REGISTERED NUMBER: 03357439 (England and Wales)

Group Strategic Report, Report of the Directors and

Audited Consolidated Financial Statements

for the Year Ended 31 December 2024

for

Cutting Edge Investments Limited

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Consolidated Income Statement

9

Consolidated Other Comprehensive Income

10

Consolidated Balance Sheet

11

Company Balance Sheet

12

Consolidated Statement of Changes in Equity

13

Company Statement of Changes in Equity

14

Consolidated Cash Flow Statement

15

Notes to the Consolidated Cash Flow Statement

16

Notes to the Consolidated Financial Statements

17

DIRECTORS:

Mr I S McCall

Mr M Petersen

REGISTERED OFFICE:

Unit 8, Matrix Park

Western Avenue

Buckshaw Village

Chorley

Lancashire

PR7 7NB

REGISTERED NUMBER:

03357439 (England and Wales)

AUDITORS:

Harts Limited

Chartered Accountants and Statutory Auditors

Westminster House

10 Westminster Road

Macclesfield

Cheshire

SK10 1BX

The directors present their strategic report of the company and the group for the year ended 31 December 2024.

FAIR VIEW OF BUSINESS

Turnover in 2024 was £14.3 million representing a decrease of £1.1m (7%) compared to 2023 primarily because of the year experienced by the subsidiary trading entity as described below:

Cutting Edge Services

This reduction reflects a period of operational restructuring and consolidation aimed at positioning the business for future growth and resilience. Gross margins reduced slightly during the year, primarily due to increased price competition and changes in sales mix.

Despite a decline in turnover and margin, the company maintained strong financial discipline. This is reflected in an improvement in the bank balances and in the utilisation of the factoring facility of £378k when comparing 2023 to 2024.

In the US market, a further modified Frenching machine was sold to the existing customer, maintaining presence in this strategically important sector.

Employee ownership continues to embed with the EOT structure now well established and the employee council active in representing staff views. The company recently held its first town hall where directors updated employees on progress and fielded a Q&A session.

During the year Phocas business intelligence software was used to prepare the 2024 budget and monthly management accounts, enhancing data analytics and reporting capabilities across the business.

Towards the end of 2024 the company retired its ageing on-premise server and migrated all files and applications to a hosted Azure instance. This enabled the upgrade of Sage 200 from the 2018 version to 2024 R2, negating the need for a new ERP system.

The company also changed its managed service provider during the year and implemented their Cyber Security Sphere, tightening the security of its IT infrastructure and providing ongoing education for staff on cyber risks.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks within the business continue to be competitive pricing pressures and the capital investment decisions of large customers. Inflationary pressures and high interest rates continued into 2024, though there are signs these are now easing towards the year end.

The company also remains exposed to currency exchange rate risk, particularly in relation to the US Dollar and Euro, which is monitored on an ongoing basis with forward contracts used where appropriate to mitigate exposure.

DEVELOPMENT AND PERFORMANCE

The directors monitor performance through detailed monthly management accounts comparing actual performance against budget and prior year.

Key performance indicators utilised in monitoring performance are:

- Increase/(decrease) in annual revenue 2024: -7% (2023: +3%)

- Gross margin 2024: 34.9% (2023: 36.2%)

Other performance indicators include:

- Monitoring of turnover by business division daily vs target for the month

- Daily cash collection vs target for the month

- Break-even turnover

- Monthly detailed service/product margin analysis vs budget and previous year

- 13-week cash flows prepared on a regular basis

FUTURE PERFORMANCE

In 2025 the company intends to extend use of Phocas to assist in procurement and stock management. It will continue its rolling programme of hardware upgrades, maintain strong cyber security measures, and invest in the innovative development of food processing and safety equipment to support growth.

CONCLUSION

The directors consider the group and company to be well placed to face the challenges and opportunities ahead.

ON BEHALF OF THE BOARD:

Mr I S McCall - Director

29 September 2025

The directors present their report with the financial statements of the company and the group for the year ended 31 December 2024.

PRINCIPAL ACTIVITY

The principal activity of the company continued to be that of provision of management services to the group.

The principal activity of the group continued to be the supply of capital equipment and ancillary parts to the meat, fish and and food related industries; the provision of knife and blade sharpening services; and the supply of abattoir and butchery supplies, supported by a range of personal protective equipment.

DIVIDENDS

The total distribution of dividends for the year ended 31 December 2024 was £nil (2023: £2,900).

DIRECTOR

Mr I S McCall held office during the whole of the period from 1 January 2024 to the date of this report.

Other changes in directors holding office are as follows:

Mr M Petersen was appointed as a director after 31 December 2024 but prior to the date of this report.

