The directors present the strategic report for the year ended 31 December 2024.

The Company has been focusing on its strategic expansion plan for the forthcoming years. Investment will continue in all areas of the business, including expanding the range of products and with greater focus on European growth. Management are optimistic that the Company will continue to thrive through developing new and increasing market share in key geographic markets along with continued investment into emerging areas as technology evolves into the EV (Electric Vehicle) sector. The search for strategic acquisition opportunities will continue during 2025.

The Shaftec brand is firmly recognised as the UK’s leading brand for re-manufactured automotive components and distributes both remanufactured and new components to the automotive aftermarket.

The Shaftec range of Driveshafts, Constant Velocity Joints, Propshafts, Hydraulic and Electric Brake Calipers, Hydraulic, Electric and Manual Steering Racks, Hydraulic and Electric Steering Pumps on offer to the market is unrivalled by quality, range, availability and service.

Being a remanufacturer of critical vehicle components, it allows us to counter supply chain issues that many in our industry face and maintain high levels of availability across our product range. Through the year, our teams worked hard together internally and with our partners across the globe to ensure supply lines for core and components continued to flow in and out of the business. Increased communication with our customers means that we improved our demand forecasting giving us the ability to dampen any supply issues.

Due to the ageing vehicle parc across the UK and Europe the demand for aftermarket parts remains strong and we are ensuring we focus our human and capital investment to take advantage of this. The largest growth expectation is in expanding into new and increasing sales in key geographic markets and expanding the range of products on offer to compliment the overall portfolio available to customers. The company successfully launched multiple new ranges during the year and fulfilled customer contracts which have led to the growth and increase in turnover year on year. Profitability has also increased year on year, but at a lower proportion due to key investment during the year to assist with the continued growth aspirations of the business.

Net assets have increased year on year mainly due to the increase in stock holdings to facilitate the growth of the Company.

The directors carefully monitor the company’s performance not only from within, but also with reference to the wider marketplace that includes supplier, customer and market trends. The company is a remanufacturer/distributor of automotive components for the aftermarket where stock range and availability are paramount.

Wherever possible the directors implement strategies consistent with reducing risk across all areas of the business. These include regular and frequent detailed reviews across all product ranges identifying future product development, demand trends and sourcing options ensuring that the company can offer solutions to customers that enhance their own businesses.

Shaftec offer both a new and remanufactured option on numerous product ranges to customers so if anything affects supplies in the foreseeable future, then our remanufacturing facility has the capacity to cope with an increase in demand for remanufactured product. The resilience built into our supply chain, increased stock holding and improvements to operational processes will also help us to manage any macro-economic risks due to war, energy prices, labour market tightening or commodity price increase.

The company continues to evolve its current product range and combined with additional investment into the re-manufacturing facility are key to meeting the growing demands from the customer. The continued growth of vehicle ownership and ageing vehicle parc makes the continued roll out of the European distribution programme an ongoing key objective of the directors. Significant investment into the business’ infrastructure has taken place over the last six years and more is planned for 2025 and ahead with additional warehouse expansion and the introduction of additional product ranges in particular the Electronic Power Steering product range. . This policy of continual re-investment and the ongoing search for operational improvements will further enhance the group's performance.

The directors carefully monitor the business' performance closely focusing on both financial and non-financial KPI's. The business has made progress throughout the year under review across all categories of measurement which is reflected in continued strong financial performance. The main financial KPI's measured include turnover, gross margin and profitability, as set out below.

2024     2023

Turnover          £15.94m £14.42m

Gross margin          35.82% 33.35%

Operating profit          £2.29m £1.95m

As per the above KPI’s the business has grown year on year with increases in sales and profitability. Sales are driven by launches of new products and new ranges throughout the year, capitalising on being the market leader for catalogue product range. New contracts from prior years have continued to have a positive impact, along with new customer branches and structured pricing have led to increased stock holdings to facilitate growth and realise customer orders within agreed SLA’s and drive margin.

Investment into R&D continued throughout 2024. Continual work has been undertaken to programmes that have been upgraded to improve stock replenishment, customer order fulfilment rates, stock availability, improving scrap rates and therefore producing less waste. In addition to this, we have continued to develop our EPS (electrical power steering) offering within improved and increased testing facilities on site allowing increased remanufacturing opportunities and increasing the proffered range which will continue.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2024.

The principal activity of the company continued to be that of the supply and manufacture of automotive components.

The results for the year are set out on page 9.

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

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

The company carefully monitors and ensures that investment opportunities and working capital elements are held within carefully controlled liquidity parameters.

The company's credit risk is primarily attributable to its trade debtors. The business has implemented a number of strategies that reduce the likelihood of material adverse impact upon the company's financial performance in this area. The amounts presented in the balance sheet are net of provision for bad and doubtful debtors.

