SEQUANA_MARITIME_LIMITED - Accounts

The directors present their Strategic Report for the year ended 31 December 2022.

The principal activity of the group is that of ship vessel owning, the operation of time-chartered vessels, and performing ship and cargo brokerage for third party clients.

The group’s results for the year show a profit after tax of £3.15m (2021: £0.65m). The contributions from the trading of MV Timberland (Midlife Shipping Ltd owned vessel) and from the operation of time-chartered vessels for the timber trade produced better than expected earnings. Over the course of the year the freight market as a whole became fragile with rates falling in all segments. Container prices have dropped significantly and the price of hiring a typical 32000 dwt vessel fell from around $30,000 per day at the beginning of the year to $14,000 by December. Rates for timber parcels from south Finland have dropped from $65 per cbm to $45 per cbm. Monthly turnover in dollar terms has been reducing but with little overall significance. The actual volume of business (timber carried) increased by almost 20% over 2021 as a result of a 10% increase in market share.

Imperial’s shipping operations contributed a gross profit of £6.4m in the year (2021 loss: £0.5m), from its chartered voyages. The main market for southbound voyages continues to be Egypt and the trade is being crippled by the restrictions on dollar movements imposed by the government. There is no end to this policy in sight. Traders are seeking all means to obtain US dollars but their cash is increasingly trapped either within the banks, when Egyptian pounds are deposited awaiting conversion, or in timber stocks which cannot be sold as domestic buyers cannot find dollars for their purchases. Some traders have waited 8 months for banks to credit dollars to their accounts. The lack of liquidity has affected the trade throughout with sawmills, traders, receivers and shipping companies all being starved of cash. We have continued to trade with our long term partners with increasing levels of indebtedness and with delayed freights with a sense that ‘we are all in the mess together’. Payment of freights does have some priority with the Egyptian banks and we are increasingly being asked by shippers to invoice freight advances to receivers in Egypt. The freight advances are passed back to shippers which effectively becomes a deposit for new business enabling the trading cycle to continue. The availability of timber and the willingness of receivers to purchase are not a problem but actually having the business confirmed is increasingly difficult due to the payment crisis. Consequently, there are many cancelations, postponements, delays and ship re-scheduling’s. Our willingness to be flexible and accommodating is appreciated by shippers. The consequence of this situation however is that we had to make a provision against delayed debts of £6.3m in the year to fully provide for 2021 /2022 debts which still have not been received, and this has substantially reduced our profit for the year. It is still expected that there will be repayment of at least some of these old debts in the future, but it is prudent to provide for them at this stage.

The uncertainty involved in the business has enabled us to keep freight rates higher than they should otherwise be and with careful execution of the voyages we have been able to keep margins healthy. We have noted volumes and revenues contracting during 2023 and earnings have reduced. We continue to try and increase market share with a target to gain a further 10% during 2023/2024.

Our participation in the northbound trade of windmill blades and towers has increased during 2022 which has directly benefited earnings for Timberland (having ideal deck space for 75 metre blades) and which has enabled us to time-charter profitable vessels specifically for this new business.

Chartering commissions earned by Sequana exceeded forecasts for 2022 but will drop back in 2023 since they will be based on a considerably weaker freight market.

Agency commissions earned by Sequana from its freight forwarding business to West Africa remain dire with no change in market conditions from last year.

The freight market is in a downward cycle. Imperial will benefit from falling time-charter prices while rates for cargo bookings do not fall at the same pace. It is inevitable that margins from our core business will reduce and earnings will contract during 2023. When the market arrives at the bottom of the cycle opportunities will arise to take long term charter vessels. Such vessels will be sought both to provide cover for a future rising freight market and to secure suitable vessels to further expand participation in the trade of windmill towers and blades from Turkey into Scandinavian countries.

Managing cash flow remains a major challenge for all the reasons mentioned above. Management will work closely with our trading partners to reduce arrears in freight payments. There is a willingness from all sides to better the situation, but results will largely depend on the fiscal policies of the Egyptian government. Devaluation remains a major risk since much of the trapped funds are held in Egyptian pounds whose value will drop with devaluation. The official bank rate for the Egyptian pound fell from 16 to 25 to the dollar during 2022 with the rate falling still further to around 31 in 2023 (when the ‘unofficial’ rate in the money exchanges stood at 38/$). It is rumoured that the IMF would like the rate to fall to 37/38 before they advance new loans. The ability of receivers to pay their outstanding debts will be affected by any devaluation and, in the worst case, creditors are expecting a commensurate forgiveness in debt.

