The directors present the strategic report for the year ended 31 December 2022.

The principal activity of the group continued to be that of the manufacture and distribution of plumbing products. The company's principal activity is that of a holding company.

The group’s revenue increased from prior year primarily due to an increase in demand in Turkey OEM market and the impact from foreign exchange translation. Profitability has increased due to a reorganization charge recorded in 2021 of £5,280,265 (2022 - £nil) to relocate manufacturing operations from the Netherlands and Great Britain to the ongoing operations in Slovenia and Turkey.

The business and its adopted strategies are subject to certain risks, including increasing overseas competition, product liability, the self‑insurance of product liability (see note 21) and rising commodity and labor costs. Continued capital investment, the adoption of more modern manufacturing techniques and further product development will help to mitigate these risks.

The group operates internationally across a wide spread of geographical markets. The group must maintain good customer relations, with product quality and service of paramount importance, in order to maintain and grow market share.

The group trades in four main currencies: Pounds Sterling, US Dollars, Euros and Turkish Lira. The group is therefore exposed to fluctuations in the exchange rates of these currencies.

The board monitors progress in achieving the overall strategy by reference to the following KPIs. Performance in the period, together with historical data is set out in the table below:

Future outlook

Further growth is envisaged as markets, both in the UK and overseas, continue to recover, as new products are introduced and new customers gained and as our acquisitions contribute to the success of the group.

Going concern

The group has expanded through a number of acquisitions in recent years which have been funded by the ultimate parent company (Fluidmaster Inc.) through intercompany balances. This funding has no formal repayment terms and has therefore been classified as falling due within one year in the consolidated and company balance sheets.  The amount due from the group to the ultimate parent company was £74.0m and the amount due from the company to the ultimate parent company was £62.8m at 31 December 2022.

The Board of Directors has undertaken a recent thorough review of the group’s budgets and forecasts and has produced detailed and realistic cash flow projections. The company has continued support from the Group and ultimate parent company Fluidmaster, Inc and the ultimate parent company has provided written confirmation that it will provide financial support, if required, to enable the company to meet its liabilities as the fall due for a period of at least 12 months from the date of approval of the financial statements. There is worldwide group line credit facility of $50M, of which $31M remains unused. This level of cash and support is considered enough to meet the worst case stress test scenario, whereby trading cash flows are reduced, despite the current increased demand. These cash flow projections, when considered in conjunction with the company’s existing cash balances and support from the group, demonstrate that the company has sufficient working capital for the foreseeable future.

The directors of the ultimate parent company recognise that the group (and company) is not able to continue to trade and pay its debts as they fall due for payment unless these intercompany balances are retained and / or alternative funding is put in place. Therefore the ultimate parent company has provided the directors of the company with written confirmation that: (1) Repayment of the intercompany balances noted above will be not requested for a period of at least 12 months from the date of approval of the financial statements unless the group has sufficient financial resources available to make full or partial repayments and (2) Any financial support required to enable the group (and company) to continue to trade and pay debts as they fall due for payment will be made available to the group (and company) by the ultimate parent company for a period of not less than 12 months from the date of signing the financial statements for the year ended 31 December 2022. However, it is noted that this support has not been provided in the form of a legally binding arrangement and therefore is at the discretion of the ultimate parent company.

The lack of a legally binding commitment from the ultimate parent company is considered by the directors to indicate the existence of material uncertainties which may cast significant doubt on the group and parent company’s ability to continue as a going concern. The financial statements do not include any adjustments that would result if the group and the parent company is unable to continue as a going concern.

Introduction

As directors of Fluidmaster UK Limited, we are dedicated to promoting the success of the group for the benefit of its members as a whole, while considering the interests of our stakeholders. This statement outlines how we have fulfilled our duties under Section 172 of the Companies Act 2006.

Long-term Decision Making

We prioritise sustainable growth and innovation. Our strategic decisions, such as investing in advanced technologies and expanding our service offerings, are made with a long-term perspective to ensure Fluidmaster UK Limited’s continued success and competitiveness in the plumbing products sector.

