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

Wartsila Defence Solutions Ltd is a private company limited by shares and registered in England.

The directors submit their strategic report together with the audited financial statements of Wartsila Defence Solutions Ltd ('the Company') for the financial year ending 31 December 2024.

Business review

During the financial year the company continued to develop its capability and capacity, in line with the strategy, to deliver integrated shaft lines.

The strategic objective is to continue as leaders in our chosen markets. This objective is achieved through continuous product development, a focus on engineering excellence, the building of exceptional customer relationships and a culture of whole product life cycle support.

Our Vision: Our shaft line solutions propel all NATO, Commonwealth, and allied vessels, throughout their lives, wherever they operate.

Our Mission: To become our customers preferred supplier of navy shaft line solutions and life cycle support.

The Company uses a number of Key Performance Indicators (KPI), designed to give a balanced picture of progress and performance.

Financial Performance

The Company's financial performance was strong during the year to 31 December 2024. Turnover was in line with expectations at £26.7m (2023: £28.2m) with a PBT as a percentage of sales of 6.6% (2023: 0%). During the prior year it was decided to follow the Corporate methodology for impairments to inventories which resulted in an increase in these provisions, impacting profit. The charge to the profit and loss account for such impairments was £0.8m (2023: £3.3m), and if not incurred PBT would have been 9.6% (2023: 12%) of sales.

Financial Position

The Company continues to carry a warranty provision as at the balance sheet date to protect itself against warranty claims resulting from the issues with the composite material which was released in a technical bulletin during 2020. The Company continues to carry a high inventory level, current assets remain high at £27.3m (£19.7m in 2023).

Risks and Uncertainties

Trading Risk:

The Company continues to focus on quality and technical excellence as key differentiators in the markets it serves. Whilst price competition from low-cost areas of manufacture remains a risk, the strategy of maintaining technical leadership has proven to provide good mitigation against competitive risk.

The Company operates internationally and provides equipment manufactured using highly specialised materials. The risk of lack of supply of these materials is managed through flexible arrangements with suppliers and order book reviews being conducted on a regular basis.

Reporting on Compliance with Section 172 Requirements

In performance of their statutory duties and in accordance with s172 (1) Companies Act 2006, the board of directors consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172 (1) (a-f) of the act) in the decisions taken during the year ended 31 December 2024.

Each year, the Board reviews the performance of the Company and the divisions within it and receives updates on the statuses within those divisions. In making decisions the Board has regard to a variety of matters including the interests of various stakeholders, the consequences of its decisions in the long term and its long-term reputation.

The following paragraphs summarize how the directors fulfil their duties.

Long Term Decision Making

As our business develops, changes, and becomes more complex, it is vital that risks are effectively identified, evaluated, managed and mitigated and that our approach to risk management continues to evolve to support the long-term strategy of the company. Details of our principal risks and uncertainties and our approach to managing them are noted above.

Culture and values underpin how a company creates and sustains value over the longer term and are key elements of how it maintains a reputation for high standards of business conduct. The standards set by the Board and by Wärtsilä group, mandate certain requirements and behaviours with regards to the activities of its directors, employees and others associated with it. The culture throughout Wärtsilä and the wider group is one that promotes engagement, collaboration, and development of employees for the mutual benefit of the business and those working within the organisation.

Employee Interests

The Company is committed to being a responsible business and our behaviour is aligned with the expectations of our employees, customers and investors. For the business to succeed, we need to manage our employees' performance and develop and bring through talent whilst ensuring we operate as efficiently as possible. All employees are set individual goals and annual development reviews are undertaken. The Company carries out regular engagement surveys, the results of which are shared with employees and used to formulate future strategy.

Business Relationships

The Company is 100% owned by Wärtsilä Technology Oy Ab. As such, the Board maintain close working relationships with the Group head office and the strategies of the Company are closely aligned with the larger Group.

The Company trades with customers globally, and as such the Board delegate the ownership of customer relations to the sales team who co-ordinate activities through their regional teams which are supported by the wider Group. This allows the Company to understand and work efficiently with its customers whilst maintaining high levels of service. Understanding the needs of our customers is central to the success of the business and this underlines the importance of maintaining strong relationships with our customer base.

The Company works to identify and foster key supplier relationships to the mutual benefit of our business and our suppliers. By having preferred suppliers, the business focuses on quality and reliability of our supply chain whilst driving value for money.

