The directors present the strategic report for the year ended 31 December 2024.
The COVID-19 pandemic caused a global supply chain disruption resulting in a dramatic and quick shift in the semiconductor supply. This resulted in a market reset where a subsequent surplus in inventory in 2023 and sustained declines in 2024. The reduced results in 2024 are the result of a larger-than-expected build-up of excess inventory by customers in 2022 and 2023. In planning for the 2024 financial year, the Group expected results to decline as customers deplete their inventory and the market continued to recover.
The Group's key measure for performance is its turnover and profit before tax. Turnover for the year ended 31 December 2024 was £17,019,199 (2023: £41,261,975), a decrease of 59% compared to last year. The profit before tax was £2,164,083 (2023: £5,745,448) and the gross profit margin for the year was 46% (2023: 26%).
Strategy
The strategy of the Group during the year was to continue to adjust its marketing and selling activities for the challenging market conditions that exist. These conditions included various product shortages as electronics component manufacturers' production continue to fall short of demand. The change in activities includes finding additional sources of product supply, identifying new customer opportunities and expanding sales penetration into several original equipment manufacturers ("OEMs") and electronic manufacturing services.
Turnover
Turnover decreased by £24,242,776 or 59%, from the prior year. This decrease was the result of continued unfavorable market conditions spurred on by customer excess inventory buildup from the previous shortage market, causing surpluses in the supply chain during the year ended 31 December 2024.
Gross profit and gross profit margin
Gross profit decreased by £2,805,339 or 26%, driven by decreased sales volume. Gross profit margin increased from 26% in 2023 to 46% in 2024, driven primarily by cost of sales and overhead decreasing disproportionately with revenue.
Administration expenses
Administration expenses decreased by £1,054,737 or 13%, in 2024. This was due primarily to decreased payroll.
Assessment of principal risks and uncertainties remains a key audit focus, particularly in light of geopolitical risks, including the war in Ukraine and China–Taiwan tensions, which may adversely affect product sourcing and supply chain continuity.
Competition
The markets in which the Group operates are highly competitive. As a result, there is constant pressure on the Group's overall product margins. The Group has in place procedures and systems to monitor market prices and to perform ongoing market research to mitigate the risk. There is also the constant pressure of meeting and/or exceeding ever-increasing customer expectations. The Group is constantly improving its sales and customer service expertise, product procurement, quality inspection & testing and delivery systems to mitigate this risk.
Sources of supply
The turnover of the Group is highly dependent upon its ability to effectively locate and procure parts that meet its customers' requirements. The Group has established long term purchase relationships with several large affiliated distributors as well as numerous other independent brokers, distributors and OEMs to mitigate this risk.
Fluctuations in currency exchange rates
A large proportion of the Group's turnover relates to sales in currencies other than Sterling to companies located in Asia, Europe, the Middle East and North America, exposing the Group to foreign currency fluctuations.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2024.
The results for the year are set out on page 10.
The profit for the year, after taxation, amounted to £1,986,998 (2023: profit of £3,347,407).
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Group uses various financial instruments, including intra Group borrowings, cash and various items such as trade debtors and trade creditors, that arise directly from its operations. The main purpose of these financial instruments is to maintain an adequate level of working capital for the Group's operations.
The existence of these financial instruments exposes the Group to a number of financial risks. The main risks arise from the Group's financial instruments are market and currency risks.
The Group seeks to manage financial risk by ensuring that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.
The Group finances its operations primarily through retained profits and debt from affiliates. Trade debtors and creditors do not attract interest and therefore not subject to interest rate risk.
The Group is a distributor of semiconductor products which sources and sells its products in a number of currencies including US Dollars and Euros and consequently is exposed to exchange rate fluctuations.
The Group's principal financial assets are cash, trade debtors and amounts owed by group undertakings. The credit risk associated with cash and amounts owed by group undertakings is limited. The principal credit risk arises therefore from its trade debtors which are managed through a diversified customer base such that no one customer represents a significant proportion of the Group's trade.
As the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
The directors have concluded that it is appropriate to continue to adopt the going concern basis of accounting in preparing the financial statements. Please see note 1.4 for further details.
We have audited the financial statements of America II Europe Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2024 which comprise the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, 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 opinion
Material uncertainty related to going concern
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the 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.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the group and parent company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the group and parent company by discussions with directors and by updating our understanding of the sector in which the group and parent company operates.
Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006 and UK Tax legislation.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of group and parent company financial statement disclosures. We reviewed the parent company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through 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.
Use of our report
This report is made solely to the parent 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 parent 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 parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £491,073 (2023 - £322,033 profit).
America II Europe Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is located at C/O Tmf Group, 13th Floor, 1 Angel Court, London, United Kingdom, EC2R 7HJ.
The Group's principal activity during the year was the sale of semiconductor products.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company America II Europe 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 31 December 2024. 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.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group statement of financial position at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the group's ability to continue as a going concern.
The directors recognise the Company will continue to face challenges from competing franchises and independent distributors, among other unforeseen obstacles, including the ongoing war in Ukraine and tensions between China and Taiwan. Current economic uncertainties raise a material uncertainty related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. Forecasts have been prepared at parent entity level for the wider Group, to support the use of the going concern basis of accounting. These forecasts indicate that the Company is reliant on the continued financial support from the parent company. The parent company have provided assurances to the directors that they will continue to support the Company going forward for a period of not less than 12 months from the signing of these financial statements.
The directors have therefore seemed it appropriate to continue to adopt the going concern basis of accounting in preparing the financial statements.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, less discounts, rebates, value added tax and other sales taxes. Revenue is recognised when the risks and rewards of ownership of the goods have passed to the buyer (i.e., when the product is shipped). Expenses are recognised upon utilisation of goods or services or at the date they are incurred.
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 income statement.
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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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.
The group 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 group's statement of financial position when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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, which include debtors, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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.
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 group 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
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 income statement 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. Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income. 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.
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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Foreign currency translation
Foreign currency transactions are translated into the functional currency using the average exchange rate for the reporting period.
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 except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Consolidated Statement of Comprehensive Income within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. 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.
In the application of the group’s accounting policies, the directors are required to make judgements:
- Determine whether there is any indication of impairment of investment in subsidiary in the parent Company. This was made by performing an impairment analysis based on the historic data and the assessment of the future expected cash flows of the subsidiary.
- The Group has significant transactions which are denominated in currencies other than the Sterling Pound. The Sterling Pound is the Group's functional currency, which best represents the flow of goods and services, as determined by management.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months.
There is a single class of ordinary shares. There are no restrictions on dividends and the repayment of capital.
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:
The Group has taken the exemption detailed in Section 33 of FRS 102 "Related Party Disclosures" to not disclose details of transactions undertaken between companies within a wholly owned group.
Key management personnel include all directors any senior managers across the Group who together have authority and responsibility for planning, directing and controlling the activities of the Group. The total compensation paid to key management personnel for services provided to the Group was £nil (2023: £Nil).
As at 31 December 2024, all of the Group's assets are pledged as collateral to secure the America II Group's loans.