Employee Interests

Our employees are our greatest asset. We have implemented comprehensive training programs, competitive compensation packages, and a supportive work environment to foster their growth and well-being. Regular feedback sessions and employee surveys help us understand and address their needs.

Business Relationships

Maintaining strong relationships with our suppliers, customers, and partners is crucial. We engage in regular dialogue with our key stakeholders to ensure mutual benefits and address any concerns promptly. Our customer centric approach drives us to continuously improve our products and services.

Community and Environment

We are committed to minimizing our environmental impact and contributing positively to the communities we operate in. Our sustainability initiatives include reducing carbon emissions, promoting recycling, and supporting local community projects. We also adhere to ethical sourcing practices.

High Standards and Business Conduct

Integrity and transparency are at the core of our business conduct. We have robust governance frameworks and compliance programs in place to ensure we operate ethically and in accordance with all relevant laws and regulations. Our Code of Conduct guides our employees in maintaining high standards of professionalism.

Fair Treatment of Members

We strive to act fairly between members of the group. Our communication with shareholders is transparent and timely, ensuring they are well-informed about the group’s performance and strategic direction. We encourage active shareholder engagement and consider their feedback in our decision-making processes.

Conclusion

In fulfilling our duties under Section 172, we remain dedicated to balancing the interests of our stakeholders while driving the long-term success of Fluidmaster UK Limited. We believe that this approach not only benefits our members but also contributes to the broader societal good.

On behalf of the board

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

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

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

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

Directors indemnities

The company maintains liability insurance for its directors and officers. Following shareholder approval the company has also provided an indemnity for its directors and the secretary, which is a qualifying third party indemnity provision for the purposes of the Companies Act 2006.

The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date. Following shareholder approval the company has also provided an indemnity for its directors and the secretary, which is a qualifying third party indemnity provision for the purposes of the Companies Act 2006.

The risks facing the company are assessed on an on‑going basis. The directors evaluate the likelihood and potential impact of each risk and ensure appropriate action is taken. A number of key risks such as liquidity, interest rates, currency fluctuations, credit management, capital expenditure, insurance, health and safety and regulatory compliance come under the direct control of the directors.

The group is committed to a policy of recruitment and promotion on the basis of aptitude and ability without discrimination of any kind. Management actively pursues both the employment of disabled persons whenever a suitable vacancy arises and the continued employment and retraining of employees who become disabled whilst employed by the group. Particular attention is given to the training, career development and promotion of disabled employees with a view to encouraging them to play an active role in the development of the group.

The group places considerable value on the involvement of its employees and has a policy of keeping them informed on matters affecting them as employees and on the various factors affecting the performance of the group.

As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.

The directors 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 group and company, and of the profit or loss of the group 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 accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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 auditor of the company 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 auditor of the company is aware of that information.

We have audited the financial statements of Fluidmaster UK 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 balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

• give a true and fair view of the state of the group's and the parent company's affairs as at 31 December 2022 and of the group's 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 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 group and parent 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 group's and parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the 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:

• The information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• The strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

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

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

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, 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 parent 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.

Extent to which the audit was considered capable of detecting irregularities, including fraud

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.

We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.

Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we have considered the following:

• the nature of the industry and sector, control environment and business performance including the design of the Company's remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;

• results of our enquiries of management about their own identification and assessment of the risks of irregularities;

• the matters discussed among the audit engagement team and relevant specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud;

• any matters we identified having obtained and reviewed the Company's documentation of their policies and procedures relating to:

  • identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

  • detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;

  • the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas: timing of recognition of commercial income, posting of unusual journals and complex transactions; and manipulating the Company's performance profit measures and other key performance indicators to meet remuneration targets and externally communicated targets. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the Company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included UK Companies Act, employment law, health and safety regulations, pensions legislation and tax legislation.

Audit response to risks identified

Our procedures to respond to risks identified included the following:

• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;

• enquiring of management concerning actual and potential litigation and claims;

• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

• reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; and

• in addressing the identified risks of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance 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: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £67,187 (2021 - £501,850 profit).

