REGISTERED NUMBER: 04803506 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements for the Year Ended 30 September 2025

for

Threeshires Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Independent Auditors' Report

6

Income Statement

9

Other Comprehensive Income

10

Balance Sheet

11

Statement of Changes in Equity

12

Cash Flow Statement

13

Notes to the Cash Flow Statement

14

Notes to the Financial Statements

15

DIRECTORS:

J B Lloyd

J L Lloyd

M S Elson

W H Schofield

T Broughton Lloyd

SECRETARY:

J L Lloyd

REGISTERED OFFICE:

Toll Bar House

1 Derby Road

Ilkeston

Derbyshire

DE7 5FH

REGISTERED NUMBER:

04803506 (England and Wales)

INDEPENDENT AUDITORS:

BK Plus Audit Limited

Azzurri House

Walsall Road

Aldridge

Walsall

West Midlands

WS9 0RB

The directors present their strategic report for the year ended 30 September 2025.

FAIR REVIEW OF THE BUSINESS

The principal activities of the company during the year were Environmental Appraisal & Contracting Services. The company's' suite of contracting services includes large scale site clearance, arboriculture works, the design and implementation of all types of ecological mitigation and enhancement measures, habitat creation and management, fencing and landscaping, and the design and implementation of invasive weed solutions. Alongside our contracting business, we also have an experienced team of Ecological and Heritage Consultants.

The company has a consistent and proactive approach to investing in its people and is equally passionate in the environment.

The company has considerable financial resources and contracts with a number of blue chip clients across different geographic areas. Accordingly, we believe that the company is well placed to manage it business risks successfully. The sustained improvement in customer service levels have helped to enable the company to build for the future whilst further investing in the foundations for future growth.

Turnover for the year ended 30 September 2025 was £7,414,028 (2024: £7,597,867), representing a decrease of £183,839 (2.42%) year on year. The reduction in revenue primarily reflects a change in the mix of work undertaken during FY25. The business has historically generated a significant proportion of turnover from fencing and other highly material- and labour-intensive projects. During FY25, this was partially replaced by larger maintenance, spraying, and clearance contracts. While these projects typically generate lower absolute revenues, they deliver stronger margins and a more efficient use of resources.

In addition, the business experienced an ongoing shortage of high-quality subcontract labour. As a result, management adopted a cautious approach to accepting additional work that could not be delivered primarily through internal resources, prioritising quality, delivery certainty, and reputational protection over short-term revenue growth.

Gross profit for the year was £3,601,612 (2024: £3,474,937), an increase of £126,675 (3.64%) compared with the prior year. This improvement reflects both the change in the mix of works undertaken and continued incremental efficiency gains across operations. The shift towards lower-revenue but higher-margin activities has positively impacted gross margin performance, demonstrating the underlying strength and resilience of the operating model.

Operating profit for the year was £309,724 (2024: £407,790), representing a decrease compared to the prior year. Several factors contributed to this reduction. Depreciation increased materially following capital expenditure undertaken during the year, including investment in operational capabilities and the renewal of the vehicle fleet. These investments are expected to support operational resilience and efficiency in future periods.

Staff costs also increased as a result of rises in the National Minimum Wage and National Living Wage, alongside actions taken to retain key personnel and maintain the business’s position as a competitive employer in a challenging labour market. In addition, the business experienced industry-wide cost increases in accreditations and certifications required to operate in the normal course of business. The year also included a number of high-value, non-recurring repair costs relating to personal protective equipment (PPE).

Amounts recoverable on contracts at 30 September 2025 totalled £153,573 (2024: £35,807). The increase reflects the position of several significant contracts that were at an early stage of delivery at the reporting date. These projects had incurred substantial upfront costs relating to material procurement and mobilisation, with limited installation or performance activity completed by year-end. Key contracts contributing to this balance include Sizewell C, Boothby, and EGL-2 Bridlington.