Midlife Shipping’s owned vessel Timberland was fitted with required new Ballast Water Treatment System during her 2022 drydock. Overall docking costs exceeded budget by $200k but the ship is now in good condition. Earnings are likely to decline during 2023 due to falling freight rates but good profits are still expected since 50% of her northbound base cargoes are covered by contract (showing in excess of $10,000/day t/c equivalent return) which increases by 40% when we can combine with windmill blades. The vessel will also benefit from higher rates in winter months due to her high ice class.

We are currently vigorously disputing a claim from the owners of the ‘Jade I’ (against Imperial Shipping) for $1.77 million plus costs and interest (loss of deck cargo in storm December 2021) which is expected to reach the hearing stage of arbitration in July 2024. We are still confident that we are not at fault. Our lawyers are estimating chances of success at 65-70% but the element of uncertainty always encourages P&I Clubs to recommend a compromise. Imperial refused to post security requested by Jade owners since the fact that we are engaged in Arbitration and are bound by the result should have sufficed. The owners of Jade eventually managed to convince an Egyptian court to arrest the Timberland vessel (owned by Midlife Shipping a subsidiary of Imperial) in January 2023. The arrest demand was for the sum of $850k which Jade’s owners had paid in compensation to cargo claimants. Lawyers for Jade indicated that if Imperial were to put up security to the London Arbitration, then the arrest would be lifted. We resisted acceding to this tactic and instead posted a security in Egypt for $850k plus associated bank fees which enabled the release of the Timberland. Midlife has filed a counterclaim in the Egyptian courts for $1,070k due to unlawful arrest of the vessel. The arrest would be unlawful in many jurisdictions (including the UK) since the claim of the Jade owners is against Imperial not Midlife, but the Egyptian courts are less predictable. It is very difficult to assess the outcome of the Egyptian proceedings, but it is likely that the court process will be so slow that the London Arbitration will be decided beforehand. If Imperial are 100% successful, then the Egyptian arrest would be evidently wrongful. Anything less than 100% success for Imperial might make the outcome of the Egyptian proceedings complicated. The process negatively affected cash flow with $892k being expended in Egypt and Timberland/Midlife losing one month’s earnings.

We continue to rely on the willingness of SOL to support our operations by not insisting on loan repayment. Debt during the year remained higher than expected due to freights being trapped in Egypt and to cash from earnings being used in the turnover of the business. We are aware that SOL are facing challenging trading conditions and they have asked us to reduce our indebtedness with them as quickly as possible. We have reduced the debt as 2023 has progressed and we expect to reduce debt levels still further when the cash flow cycle improves.

The directors have identified the need to manage the group’s material financial risks which are principally liquidity risk, foreign exchange risk and going concern risk as follows:

• Liquidity risk

The group finances its business from a combination of cash flow arising from its operations. Liquidity risk is the risk that the group will encounter difficulties in meeting its obligations. This risk is managed by ensuring that regular reviews of the group’s cash flow are undertaken so that the group can meet its obligations in order to continue to finance its operations and investments.

• Foreign exchange risk

The group’s activities are principally conducted in US dollars as well as Euros. The directors closely monitor the group’s exposure. The directors have considered the use of derivative instruments when commercially appropriate to assist in managing such risks. No such instruments were held by the group at any time during the year or at the year end.

• Going concern risk

A potential financial risk also exists in respect of funding requirements over the short to medium term. The directors review the group’s funding requirements on a regular basis and maintain on-going monitoring in respect of trading performance and future working capital requirements. This risk is discussed in more detail in Note 1.4 Going Concern.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2022.

The principal activity of the company and group continued to be that of voyage based chartering and commission chartering

The results for the year are set out on page 10.

No ordinary dividends were paid. The directors have not recommended 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:

So far as each person who was a director at the date of approving the report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

The group has chosen in accordance with the Companies Act 2006, s.414C(11) to set out in the group’s strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors’ report.

The Companies & Limited Liability Partnerships (Accounts & Audit Exemptions & Change of Accounting Framework) Regulations 2012 (S1 2012/2301) amends the Companies Act 2006 from 1 October 2012 in relation to statutory audit requirements.