Environment

Wärtsilä acknowledges climate change and other environmental impacts are both global as well as local concerns, and the Company strives to minimise its impact. Wärtsilä is committed to working in an environmentally responsible and efficient manner and strives to minimise its environmental footprint.

For Wärtsilä, environmental responsibility has two dimensions: products and operations. Most of the efforts to improve our environmental performance, including our operations, are conducted as part of the product development and improvement processes. This work is supported by operational measures, which are based on achieving high environmental standards and which seek constant improvement. We are also committed to continuous improvement in our environmental and social performance activities to avoid causing harm to those communities located close to our operations. Further details on this can be found on the Wärtsilä group website www.wartsila.com, and also in the Annual Report that can also be accessed from the website.

This report was approved by the board signed by order of the board.

The directors present their report and the audited financial statements of Wartsila Defence Solutions Ltd ('the Company') for the financial year to 31 December 2024.

The following headings have been addressed in the Strategic Report:

- Future developments

- Statement on engagement with suppliers, customers and others in business relationship with the company

- Branches outside the UK

Wartsila Defence Solutions Ltd delivers engineered shaft line products and integrated shaft line solutions to naval and cruise customers for both new construction and throughout the life cycle of the vessel – in a safe, reliable, and environmentally sustainable way.

The profit for the financial period, after taxation, amounted to £984k (£57k in 2023).

No dividend was proposed or approved in relation to the financial year ending 31 December 2024 (£3m was paid for 2023).

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

Political contributions

The Company made no political or charitable donations during the period.

Research and development

Research and development activity is concentrated on improving product performance and capability and developing opportunities to penetrate new markets. Research and development costs are typically customer funded as part of ongoing improvements.

During the financial year ending 31 December 2024 £1,099k was expensed through the profit and loss relating to research and development activities, (£149k was expensed in the financial year ending 31 December 2023), these costs were predominantly salaries for customer funded development work.

Financial risk management

Price risk

The Company is exposed to commodity price risk, principally for certain raw materials and so the company buys when prices with vendors are competitive in order to manage the impact of price movements on its gross margin. Such purchases are only made to satisfy known orders.

Liquidity risk

The Company seeks to manage liquidity risk by ensuring sufficient liquidity is available to meet foreseeable needs. The Company funding has been managed through a group revolving credit facility. Short‑term liquidity forecasting is undertaken on a weekly basis and is reviewed by the Group Treasury Department.

Cash flow risk

Detailed cash flow forecasts are prepared on a weekly basis, with the objective of alerting Group Treasury to possible funding requirements. The Company operates its banking facilities within a Group Cash Pooling arrangement mitigating the effects of liquidity risks.

Exchange rate risk

Wartsila Defence Solutions Ltd operates in a global marketplace, and as such is exposed to foreign exchange rate risk. The company buys and sells in the same foreign currencies, which mitigates this risk.

Financial risk

The Company has intercompany lending on which interest is paid at a fixed rate. The Company has no external borrowings, and it has been deemed unnecessary to hedge any interest rate risk.

Employee engagement

The spread of the Company's business and the devolution of responsibility to local management means involving employees. Team briefings, management forums, employee councils, Wärtsilä intranet and in house newsletters are the main methods used to ensure that employees are well informed and given the forums in which to express their views and concerns regarding all areas of the business.

Employees can participate in a bonus scheme that is linked to the performance of the Wärtsilä Corporation.

Occupational health and safety matters continue to receive management attention at all levels.

It is the policy of the Company and its ultimate parent, Wärtsilä Corporation, which is incorporated in Finland, to offer equal employment opportunities to those who are disabled, provided it is practicable to offer them suitable employment, and to make every effort to provide appropriate employment for employees who become disabled. Furthermore, it is the intention to give disabled people opportunities for training, career development and promotion consistent with their capabilities.

The directors have engaged directly with employees in their respective divisions during the team briefings and have been able to advise during this on the performance of the company, economic factors affecting the company and all developments and changes affecting the employees, giving them the opportunity to ask questions and view concerns.

Going concern

The financial statements have been prepared on a going concern basis, which assumes that the Company will continue trading. The Company has an intercompany loan from its ultimate parent company, which is repayable 3 months from the agreement date, at which time it can be rolled over, and therefore the directors have obtained a letter of support from the ultimate parent Company, Wärtsilä Corporation, which states that repayment of the loan will not be required for at least 12 months following the signing of these financial statements. The high level forecasts prepared by management show that aside from the intercompany loan, the Company is able to continue to trade and settle all liabilities as they fall due for at least twelve months from the signing of these financial statements and the letter of support referred to above also confirms that the ultimate parent will provide support if required during this period. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Disclosure of information to auditors

The directors who held office at the date of approval of this directors’ report confirm that:

• So far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and

• Each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

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

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law).

