Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2023
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COMPANY INFORMATION
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CONTENTS
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GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their strategic report of Solai Holdings Limited ("the company") and its subsidiaries (together "the group") for the year ended 31 December 2023.
The principal activity of the company in the year under review is that of an investment holding company.
The predominant force behind the group's activities is the indirect operating subsidiary, Nipco Plc, along with its subsidiaries. Their core activities include acquiring, storing, and distributing petroleum products. Nipco's operations also encompass trading in Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), and aviation fuel, further diversifying the group's portfolio and revenue streams. Additionally, the Nipco Plc group engages in the real estate sector by leasing investment properties to corporate entities and continues its growth and presence in the hospitality industry. In the UK, the results of the group are predominately driven by the main operating subsidiary Agri-Chemicals Limited. This entity focuses on acquiring and selling petroleum products, raw materials for the mining, food, and building sectors, as well as equipment and machinery for a broad range of clients across Africa. Additionally, other UK-based subsidiaries of the group are involved in property development, residential and commercial rentals, hospitality and investing in both private and publicly traded equities on recognised stock exchanges. The group also has interests in shipping with its associate undertaking, Union Maritime Ltd, which is a UK based ship owner and operator of a diversified fleet of crude, product and chemical tankers and with its joint venture interest in Union Carriers Limited, which is a UK based ship owner and operator of a fleet of dry bulk vessels. Review of business The group operates in markets which remain highly competitive and continued to perform well. Turnover decreased marginally by 4.6% in 2023 from £1,725.6m in 2022 to £1,646.4m in 2023. The decrease is due to adverse foreign exchange movements impacting turnover earned overseas. The group's Nigerian subsidiaries, who have a reporting currency of "the Naira" together generated turnover denominated in their local currency of N1,243.549m (2022 - N850.250m), which represents an impressive growth of 46.26%. However due to the significant decline in value of the Naira against the £, on conversion to £ sterling this transpired to a fall in turnover from £1,624m in 2022 to £1,547m in 2023. Gross Profit in the year to 31 December 2023 was £176.8m (2022 - £166.2m), an increase of 6.4%. Profit before tax in the year to 31 December 2023 was £207.8m (2022 - £170.6m), an increase of 21.8%.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Financial key performance indicators
The group operates key performance indicators (KPI's) which give an understanding of the development, performance and position of the group which are subject to regular review by the Board. Set out below are some of the key performance indicators that the directors use to monitor the performance of the business: The directors are of the opinion that the above figures show that the group has demonstrated a robust performance over the past year, showcasing resilience in a dynamic market environment. The group's profit after tax has grown significantly in the year, reinforcing the group’s strong growth and capability to invest in future growth opportunities. Net assets have decreased from £738.8m to £656.5m which was due to the fall in the net asset value of overseas subsidiaries whose functional currencies have fallen in value against the £ sterling. The group's robust asset base and profitability provides a solid foundation for sustainable growth and shareholder value enhancement. In conclusion, the directors are of the opinion that the business has shown exceptional performance, underpinned by strategic decision-making and a focus on profitability. The group is well-positioned to continue this trajectory of growth and to meet the challenges of the future with confidence and a strong financial footing. Environmental The group recognises its corporate responsibility to carry out its operations whilst minimising environmental impacts. The directors’ continued aim is to comply with all applicable environmental legislation, prevent pollution and reduce waste wherever possible. The group is exempt from the requirement to disclose details of CO2 emissions and energy consumption by virtue of UK consumption being less than 40,000 kWh during the period. Principal risks and uncertainties The group operates a risk-based approach to identify and manage risk. The directors review the principal risks and uncertainties pertaining to the business on a regular basis and adopt appropriate measures to mitigate such risks and uncertainties. The company's strategic risk and operational risks remained the same over the past year with no changes in the company's portfolio. The key business risks are detailed below.