Additionally, there remains a material recoverable balance in respect of the Hornsea project, where certified payments to date do not fully reflect the value of work completed as at the reporting date. Management remains confident that these balances will be recovered in the normal course of contract administration.

PRINCIPAL RISKS AND UNCERTAINTIES

We see a number of risks for the year ahead which are disclosed below. We are constantly monitoring and reviewing to minimise the potential impact.

Loss of employees

Staff appraisals are conducted to improve communication, review salaries and working conditions to ensure the company remains a competitive employer.

Economic climate

Throughout our years in business there have been many periods of economic downturn. We manage the times with tight controls and measures to limit our exposure.

Credit risk

The company's principal financial assets are bank balances and other trade receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The company only trades with reputable companies to minimise this risk.

Liquidity risk

The company manages its cash and borrowing requirement to ensure the company has sufficient liquid resources to meet the operating needs of the business, and reviews cashflow projections to ensure there is sufficient headroom in forecasts.

KEY PERFORMANCE INDICATORS

For the year ended 30 September 2025 performance is reported using the following key performance indicators which has been described in our report above:

Turnover £7,414,028 (2024 - 7,597,867)

Profit before taxation £117,354 (2024 - £354,776)

Net assets £3,964,726 (2024 - £3,647,781)

ON BEHALF OF THE BOARD:

J B Lloyd - Director

16 April 2026

The directors present their report with the financial statements of the company for the year ended 30 September 2025.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of environmental appraisal & contracting services.

DIVIDENDS

An interim dividend of £24.8228 per share was paid on the Ordinary £1 shares on 6 April 2025. No dividends were paid on any other classes of shares.

The total distribution of dividends for the year ended 30 September 2025 will be £248,228.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 October 2024 to the date of this report.

J B Lloyd

J L Lloyd

M S Elson

W H Schofield

T Broughton Lloyd

As permitted by the Articles of Association, the Directors have the benefit of an indemnity, which is a qualifying third-party indemnity provision by section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force.

GOING CONCERN AND FUTURE DEVELOPMENTS

The financial statements have been prepared on a going concern basis, which assumes that the company will continue in operational existence for the foreseeable future.

The directors have prepared profit and cash flow forecasts for the company for a period of at least 12 months from

the date of approval of the financial statements. Based on this review, along with assessing the latest financial

performance of the company in FY26, the directors consider the company to have sufficient resources to continue

trading for a period of at least 12 months from the date of approval of the financial statements, being able to meet its

liabilities as and when they fall due.

Because of the reasons set out above, the directors have adopted the going concern basis in preparing the financial statements and have concluded that there are no material uncertainties present in relation to going concern.

DISCLOSURE IN THE STRATEGIC REPORT

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 financial risk

management.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the 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 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;

-	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.

INDEPENDENT AUDITOR

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

ON BEHALF OF THE BOARD:

J B Lloyd - Director

16 April 2026

Opinion

We have audited the financial statements of Threeshires Limited (the 'company') for the year ended 30 September 2025 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the 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 company's affairs as at 30 September 2025 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 qualified 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 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 directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Auditors' Report 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 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 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 company and its environment obtained in the course of the audit, we have not identified material misstatements in the 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, 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.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page five, 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 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.

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 an Auditors' 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.

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.

From the preliminary of the audit, we ensure our understanding of the entity is up to date. This includes, but is not

limited to, current knowledge of their activities, the business and control environments, and their compliance with the

applicable legal and regulatory frameworks. This information supports our risk identification and the subsequent design

of audit procedures to mitigate those risks; ensuring that the audit evidence obtained is sufficient and appropriate to

support our opinion.

In response to the risks identified, specific to this entity, we designed procedures which included, but were not limited

to:

- Enquiry of management and those charged with governance around actual and potential litigation and claims;

- Reviewing minutes of meetings of those charged with governance, if available;

- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with

applicable laws and regulations;

- Auditing the risk of management override of controls, including through testing journal entries and other adjustments

for appropriateness, and evaluating the business rationale for significant transactions outside the normal course of

business.