Under company law, 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 the financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently

• state whether applicable United Kingdom Accounting Standards, comprising FRS 101 have been followed, subject to any material departures disclosed and explained in the financial statements

• make judgements and accounting estimates that are reasonable and prudent

• 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 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 directors are also 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.

We have audited the financial statements of Wartsila Defence Solutions Ltd (the 'company') for the year ended 31 December 2024 which comprise the income statement, the statement of comprehensive income, the statement of financial position, 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 101 Reduced Disclosure Framework (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 as set out on page 8, 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.

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.

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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Reviewing minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection; 

• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

• Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias. 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions or misrepresentations.

Use of our report

This report is made solely to the company’s member 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 member, those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.

The notes on pages 15 to 34 form part of these financial statements.

The notes on pages 15 to 34 form part of these financial statements.

The notes on pages 15 to 34 form part of these financial statements.

The notes on pages 15 to 34 form part of these financial statements.

Wartsila Defence Solutions Ltd (the “Company”) is a private company limited by shares and incorporated and domiciled in the UK.

These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”) and historic cost convention.

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

The financial statements are prepared in Sterling which is the functional currency of the company and are rounded to the nearest thousand pounds (£'000) except when otherwise stated.

Judgements made by directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 2.

The company has taken advantage of the following disclosure exemptions under FRS 101:

• the requirements of IFRS 7 Financial Instruments: Disclosures

• the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement

• the requirement in paragraph 38 of IAS 1 'Presentation of Financial Statements' to present comparative information in respect of:

  • paragraph 73(e) of IAS 16 Property, Plant and Equipment;

  • paragraph 118(e) of IAS 38 Intangible Assets;

• the requirements of IAS 7 Statement of Cash Flows

• the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures

• the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.

At the date of approval of the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence, and therefore as a going concern, for the foreseeable future, and for a minimum period of 12 months from the date of approval of these financial statements. The basis of their assessment in this respect is as set out in the directors' report on page 5. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.true

Under IFRS 15, revenues from contracts with customers, revenue recognition is based on the transfer of control, i.e. notion of control is used to determine when a good or service is transferred to the customer. In accordance, with this, the company has adopted a single comprehensive model for the accounting for revenues from contracts with customers, using a five-step approach for revenue recognition:

(1) Identifying the contract.

(2) Identifying the performance obligations in the contract.

(3) Determining the transaction price.

(4) Allocating the transaction price to the performance obligations in the contract.

(5) Recognising revenue when the Company satisfies a performance obligation.

Revenue represents amounts receivable for goods or services provided in the normal course of business excluding amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes. Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured at the fair value of the consideration received or receivable.

The company revenue is generated from the following:

Revenue recognised over-time

Long-term contracts

Long-term contracts revenue is recorded based over time based on costs incurred as a proportion of total costs to be incurred for total services provided. Cash is received on completion of agreed milestones within normal commercial terms.

Revenue recognised at a point in time

Spare parts and other product sales

Spare parts and other product revenue is recognised per the terms of sales contract, payment terms are on normal commercial terms following completion of the delivery obligations.

Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation losses. The estimated useful lives are as follows:

• Intangible in progress        3-7 years

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Amortisation is included in the profit and loss account above operating profit.

Tangible fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of tangible fixed assets have different useful lives, they are accounted for as separate items of tangible fixed assets.

Depreciation is charged to the profit and loss account on a straight-line basis over the estimated useful lives of each part of an item of tangible fixed assets. Land is not depreciated. The estimated useful lives are as follows:

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and they are recognised within ‘Other (expense)/​income’ in the income statement.

Right-of-use assets

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

• Leases of low value assets; and

• Leases with a duration of twelve months or less

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case The Company’s incremental borrowing rate on commencement of the lease is used. Other variable lease payments are expensed in the period to which they relate.

Right-of-use assets are initially measured at the amount of the lease liability.

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

To determine the incremental borrowing rate, the company:

• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received;

• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the company, which does not have recent third-party financing, and

• makes adjustments specific to the lease, e.g. term, currency and security. If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market data) which has a similar payment profile to the lease, then the company uses that rate as a starting point to determine the incremental borrowing rate.