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Price Risk The group's risks are impacted by its investment holdings, with its largest holding being within the oil and gas sector. The risks are impacted by the inherent uncertainties of the oil and gas market. Daily price monitoring systems used to determine selling prices enable the company to effectively manage the risk of gross margin erosion. Geopolitical risk We actively operate and explore potential opportunities in countries, regions, and cities that undergo political, economic and social transitions. Political instability, changes to the regulatory or taxation environment, international trade disputes and barriers to free trade, international sanctions, expropriation or nationalisation of property, civil strife, strikes, insurrections, acts of terrorism, acts of war and public health situations (including any future epidemic or pandemic). These factors have the potential to disrupt or limit our operational activities, impacting the company's ability to execute its strategy. Currency Risk As a global business the group faces the risk of currency fluctuations. The group is exposed to translation and foreign exchange risk as those currencies become stronger or weaker against the Pound Sterling (£). The financial results are presented in Pound Sterling (£) and these results are sensitive to either a relative strengthening or weakening of the Pound Sterling (£) against the major currencies the group is exposed to. Credit risk The group’s credit risk is primarily attributable to its trade debtors. The amounts presented in the statement of financial position are net of provisions for doubtful debts. The group manages its concentration of credit risk with exposure spread over a number of customers and manages its overall exposure by taking stage payments from its customers. Liquidity risk The group’s liquidity risk and ability to meet its obligations as they fall due are considered well managed, being supported by substantial cash balances and positive cashflows from the groups trading activity. The group places particular importance on management of its cash resources with vigorous planning and regular reviews of the group's spend and cash inflow from operations. Interest rate cash flow risk The group has both interest-bearing assets and interest-bearing liabilities. Interest bearing assets include mainly cash at bank, all of which earn interest at variable rates. Interest bearing liabilities relate to bank facilities and the group is exposed to interest rate risks. The group is proactively seeking refinancing opportunities, diversifying its investments, enhancing operational efficiencies, and negotiating to fix rates to manage borrowing costs and uphold financial stability. Inflation Global economies are seeing a period of volatility in inflation rates, causing uncertainty in the cost of goods and services. The group continues to review the commercial terms and evolving inflation rates to ensure minimal impact.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Cyber risk In today's digital age, cyber threats pose a significant and evolving challenge to our operations, reputation, and stakeholder confidence. Recognising this, cyber risk management remains a pivotal aspect of our strategic planning. We are committed to safeguarding our digital infrastructure, intellectual property, and customer data against potential cyber-attacks. We continue to review and invest where appropriate in the development and maintenance of our IT infrastructure, systems and processes and information security. We operate a firewall and anti-virus software, monitor any attempted breaches and take action where necessary to ensure our infrastructure remains robust and appropriate. Statement in relation to section 172(1) Companies Act 2006 This statement which forms part of the Strategic Report, is intended to show how the company's directors have approached and met their responsibilities under section 172 Companies Act 2006 during 2023. The statement has been prepared in response to the obligations as set out in the Companies (Miscellaneous Reporting) Regulations 2018. As required by section 172 of the UK Companies Act 2006, a director of a company must act in a way he/she considers, in good faith, would most likely promote the success of the company for the benefit of its members. In doing this, the director must have regard, amongst other matters, to: - The likely consequences of any decisions on the long-term; - The interests of the group's employees; - The need to foster the group's business relationships with suppliers, customers, and others; - The impact of the group's operations on the community and environment, - The desirability of the group maintaining a reputation for high standards of business conduct; - The need to act fairly between shareholders of the group. As part of the Board’s decision-making process, consideration of key stakeholder interests and the potential impact decisions have on each group is vital. Our various engagement processes provide us with a better understanding of what matters to our stakeholders, their views and requirements, and the consequences of any decision, which are then considered in the business decisions made by the Board. The Board also strive to embed this decision-making principal throughout all levels of the group. Our key stakeholder groups are set out below. • Employees – the strength of the group is built on a committed, motivated team of employees. Our colleagues rely on us to provide steady employment and opportunities to realise their potential in a working environment where they can perform to their best. • Customers – we aim to build strong, long-lasting relationships with our customers. This is based on a commitment to deliver a quality service that our customers can rely upon. • Supply chain – we depend on all levels of our supply chain to provide the materials, labour and infrastructure that are essential to operate our business. We ensure a robust pre-approval and ongoing monitoring process to develop the relationship with our supply chain and provide future opportunities for our suppliers. • Communities and the Environment – communities and the wider public expect us to act as a responsible group and neighbour, and to minimise any adverse impact we might have on local communities and the environment. • Public Bodies and Regulators – we seek to enjoy a constructive and cooperative relationship with the bodies that authorise and regulate our business activities. This helps us maintain a reputation for high standards of business conduct. They expect us to comply with applicable law, regulations and licence conditions.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Outlook As the group broadens its portfolio across different industries and locations, its challenges become more complex and widespread. The oil and gas sector is swayed by international market prices and regulatory shifts, while hospitality responds to domestic economic and tourism fluctuations. Introducing precious metals production and exploration adds further diversity and new challenges like market volatility and geographical concerns. The company must navigate these intricacies, adjusting to both UK and international landscapes. Its success hinges on skillfully balancing this diverse portfolio, seizing opportunities, and responding to the unique demands of each market and sector. Future development The group is committed to sustaining growth by leveraging its current, successful business framework. We aim to naturally expand the company by utilising our well-established networks and remain vigilant in assessing the market for potential investment opportunities in promising industries. Please refer to note 33 of the consolidated financial statements for post balance sheet events. Strategically, the group has broadened its investment portfolio to encompass indirect investments in both privately held and publicly traded firms on a reputable stock exchange.
This report was approved by the board on 18 November 2024 and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their report and the financial statements for the year ended 31 December 2023.
The profit for the year, after taxation and minority interests, amounted to £179.4m (2022 - £105.2m). Dividends of £3.0m (2022 - £nil) were paid during the year.
The directors who served during the year were:
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group 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 the group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Please refer to the Strategic Report on pages 1 and 5 for activities and the likely future developments of the group and a discussion of the risks and uncertainties.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Information relating to events since the end of the year is given in the notes to the financial statements.
Sopher + Co LLP were appointed as statutory auditors during the year. Under section 487(2) of the Companies Act 2006, Sopher + Co LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board on
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SOLAI HOLDINGS LIMITED
We have audited the financial statements of Solai Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023, which comprise the Group Statement of Comprehensive Income, the Group and Company Statements of Financial Position, the Group Statement of Cash Flows, the Group and Company Statement of Changes in Equity and the related notes, including a summary of 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).
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
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 group's or the parent 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SOLAI HOLDINGS LIMITED (CONTINUED)
The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our Auditors' Report thereon. 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group 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 Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
∙the parent company financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of directors' remuneration specified by law are not made; or
∙we have not received all the information and explanations we require for our audit.
As explained more fully in the Directors' Responsibilities Statement set out on page 6, 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 group's and the parent 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 group or the parent company or to cease operations, or have no realistic alternative but to do so.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SOLAI HOLDINGS LIMITED (CONTINUED)
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 Auditors' 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 group 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:
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 and group through discussions with directors and other management, and from our commercial knowledge and experience of the 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 and group, including the Companies Act 2006, taxation legislation and data protection, environmental and health and safety legislation;
∙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.
We assessed the susceptibility of the group’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;
∙considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
∙understanding the design of the company’s and group's remuneration policies.
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 HMRC, relevant regulators and the company’s and group's legal advisors.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SOLAI HOLDINGS LIMITED (CONTINUED)
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 for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' 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 Auditors' 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.
for and on behalf of
Chartered Accountants
Statutory Auditors
5 Elstree Gate
Elstree Way
Borehamwood
Hertfordshire
WD6 1JD
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 18 November 2024.
The notes on pages 24 to 59 form part of these financial statements.
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 24 to 59 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 22
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CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 23
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Solai Holdings Limited is a private limited liability company registered in England and Wales. The registered address and principal place of business is at Portland House, 69-71 Wembley Hill Road, Wembley, Middlesex, HA9 8BU.
The principal activity of the company and group is detailed in the Strategic Report. The company's functional and presentational currency is £ Sterling. Monetary amounts in these financial statements are rounded to the nearest whole £ thousand (£000) except where otherwise indicated.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires group management to exercise judgment in applying the group's accounting policies (see note 3).
The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the company and its own subsidiaries ("the group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases. Non controlling interests represent the proportion of profit or loss and net assets of subsidiaries that are not held directly or indirectly by the group.
The group's business activities, together with the factors likely to affect its future development, performance and position are set out in the strategic report. At the year end the group had net assets of £657m and generated a net profit attributable to the owners of £180m.
The directors believe the group will generate sufficient working capital and cashflows to continue in operational existence and have as a result prepared the financial statements on a going concern basis.
Page 24
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. On consolidation, the results of overseas operations are translated into Sterling at the average rate of exchange during the period. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income. Sale of goods and petroleum products Turnover from sales of petroleum products, liquefied petroleum gas and all other products and goods is recognised at the fair value of consideration received or receivable, after deducting sales taxes, excise duties and similar levies, when significant risks and rewards of ownership have been transferred. Transfer of risks and rewards generally occurs when the product is either at the point of delivery or the point of receipt depending on contractual terms with the customer.
Page 25
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Turnover from the supply of services Turnover from the supply of services represents the value of services provided under contracts to the extent that there is a right to consideration and is recorded at the fair value of the consideration received or receivable after deducting sales taxes, excise duties and similar levies. Where a contract has only been partially completed at the balance sheet date revenue represents the fair value of the service provided to date based on the stage of completion of the contract activity at the balance sheet date. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of creditors due within one year. Turnover from hospitality business Room charges are recognised in the Statement of Comprehensive Income when the rooms are occupied. Event hire fees are recognised when the event takes place. Food and beverage sales are recognised at the point of sale. Turnover from property rental Rent receivable is recognised when the rentals are contractually due.
Page 26
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Defined contribution pension plan
The group contributes to a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. Once the contributions have been paid the group has no further payment obligations. The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the group in independently administered funds. Defined benefit pension plan The group operates a defined benefit plan for certain employees. The defined benefit plan defines the pension benefit that the employee will receive on retirement, dependent upon length of service and final salary. The legal obligation for any benefits remains with the group, even if plan assets for funding the defined benefits plan have been set aside. Plan assets may include assets specifically designated to a long term benefit fund as well as a qualifying insurance policy. The liability recognised in the Statement of Financial Position in respect of the defined benefit plan is the present value of the defined benefit obligation at the end of the reporting date less the fair value of plan assets at the reporting date out of which the obligations are to be settled. The defined benefit obligation is calculated annually by independent actuaries. The present value is determined by discounting the estimated future payments using market yields on high quality corporate bonds and that have terms approximating to the estimated period of the future payments ('discount rate'). Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to other comprehensive income. These amounts together with the return on plan assets, less amounts included in net interest, are disclosed as 'Remeasurement of net defined benefit liability'. Service costs of the defined benefit plan are recognised in profit or loss as employee costs. Employee contributions, all of which are independent of the number of years of service, are treated as a reduction of service costs. Net interest expense on the net defined benefit liability is included in finance costs.
Page 27
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the company and the group operate and generate income. Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the reporting date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits;
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and
∙Where they relate to timing differences in respect of interests in subsidiaries, associates, branches and joint ventures and the group can control the reversal of the timing differences and such reversal is not considered probable in the foreseeable future.
Deferred tax balances are not recognised in respect of permanent differences. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Goodwill
Goodwill represents the future economic benefits arising from business combinations that are not individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment losses. Any excess of the cost of the business combination over the group's interest in the fair value of identifiable assets and liabilities at the date of acquisition is amortised over its estimated useful life. Other intangible assets Other intangible assets comprise of software license, franchise costs and permits and are initially measured at cost. Intangible assets amortisation is recognised in profit or loss. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortisation period or method as appropriate, and are treated as changes in accounting estimates. Intangible assets are amortised on a straight-line basis over 10 to 20 years. Residual values and useful lives are reviewed at each reporting date and subject to impairment testing.
