse Engineering Limited and the results of Atmos International Limited are included in the consolidated financial statements of Reverse Engineering Limited which are available from Companies House, Crown Way, Maindy, Cardiff, CF14 3UZ. For this reason Atmos International Limited and its subsidiaries are exempt from the requirement to prepare consolidated financial statements.
1.2
Going concern
Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Turnover
Turnover represents amounts receivable for the provision and maintenance of pipeline application software prior to the balance sheet date, net of VAT as well as royalties receivable. Amounts in respect of long term contracts are recognised in accordance with the stage of completion of the contract in proportion to the costs incurred compared to the estimated total contract costs. Royalty fees are recognised on an accruals basis in accordance with the substance of the relevant agreement.
1.4
Research and development expenditure
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 11 -
1.5
Tangible fixed assets
Tangible fixed assets are initially measured at cost net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Leasehold improvements
10% per annum straight line basis
Plant and machinery
25% per annum straight line basis
Fixtures, fittings & equipment
25% per annum straight line basis
Computer equipment
25% per annum straight line basis
Motor vehicles
20% per annum straight line basis
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 credited or charged to profit or loss.
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 the profit or loss account.
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
Impairment of fixed 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.
If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the the amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the profit or loss.
1.8
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 12 -
1.9
Long term software contracts
Where the outcome of a software contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.
When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.
Where the outcome of a software contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. Costs incurred in securing a contract are recognised as an expense in the period in which they are incurred.
The “percentage of completion method” is used to determine the appropriate amount to recognise in a given period. The percentage completion is determined by the Project Manager for each contract, with the total contracted revenue being multiplied by the percentage completion as at the year end. Any amounts not yet invoiced will be recognised in debtors as amounts recoverable on contracts, and for any amounts invoiced in advance these will be recognised as projects invoiced in advance and included in accruals.
1.10
Cash at bank and in hand
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.11
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include 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.
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 13 -
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.12
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.
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 14 -
1.13
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.14
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.
1.15
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.16
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
1.17
Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to the profit and loss account.
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
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.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Long term contracts, accrued and deferred income
The calculation of accrued and deferred income on long term contracts is subject to estimation uncertainty and requires an estimation of the value at the reporting date based on the stage of completion of the contract and the overall contract value. Due to the nature of the work undertaken the contracts can take several years to complete and are subject to unforeseen circumstances, however historically this has not been an issue. The carrying amount of amounts due from contract customers at the reporting date was £1,982,768 (2022: £1,767,665) and deferred income was £2,528,060 (2022: £2,266,727).
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2023
2022
£
£
Turnover analysed by class of business
Project and contract income
7,027,748
6,662,923
Maintenance income
2,724,365
2,579,817
Royalty fees
3,124,791
2,875,431
12,876,904
12,118,171
2023
2022
£
£
Turnover analysed by geographical market
UK
2,968,093
2,741,959
Europe
2,016,481
1,648,399
Rest of the World
4,767,539
4,852,382
Royalty fees not analysed
3,124,791
2,875,431
12,876,904
12,118,171
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
3
Turnover and other revenue
(Continued)
- 16 -
2023
2022
£
£
Other significant revenue
Interest income
303,305
122,427
Research and development expenditure credit
-
7,878
Grants received
8,854
132,146
4
Operating (loss)/profit
2023
2022
Operating (loss)/profit for the year is stated after charging/(crediting):
£
£
Exchange losses/(gains)
488,962
(372,098)
Government grants
(8,854)
(132,146)
Fees payable to the company's auditor for the audit of the company's financial statements
17,440
16,450
Fees payable to the company's auditor for non audit services
4,584
19,746
Depreciation of owned tangible fixed assets
122,928
103,837
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Administration
7
9
Business Development
12
13
Operations
68
64
Directors
3
3
Total
90
89
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
6,492,503
5,941,485
Social security costs
753,941
623,150
Pension costs
1,034,193
767,018
8,280,637
7,331,653
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
6
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
120,028
97,187
Company pension contributions to defined contribution schemes
111,307
61,263
231,335
158,450
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022- 2).
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
303,305
118,682
Other interest income
3,745
Total income
303,305
122,427
8
Taxation
2023
2022
£
£
Current tax
Foreign current tax on profits for the current period
113,227
70,868
Adjustments in foreign tax in respect of prior periods
398
(50)
Total current tax
113,625
70,818
Deferred tax
Origination and reversal of timing differences
(640,122)
(374,103)
Total tax credit
(526,497)
(303,285)
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
8
Taxation
(Continued)
- 18 -
The actual credit for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
2023
2022
£
£
(Loss)/profit before taxation
(1,204,537)
865,605
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%)
(283,307)
164,465
Tax effect of expenses that are not deductible in determining taxable profit
1,232
761
Permanent capital allowances in excess of depreciation
(231)
(1,540)
Research and development tax credit
(310,025)
(435,108)
Other permanent differences
(9,910)
(12,897)
Foreign tax credits
113,227
70,868
Foreign tax adjustments in respect of prior years
398
(50)
Effect of change in deferred tax rate
(37,881)
(89,784)
Taxation credit for the year
(526,497)
(303,285)
A UK corporation tax rate of 25% was announced in the Chancellor’s Budget of 3 March 2021. The 25% rate applied from 1 April 2023 and deferred tax has been calculated at this rate.