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 Auditors' 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 Auditors' 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.

Andrew Williams FCCA (Senior Statutory Auditor)

for and on behalf of BK Plus Audit Limited

Azzurri House

Walsall Road

Aldridge

Walsall

West Midlands

WS9 0RB

16 April 2026

TURNOVER

4

7,414,028

7,597,867

Cost of sales

3,793,630

4,122,930

GROSS PROFIT

3,620,398

3,474,937

Administrative expenses

3,569,319

3,118,923

51,079

356,014

Other operating income

5

177,975

51,776

OPERATING PROFIT

7

229,054

407,790

Interest receivable and similar income

2,349

1,456

231,403

409,246

Interest payable and similar expenses

8

114,049

54,470

PROFIT BEFORE TAXATION

117,354

354,776

Tax on profit

9

(447,819

)

169,225

PROFIT FOR THE FINANCIAL YEAR

565,173

185,551

PROFIT FOR THE YEAR

565,173

185,551

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

565,173

185,551

FIXED ASSETS

Tangible assets

11

2,680,402

2,779,965

Investments in joint venture

12

-

150,000

Investment property

13

456,050

-

3,136,452

2,929,965

CURRENT ASSETS

Stocks

14

329,225

384,729

Debtors

15

2,343,251

2,532,418

Cash at bank

748,621

509,086

3,421,097

3,426,233

CREDITORS

Amounts falling due within one year

16

1,159,155

1,342,728

NET CURRENT ASSETS

2,261,942

2,083,505

TOTAL ASSETS LESS CURRENT LIABILITIES

5,398,394

5,013,470

CREDITORS

Amounts falling due after more than one year

17

(825,327

)

(680,980

)

PROVISIONS FOR LIABILITIES

21

(608,341

)

(684,709

)

NET ASSETS

3,964,726

3,647,781

CAPITAL AND RESERVES

Called up share capital

22

10,525

10,525

Revaluation reserve

23

111,840

111,840

Retained earnings

23

3,842,361

3,525,416

SHAREHOLDERS' FUNDS

3,964,726

3,647,781

The financial statements were approved by the Board of Directors and authorised for issue on 16 April 2026 and were signed on its behalf by:

J B Lloyd - Director

Called up

share

Retained

Revaluation

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 October 2023

10,525

3,506,879

111,840

3,629,244

Changes in equity

Dividends

-

(167,014

)

-

(167,014

)

Total comprehensive income

-

185,551

-

185,551

Balance at 30 September 2024

10,525

3,525,416

111,840

3,647,781

Changes in equity

Dividends

-

(248,228

)

-

(248,228

)

Total comprehensive income

-

565,173

-

565,173

Balance at 30 September 2025

10,525

3,842,361

111,840

3,964,726

Cash flows from operating activities

Cash generated from operations

1

622,696

322,563

Interest paid

-

(1,734

)

Interest element of hire purchase payments paid

(114,049

)

(52,736

)

Tax paid

223,656

-

Taxation refund

207,039

189,775

Net cash from operating activities

939,342

457,868

Cash flows from investing activities

Purchase of tangible fixed assets

(167,487

)

(53,984

)

Purchase of investment property

(456,050

)

-

Sale of tangible fixed assets

253,799

125,000

Sale of fixed asset investments

248,000

-

Sale and leaseback

500,025

-

Interest received

2,349

1,456

Net cash from investing activities

380,636

72,472

Cash flows from financing activities

Loan repayments in year

-

(138,047

)

Loan receipts in year

20,000

-

Capital repayments in year

(764,417

)

(496,400

)

SIPP Payments

(336,026

)

-

Net cash from financing activities

(1,080,443

)

(634,447

)

Increase/(decrease) in cash and cash equivalents

239,535

(104,107

)