DISCLOSURE IN THE STRATEGIC REPORT

In accordance with section 414A of the Companies Act 2006, the group has prepared a strategic report which can be found on page 2 and which includes a fair review of the group’s business and a description of the principal risks and uncertainties facing the group.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group Strategic Report, the Report of the Directors 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 the group and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

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

-	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 and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group 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 the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS

The auditors, Harts Limited, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Mr I S McCall - Director

29 September 2025

Opinion

We have audited the financial statements of Cutting Edge Investments Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2024 which comprise the Consolidated Income Statement, Consolidated Other Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the group's and of the parent company affairs as at 31 December 2024 and of the group's profit for the year then ended;

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

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

Basis for opinion

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

Conclusions relating to going concern

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

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

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

Other information

The directors are responsible for the other information. The other information comprises the information in the Group Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

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.

In connection with our audit of the financial statements, 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 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 the audit:

-	the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Group Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Report of the Directors.

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

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

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

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

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

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, 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 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 group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors 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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

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.

The primary responsibility for the prevention and detection of non-compliance with laws and regulations, including fraud, rests with both those charged with governance of the entity and management.

We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and considered acts by the group that were contrary to these laws and regulations, including fraud.

We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of an override of controls) and determined that the principle risks were related to income recognition. We also determined that there is a risk of inappropriate journal entries being included.

Appropriate procedures performed by the engagement team included:

- Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations;

- Challenging the assumptions and judgements made by management in their significant accounting estimates;

- Reviewing the minutes of meetings of the Board of Directors;

- Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud; and

- Performing analytical procedures to identify and unusual or unexpected relationships that may indicate risks of material misstatement due to fraud.

There are inherent limitations in the audit procedures described above. The further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, intentional misrepresentation or through collusion.

Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations that could materially impact the financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

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 a Report of the Auditors 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.

Melissa Bowers FCCA (Senior Statutory Auditor)

for and on behalf of Harts Limited

Chartered Accountants and Statutory Auditors

Westminster House

10 Westminster Road

Macclesfield

Cheshire

SK10 1BX

30 September 2025

TURNOVER

3

14,291,567

15,403,136

Cost of sales

(9,297,961

)

(9,829,452

)

GROSS PROFIT

4,993,606

5,573,684

Administrative expenses

(3,467,807

)

(4,092,802

)

OPERATING PROFIT

5

1,525,799

1,480,882

Interest payable and similar expenses

7

(145,941

)

(154,880

)

PROFIT BEFORE TAXATION

1,379,858

1,326,002

Tax on profit

8

(369,438

)

(254,961

)

PROFIT FOR THE FINANCIAL YEAR

1,010,420

1,071,041

Profit attributable to:

Owners of the parent

1,010,420

1,071,041

PROFIT FOR THE YEAR

1,010,420

1,071,041

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

1,010,420

1,071,041

Total comprehensive income attributable to:

Owners of the parent

1,010,420

1,071,041

FIXED ASSETS

Intangible assets

11

52,840

69,522

Tangible assets

12

106,877

111,351

Investments

13

-

-

159,717

180,873

CURRENT ASSETS

Stocks

14

2,245,807

2,700,015

Debtors

15

3,116,420

3,081,630

Cash at bank and in hand

127,590

123,937

5,489,817

5,905,582

CREDITORS

Amounts falling due within one year

16

(4,919,187

)

(5,401,157

)

NET CURRENT ASSETS

570,630

504,425

TOTAL ASSETS LESS CURRENT LIABILITIES

730,347

685,298

CREDITORS

Amounts falling due after more than one year

17

(72,382

)

(194,432

)

PROVISIONS FOR LIABILITIES

20

(23,100

)

(34,502

)

NET ASSETS

634,865

456,364

CAPITAL AND RESERVES

Called up share capital

21

450

450

Retained earnings

22

634,415

455,914

SHAREHOLDERS' FUNDS

634,865

456,364

The financial statements were approved by the Board of Directors and authorised for issue on 29 September 2025 and were signed on its behalf by:

Mr I S McCall - Director

FIXED ASSETS

Intangible assets

11

-

-

Tangible assets

12

-

-

Investments

13

797,098

797,098

797,098

797,098

CURRENT ASSETS

Debtors

15

6,674

14,424

Cash at bank

1,315

1,565

7,989

15,989

CREDITORS

Amounts falling due within one year

16

(533,661

)

(541,661

)

NET CURRENT LIABILITIES

(525,672

)

(525,672

)

TOTAL ASSETS LESS CURRENT LIABILITIES

271,426

271,426

CAPITAL AND RESERVES

Called up share capital

21

450

450

Retained earnings

22

270,976

270,976

SHAREHOLDERS' FUNDS

271,426

271,426

Company's profit for the financial year

831,919

906,564

The financial statements were approved by the Board of Directors and authorised for issue on 29 September 2025 and were signed on its behalf by:

Mr I S McCall - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2023

450

289,308

289,758

Changes in equity

Contribution to Employee Ownership Trust

-

(901,535

)

(901,535

)

Dividends

-

(2,900

)

(2,900

)

Total comprehensive income

-

1,071,041

1,071,041

Balance at 31 December 2023

450

455,914

456,364

Changes in equity

Contribution to Employee Ownership Trust

-

(831,919

)

