Company registration number 06763953 (England and Wales)
SVAROG SHIPPING & TRADING COMPANY LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Faulkner House
Victoria Street
Rayner Essex LLP
St Albans
Chartered Accountants
Hertfordshire
AL1 3SE
SVAROG SHIPPING & TRADING COMPANY LIMITED
COMPANY INFORMATION
Directors
Mr N Savva
Ms C Konstantinou
Company number
06763953
Registered office
Tavistock House South
Tavistock Square
London
WC1H 9LG
Auditor
Rayner Essex LLP
Faulkner House
Victoria Street
St Albans
Hertfordshire
AL1 3SE
SVAROG SHIPPING & TRADING COMPANY LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Profit and loss account
8
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 21
SVAROG SHIPPING & TRADING COMPANY 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 Company reported an operating loss of $5.6m (2022: profit $4.2m) and net loss of $5.9m (2022: profit $4.1m). The Company's operating activities have been significantly impacted due to the ongoing uncertainty and trading restrictions arising from the Russia and Ukraine conflict.
Principal risks and uncertainties
The principal risks and uncertainties faced by the company in the view of the directors are as follows:
Credit risk
Credit risk is managed on an individual basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, management assess the credit risk of the customer, taking into account its financial position, past experience and other factors. Individual credit limits and credit terms are set based on the credit quality of the customer in accordance with set limits set by the board of directors. The utilisation of credit limits is regularly monitored.
The Company considers the probability of default upon initial recognition of the asset and whether there has
been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the financial asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information.
Especially the following indicators are incorporated:
• internal credit rating
• external credit rating (as far as available)
• actual or expected significant adverse changes in business, financial or economic conditions that are
expected to cause a significant change to the borrower's/counterparty's ability to meet its obligations
• actual or expected significant changes in the operating results of the borrower/counterparty
• significant increases in credit risk on other financial instruments of the same borrower/counterparty
• significant changes in the value of the collateral supporting the obligation or in the quality of third-party
guarantees or credit enhancements
• significant changes in the expected performance and behaviour of the borrower/counterparty, including
changes in the payment status
Interest rate risk
The company is exposed to interest rate risk on its borrowings. Borrowings issued at fixed rates expose the company to fair value interest rate risk. The directors monitor the interest rate fluctuations on a continuous basis and acts accordingly.
Liquidity risk
The board manages liquidity risk by a combination of controls such as maintaining sufficient cash and other highly liquid assets and by having available an adequate amount of committed credit facilities. This includes monitoring gearing levels and ensuring the company has sufficient available funds for its operations.
Cash flow risk
The board continually monitor the cash requirements of the company to ensure that there are the appropriate levels of cover. The company has support from its parent company to meet cash flow requirements if required.
SVAROG SHIPPING & TRADING COMPANY LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Foreign currency risk
The directors are constantly reviewing the company's exposure to limit the adverse effects of such risks on its financial performance. The directors undertake sensitivity analysis to identify foreign currency exposure. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the GBP, Swiss Franc and the Euro.
Supply chain network uncertainty
The company relies on sourcing of vessels to meet customer demands. The directors use experienced agents to continually source vessels and build relationships with suppliers. The directors seek to ensure that adequate vessels are available to meet the requirements of its customers.
Russia and Ukraine conflict
The impact on the Company largely depends on the nature and duration of uncertain and unpredictable events, such as further military action, additional sanctions and reactions to ongoing developments by global financial markets. The Company's management continues to monitor the ongoing conflict between Russia and Ukraine and any potential impact this could have on the company.
Development and performance
The directors are looking at new areas to continue its shipping activities.
Key performance indicators
The directors review various key performance indicators during the year to measure the performance of the company compared to budget. A summary of these indicators are as follows:-
Turnover
The directors review pricing in line with the market. This means the prices offered by the company to its customers remain competitive. Turnover for the period was $3.5m (2022: $30.3m)
Gross profit
The directors continually take steps to ensure that the company maintains its gross margin. Gross margin achieved was 4.0% (2022: 6.9%)
Mr N Savva
Director
26 September 2024
SVAROG SHIPPING & TRADING COMPANY 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.
Principal activities
The principal activity of the company through it's Cypriot branch is the transportation of heavy fuel products.
Results and dividends
The results for the year are set out on page 8.
The directors do not recommend payment of a dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mr N Savva
Ms C Konstantinou
Financial instruments
The company used financial instruments comprising trade receivables and cash together with trade creditors and loans from group companies that arise directly from its operations. It is the objective of the directors to ensure that the company has ready access to the level of funds that the directors deem necessary at any time during the year. The directors review future contracts to highlight any times when requirements may exceed current levels of funding to ensure facilities are in place and available.