Fluidmaster UK Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Twyford Road, Rotherwas Industrial Estate, Hereford, HR2 6JR.

The group consists of Fluidmaster UK 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 preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies.

The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.

The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group) as if they form a single entity, with the exception of LIV Mont d.o.o, Sarajevo and Fluidmaster GmbH whose results are excluded on the basis that they are immaterial to the results of the group as a whole. Intercompany transactions and balances between group companies are therefore eliminated in full,

The consolidated financial statements incorporate the results of the business combinations using the purchase method. In the balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at at their fair values at the acquisition date. The results of the acquired operations are included in the Consolidated Statement of Comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases,

In accordance with the transitional exemption available in FRS 102, the group has chosen not to retrospectively apply the standard to business combinations that occurred before the date of transition to FRS 102, being 01 January 2014.

Parent Company disclosure exemptions

In preparing the separate financial statements of the Parent Company, advantage has been taken of the following disclosure exemptions available in FRS 102:

• Only on reconciliation of the number of shares outstanding at the beginning and end of the period has been presented as the reconciliations for the Group and the parent company would be identical;

• No cashflow statement has been presented for the Parent Company;

• Disclosures in respect of the Parent Company's financial instruments and share-based payment arrangements have not been presented as equivalent disclosures have been provided in respect of the Group as a whole; and

• No disclosure has been given for the aggregate number remuneration of the key management personnel of the Parent Company as their remuneration is included in the totals for the Group as a whole.

The group has expanded through a number of acquisitions in recent years which have been funded by the ultimate parent company (Fluidmaster Inc.) through intercompany balances. This funding has no formal repayment terms and has therefore been classified as falling due within one year in the consolidated and company balance sheets. At 31 December 2022 intercompany borrowings financing the group were £74m of which £69m were due from the company.

The Board of Directors has undertaken a recent thorough review of the groups' budgets and forecasts and has produced detailed and realistic cashflow projections. Various scenarios have been run on the potential impact of COVID-19, including the modelling of worst-case scenarios, The company has continued support from the Group and ultimate parent Company Fluidmaster Inc and the ultimate parent company has provided written confirmation that it will provide financial support, if required, to enable the company to meet its liabilities as they fall due for a period of at least 12 months from the date of approval of the financial statements. There is worldwide group line credit facility of $50m, of which $30m remains unused. This level of cash and support is considered enough to meet the worst case stress test scenario, where by trading cashflows are reduced, despite the current increase in demand. These cash flow projections when considered in conjunction with the company's existing cash balances and support from the group, demonstrate that the company has sufficient working capital for the foreseeable future.

The directors of the ultimate parent company recognise that the group (and company) is not able to continue to trade and pay its debts as they fall due for payment unless these intercompany balances are retained and / or alternative funding is put in place. Therefore the ultimate parent company has provided the directors of the company with written confirmation that: (1) Repayment of the intercompany balances noted above will not be requested for a period of at least 12 months from the date of approval of the financial statements unless the group has sufficient financial resources available to make full or partial repayments and (2) Any financial support required to enable the group (and company) to continue to trade and pay debts as they fall due for payment will be made available to the group (and company) by the ultimate parent company for a period of not less than 12 months from the date of the signing of the financial statements for the year ended 31 December 2022. However, it is noted that this support has not been provided in the form of a legally binding arrangement and therefore is at the discretion of the ultimate parent company.

The lack of a legally binding commitment from the ultimate parent company is not considered by the directors to indicate the existence of material uncertainties which may cast significant doubt on the group and parent company's ability to continue as a going concern. The financial statements do not include any adjustments that would result if the group and the parent company is unable to continue as a going concern.