(831,919

)

Total comprehensive income

-

1,010,420

1,010,420

Balance at 31 December 2024

450

634,415

634,865

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2023

450

265,948

266,398

Changes in equity

Contribution to Employee Ownership Trust

-

(901,536

)

(901,536

)

Total comprehensive income

-

906,564

906,564

Balance at 31 December 2023

450

270,976

271,426

Changes in equity

Contribution to Employee Ownership Trust

-

(831,919

)

(831,919

)

Total comprehensive income

-

831,919

831,919

Balance at 31 December 2024

450

270,976

271,426

Cash flows from operating activities

Cash generated from operations

1

1,748,404

2,389,462

Interest paid

(141,697

)

(150,978

)

Interest element of hire purchase payments paid

(4,244

)

(3,902

)

Tax paid

(191,651

)

(245,656

)

Net cash from operating activities

1,410,812

1,988,926

Cash flows from investing activities

Purchase of intangible fixed assets

(17,901

)

-

Purchase of tangible fixed assets

(81,515

)

(43,053

)

Sale of intangible fixed assets

11,614

-

Sale of tangible fixed assets

2,165

-

Net cash from investing activities

(85,637

)

(43,053

)

Cash flows from financing activities

Loan repayments in year

(485,940

)

(1,003,948

)

Capital repayments in year

(3,663

)

30,122

Amount withdrawn by directors

-

(100,000

)

Contributions to EOT

(831,919

)

(904,192

)

Equity dividends paid

-

(2,900

)

Net cash from financing activities

(1,321,522

)

(1,980,918

)

Increase/(decrease) in cash and cash equivalents

3,653

(35,045

)

Cash and cash equivalents at beginning of year

2

123,937

158,982

Cash and cash equivalents at end of year

2

127,590

123,937

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

31.12.24

31.12.23

£

£

Profit before taxation

1,379,858

1,326,002

Depreciation charges

107,235

138,388

Profit on disposal of fixed assets

(474

)

-

Finance costs

145,941

154,880

1,632,560

1,619,270

Decrease in stocks

454,208

132,416

(Increase)/decrease in trade and other debtors

(34,790

)

1,513,916

Decrease in trade and other creditors

(303,574

)

(876,140

)

Cash generated from operations

1,748,404

2,389,462

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 December 2024

31.12.24

1.1.24

£

£

Cash and cash equivalents

127,590

123,937

Year ended 31 December 2023

31.12.23

1.1.23

£

£

Cash and cash equivalents

123,937

158,982

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1.1.24

Cash flow

At 31.12.24

£

£

£

Net cash

Cash at bank and in hand

123,937

3,653

127,590

123,937

3,653

127,590

Debt

Finance leases

(30,122

)

3,663

(26,459

)

Debts falling due within 1 year

(1,299,569

)

368,637

(930,932

)

Debts falling due after 1 year

(167,866

)

117,303

(50,563

)

(1,497,557

)

489,603

(1,007,954

)

Total

(1,373,620

)

493,256

(880,364

)

1.	STATUTORY INFORMATION

Cutting Edge Investments Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the General Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", FRC's Ethical Standard and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

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 £.

Financial Reporting Standard 102 - reduced disclosure exemptions

The group has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);

•

the requirements of paragraphs 26.18(b), 26.19 to 26.21 and 26.23;

•

the requirement of paragraph 33.7.

Basis of consolidation

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

The consolidated group financial statements consist of the financial statements of the parent company Cutting Edge Investments Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

All financial statements are made up to 31 December 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.

Turnover

Sale of goods

Turnover is recognised at the fair value of the consideration received or receivable, excluding trade discounts, settlement discounts and volume rebates, for sale of goods and is shown net of VAT and other sales related taxes.

Turnover 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.

Rendering of services

Revenue from the services, provided in the normal course of business, is recognised when the outcome of a transaction can be estimated reliably and turnover from services is recognised by reference to the stage of completion at the balance sheet date. Stage of completion is measured by reference to finalisation of work completed.

Where the outcome cannot be measured reliably, turnover is recognised only to the extent of the expenses recognised that are recoverable.

Goodwill

Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is in line with the lease period of subsidiaries acquired and is generally up to 10 years.

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

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Development costs are being amortised evenly over their estimated useful life of three years.

Computer software is being amortised evenly over its estimated useful life of three years.

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

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Improvements to property

-

Over the period of the lease

Plant and machinery

-

25% on cost

Fixtures and fittings

-

25% on cost

Motor vehicles

-

33% on cost

Computer equipment

-

33% on cost

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

Impairment of fixed assets

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Stocks

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.

Cost is calculated using the first-in first out method and includes the normal cost of transporting stock to its present location and condition.

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

Financial instruments

The group 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 group's balance sheet when the group becomes party to the contractual provisions of the instrument.

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

Basic financial assets

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.

Impairment of financial assets

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

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

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

Derecognition of financial assets

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

Classification of financial liabilities

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

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

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

Derecognition of financial liabilities

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.