The main risks arising from financial instruments used by the company are credit risk, interest rate risk, foreign exchange risk, liquidity risk and cash flow risk.
Future developments
The company ceased operations temporarily from February 2023 as a result of the sanctions imposed to Russia on Russian sourced oil products on the 5th of February 2023. The management of the company is looking for new areas to continue its shipping.
Auditor
In accordance with the company's articles, a resolution proposing that Rayner Essex LLP be reappointed as auditor of the company will be put at a General Meeting.
SVAROG SHIPPING & TRADING COMPANY LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 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.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
Mr N Savva
Director
26 September 2024
SVAROG SHIPPING & TRADING COMPANY LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SVAROG SHIPPING & TRADING COMPANY LIMITED
- 5 -
Opinion
We have audited the financial statements of Svarog Shipping & Trading Company Limited (the 'company') for the year ended 31 December 2023 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
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.
Material uncertainty relating to going concern
As at 31 December 2023 the Company's liabilities exceeded its assets by US$1,453,077.
The Company incurred a net loss amounting to US$5,680.962. The Company's loss mainly incurred from the impairment of other receivables of US$ 5,329,774.
As stated in note 2.2, these events or conditions, along with the other matters as set forth in note 1.2, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 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. 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.
SVAROG SHIPPING & TRADING COMPANY LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SVAROG SHIPPING & TRADING COMPANY LIMITED (CONTINUED)
- 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with the directors and other management, and from our commercial knowledge and experience of the transportation sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, shipping regulations as set by IMO and MARPOL and other relevant regulations;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
SVAROG SHIPPING & TRADING COMPANY LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SVAROG SHIPPING & TRADING COMPANY LIMITED (CONTINUED)
- 7 -
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with Cyprus tax authorities and relevant regulators.
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.
Antony Federer FCA FCCA CF
Senior Statutory Auditor
For and on behalf of Rayner Essex LLP
26 September 2024
Chartered Accountants
Statutory Auditor
Faulkner House
Victoria Street
St Albans
Hertfordshire
AL1 3SE
SVAROG SHIPPING & TRADING COMPANY LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
$
$
Turnover
3
3,567,608
30,279,858
Cost of sales
(3,423,586)
(28,197,472)
Gross profit
144,022
2,082,386
Administrative expenses
(5,773,591)
(1,456,609)
Exceptional item
4
3,625,864
Operating (loss)/profit
5
(5,629,569)
4,251,641
Interest receivable and similar income
8
9,240
Interest payable and similar expenses
9
(60,633)
(28,968)
(Loss)/profit before taxation
(5,680,962)
4,222,673
Tax on (loss)/profit
11
(95,944)
(Loss)/profit for the financial year
(5,680,962)
4,126,729
The profit and loss account has been prepared on the basis that all operations are continuing operations.
SVAROG SHIPPING & TRADING COMPANY LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 9 -
2023
2022
$
$
(Loss)/profit for the year
(5,680,962)
4,126,729
Other comprehensive income
-
-
Total comprehensive income for the year
(5,680,962)
4,126,729
SVAROG SHIPPING & TRADING COMPANY LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2023
31 December 2023
- 10 -
2023
2022
Notes
$
$
$
$
Current assets
Debtors falling due after more than one year
13
3,007,198
Debtors falling due within one year
13
431,419
5,251,661
Cash at bank and in hand
1,811,742
3,789,829
2,243,161
12,048,688
Creditors: amounts falling due within one year
15
(218,539)
(2,491,835)
Net current assets
2,024,622
9,556,853
Creditors: amounts falling due after more than one year
14
(3,477,699)
(5,328,968)
Net (liabilities)/assets
(1,453,077)
4,227,885
Capital and reserves
Called up share capital
17
15,159
15,159
Profit and loss reserves
(1,468,236)
4,212,726
Total equity
(1,453,077)
4,227,885
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 26 September 2024 and are signed on its behalf by:
Mr N Savva
Ms C Konstantinou
Director
Director
Company registration number 06763953 (England and Wales)
SVAROG SHIPPING & TRADING COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
Share capital
Profit and loss reserves
Total
Notes
$
$
$
Balance at 1 January 2022
15,159
5,385,997
5,401,156
Year ended 31 December 2022:
Profit and total comprehensive income
-
4,126,729
4,126,729
Dividends
10
-
(5,300,000)
(5,300,000)
Balance at 31 December 2022
15,159
4,212,726
4,227,885
Year ended 31 December 2023:
Loss and total comprehensive income
-
(5,680,962)
(5,680,962)
Balance at 31 December 2023
15,159
(1,468,236)
(1,453,077)
SVAROG SHIPPING & TRADING COMPANY LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
2023
2022
Notes
$
$
$
$
Cash flows from operating activities
Cash absorbed by operations
19
(34,260)
(77,576)
Interest paid
(60,633)
(28,968)
Income taxes paid
(41,165)
(89,327)
Net cash outflow from operating activities
(136,058)
(195,871)
Investing activities
Proceeds from disposal of tangible fixed assets
2,429,251
Interest received
9,240
Net cash generated from investing activities
9,240
2,429,251
Financing activities
Proceeds from issue of shares
(15,159)
Repayment of borrowings
(1,851,269)
5,328,968
Dividends paid
(5,300,000)
Net cash (used in)/generated from financing activities
(1,851,269)
13,809
Net (decrease)/increase in cash and cash equivalents
(1,978,087)
2,247,189
Cash and cash equivalents at beginning of year
3,789,829
1,542,640
Cash and cash equivalents at end of year
1,811,742
3,789,829
SVAROG SHIPPING & TRADING COMPANY LIMITED
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
1
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.
2
Accounting policies
Company information
Svarog Shipping & Trading Company Limited is a private company limited by shares incorporated in England and Wales. The registered office is Tavistock House South, Tavistock Square, London, WC1H 9LG.
The company's trading address is 38, Karaiskaki Street, Kanika Alexander Court, Bock 1, 1st Floor, Office 113C/D, PC 3032, Limassol, Cyprus
2.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in US$, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest $.
The financial statements have been prepared on the historical cost convention.
2.2
Going concern
The main conditions and matters considered by the Board of Director's of the Company to determine the existence of uncertainty over the Company's ability to continue as a going concern are as follows. The Company incurred a net loss of $5,680,962 and at 31 December 2023, liabilities exceed assets by $1,453,077. Despite the Company having net outflows of $1,978,087, the Company has positive cash balances of $1,811,742 at 31 December 2023. This cash balance is sufficient to cover annual overheads of around $240,000 per annum until the repayment of the loan. The third party loan is repayable 20 August 2025, however the lender has indicated his intention to continue to provide financial support to the Company to enable it to continue as a going concern and meet its obligations as they fall due.
The Company is negatively affected by the economic environment in which it operates. The Company ceased operations temporarily from February 2023 as a result of the sanctions imposed to Russia on Russian sourced oil products on the 5th of February 2023. The management of the Company is looking for new areas to continue its shipping activities.
The Board of Directors of the Company after considering and evaluating all the above conditions and relevant factors has concluded that the Company has currently the available resources to enable it to continue its activities, however, given the conditions described above there is material uncertainty over the Company's ability to continue as a going concern. In drawing this conclusion, the Board of Directors of the Company also considered that the lender has indicated his intention to continue providing financial support to the Company to enable it to continue as a going concern and to meet its obligations as they fall due.
The Directors therefore have a reasonable expectation that he company will continue in operational existence for the foreseeable future.
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Accounting policies
(Continued)
- 14 -
2.3
Turnover
Revenues earned by the Company are recognised on the following bases:
Rendering of services
Sales of services are recognised in the accounting period in which the services are rendered by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.
Time charter hire revenue
Revenue from time charters represents charter hire earned under time charter agreement and is recorded over the term of the charter as service is provided.
Freight income
All voyage revenues are recognised on a percentage of completion method. The Company used a discharge-to-discharge basis in determining percentage of completion for all voyages.
2.4
Expenditure
Claims for demurrage are recognised in the period to which the cost is invoiced.
2.5
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.
2.6
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
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.
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Accounting policies
(Continued)
- 15 -
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
2.7
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.
2.8
Taxation
The company is subject to Cypriot corporation tax. 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.
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Accounting policies
(Continued)
- 16 -
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.
2.9
Foreign exchange
Items included in the compay's financial statements are measured using the currency of the primary economic environment in which the company operates (the "functional currency"). The financial statements are presented in United States Dollars (US$), which is the company's functional and presentational currency.
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account.
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2023
2022
$
$
Turnover analysed by class of business
Freight income
2,025,600
9,159,060
Time charters
576,240
16,236,239
Demurrages
-
1,402,894
Other ship income
965,768
3,481,665
3,567,608
30,279,858
2023
2022
$
$
Turnover analysed by geographical market
Rest of the world
3,567,608
30,279,858
2023
2022
$
$
Other revenue
Interest income
9,240
-
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
4
Exceptional item
2023
2022
$
$
Income
Other operating income (disposal of vessel)
-
(3,625,864)
5
Operating (loss)/profit
2023
2022
Operating (loss)/profit for the year is stated after charging/(crediting):
$
$
Exchange (gains)/losses
(217,918)
137,122
Fees payable to the company's auditor for the audit of the company's financial statements
10,666
9,392
Depreciation of owned tangible fixed assets
-
109,180
6
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
$
$
For audit services
Audit of the financial statements of the company
10,666
9,392
7
Employees
2023
2022
Number
Number
Total
8
Interest receivable and similar income
2023
2022
$
$
Interest income
Other interest income
9,240
9
Interest payable and similar expenses
2023
2022
$
$
Interest on financial liabilities measured at amortised cost:
Interest payable to group undertakings
60,633
28,968
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
10
Dividends
2023
2022
$
$
Final paid
5,300,000
11
Taxation
2023
2022
$
$
Current tax
UK corporation tax on profits for the current period
95,944
The actual charge 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
(5,680,962)
4,222,673
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 12.50% (2022: 12.50%)
(710,120)
527,834
Non deductible expenses
695,475
17,188
Tax effect allowances not subject to tax
(57,602)
(459,179)
Tonnage tax
3,870
Timing difference
(5,737)
6,231
Tax loss
75,212
Defence contribution
2,772
Taxation charge for the year
-
95,944
The company is subject to Cypriot corporation tax and not UK corporation tax.
Under certain conditions interest income may be subject to defence contribution at the rate of 30% (reduced to 17% as of 1 January 2024). In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 17%.
The income generated under the Cyprus flag owned vessel is automatically taxed under the Tonnage Tax System(TTS) and is exempted from the Corporation tax.
Due to tax losses sustained in the year, no tax liability arises on the Company. Under current legislation, tax losses may be carried forward and be set off against taxable income of the five succeeding years.
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
12
Financial instruments
2023
2022
$
$
Carrying amount of financial assets
Debt instruments measured at amortised cost
373,024
8,205,994
Carrying amount of financial liabilities
Measured at amortised cost
3,696,238
7,779,638
13
Debtors
2023
2022
Amounts falling due within one year:
$
$
Trade debtors
25,653
2,837,771
Unpaid share capital
15,159
15,159
Other debtors
389,487
2,200,863
Prepayments and accrued income
1,120
197,868
431,419
5,251,661
2023
2022
Amounts falling due after more than one year:
$
$
Other debtors
3,007,198
Total debtors
431,419
8,258,859
14
Creditors: amounts falling due after more than one year
2023
2022
Notes
$
$
Other borrowings
16
3,477,699
5,328,968
During the prior year it was agreed by the company and outgoing shareholder to novate an existing obligation to pay a dividend and convert this into a loan. Interest is charged on this loan at a rate of 1.5% per annum. The loan is repayable on or before 20 August 2025.
15
Creditors: amounts falling due within one year
2023
2022
$
$
Trade creditors
15,363
401,924
Corporation tax
41,165
Accruals
203,176
2,048,746
218,539
2,491,835
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
16
Loans and overdrafts
2023
2022
$
$
Other loans
3,477,699
5,328,968
Payable after one year
3,477,699
5,328,968
In the prior year it was agreed by the company and outgoing shareholder to novate an existing obligation to pay a dividend and convert this into a loan. Interest is charged on this loan at a rate of 1.5% per annum. The loan is repayable on or before 20 August 2025. The loan is unsecured.
17
Share capital
2023
2022
$
$
Ordinary share capital
Issued and not fully paid
10,000 Ordinary of $1.5159 each
15,159
15,159
18
Ultimate controlling party
The ultimate controlling party is Mr Ramiz Hasanov by virtue of his shareholding.
19
Cash absorbed by operations
2023
2022
$
$
(Loss)/profit for the year after tax
(5,680,962)
4,126,729
Adjustments for:
Taxation charged
95,944
Finance costs
60,633
28,968
Investment income
(9,240)
Depreciation and impairment of tangible fixed assets
109,180
Movements in working capital:
Decrease in stocks
870,074
Decrease/(increase) in debtors
7,827,440
(4,166,587)
Decrease in creditors
(2,232,131)
(1,141,884)
Cash absorbed by operations
(34,260)
(77,576)
SVAROG SHIPPING & TRADING COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
20
Analysis of changes in net debt
1 January 2023
Cash flows
31 December 2023
$
$
$
Cash at bank and in hand
3,789,829
(1,978,087)
1,811,742
Borrowings excluding overdrafts
(5,328,968)
1,851,269
(3,477,699)
(1,539,139)
(126,818)
(1,665,957)
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