Sequana Maritime Limited has agreed to guarantee all the liabilities of Midlife Shipping Limited and of Tyrusland Limited (subsidiaries of Imperial Shipping Limited) at 31 December 2022; both companies have claimed the audit exemption from mandatory audit that is permitted by these regulations.

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and 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 and company will continue in business

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Qualified Opinion

We have audited the financial statements of Sequana Maritime Limited (the 'parent company') and its subsidiaries ('the group') for the year ended 31 December 2022 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion, except for the effects of the matter described in the Basis for qualified opinion section of our report, the financial statements:

•     give a true and fair view of the state of the 's affairs as at 31 December 2022 and of its profit for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for qualified opinion

As explained in Note 12 to the financial statements, as at the reporting date the Group has a trade debtor balance owed by a principal trading partner of £2.24m (net of a provision brought forward of £2.57m) and a loan balance owed by that partner of £2.92m. Recovery of these balances is dependant upon the continuing trading of this partner and also the relaxation of US $ foreign currency controls by the Egyptian authorities. Whilst the directors remain confident of the full recovery of these balances, in 2023 the exposure to this trading partner has increased significantly with additional loans of £2.78m and an increase in the overall trading balance of approximately £400k. We were unable to obtain sufficient appropriate audit evidence about the recoverability of these balances because it is not possible to forecast with any degree of certainty how the Egyptian authorities will deal with the ongoing US $ currency problems and thus the possible future impact on the ability of this trading partner to continue to trade in this jurisdiction. Consequently, we were unable to determine whether any adjustments to these amounts were necessary. In addition, were any adjustments to these amounts to be required, the strategic report would also need to be amended.

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Material uncertainty relating to going concern

We draw attention to note 1.4 to the financial statements concerning the Company’s (and Group's) ability to continue as a going concern. As explained in note 1.4 the Group’s forecasts depend upon factors which are inherently uncertain in the current economic environment. These conditions along with other matters as set forth in note 1.4 indicate that a material uncertainty exists that may cast significant doubt on the Company’s (and Group's) ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company (and Group) were unable to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

As described in the basis for qualified opinion section of our report, we were unable to satisfy ourselves concerning the recoverability of trade and loan balances totalling £5.16m at 31 December 2022. We have concluded that where the other information refers to these balances or related balances such as profit before tax, it may be materially misstated for the same reason.

Opinions on other matters prescribed by the Companies Act 2006

Except for the possible effects of the matter described in the basis for qualified opinion section of our report, in our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial period 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.

Except for the matter described in the basis for qualified opinion section of our report, in the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

Arising solely from the limitation on the scope of our work relating to specific debtor balances, referred to above:

• We have not obtained all the information and explanations that we considered necessary for the purpose of our audit: and

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the 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.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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 company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.

The extent to which the audit was considered capable of detecting irregularities including fraud.

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

• the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;

• we identified the laws and regulations applicable to the group and the parent company through discussions with directors and other management, and from our commercial knowledge and experience of the shipping industry;

• 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 group and the parent company, including the Companies Act 2006 and taxation 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 and the parent company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

• understanding the business model as part of the control and business environment;

• making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and

• considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.

To address the risk of fraud through management bias and override of controls, we:

• performed analytical procedures to identify any unusual or unexpected relationships;

• tested journal entries to identify unusual transactions;

• assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and

• investigated the rationale behind significant or unusual transactions.

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

• agreeing financial statement disclosures to underlying supporting documentation;

• enquiring of management as to actual and potential litigation and claims; and

• reviewing correspondence and enquiring with the company of actual and potential non-compliance with laws and regulations.

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 by for example forgery, or intentional misrepresentation or through collusion. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: 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.

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 £294,754 (2021 - £240,414 profit).

Sequana Maritime Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 200 Court Road, Eltham, London, SE9 4EW200 Court Road, Eltham, London, SE9 4EW.

The group consists of Sequana Maritime 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. 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

The consolidated group financial statements consist of the financial statements of the parent company Sequana Maritime 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 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.

At 31 December 2022, the Group had net current assets of £5.06m (2021: £1.85m) having recorded a profit after tax of £3.15m (2021: £648k).

Note 12 also discloses a debtor due to the company from a related party of approximately £1.09m (2021: £1.09m) where the timing of full recoverability is not possible to predict with any certainty.

