Company Registration No. 4132272 (England and Wales)
IPG PHOTONICS (UK) LIMITED
STRATEGIC REPORT, DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
IPG PHOTONICS (UK) LIMITED
COMPANY INFORMATION
Directors
D Goodwin
T Mammen
T Ness
M Gitin
(Appointed 5 June 2024)
Secretary
A Lopresti
Company number
4132272
Registered office
C/O The Manufacturing Technology Centre Limited
Pilot Way
Ansty Park
Coventry
CV7 9JU
Auditor
Ellacotts Audit Services Limited
Countrywide House
23 West Bar
Banbury
Oxfordshire
England
OX16 9SA
Bankers
Bank of  America
2 King Edward Street
London
EC1A 1HQ
IPG PHOTONICS (UK) LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Notes to the financial statements
11 - 21
IPG PHOTONICS (UK) LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

 

IPG Photonics (UK) Limited ("IPG UK" or “the Company”) is a 100% subsidiary of IPG Photonics Corporation (“IPGP”), a company incorporated in the United States of America and listed on The NASDAQ Global Select Stock Market. IPG UK’s scope covers the sales, applications engineering, installation, commissioning and service of laser devices and laser materials processing systems in the United Kingdom and Ireland manufactured by its affiliates in the United States, Canada, Germany and Italy. Fiber lasers are a type of laser that combine the advantages of semiconductor diodes, such as long life and high efficiency, with the high amplification and precise beam qualities of specialty optical fibers to deliver superior performance, reliability and usability. Within industrial materials processing applications, fiber lasers continue to gain market share from non-laser processing technologies and from other lasers because of their greater productivity, lower cost of ownership and ease of use.

Description of principal risks and uncertainties

The UK entity continued to enhance its capabilities, expanding the range of service activities it can support locally, as well as broader applications engineering resources. Sales generated in the e-mobility sector in particular were a bi-product of localized engineering support, enabling IPG UK to support customers through their development phases. IPG’s Adjustable Mode Beam (AMB) lasers have now become the benchmark product for battery module and pack welding applications, with upgrades taking place on existing production lines, alongside new lines where AMB was specified married together with IPG’s beam delivery and weld process monitoring equipment. Whilst the e-mobility business has been (and will be) fruitful we are focused on supplementing this business in other core IPG areas such as defence, medical and precision industrial. IPG’s handheld laser welding product range continues to expand, enabled by an approved re-seller network to access the SME markets the product line is mostly serving. As anticipated, the SME’s customers, who are mostly new to lasers, are gaining an understanding of the potential laser materials processing may offer them.

Fair review of Company's business

The market for IPG UK grew steadily in 2023, with some bulk orders being routed through the entity in Germany to integrators in Europe. Aerospace activity continued to be slow, but general industrial held up well and medical started to generate meaningful sales and offer good opportunities in the future. Handheld laser welding products provided for a significant proportion of sales in 2023 and whilst there are competitive headwinds with low-cost entrants in this market, IPG’s product performance, quality and support will win over the customer segment we are seeking to working with.

Balanced and comprehensive analysis of development and performance during the year and the position at the end of it

IPG’s handheld laser welder “LightWELD” was transitioned to a re-seller network during 2023, building upon a successful launch. This has expanded the number of sites where customers can see the product, as well as on-site demonstrations through fully equipped vehicles. 2023 was very much a year for establishing this model and helping put necessary resources in place.

 

New enquiries within the e-mobility sector tailed off slightly, although sales of laser sources, process heads, process monitoring equipment and fully integrated systems continued from work completed in prior periods and will remain strong through 2024. IPG’s Adjustable Mode Beam (AMB) lasers have demonstrated huge advantages, both in terms of quality, process stability and throughput rates. An expanded range of AMB core and ring sizes and power levels, updated beam delivery equipment and integration added to the benefits we provide our customers.