Stocks are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle and includes expenditure incurred in acquiring the stocks, production or conversion costs and other costs in bringing them to their existing location and condition. In the case of manufactured stocks and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. Stock is stated after provision for obsolete and slow-moving items.

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

Dividends are recognised through equity on the approval by the Company’s shareholders. Dividend distributions to the company' shareholders are recognised as a liability in the company' financial statements in the period in which the dividends are approved by the company's shareholders.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

Rectification provision - estimate made by management of the cost to rectify known warranty issues, using prior experience of similar work with current material costs.

Dilapidation provision – estimate made based on area and lease length to return the property to its original state at the end of the lease term.

Foreseeable losses – cost of any agreed and not yet settled warranty claims or customer complaints pending.

Inventory devaluation - Inventories are valued at the lower cost and net realisable value. Net realisable value includes, where necessary, provisions for slow-moving and obsolete inventories. Calculation of these provisions are based on the group inventory policy which requires judgements to be made based on the review of the ageing of inventories, consumption and how long the available quantity of a material at a particular period can cover the requirements in the subsequent periods.

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account in the periods during which services are rendered by employees.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company's net obligation in respect of defined benefit pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value and the fair value of any plan assets (at bid price) are deducted. The Company determines the net interest on the net defined benefit liability/​(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/​(asset).

The discount rate is the yield at the reporting date on bonds that have a credit rating of at least AA that have maturity dates approximating the terms of the Company's obligations and that are denominated in the currency in which the benefits are expected to be paid.

Remeasurements arising from defined benefit plans comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest). The Company recognises them immediately in other comprehensive income and all other expenses related to defined benefit plans in employee benefit expenses in profit and loss.

The calculation of the defined benefit obligations is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognised asset is limited to the present value of benefits available in the form of any future refunds from the plan or reductions in future contributions and takes into account the adverse effect of any minimum funding requirements.

Short term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Termination benefits

Termination benefits are recognised as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits because of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted.

Transactions in foreign currencies are translated to the Company’s functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Research and Development

Expenditure on research activities is recognised in the profit and loss account as an expense as incurred, typically customer funded product improvements. The development costs incurred during the financial period are only related to staff costs and therefore are included in the staff costs in the profit and loss statement.

Provisions

A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation because of a past event, that can be reliably measured, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Pension Assumptions

Pension assumptions and sensitivity analysis are included in the pensions note 18. These pension assumptions are set by management and advised and administered by the fund consultants and actuaries at Isio.

Revenue

Revenue is recognised as laid out in Note 1.3. On long-term contracts, revenue is calculated using the costs incurred as a percentage of the estimated total costs to complete. The key judgement applied by management is in estimating the total costs to complete for contracts. This is estimated based on management experience of prior similar projects performed and the related costs incurred. There are no reasonably possibly changes in assumptions on an individual contract that would result in the estimate being materially different in 12 months time.

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

Staff costs, including directors' remuneration, were as follows:

The charge for the year can be reconciled to the profit/(loss) per the profit and loss account as follows:

In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:

The intangible assets in progress relate to future seal development work. Amortisation is reflected above operating profit in the profit and loss accounts.

Tangible fixed assets includes right-of-use assets, as follows:

The company has lease contracts for various buildings, equipment and vehicles used in the operations. The

amounts recognised in the financial statements in relation to the lease liabilities are as follows:

No further requirement to disclose related party transactions per FRS 101 exemption from the requirements in IAS 24 to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.

The company is aware that in July 2024 the Court of Appeal upheld the 2023 High Court decision in the Virgin Media v NTL Pension Trustees II Limited case. The decision calls into question the validity of any amendments made in respect of the rules of a contracted out pension scheme between 6 April 1997 and 5 April 2016. The judgement means that some historic amendments affecting s9(2B) rights could be void if the necessary actuarial confirmation under s37 of the Pension Schemes Act 1993 was not obtained. Whilst there is no indication that the relevant legal requirements were not met, the Trustees are considering the potential consequences of this ruling on the Scheme's liabilities, should the historical changes be deemed invalid.

However, on 5 June 2025 the UK Government announced the intention to introduce legislation that will provide affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic benefit changes met the necessary standards. Therefore, until further investigations have been completed by the Scheme’s Actuary or such legislation is enacted by the government, the potential impact if any, on the valuation of the scheme’s liabilities cannot be quantified.