The directors have reviewed the 2023 draft group management accounts to December 2023 as well as preparing financial forecasts for 2024 on the basis of various trading and working capital assumptions. Based on its forecasting exercise the directors have concluded that the group will be profitable in 2023 and 2024. Forecasting for the group’s ongoing shipping operations is not an exact science with actual outturns being impacted by the general economic situation globally and especially the war in Ukraine and more recently the events in the Middle East which impacts upon time charter rates beyond the control of individual ship owning groups. . In addition, although the directors remain confident that the trading balance and loans (Note 12) made to a principal trading partner remain fully recoverable, there can be no certainty as to the timing of this.

The forecast results do not include any further provision against outstanding trade debtors or loans advanced and nor do they forecast a significant reduction in the balance owed to the SOL group (£5.5m at the balance sheet date but currently reduced to around £3.5m). The directors have concluded that the group remains reliant upon the continued support of the SOL group to enable it to continue trading as forecast. Relations with the SOL group remain excellent however, they have found trading conditions challenging in 2023 and have sought to recoup the balance owed by the group as quickly as possible. We have managed to reduce the outstanding balance as noted above. There remains a charge on the balance owed to them (the debt being secured on a fellow subsidiary’s ship) and should the SOL group seek repayment of the outstanding balance then currently the vessel would likely need to be sold or new external finance sought. Currently the directors have no indication that the SOL group will seek repayment of the outstanding balance until the group are able to make repayment without causing any financial distress.

Based on the factors outlined above the directors have concluded that the company (and group) will be able to realise its assets and discharge its liabilities in the normal course of business for the foreseeable future. The directors have therefore continued to adopt the going concern basis in preparing these financial statements.

Although the directors are satisfied that adopting the going concern basis is appropriate, there can be no certainty that the outcome of the matters discussed above will be as forecast by the directors. Therefore, there exists a material uncertainty that may cast a significant doubt upon the company’s (and group’s) ability to continue as a going concern and to meet its liabilities as they fall due.

The financial statements do not include any adjustments to the value of balance sheet assets, or provision for further liabilities which would result should the going concern concept not be valid.

Turnover is recognised at the fair value of the consideration received or receivable for 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.

Shipping

i. Chartered vessels

Contracts are made in the spot market for the use of a vessel for a specific voyage for a specified charter rate. If a charter agreement exists and collection of the related revenue is reasonably assured, revenue is recognised when the vessels have been fully loaded and have departed for their ultimate destination.

Voyage expenses, primarily consisting of port, canal and bunker expenses that are unique to a particular charter, are paid by the shipping companies under voyage charter arrangements. All voyage expenses are recognised in line with the related revenue. Ship management and commissions are expenses as incurred.

ii. Vessels chartered by the group

Revenue is recognised when the vessels have been fully loaded and have departed for their ultimate destination.

Voyage expenses, primarily consisting of port, canal and bunker expenses that are unique to a particular charter, are paid by the the relevant group company under voyage charter arrangements. All voyage expenses are recognised in line with the related revenue. Commissions are expenses as incurred.

iii. Time chartered vessels

Contracts are entered into for the use of a shipping company vessel for a fixed period of time at a specified daily charter hire rate. Revenue is recognised as it is earned rateably over the duration of the time charter period.

Voyage expenses, primarily consisting of port, canal and bunker expenses that are unique to a particular charter, are paid by the directly by the charterer under time charter arrangements, except for commissions and ship management fees, which are always paid by the shipping companies.

iv. Bareboat time chartered vessels

Contracts are entered into for the use of a vessel for a fixed period of time at a specified daily charter hire rate. Revenue is recognised as it is earned rateably over the duration of the time charter period.

Voyage expenses, primarily consisting of port, canal and bunker expenses that are unique to a particular charter, are paid for directly by the charterer under the time charter arrangements, except for commissions, which are always paid by the shipping companies.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

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.

Residual value is calculated on prices prevailing at the reporting date, after estimated costs of disposal, for the asset as if it were at the age and in the condition expected at the end of its useful life. Subsequent expenditure which results in improvements or new fixtures is capitalised over the remaining expected useful life of the ship, while dry docking costs are expensed over a period to the next scheduled docking (usually 3 years).

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.

Cash and cash equivalents are basic financial assets and include cash in hand.

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ 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 and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.

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, and loans from fellow group companies, 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.