 

Globally, IPG continued to provide a pipeline of new products to IPG UK. High-power nanosecond lasers, now up to 5kW total power, are unmatched in the industry, used for de-coating, cleaning and other surface preparation processes. Ultrafast picosecond and femtosecond lasers sold well. Further System sales, mostly for advanced welding applications, including IPGP’s latest EV Welding System equipment, performed well, supplemented by a strong pipeline of enquiries in medical we hope to see mature from 2024. Systems as a whole will continue to become a dominant part of IPG UK sales as the business develops.

IPG PHOTONICS (UK) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Analysis using financial key performance indicators

Revenue

IPG UK’s total revenue increased by 14% from £7,933,444 in 2022 to £9,027,834 in 2023.

 

Gross profit

The gross profit percentage increased from 23.3% in 2022 to 24.8% on 2023.

 

Administrative expenses

Administrative expenses increased by 10.4% from £1,614,665 in 2022 to £1,781,990 in 2023.

 

Headcount

The UK staff headcount was 16 people at the year-end. The subsidiary complied with a number of regulatory requirements triggered by staff headcount increase, completing projects to comply with legislation regarding risk management, workplace pensions, human resources, government security clearances, anti-slavery and Health & Safety in the workplace.

 

Operating profit

Operating profit increased to £458,242 in 2023 from £234,288 in 2022. The Company incurred expenses related to share based compensation of £29,378 and £22,573 in 2023 and 2022, respectively. These amounts were invoiced to IPG-UK by IPGP in accordance with the Agreement on Stock Option Costs and reported as taxable compensation of the respective employees through PAYE.

On behalf of the board

D Goodwin
Director
31 August 2024
IPG PHOTONICS (UK) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -

The directors present their Directors' report and the financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company continued to be that of providing the sale of fiber lasers.

Results and dividends

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

D Goodwin
T Mammen
T Ness
M Gitin
(Appointed 5 June 2024)
Auditor

Ellacotts Audit Services Limited were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

Statement of directors' responsibilities

The directors are responsible for preparing the Strategic report, the Directors' 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:

 

 

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.

IPG PHOTONICS (UK) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -

Environmental matters

The Company's products are recognised as being environmentally friendly, IPGP fiber lasers' electrical efficiency exceeds 45% as compared to between 2% and 20% for other laser technologies. IPGP fiber lasers consume significantly less electricity when employed in industrial and other applications than traditional lasers.

 

In addition, fiber lasers consume fewer gases such as helium, CO2, oxygen and argon than traditional lasers when cutting and welding different types of materials. Fiber lasers are also replacing environmentally less friendly processes such as printing with inks or engraving, etching and cleaning with chemicals, solvents and media blast.

 

Financial instruments

The Company's principal financial instruments comprise bank balances, trade debtors and trade creditors. The main purpose of these instruments is to raise and maintain funds to finance the Company's operations. Due to the short-term nature of the financial instruments have been immaterial. The Company's approach to managing risks applicable to the financial instruments concerned is discussed below.

 

In respect of bank balances, the liquidity risk is managed by ensuring the Company is adequately capitalised, generates a profit on sales of product, manages expenses to match the level of activity and by balancing the extension of credit terms to customers with the payment terms obtained from suppliers to ensure a continuity of funding. In addition, bank accounts are maintained at and funds deposited with financial institutions that we believe constitute a low credit risk. Historically, we have also obtained short-term funding and permanent increases in capital from our parent company IPG Photonics Corporation (Nasdaq: IPGP), to either finance short-term liquidity requirements, capital investment projects or finance losses from the trading operations.

 

Engagement with suppliers, customers and others

Trade debtors are managed in respect of credit and cashflow risk by policies relating to the terms under which credit may be offered to customers and the regular monitoring of amounts outstanding relative to the payment due dates and to ensure the amount of credit issued to customers is not in excess of their established credit limits.

 

Trade creditors' liquidity risk is managed by ensuring sufficient funds are available to meet amounts due and by negotiating extended credit terms with suppliers.