All of the company's contracts with customers contain a single performance obligation, recognised at a point in time and consist of toilet trim and relevant plumbing products. Revenue is recognised when control of the product transfers to the customer, generally upon product shipment. The company extends credit to its customers based upon an evaluation of the customers financial condition and credit history and generally does not require collateral. Credit losses are provided for in the consolidated financial statements and consistently have been within managements expectations. The company's payment terms are generally between 30 and 60 days, however certain customers are granted promotional volume discounts and extended payment terms up to 180 days. The company has not experienced significant returns or write-offs associated with these programs. Revenues are recorded net of estimated adjustments related to certain advertising and sales discounts, rebates and estimated returns. The company recognises cash consideration, including sales incentives, given by the Company to a customer, as a reduction of the selling price of the Company's products and a reduction of revenue when recognised in the company's consolidated statement of income.

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over a 10 - 20 year period.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation 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:

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 profit and loss account.

Investments in subsidiary undertakings and group undertakings are stated at cost less any provision for impairment.

Group other investments are measured at fair value.

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible 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.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.

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.

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.

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.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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 profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event, it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

The Group operates defined contribution pension schemes for its employees in the territories it operates in, where benefits are based upon contributions, and assets are held in a separate trustee administered fund. The cost of providing requirement pensions and related benefits is charged against profits over the period which benefit from the employees services.

Rentals paid under operating leases are charged to the profit and loss on a straight line basis over the lease term.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

Foreign currency transactions are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities are translated at the rate of exchange ruling at the balance sheet date. Any differences are taken to profit and loss and recognised within other operating expenses.

Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

On consolidation, the results of the overseas operations, except those in Hyperinflationary economies, are translated into Sterling at rates approximating to those ruling when transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income. Companies in hyperflationary economies are subject to the policy detailed below.

Hyperinflationary Economies

The Turkish economy was designated as hyperinflationary from 1 July 2022. As a result the application of FRS102 section 31 has been applied to the subsidiary whose functional currency is the Turkish Lira. The application of section 31 includes :

• Adjustment of historical cost non-monetary assets and liabilities for the change in purchasing power caused by inflation from the date of intitial recognition to the balance sheet date;

• adjustment of the profit and loss account for inflation during the reporting period;

• translation of the profit and loss account at the period end foreign exchange rate instead of an average rate; and

• adjustment of the profit and loss accounts to reflect the impact of inflation and exchange rate movement on holding monetary assets and liabilities in local currency.

Research and Development

Any research and development costs are written off to the profit and loss account as incurred.

In the application of the group’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.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

The group has made a provision for claims received amounting to £528,105 in respect of failure of a product incorporating a specific component,all manufactured in years prior to 2012. The directors have valued the provision based on their estimate of the most likely value of future payments. In making their assessment, the directors have considered factors such as the number and value of actual claims received to date, average settlement amounts paid to settle claims, the level of insurance coverage in place and an estimate of the volume of claims to be received. A discount rate of 3.50% has been applied for the purposes of valuing the provision, based on the group borrowing rate.

Where a business combination occurs, the directors consider the fair value of assets and liabilities acquired, including an assessment of intangible assets, with goodwill recognised as the excess of the cost of the business combination over the fair value of the group's share of the net identifiable assets of the subsidiary at the date of acquisition. In making this assessment, the directors determine which intangible assets can be separately identified and whether their fair value can be measured reliably. The value of customer relationships amounting to £nil was valued using a discounted cash flow model of expected returns and has been amortised since.

The group evaluates goodwill on an annual basis or more frequently if management believes indicators of impairment exist. During the year ended 31 December 2022, the company had no impairment of goodwill.

The main driver for the net liability position of the group balance sheet is the loan due to Fluidmaster Inc, which is not expected to be recalled in the near future. This was to assist with the funding of all of the acquisitions. Each entity is creating a profit and positive cashflows from operations which have improved since acquisition. There continues to be capital asset acquisition but this is due to expansion as the European presence continues to grow, Therefore no provision for impairment has been included in the year ended 31 December 2022.

At reach reporting date, Stock is assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to sell. The impairment loss amounting to £815,654 is recognised immediately in profit and loss.

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

Their aggregate remuneration comprised:

Company:

The company has no employees other than directors, who did not receive any remuneration (2021: £NIL)

Audit fees in relation to the audit of the Parent Company are £45,000 (2022: £40,200).