Price risk

The company carefully monitors its pricing strategy in its various market sectors in order to maintain and

strengthen its financial robustness whilst maintaining a competitive offering to its customers.

Foreign Exchange Risk

The company's foreign exchange risk is attributable to the purchases and sales in currencies other than British Pounds. The business has implemented strategies, supported by regular forecasts, to mitigate this risk primarily by forward hedging its net foreign currency exposure.

PM+M Solutions for Business LLP were appointed as auditor to the company and are deemed to be reappointed under section 487 of the Companies Act 2006.

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

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

In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent; and

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

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

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of the principal activity of the company.

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.

This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.

We have audited the financial statements of Shaftec Automotive Components Ltd (the 'company') for the year ended 31 December 2024 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity 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 company's affairs as at 31 December 2024 and of its profit for the year then ended;

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

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

Basis for 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:

• 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 company and its 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, or returns adequate for our audit have not been received from branches not visited by us; or

• the 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 company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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

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.

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

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

Shaftec Automotive Components Ltd is a private company limited by shares incorporated in England and Wales. The registered office is Soho Poolway Park Road, Hockley, Birmingham, B18 5JA.

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.

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:

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

The financial statements of the company are consolidated in the financial statements of Shaftec Holdco Limited. These consolidated financial statements are available from its registered office, which is the same as this company.

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.

Turnover is recognised at the fair value of the consideration received or receivable for goods provided in the normal course of business, and is shown net of rebates, less returns received and estimated future returns, at selling price excluding sales related taxes.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

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 credited or charged to profit or loss.

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.

At each reporting date, an assessment is made for impairment. Provisions for obsolete stock are made when stock levels exceed historic usage levels. Stock is provided for based on the class of asset, usages rates and market data.

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,

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets are assessed for indicators of impairment at each reporting end date.

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

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

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the 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.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

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

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

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

Derivatives, including 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.

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

Equity instruments issued by the company 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 company.

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 company’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 when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company 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.

Customer surcharge provision:

The Company offers a credit against future sales providing that the customer returns the used core part in an acceptable condition. No credit is given if the part is not deemed by the Company to be acceptable or if the part has no value. The potential credit is identified on the original sales invoice as a surcharge and has a fixed period of time in which it may be returned. The obligation to honour this credit is a constructive obligation and therefore, in accordance with FRS 102, a surcharge provision has been made on the basis of the repurchased asset value and the probability that the liability will be realised.

Warranties and credit note provision:

Products have a warranty ranging from one to five years, provisioning for warranties and other sales returns is based upon an expected return rate against sales.

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.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

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

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

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.

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.

Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.

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

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.

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 Company operates a surcharge mechanism whereby customers are charged a refundable surcharge at the point of sale, which is credited back upon return of an acceptable used core part within a specified time frame. Management has recognised a surcharge provision of £5.8m within provisions at the year-end, reflecting the constructive obligation to refund surcharges for expected returns. This estimate is based on historical redemption rates and the value of historic surcharge sales.

The estimation of the level of future surcharge returns is inherently subjective, as it relies on historical trends continuing into the future. Changes in customer behaviour, return rates, or product acceptance criteria could result in material differences between estimated and actual outcomes. As such, the estimate is sensitive to changes in redemption patterns and customer return rates.

In conjunction with the surcharge provision, a repurchase asset of £2.8m has been recognised within other debtors. This asset represents management’s estimate of the value of core stock expected to be returned and accepted, based on the same historical trends used in the provision calculation. The recoverability of this asset is similarly subject to uncertainty regarding the volume and condition of returns.

Management regularly reviews and updates these estimates to reflect current information, and any changes in assumptions are recognised in the period in which they occur.

The Company provides warranties on its products ranging from one to five years. A provision of £724k has been recognised at the year-end in respect of expected warranty claims and other sales-related returns.The provision is calculated with reference to historical credit note issuance and warranty claims as a percentage of turnover, adjusted for known current factors where appropriate.

The estimation of this provision involves a significant degree of judgement. While historical trends provide a reasonable basis for forecasting future claims, the actual level and timing of returns or faults may vary depending on product performance, customer usage patterns, and other external factors. As a result, the provision is sensitive to changes in return rates and the nature of warranty issues experienced.

This estimate is reviewed regularly and revised as necessary based on the most recent data available, including trends in actual claims and any known quality issues. Any changes to the underlying assumptions could result in a material adjustment to the provision in future periods.

At the year-end, a provision of £1.4m has been recognised against inventory. The Company reviews stock at each reporting date to assess for impairment. Inventory is assessed for obsolescence and slow-moving lines, with provisions made where stock levels exceed historic usage or where there is limited market demand.

The calculation of the stock provision requires judgement, particularly in determining the expected usage of inventory items and estimating their recoverable value. Provisions are assessed based on the class of inventory, historical usage rates, and available market data, including current and forecast demand.