Statement of disclosure to auditor

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

On behalf of the board
D Goodwin
Director
31 August 2024
IPG PHOTONICS (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF IPG PHOTONICS (UK) LIMITED
- 5 -
Opinion

We have audited the financial statements of IPG Photonics (UK) Limited (the 'Company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

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

Conclusions relating to going concern

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

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

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

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.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

IPG PHOTONICS (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF IPG PHOTONICS (UK) LIMITED
- 6 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

 

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:

 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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

IPG PHOTONICS (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF IPG PHOTONICS (UK) LIMITED
- 7 -

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.

 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. The risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

 

As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the audit. We also performed the following procedures:

 

 

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://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.

Charlotte Toemaes BSc FCA
Senior Statutory Auditor
For and on behalf of Ellacotts Audit Services Limited
Chartered Accountants
Statutory Auditor
Countrywide House
23 West Bar
Banbury
Oxfordshire
England
OX16 9SA
2 September 2024
IPG PHOTONICS (UK) LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£
£
Turnover
3
9,027,834
7,933,444
Cost of sales
(6,787,602)
(6,084,491)
Gross profit
2,240,232
1,848,953
Administrative expenses
(1,781,990)
(1,614,665)
Operating profit
4
458,242
234,288
Interest payable and similar expenses
8
(39,750)
(32,419)
Profit before taxation
418,492
201,869
Tax on profit
9
-
0
-
0
Profit for the financial year
418,492
201,869

The profit and loss account has been prepared on the basis that all operations are continuing operations.

There was no other comprehensive income for 2023 (2022: £nil).

 

The notes on pages 11 to 21 form part of these financial statements.

IPG PHOTONICS (UK) LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
10
13,232,673
14,007,366
Current assets
Stocks
11
597,769
499,121
Debtors
12
2,620,060
2,470,540
Cash at bank and in hand
1,868,081
1,910,214
5,085,910
4,879,875
Creditors: amounts falling due within one year
13
(2,110,143)
(3,119,775)
Net current assets
2,975,767
1,760,100
Total assets less current liabilities
16,208,440
15,767,466
Creditors: amounts falling due after more than one year
14
(22,482)
-
0
Net assets
16,185,958
15,767,466
Capital and reserves
Called up share capital
17,155,710
17,155,710
Profit and loss reserves
(969,752)
(1,388,244)
Total equity
16,185,958
15,767,466

These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.

The financial statements were approved by the board of directors and authorised for issue on 31 August 2024 and are signed on its behalf by:
D Goodwin
Director
Company registration number 4132272 (England and Wales)
IPG PHOTONICS (UK) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 January 2022
17,155,710
(1,590,113)
15,565,597
Year ended 31 December 2022:
Profit and total comprehensive income
-
201,869
201,869
Balance at 31 December 2022
17,155,710
(1,388,244)
15,767,466
Year ended 31 December 2023:
Profit and total comprehensive income
-
418,492
418,492
Balance at 31 December 2023
17,155,710
(969,752)
16,185,958
IPG PHOTONICS (UK) LIMITED
STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
1
Judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Impairment of trade receivables

The Company is required to make an estimate of the recoverable value of trade receivables. When assessing impairment of trade receivables, management considers factors including any specific known problems or risks.

Tangible fixed assets

Management considers there to be judgements applied on the depreciation policy of fixed assets and the depreciation rates based upon the expected useful life of assets.

Share-based payments

Determining the appropriate fair value model and calculating the fair value of share-based payments requires the use of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility.

IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
2
Accounting policies
Company information

IPG Photonics (UK) Limited is a private company limited by shares incorporated in England and Wales. The registered office is C/O The Manufacturing Technology Centre Limited, Pilot Way, Ansty Park, Coventry, CV7 9JU.

2.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in pound sterling, which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest pound sterling.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

This 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:

 

 

The financial statements of the company are consolidated in the financial statements of IPG Photonics Corporation (USA). These consolidated financial statements are available from www.ipgphotonics.com.

2.2
Going concern

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

2.3
Turnover

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.