9
Dividends
2023
2022
£
£
Interim paid
4,337,005
4,640,281
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
10
Tangible fixed assets
Leasehold improvements
Plant and machinery
Fixtures, fittings & equipment
Computer equipment
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 January 2023
183,036
110,930
235,858
328,042
78,112
935,978
Additions
4,595
10,747
34,610
49,952
Disposals
(4,430)
(221,543)
(225,973)
At 31 December 2023
183,036
111,095
246,605
141,109
78,112
759,957
Depreciation and impairment
At 1 January 2023
183,036
49,471
174,297
269,947
19,125
695,876
Depreciation charged in the year
27,390
41,990
37,925
15,623
122,928
Eliminated in respect of disposals
(4,430)
(221,543)
(225,973)
At 31 December 2023
183,036
72,431
216,287
86,329
34,748
592,831
Carrying amount
At 31 December 2023
38,664
30,318
54,780
43,364
167,126
At 31 December 2022
61,459
61,561
58,095
58,987
240,102
11
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
12
571,874
571,874
12
Subsidiaries
These financial statements are separate company financial statements for Atmos International Limited.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Atmos International Limited - Beijing
China
Ordinary
100.00
Atmos International Limited - Canada
Canada
Ordinary
100.00
13
Stocks
2023
2022
£
£
Stocks
179,864
156,819
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
14
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
2,285,389
1,952,887
Gross amounts owed by contract customers
1,982,768
1,767,665
Corporation tax recoverable
345,973
Amounts owed by group undertakings
15,421
38,304
Other debtors
1,150,565
2,207,921
Prepayments and accrued income
423,459
284,569
5,857,602
6,597,319
Deferred tax asset (note 17)
996,681
356,559
6,854,283
6,953,878
2023
2022
Amounts falling due after more than one year:
£
£
Amounts owed by group undertakings
6,251,346
6,176,759
Total debtors
13,105,629
13,130,637
15
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Other borrowings
16
914,016
Trade creditors
250,091
146,710
Amounts owed to group undertakings
14,541
Taxation and social security
312,474
397,923
Other creditors
4,699,477
1,608,377
Accruals and deferred income
3,788,635
4,638,006
9,065,218
7,705,032
16
Loans and overdrafts
2023
2022
£
£
Other loans
914,016
Payable within one year
914,016
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
17
Deferred taxation
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Assets
Assets
2023
2022
Balances:
£
£
Accelerated capital allowances
(10,035)
(23,649)
Tax losses
978,596
355,073
Other provisions
-
25,135
Short term timing differences
28,120
-
996,681
356,559
2023
Movements in the year:
£
Asset at 1 January 2023
(356,559)
Credit to profit or loss
(640,122)
Asset at 31 December 2023
(996,681)
The deferred tax asset set out above mostly relates to the utilisation of tax losses against future expected profits of the same period.
The total taxable losses carried forward amount to £3,914,384 (2022: £1,420,295).
18
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
1,034,193
767,018
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.
As at the year end £72,000 (2022: £67,000) of the defined contribution scheme contributions were unpaid.
19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
100,000
100,000
100,000
100,000
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
20
Share premium account
This reserve records the amount above the nominal value for shares issued, less transaction costs.
21
Capital redemption reserve
This reserve records the nominal value of shares repurchased by the company.
22
Profit and loss reserves
Profit and loss reserves relate to the accumulated profits made to the date of the balance sheet which have not been distributed.
23
Financial commitments, guarantees and contingent liabilities
At the balance sheet date the company has given guarantees to customers totalling £508,513 (2022: £431,516). The guarantees are provided via the company's bankers and are only payable in the event of any potential claim. This is a contingent liability although the likelihood of any claims is considered to be low.
24
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
Sales of services
Purchase of services
2023
2022
2023
2022
£
£
£
£
Entities under common control
5,127,157
5,769,185
669,737
1,226,859
The following amounts were outstanding at the reporting end date:
2023
2022
Amounts due to related parties
£
£
Entities under common control
3,202,749
1,615,483
The following amounts were outstanding at the reporting end date:
2023
2022
Amounts due from related parties
£
£
Entities under common control
-
2,177,767
25
Ultimate controlling party
The ultimate parent company is Reverse Engineering Limited, a company registered in England and Wales.
The ultimate controlling party is considered to be Dr X J Zhang by virtue of her majority shareholding in the ultimate parent company.
ATMOS INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
25
Ultimate controlling party
(Continued)
- 23 -
The ultimate parent company prepares consolidated accounts which are publicly available from Companies House, Crown Way, Cardiff, CF14 3UZ.
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