Due to the nature of the products and changing market conditions, actual outcomes may differ from estimates. As such, the provision is sensitive to changes in usage patterns and marketability. The estimate is reviewed regularly and updated to reflect the most recent available information.

The stock balance of £7,812,617 (2023: £6,211,662) is reported net of a provision for obsolete and slow-moving inventory amounting to £1,384,590 (2023: £1,407,248). The movement in the provision during the year, a credit of £22,658 (2023: credit £103,554), has been recognised within cost of sales.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined benefit schemes amounted to 1 (2023 - 1).

Since 1 April 2023 the effective tax rate has been 25%. During the period, the effective tax rate was therefore 25% (2023: 23.52%).

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

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Other debtors include a repurchase asset of £2,806,981 (2023: £1,601,144), representing the value of core parts expected to be returned by customers. This asset is recognised in accordance with FRS 102 and reflects the anticipated returns linked to outstanding surcharge credits.

There are no securities against long-term bank loans. The loan facility was repaid during the year as part of the group refinancing, and no bank loans were outstanding at the year end. Interest was charged on the loan at a rate of 2.5% prior to repayment.

At the prior year-end, the Company operated a debt factoring arrangement with a third party, which covered all trade debtors. As at 31 December 2024, no such facility was in place (2023: £1,328,624 due under the facility), and no amounts were outstanding. The 2023 balance was presented within bank loans payable within one year.

During 2024, the Company completed a refinancing. As part of this refinancing, all financing facilities were transferred to the Company’s parent undertaking. Consequently, the Company no longer maintains any direct credit facilities or debt factoring agreements as at the year-end.

In connection with the refinancing, a new secured facility was established. This facility includes both fixed and floating charges over all the assets and undertakings of the Company, along with a negative pledge restricting the creation of further security without lender consent. This arrangement replaces the previous security linked to the debt factoring facility.

The company had no obligations under finance leases or hire purchase contracts as at the year end as all liabilities were settled during the year. In the prior year, finance lease payments represented rentals payable for certain items of plant and machinery. These leases included purchase options at the end of the lease period, had an average lease term of one year, and were on a fixed repayment basis with no contingent rental arrangements. No restrictions were placed on the use of the assets.

In the prior year, obligations hire purchase contracts were secured by the related assets and bore finance charges at rates ranging from 8.78% to 11.45% per annum. All such obligations have been fully settled in the current year

A gross provision of £6,563,666 (2023 - £4,304,829) has been recognised for expected surcharge and warranty claims on goods sold. It is expected that most of this expenditure will be incurred in the short to medium term.

Shaftec offers a credit against future sales providing that the customer returns the used part in an acceptable condition. No credit is given if the part is not deemed by Shaftec to be acceptable or if the part has no value. The potential credit is identified on the original sales invoice as a surcharge and has a fixed period of time in which it may be returned. The obligation to honour this credit is a constructive obligation and therefore, in accordance with FRS 102, a surcharge provision has been made on the repurchased asset value and the probability that the liability will be realised. The amount recognised as a liability is the expected value of credits in the future at the balance sheet date adjusted for any changes in the repurchased asset value. The corresponding return of the asset, the used part, is recognised as an asset under Other Debtors.

The warranty provision represents the company's liability in respect of 12-60 month warranties granted on certain of its products. The amount provided represents management's best estimate of the future cash outflows in respect of those products still within the warranty period at the year end. It is based on past experience and costs incurred which are monitored on a regular basis.

The credit note provision represents the company's expected cash outflows in respect of products which have been sold prior to the year end which are expected to be returned. The amount provided represents managements best estimate of the future cash outflows in respect of these sales, it is based on past experience and cost incurred which are monitored on a regular basis.

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

The deferred tax liability above arises from accelerated capital allowances and is expected to reverse over the useful lives of the related assets. However, this reduction is likely to be offset by deferred tax on capital allowances for future asset purchases.

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.

There is a creditor of £24,308 at the year end date (2023 - £21,550) representing employer and employee contributions not yet paid.

The company's ordinary shares, which carry no right to fixed income, each carry the right to one vote a general meetings of the company.

Share premium

Share premium comprises consideration received for shares issued above their nominal value net of transaction costs.

Profit and loss reserves

Profit and loss reserves comprise of cumulative profit and loss net of distributions to owners.

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:

As permitted by FRS 102, the financial statements do not disclose transactions with the parent company and wholly owned subsidiaries where 100% of the voting rights are controlled within the group.

The Company’s immediate parent undertaking is Shaftec Holdco Limited, a company incorporated in England and Wales. The parent company of the smallest group in which the results of the Company are consolidated is also Shaftec Holdco Limited.

The Company’s ultimate controlling party is Ardenton Capital Corporation, a company incorporated in Canada. Consolidated financial statements of the group can be requested from Ardenton Capital Corporation, 1100 Melville Street, Suite 220 Vancouver, BC V6E 4A6, Canada.