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, the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Accounting policies
(Continued)
- 13 -

Revenue from contracts for the provision of services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably and it is probable that the Company will receive the consideration due under the transaction. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.

2.4
Tangible fixed assets

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:

Freehold land and buildings
Over 20-30 years for buildings, over 15 years for land improvements and land is not depreciated
S/Term leasehold property
Over the lease term
Plant and machinery
14 - 20% straight line
Fixtures and fittings
14 - 20% straight line
Office equipment
14 - 20% straight line
Demo units
33% straight line
Computer equipment
33% straight line

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 credited or charged to statement of comprehensive income.

The assets residual values, useful lives and depreciation methods are reviewed and adjusted prospectively if appropriate or if there is an indication of a significant change since the last reporting date.

2.5
Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing stock to its present location and condition. Cost is calculated using the first-in, first-out formula. Provision is made for damaged, obsolete and slow-moving stock where appropriate.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

2.6
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Accounting policies
(Continued)
- 14 -
2.7
Financial instruments

The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans from related parties and investments in non-puttable ordinary shares.

 

Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements or a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.

 

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of comprehensive income.

 

For financial assets measured at amortised cost, the impairment loss is measured at the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

Other financial assets

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.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Accounting policies
(Continued)
- 15 -
Other financial liabilities

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 that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. 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.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

2.8
Taxation
Current tax

Tax is recognised in the Statement of comprehensive income, except that a charge attributable to an item of income expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

 

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.

2.9
Employee benefits

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.

2.10
Retirement benefits

The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.

The contributions are recognised as an expense in the Statement of comprehensive income when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet. The assets of the plan are held separately from the Company in independently administered funds.

IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Accounting policies
(Continued)
- 16 -
2.11
Share-based payments

The Company grants share-based payments as consideration for services received from certain employees and directors. Compensation cost for all share-based payments is based on the estimated grant-date fair value. The fair value of both stock options and restricted stock units ("RSU") granted is estimated using the Black-Scholes method. Determining the appropriate fair value model and calculating the fair value of share-based payments required the use of assumptions, including volatility, expected life, and expected annual dividend yield. The Company allocates and records share-based compensation on a straight-line basis over the requisite service period, which is generally the vesting period. The amount recognised as an expense is adjusted to reflect the actual number of shared or options that will vest.

The Company applies "withhold to cover" as a tax payment method for vesting of restricted stock awards. Pursuant to this method, the Company settles the restricted stock grants on a net basis by withholding the number of shares with a fair value equal to the monetary value of the employees' tax obligation based on the actual stock price on the vesting date and only issues the remaining shares on completion of the vesting period.

2.12
Leases

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 leases asset are consumed.

2.13
Foreign exchange

Transactions in currencies other than pound 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.

3
Turnover
2023
2022
£
£
Turnover analysed by class of business
Sale of laser equipment
8,962,533
7,933,444
Sale of services
65,301
-
9,027,834
7,933,444
2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
8,495,672
7,368,417
Rest of Europe
493,639
547,331
Rest of World
38,523
17,696
9,027,834
7,933,444
IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(7,541)
34,464
Fees payable to the company's auditor
9,900
9,000
Depreciation of owned tangible fixed assets
823,981
820,005
Profit on disposal of tangible fixed assets
(118,820)
(126,235)
Share-based payments
39,966
22,573
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
9,900
9,000
6
Employees

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

2023
2022
Number
Number
Administration
5
4
Sales, Service & Research
11
9
Total
16
13

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
1,098,267
972,541
Social security costs
109,109
74,148
Pension costs
29,378
23,938
1,236,754
1,070,627
7
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
205,633
207,600
IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
7
Directors' remuneration
(Continued)
- 18 -
Remuneration disclosed above include the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
205,633
207,600
8
Interest payable and similar expenses
2023
2022
£
£
Interest payable to group undertakings
39,750
32,419
9
Taxation

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:

2023
2022
£
£
Profit before taxation
418,492
201,869
Expected tax charge based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
98,346
38,355
Tax effect of expenses that are not deductible in determining taxable profit
19,186
5,341
Tax effect of utilisation of tax losses not previously recognised
(189,246)
(36,839)
Permanent capital allowances in excess of depreciation
(103,502)
(144,833)
Depreciation on assets not qualifying for tax allowances
193,636
155,801
Loss/(profit) on sale of fixed assets
(27,923)
(23,985)
Non Trade Loan Relationships
9,341
6,160
Disallowable Expenditure
162
-
0
Taxation charge for the year
-
-

The Company has £2,792,535 (2022: £3,628,133) of tax losses which are being carried forward to use against future taxable profits.

IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
10
Tangible fixed assets
Freehold land and buildings
S/Term leasehold property
Plant and machinery
Fixtures and fittings
Office equipment
Demo units
Computer equipment
Total
£
£
£
£
£
£
£
£
Cost
At 1 January 2023
14,240,863
35,198
1,601,271
69,978
8,905
347,691
7,400
16,311,306
Additions
-
0
-
0
105,468
-
0
-
0
-
0
-
0
105,468
Disposals
-
0
-
0
(259,268)
-
0
-
0
-
0
-
0
(259,268)
At 31 December 2023
14,240,863
35,198
1,447,471
69,978
8,905
347,691
7,400
16,157,506
Depreciation and impairment
At 1 January 2023
1,091,763
34,920
832,965
29,060
8,905
298,927
7,400
2,303,940
Depreciation charged in the year
518,310
278
247,581
9,048
-
0
48,764
-
0
823,981
Eliminated in respect of disposals
-
0
-
0
(203,088)
-
0
-
0
-
0
-
0
(203,088)
At 31 December 2023
1,610,073
35,198
877,458
38,108
8,905
347,691
7,400
2,924,833
Carrying amount
At 31 December 2023
12,630,790
-
0
570,013
31,870
-
0
-
0
-
0
13,232,673
At 31 December 2022
13,149,100
278
768,306
40,918
-
0
48,764
-
0
14,007,366
IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
11
Stocks
2023
2022
£
£
Finished goods and goods for resale
597,769
499,121
12
Debtors: amounts falling due within one year
2023
2022
£
£
Trade debtors
2,157,055
1,566,720
Amounts owed by group undertakings
395,262
825,601
Prepayments and accrued income
67,743
78,219
2,620,060
2,470,540
13
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Other borrowings
15
-
0
1,000,000
Trade creditors
72,398
64,886
Amounts owed to group undertakings
256,344
1,241,524
Taxation and social security
393,938
318,428
Other creditors
(1,585)
(694)
Accruals and deferred income
1,389,048
495,631
2,110,143
3,119,775
14
Creditors: amounts falling due after more than one year
2023
2022
£
£
Trade creditors
22,482
-
0
15
Loans and overdrafts
2023
2022
£
£
Loans from group undertakings
-
0
1,000,000
Payable within one year
-
0
1,000,000
IPG PHOTONICS (UK) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
16
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
29,378
23,938

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund. Contributions totalling £nil (2022:£nil) was due to the fund at the balance sheet date.

17
Operating lease commitments
Lessee

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2023
2022
£
£
Within one year
13,395
1,450
Between two and five years
26,458
-
0
39,853
1,450
18
Events after the reporting date

On 27 March 2024 the company disposed of its Freehold Property, as shown in the balance sheet at a carrying value of £12,630,790.

19
Related party transactions

The Company is a fully owned subsidiary of IPG Photonics Corporation (USA), in addition to related party transactions with the parent company, the Company also traded with other fully owned subsidiaries of the parent company. The following companies traded with IPG Photonics (UK) Limited during the year under review:

 

IPG Laser GmbH (Germany)

IPG Photonics (Italy) Srl

IPG Photonics Canada (Canada)

20
Ultimate controlling party

The ultimate controlling party is IPG Photonics Corporation (USA), a company registered in the USA. The financial statements of the parent company are available on https://www.ipgphotonics.com.

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