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. Deferred tax is charged or credited in the income statement, 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.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Government grants relate to furlough support claimed by the company under the Coronavirus Job Retention Scheme during the year and are disclosed in note 3 to the financial statements.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

The assets and liabilities of subsidiary undertakings with a presentational currency other than sterling are translated at the closing exchange rate whilst the profit and loss accounts are translated using the average rate for the year. Gains and losses arising on these translations are taken to reserves, net of exchange differences on related foreign currency borrowings.

The total turnover of the group derives from its principal activity of shipping services outside the UK.

Government grants relate to claims received by the Company in relation to the Coronavirus Job Retention Scheme and are included within Other operating income.

The average monthly number of persons (including directors) employed by the group and company during the year was:

Their aggregate remuneration comprised:

The actual credit 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:

Details of the company's subsidiaries at 31 December 2022 are as follows:

Registered office addresses (all UK unless otherwise indicated):

**These companies are wholly owned by Imperial Shipping Limited

***These companies are wholly owned by Medro Shipping Company Limited

Audit Exemption

Certain subsidiary companies have taken the exemption in section 479A of the Companies Act 2006 (the Act) from the requirements in the Act for their individual accounts to be audited. These companies are:

Midlife Shipping Limited

Tyrusland Limited

Group trade debtors are stated after provisions for impairment of £10.08m (2021: £3.225m).

Included within amounts owed by group undertakings are trade receivable balances that are unsecured, interest free and repayable on demand.

Included with Other Debtors (Company and Group) is approximately £1.09m (2021: £1.09m) (repayable on demand) owed by a related party. The balance is stated after provisions for impairment of £2.2m (2021: £2.2m). The related party is itself reliant upon the recovery of amounts it has advanced to another company to be able to make repayments to Sequana. This other company has a history of loss making and whilst the directors believe that the net debt outstanding will eventually be recovered it is highly unlikely to be received within 12 months of formal approval of these financial statements. Currently it is not possible to predict with any certainty the timing of full recoverability of the debt.

Included within Trade Debtors (Group) is approximately £2.24m (2021: £0) due from a trading partner who also owes the group an unsecured loan balance of £2.92m (included in Other Debtors). The trade debtor balance is stated after provisions for impairment of £2.57m (2021: £2.57m). The group has continued to trade with this partner in 2023 but, although receiving monies for some current 2023 voyages, the overall net trading balance has increased by around £400k. In addition, further loan advances have been made to this partner and at the date of approval of these financial statements, the loan balance outstanding is around £5.7m with no repayments having been received. The amount of these balances outstanding is not in dispute and the directors remain confident that full settlement will be received. Currently however it is not possible to predict with any certainty the timing of the full recovery of the outstanding balances.

Included within amounts owed to group undertakings are trade payable balances that are unsecured, interest free, have no fixed date of repayment and are repayable on demand.

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

Capital redemption reserve represents the nominal value of shares repurchased and still held by the company.

Profit and loss reserves represents accumulated comprehensive income for the year and prior periods less dividends paid.

Loss of cargo

The P&I claim against Imperial Shipping regarding a 2021 voyage where ‘Jade I’ lost her deck cargo in a storm in the Bay of Biscay during December 2021 is still ongoing. The owners are seeking the full amount of $1.77m plus costs and interest from Imperial and we are vigorously disputing their claim. The owners succeeded in temporarily arresting the vessel owned by Imperial’s subsidiary MV Timberland at Alexandria in Egypt in Jan/Feb 2023 and Imperial was obliged to lodge security of $850k with Egyptian banks to secure her release. We are counterclaiming for this as the Egyptian courts should not have allowed an arrest whilst arbitration was ongoing in the UK in addition to the fact that the original claim on Jade I is against Imperial not Midlife. The case will likely be going to arbitration in July 2024 however that date could be moved back further into 2024. The outcome is not certain, and currently although the directors remain confident of success it is not possible to predict with any accuracy what award could be made against the company should we be unsuccessful in the arbitration hearing. As a result, no provision for this has been made in the financial statements.

Subsidiary exemptions

The following subsidiary companies have taken advantage of the exemption in section 479A of the Companies Act 2006:

Midlife Shipping Limited

Tyrusland Limited

In order for these subsidiary companies to take this audit exemption, the company has guaranteed all outstanding liabilities totalling $1,214k of those subsidiary companies at 31 December 2022 until those liabilities are satisfied in full.

The following amounts were outstanding at the reporting end date:

The following amounts were outstanding at the reporting end date: