The director presents the strategic report for the year ended 30 September 2022.
Osprea group via Osprea Logistics USA LLC continues to be a leading player in the armoured vehicle market for Peace Keeping Operations especially out of the USA and is becoming a preferred choice of national governments. Osprea had a difficult 2 years from Covid, with delayed revenue receipts, delays in government-produced documents, and delayed incoming sales contracts from resources being diverted to pandemic requirements. We will be cutting back to essential staff in order to reduce overheads, and using the time to rework engineering, bring BOMs up to date and implement new IT systems. We are also developing new vehicle products in response to market needs. Uncertainties remained around the duration of the COVID pandemic and therefore how long revenues and contracts would be delayed. All pending delayed contracts remain in place as proposed.
The strength of sales and profits from 2019 allowed the group to hold enough reserves to carry us through the uncertainties experienced during the pandemic period of 2020 and 2021 allowing the group not only to recoup losses from 2021 but to look ahead with careful financial planning and a close eye on reducing overheads.
Osprea Group's traditional market has been in Africa where it retains a good competitive position. Osprea is committed to the expansion into other regions and has identified new possible markets for sales growth. Osprea Logistics USA LLC will continue to manufacture vehicles for its own sales and under contract with Osprea Logistics Ltd. Osprea Logistics SA (Pty) Ltd operations are developing the spares business to become a standalone profit centre in addition to its support role for the group. Subsequent to the year end Osprea Logistics SA (Pty) Ltd was closed down and all of its operations moved to the other companies within the group.
The group has a website detailing its activities. Due to the nature of the group's trade and customer base there is no formal marketing and media strategy. The Osprea group has invested in additional marketing executives in order to grow sales and expand into new markets.
Reputational Risk
The group experienced specific difficulties during the period from the instability caused by the ongoing pandemic and its impact of the global markets. The major customers delayed payments which contributed greatly to cashflow pressures on the group and in particular the USA operations. The group's key management extended substantial time and effort to resolving all of the issues from the previous year in respect of various disputes and finance including reorganisation of its finance provisions.
The Osprea Group mitigates the reputational risk due to its involvement in national and global organisations through a strict adherence to all relevant legislation and regulations.
Financial Risk
The duration of projects across financial periods can lead to a prolonged cash flow cycle. To Mitigate the risk Osprea works tirelessly to negotiate mutually beneficial payment terms with its customers and suppliers.
The non-cyclical nature of our project driven business model has led Osprea to invest in a committed sales team with years of experience in the defence industry.
The pandemic continues to impact our business for all the same reasons as stated in the review of business above. Overheads have been scaled back and the holding plan is in effect and working. There remains a risk owing to the pandemic uncertainty but we remain confident Osprea can and will weather this and come out of it stronger on account of the "back-office" and systems work being implemented. Osprea USA made the decision in March to file for a Chapter 11 Sub-Chapter 7. This was purely a tactical move to deal with one creditor whose actions were threatening to collapse the whole group. In brief they demanded immediate repayment of the $3,000,000 outstanding on their loan for the building of vehicles for the Government of Egypt and simultaneously forbade us from shipping the vehicles that were ready to the Government of Egypt to complete the sales and receive the revenue. Filing for Chapter 11 was the only way to immediately get a judge to adjudicate that we be allowed to sell the vehicles. The tactic worked, the creditor paid and the Chapter 11 immediately cancelled, and the matter closed.
We also established a good working relationship with UK Export Finance which resulted in their issuing an Expression of Interest for HM Government to underwrite a large sales contract to a client government. This has introduced a new dynamic into our business, government-backed export finance, which will enable us to offer better sales options to less wealthy client countries and also likely see the expansion of Osprea's assembly locations to include the United Kingdom. Export Finance will from now be part of our future business model.
Revenue is coming in, and solid contracts are now in finalisation which will return Osprea as a group to its expected position with sales in the $100m range, and pipeline of $200m per year for 2023 and 2024.
Sales were hit by the uncertainty over the continuing pandemic leading to production in USA ceasing for several months and all contracts for future projects being put on hold. As a result sales did not grow as desired and related mainly to the conclusion of ongoing contracts generating around $16m. The target of booked sales for the future look to return to pre-pandemic trends with expectations by 2025 to be approaching $200m with expansion into new markets having previously been expected to be reached by 2023.
The Gross Profit has stabilised following the reorganisation to a more in-house production method and with pressure on global markets due to the continuing pandemic of covid-19 the margins were squeezed from the previous levels but due to the forced cessation of production but a commitment to continued fixed costs of the employment base, even though this dropped from the previous year following a reduction in staffing numbers, the current year resulted in a gross profit.
As a result the group made a small net loss owing to its commitment to various fixed costs such as the premises rent, required insurance cover and legal obligation costs.
There is a strong appreciation for the role our vehicles play and the unparalleled job they have done saving lives in substantially large IED attacks, which has improved the brand name and image, increased enquiries and interest for the products to a pipeline of over $150,000,000.
New business in the Far East from the US company adds additional strong future sales in a new business area.
On behalf of the board
The director presents her annual report and financial statements for the year ended 30 September 2022.
The results for the year are set out on page 8.
No ordinary dividends were paid. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The group as a whole continued to generate contracts for the supply of further vehicles beyond the year end date and as an essential service the activities were permitted to continue during the pandemic production in the USA was forced to cease for several months due to the pandemics impact across the supply chain the group required access to in order to produce vehicles. As a result the group experienced a reduction in sales and contract delays well into the following year and beyond. This led to a negative impact on cashflow for many months. Despite this the contracts that were delayed were now able to be resumed and future contracts were still incoming.
The group continued to develop ideas for vehicle designs and spending on research and development operations continued. The management team within the group continued to drive the business forward and secure contracts for the future at or above the level of the most recent years.
Focus was placed on directing resources into planning for recovery from the delayed impact of the pandemic and in particular in recovery of the cashflow position.
With the pandemic now appearing to be at a close we are developing sales avenues in Latin America, building relationship with tier 1 US companies to support their needs with the introduction of a 6x6 version of the Mamba, and the groundwork for 300 vehicles over two years involving assembly in client countries. Additional developments are being made in the product engineering and back office systems which had been put on hold during the period of "closure".
In accordance with the company's articles, a resolution proposing that Moore Green be reappointed as auditor of the group will be put at a General Meeting.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
Qualified opinion on financial statements
We have audited the financial statements of Osprea Logistics Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 September 2022 which comprise the group statement of income and retained earnings, the group balance sheet, the company balance sheet, the group 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).
Basis for qualified opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's 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 and 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 director with respect to going concern are described in the relevant sections of this report.
Other information
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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The strategic report and the director's report have been prepared in accordance with applicable legal requirements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
The group was susceptible to the group financial statements having material misstatement on the basis that the major component of the group being an overseas subsidiary was not subject to audit in its country of incorporation even though it would have been had it been incorporated in the UK. The opportunity for material misstatement of the financial statements was reduced to acceptable levels by the group financial statements being prepared as part of the audit process.
In respect of fraud opportunities we did not perform any specific fraud related testing and as is normal for an audit our work is not designed to specifically detect fraud. The group does not operate in cash and due to the nature of its trade and its potential customer base there are stringent reporting requirements and documentation completion required between the group and its customers when undertaking a contract which limit the opportunities for fraud to occur.
We identified no areas of key risks based on our work which included:
- Enquiry of management, those charged with governance and relevant third parties around actual and potential litigation and claims of which there were none at the year end date.
- Enquiry of entity staff in tax and compliance functions to identify any instances of non-compliance with laws and regulations.
- Reviewing minutes of meetings of those charged with governance.
- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
- Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business
We identified the key areas to the group as revenue recognition and going concern. Our work was targeted during the audit to confirmation of revenue including assessing appropriateness of cut off adjustments and stock levels and movements. In respect of going concern our work was focused on confirmation of recoverability of assets and liability of debts along with obtaining evidence and confirmation from management of potential future revenue generation.
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.
Use of our 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.
The notes on pages 12 to 22 form part of these financial statements.
The notes on pages 12 to 22 form part of these financial statements.
The notes on pages 12 to 22 form part of these financial statements.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was $92,001 (2021 - $259,732 loss).
The notes on pages 12 to 22 form part of these financial statements.
Osprea Logistics Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 22 Friars Street, Sudbury, Suffolk, CO10 2AA.
The group consists of Osprea Logistics Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest $.
The financial statements have been prepared under the historical cost convention, [modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value]. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Osprea Logistics Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 30 September 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
At the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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.
Equity instruments issued by the group 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 group.
The tax expense represents the sum of the tax currently payable and deferred 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 group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
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 if, and only if, there is 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.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
In the application of the group’s accounting policies, the director is 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.
All turnover of the group relates to sales outside of the UK.
Other revenue is not material and not disclosed within this note.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The loan with Goldex Limited, a Mauritius based company, was written off on the basis that it's involvement with the group had ended and no sums would be due with that entity being dissolved.
The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Subsequent to the year end date the subsidiary Osprea Logistics SA Proprietary Limited was closed down with all operations having now been moved to the USA under Osprea Logistics USA LLC.
Details of the company's subsidiaries at 30 September 2022 are as follows:
Included in Other Debtors for the year are the following:-
A payment guarantee made by Bank ABC to Osprea Logistics USA LLC, the USA wholly owned subsidiary, in connection with a substantial liability disclosed in the note to creditors. The guarantee receivable from Bank ABC was repaid in full during the year.(2021: $800,000)
Included in Other Creditors is a loan by Bank ABC to Osprea Logistics USA LLC which was repaid in full during the year (2021:$800,000) used to finance debt reorganisation within the group against which there was a payment guarantee within Other Debtors. The loan was a commercial loan on flexible terms.
The group restructured some of its financing arrangements and other creditors relates solely to loans owed to key management.
Included in Other Creditors over one year is a loan by Pargola Trust, a Trust registered outside the UK which is connected to the group key management, to Osprea Logistics SA Proprietary Limited amounting to ZAR 9,488,010 ($630,453) which is unsecured with no interest charge and no fixed term of payment other than being due after more than 12 months. This Trust owns the premises rented by that subsidiary company in South Africa.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
Key employees provided loans to the subsidiaries within the group to assist with cash flow difficulties experienced due to the pandemic.
There is a long term loan with Pargola Trust and the South African subsidiary amounting to ZAR 9,488,010 disclosed in other creditors due over more than one year. This Trust is connected to the owner by mutual family and the subsidiary uses premises owned by the Trust. No interest is charged on this loan and there are no repayments terms nor any security provided.
A loan was advanced in the year by a family member of the key management and director of the subsidiaries, to the parent company to assist with cash flow. The loan is interest free and has no repayment terms nor any security provided.
The National Bank of Egypt hold a fixed charge over the UK parent company in respect of its bank accounts.
The director and management consider the group to be a going concern on the basis that:-
Contracts were secured to produce a substantial quantity of products which could realise sales in excess of $12,000,000 and generate significant profits. Within the group the level of stock holding is significant due to these pending sales and the substantial liabilities at the balance sheet date would be capable of being repaid in full.
Key management have given certain personal guarantees over various group liabilities.
Key management are constantly reviewing the group cash flow position since contracts can take several years to fulfil resulting in income arising a considerable time after the expenditure is incurred. This is reflected in the Other Debtors and Other Creditors figures at the balance sheet date where such items are known with certainty, but management also consider those that are uncertain but might become certain within the next twelve months. The review process enables management to remain on top of financing arrangements and structure the group debt accordingly as necessary.
A number of debts have been negotiated as unsecured liabilities in order to help further protect the groups assets and trade.
The expected future income from secured sales contracts is likely to substantially exceed the various group liabilities.
The impact of the continuing covid-19 pandemic on cashflow was significant but as global markets begin to return to normal and with the group now addressing the cashflow issues the directors expect the pandemic to have no further impact on the group business as a whole.
We have developed a number of strategic partnerships with Prime contractors.
We have also developed our relationship with the US Government such that we are in a position to be contracted directly by the Dept Of State rather than only through Prime contractors, which will enhance our reputation and improve our access over time. This will be expected to bear fruit in 2023-2024 and onwards.