Page 28
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, on the following bases:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Page 29
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Investments in unlisted company shares other than associates and joint ventures, whose market value can be reliably determined, are remeasured to market value at each reporting date. Gains and losses on remeasurement are recognised in the Consolidated Statement of Comprehensive Income for the period. Where market value cannot be reliably determined, such investments are stated at historic cost less impairment. Investments in listed company shares other than associates and joint ventures are remeasured to market value at each reporting date. Gains and losses on remeasurement are recognised in profit or loss for the period.
An entity is treated as a joint venture where the group is a party to a contractual agreement with one or more parties from outside the group to undertake an economic activity that is subject to joint control.
An entity is treated as an associated undertaking where the group exercises significant influence in that it has the power to participate in the operating and financial policy decisions. In the company accounts, investments in associates and joint ventures are measured at cost less accumulated impairment unless the investment is held as part of an investment portfolio. Where investments in associates or joint ventures are part of an investment portfolio they are remeasured to fair value at each reporting date. Gains and losses on remeasurement are recognised in profit or loss for the period. In the consolidated accounts, investments in associates and joint ventures are accounted for using the equity method of accounting. Under this method an equity investment is initially recognised at the transaction price (including transaction costs) and is subsequently adjusted to reflect the investors share of the profit or loss, other comprehensive income and equity of the associate. The Consolidated Statement of Comprehensive Income includes the group's share of the operating results, interest, pre-tax results and attributable taxation of such undertakings applying accounting policies consistent with those of the group. In the Consolidated Statement of Financial Position, the interests in associated undertakings are shown as the group's share of the identifiable net assets, including any unamortised premium paid on acquisition. The difference between the cost of the investment and the group's share of the net fair value of the identifiable assets and liabilities of the associate or joint venture at the acquisition date is recognised as goodwill. This goodwill is considered to be implicit goodwill, representing the premium paid for the investment that is attributable to future economic benefits arising from assets that are not individually identified and separately recognised. Implicit goodwill is not separately recognised in the statement of financial position but is included in the carrying amount of the investment. Implicit goodwill is amortised straight line over 10 years.
Page 30
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
Basic financial instruments include trade and other debtors, trade and other creditors, cash and cash equivalents, and related party loans.
Trade and other debtors are recognised initially at the transaction price less attributable transaction costs. Trade and other creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade and other debtors. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of interest. Interest bearing borrowings classified as basic financial instruments are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, they are stated at amortised cost using the effective interest method. Cash and cash equivalents comprise cash balances and call deposits.
Page 31
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Asset impairment The group reviews its non-current assets for impairment at each balance sheet date. If events or circumstances indicate that the carrying value may not be recoverable, the value is adjusted to the recoverable amount, determined by management valuations. If events or circumstances indicate that the carrying value may not be recoverable, the value is adjusted to the fair value. Impairment of non-financial assets and goodwill In assessing impairment, management estimates the recoverable amount of each asset based on expected future cash flows. Estimation uncertainty relates to assumptions about future operating results. Freehold investment property valuation The group estimates the value of its investment properties with the help from professional valuers and based on market comparable approach that reflects recent transaction prices for similar properties. Accounting policy for joint ventures and associates On consolidation, joint ventures and associates are accounted for using the equity method of accounting, except where they are held as part of a wider investment portfolio in which case they are stated at market value with any gains or losses on revaluation recognised in the Statement of Comprehensive Income. The directors have used their judgement to determine that the investment in Hoptroff London Limited is held as part of a wider investment portfolio and should be stated at market value. More details are given in note 17. Investment classification The directors have made a significant judgement in designating the investment in Kavango Resources Plc as an associate instead of as a subsidiary on the basis that Kavango Resources Plc's share options and warrants exercisable at the reporting date dilute the groups holding to below 50% and there are also some restrictions to the voting rights held by the group. Valuation of investments The fair value of the group's fixed asset investments which are not traded on recognised stock markets are estimated based on varying methods depending on the type of information available for each investment. Where unlisted investments had an equity transaction taking place close to the reporting date, that transaction is used to form the basis of a valuation. Where no transaction took place near the reporting date, the valuation is based on the share of net assets or another appropriate valuation technique. Investments in office art is revalued with the assistance of a professional valuer. Because of the inherent uncertainty, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is reasonably possible that the difference could be material. Furthermore, there is no assurance that, upon liquidation, the group will realise the values presented herein. Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and computer equipment.
Page 32
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3.Judgments in applying accounting policies (continued)
The extent to which deferred tax assets can be recognised is based on an assessment of the probability that future taxable income will be available against which the deductible temporary differences and tax loss carry forwards can be utilised. Defined benefit obligation (DBO) Management's estimate of the DBO is derived at with the assistance with professional actuaries and is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may impact DBO amount and the annual defined benefit expenses.
Analysis of turnover by country of destimation:
Page 33
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 34
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 35
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 36
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 37
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
13.Taxation (continued)
At the reporting date the company had estimated capital losses of £7,264,558 (2022 - £7,264,558) and the group had estimated capital losses of £12,208,709 (2022 - £10,655,159) available to carry forward and use against future capital gains. No deferred tax asset provision in respect of the losses has been made as there is insufficient evidence to ascertain its recoverability.
From 1 April 2023 the rate of corporation tax will remain at 19% for companies with an annual profit of £50,000 or less, increase to 25% for companies with an annual profit of £250,000 or more, and increase to a marginal rate for companies with profits between £50,000 and £250,000. These thresholds are divided by the number of associated companies.
Page 38
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The profit after tax of the parent Company for the year was £47.0m (2022 - £16.0m).
Page 39
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 40
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 41
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 42
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 43
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 44
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Subsidiary undertaking (continued)
Page 45
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The group's UK investment properties totaling £64.285m (2022 - £63.773m) were valued with the assistance from various external valuers and derived from the current market rents and investment property yields for comparable real estate, adjusted if necessary for any difference in the nature, location or condition of the specific asset.
The group's Nigerian investment properties totalling £192.464m (2022 - £377.222m) were valued by Ismail & Partners, Chartered Surveyors & Real Estate Consultants.
The 2023 valuations were made by the directors with consultation of the property manager having recent valuation experience in the location and category of the properties being valued. The fair value was determined based on the market comparable approach that reflects recent transaction prices for similar properties.
Page 46
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 47
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 48
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 49
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 50
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 51
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
25.Financial instruments (continued)
Page 52
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
25.Financial instruments (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
26.Deferred taxation (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Revaluation reserve
Foreign exchange reserve
Profit and loss account
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The group's Nigerian subsidiaries operate a Defined Benefit Pension Scheme.
The defined benefit obligation (DBO) employee plan exposes the group to actuarial risks such as interest rate risk, investment risk, longevity risk and inflation risk.
Interest rate risk - The present value of the defined benefit liability is calculated using a discount rate determined by reference to market yields of high quality corporate bonds. The estimated term of the bonds is consistent with the estimated term of the DBO and it is denominated in Naira. A decrease in market yield on high quality corporate bonds will increase the group's defined benefit liability, although it is expected that this would be offset partially by an increase in the fair value of certain plan assets. Investment risk - There are no plan assets explicitly segregated to meet terminal benefits. Longevity risk - The group is required to provide benefits for life for the members of the defined liability. Increase in the life expectancy of the members, particularly in Nigeria where the pension payments are linked to the Consumer Price Index, will increase the defined benefit liability. Inflation risk - A significant proportion of the defined benefit liability is linked to inflation. An increase in the inflation rate will increase the group's liability. A portion of the plan assets are inflation-linked debt securities which will mitigate some of the effects of inflation. The provision of gratuity of £1.166m (2022 - £2.547m) is a provision for post employment benefits. These balances were professionally valued by Nigerian actuaries for the year ended 31 December 2023. The amounts recognised in profit or loss are as follows:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
30.Pension commitments (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The company's immediate and ultimate parent company is Matel Limited (incorporated in Jersey), whose address is Oriel House, York Lane, St. Helier, Jersey. JE2 4YH.
The ultimate controlling party is The Pavel Trust. The group headed by Solai Holdings Limited is the largest group in which the company is included that prepares consolidated accounts.
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