No director received any remuneration paid by the company during the current year (2021 - £Nil). The directors are remunerated by the ultimate parent company.

The actual charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:

Finance leases

The net book value of leased assets included in fixed assets is £Nil (2021: £92,473). Depreciation charged on these leased assets during the year is £Nil (2021: £48,362).

Group investments in group undertakings relate to investments in LIV Mont d.o.o., Sarajevo and Fluidmaster GmbH, subsidiary undertakings whose results have been excluded from the consolidation on the basis that they are not material to the group as a whole. Group other investments relate to a 13.92% equity stake in Intech-les d.o.o, an unlisted Slovenian development company. The Investments are measured as cost, which the directors consider to be a materially reasonable approximation to the fair value as at the balance sheet date.

In 2019, the directors considered that an impairment of £3,069,688 was required to be made against the recorded carrying value of costs of investment in Fluidmaster Turkey.

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

*held indirectly. The shares of these companies are held by Fluidmaster Predelva Plastike d.o.o Slovenia.

**held indirectly. The shares of these companies are held by Fluidmaster Netherlands B.V.

An impairment loss of £815,614 (2021: £626,453) was recognised in cost of sales against stock during the year to slow moving and obsolete inventory,

Amounts owed by group undertakings are considered interest free and repayable on demand.

Finance leases and hire purchase contracts are secured on the assets to which they relate.

There is no fixed date for repayment of the majority of the amount due to the parent company, but the parent company has confirmed that repayment will not be required at least 12 months from the date of the approval of the financial statements. Interest is being applied at 5% per annum (which is considered to be the market rate) but is added to the amount of loan rather than being repaid,

During 2012 one of the groups subsidiary companies, Fluidmaster GB Limited, encountered an unusual incidence of claims in respect of a failure of product incorporating a specific component, all manufactured in years prior to 2012. Claims of this type were covered by third party insurance up to 6 March 2013 which reduced the impact of the claims received but the Company is now liable for the entire loss on future claims because the Company now self-insures these losses. The provision recognised is the Directors best estimate of the Groups liability based on the information available, although they recognise the actual liability could be substantially different to the current provision.

The directors are not aware of the exact cause of the product failure, the dates of manufacture for failed products or the number of products installed in the field and the reason for low level of claims actually received to date and therefore consider that it is possible that future claims could range from negligible value from to as much as £4m. The directors have included a provision at the amount specified as the most likely value of future payments based on information available to date. The incidence of claims will continue to be monitored and the provision established will be considered in future years as evidence of the level of claims received becomes available. The directors note that changes were made in the manufacturing process to remove the product failure issue.

The provision for retirement and long service payments relates to Fluidmaster Predelava Plastike d.o.o. In accordance with Slovenian legislation, employees are entitled to a one-off retirement severance payment, payable in a single instalment, and a 'jubilee' bonus payable for every 10 years of service completed. The provision has been calculated by a certified actuary based on the number of employees and total length of service at the balance sheet date and incorporating estimates around staff turnover and the size of the bonus payments to be made.

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

The group operates defined contributions pension schemes in the territories it operates in. The assets of the schemes are held separately from those of the Group in independently administered funds. Contributions totalling £203,265 (2021: £94,805) were payable to the fund at the reporting date.

There is a single class of ordinary shares. There are no restrictions on dividends and the repayment of capital beyond those in company law.

The Share Premium account includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares is deducted from share premium.

Profit and loss account

The profit and loss account includes all current and prior period retained profits and losses.

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

The Company had no operating lease commitments at 31 December 2022 or 31 December 2021.     

Amounts contracted for but not provided in the financial statements:

The Group and Company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' not to disclose related party transactions with other group companies.

The total compensation paid by the Company to key management personnel for services provided to the Company for the year was £192,817 (2021: £194,788).

The company is a subsidiary of Fluidmaster Inc, which is the ultimate parent company incorporated in the United States of America,

The largest and smallest group in which the results of the Company are consolidated is that headed by Fluidmaster Inc., incorporated in the United States of America. The consolidated accounts of this Company are not available to the public. No other group accounts include the results of the company.