Cash and cash equivalents at beginning of year

2

509,086

613,193

Cash and cash equivalents at end of year

2

748,621

509,086

1.	RECONCILIATION OF PROFIT FOR THE FINANCIAL YEAR TO CASH GENERATED FROM OPERATIONS

2025

2024

£

£

Profit for the financial year

565,173

185,551

Depreciation charges

549,187

480,250

Profit on disposal of fixed assets

(92,614

)

(47,938

)

Profit on disposal of investment

(98,000

)

-

Finance costs

114,049

54,470

Finance income

(2,349

)

(1,456

)

Taxation

(447,819

)

169,225

587,627

840,102

Decrease/(increase) in stocks

55,504

(63,844

)

Decrease/(increase) in trade and other debtors

178,864

(135,561

)

Decrease in trade and other creditors

(199,299

)

(318,134

)

Cash generated from operations

622,696

322,563

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 30 September 2025

30/9/25

1/10/24

£

£

Cash and cash equivalents

748,621

509,086

Year ended 30 September 2024

30/9/24

1/10/23

£

£

Cash and cash equivalents

509,086

613,193

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1/10/24

Cash flow

At 30/9/25

£

£

£

Net cash

Cash at bank

509,086

239,535

748,621

509,086

239,535

748,621

Debt

Finance leases

(1,223,028

)

(175,753

)

(1,398,781

)

(1,223,028

)

(175,753

)

(1,398,781

)

Total

(713,942

)

63,782

(650,160

)

1.	STATUTORY INFORMATION

Threeshires Limited is a private company limited by shares, registered in England & Wales. The company's registered office address is Toll Bar House, 1 Derby Road, Ilkeston, England, DE7 5FH.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with FRS102 "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, as modified for certain assets being measured at revalued amount.

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

Going Concern

The financial statements have been prepared on a going concern basis, which assumes that the company will continue in operational existence for the foreseeable future.

The directors have prepared profit and cash flow forecasts for the company for a period of at least 12 months from the date of approval of the financial statements. Based on this review, along with assessing the latest financial performance of the company in FY26, the directors consider the company to have sufficient resources to continue trading for a period of at least 12 months from the date of approval of the financial statements, being able to meet its liabilities as and when they fall due.

Because of the reasons set out above, the directors have adopted the going concern basis in preparing the financial statements and have concluded that there are no material uncertainties present in relation to going concern.

Turnover

Where the outcome of a contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When it is probable that total contract costs will exceed total turnover, the expected loss is recognised as an expense immediately.

Where the outcome of a contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs if the contract is obtained in a subsequent period.

The "percentage of completion method" is used to determine the appropriate amount to recognise in a given period. The stage of completion is measured by obtaining certified surveys of work completed.

Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases.

Freehold property

15% on reducing balance

Plant and machinery

10% on straight line

Office equipment

33% on straight line

Motor vehicles

25% on reducing balance

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.

Fixed asset investments

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-

term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

Impairment of fixed assets

At each reporting period end date, the company reviews the carrying amounts of its tangible 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.

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

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

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-

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

Stocks

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

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

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

Cash and cash equivalents

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

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

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 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.

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 company after deducting all its liabilities.

Basic financial 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.

Derecognition of financial liabilities

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

Equity instruments

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.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax

Current Tax

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from the net profit as reported in the income statement 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 calculate during rates of tax that have been enacted or substantively enacted by the reporting date.

Deferred tax

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.

Foreign exchange

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.

Hire purchase and leasing commitments

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.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee's services are

received.

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

Retirement benefits

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

3.	JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised where the revision affects only that

period, or in the period of the revision and future periods where the revision affects both current and future

periods.

Key sources of estimation uncertainty

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.

Profitability of contracts

The determination of work in progress balances resulting in contract assets and contract liabilities requires the exercise of judgement in relation to the estimated percentage completion and profit to be earned on each contract. The company obtain third party certification when making applications for payment, reducing the estimation uncertainty in relation to percentage completion of revenue. Contract assets and liabilities are therefore based on the expectation of profitability on contracts leading to either cost accruals or prepayments.