ARNEG UK LIMITED

STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31ST DECEMBER 2025

Page

Company Information

1

Strategic Report

2

Report of the Directors

5

Report of the Independent Auditors

7

Statement of 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

16

DIRECTORS:

S Marzaro

F Marzaro

C R O'Connor

REGISTERED OFFICE:

62 Sunderland Road

Sandy

Bedford

Bedfordshire

SG19 1QY

REGISTERED NUMBER:

02550211 (England and Wales)

AUDITORS:

HW Bedford Limited

First Floor, Woburn Court

2 Railton Road

Woburn Rd Ind Est

Kempston

Bedfordshire

MK42 7PN

The directors present their strategic report for the year ended 31st December 2025.

REVIEW OF BUSINESS

The business has continued to progress and invest in its future with a reduction in short term margins to be expected whilst in the process of undergoing a major overhaul of the business's facilities and processes. This will enable sustained profitable performance in its core operation of cabinet manufacture in future years.

Turnover as a result of cabinet sales remains on an upward trajectory although headline sales reduced in 2025, compared to 2024 as a result of a cabinet refurbishment programme by a major customer which occurred principally during the 2024 financial period, reducing its impact substantially during 2025.

As always and in particular due to current geopolitical instability, economic uncertainties and market demands provide on-going challenge, with cost pressures both in terms of materials and labour. The business is ensuring that it is well positioned to continue efficiency drives and has a solid base to secure and further improve its financial performance.

The company has now adopted the Group name, Arneg, and the parent company continues to share the ambitious plans for the business, remaining committed to providing strong support to enable the increased manufacturing capacity and sustained growth of the business. The purchase of the business' freehold premises has established a stable base from which to support the company's investment in its people and its plant and machinery, to facilitate on-going, substantial improvements to manufacturing capabilities over the coming years.

The company is committed to reducing its carbon footprint; with a carbon reduction plan, which includes efforts on multiple fronts to reduce energy consumption alongside, for example; further investment to expand the photovoltaic cell infrastructure alongside the 'green' site development plans, as further detailed in the SECR below:

Streamlined Energy and Carbon Reporting (SECR)

Arneg UK has reported scope 1and 2 (GHG) emissions in accordance with the requirements of streamlined Energy and Carbon Reporting (SECR).

This is Arneg UK's third SECR and includes stated emissions for the most recent reporting year - the 12 months starting 01/01/2025 and ending 31/12/2025.

The report includes all required fuel calculations including propane for forklifts. There has been no significant usage of grey fleet for business during the reporting year, therefore no Scope 3 activity to report under SECR.

Reporting is on a voluntary basis and demonstrates Arneg UK's commitment to measuring and reducing emissions in line with our net zero strategy.

Methodology

Greenhouse gas emissions were calculated according to the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard.

Scope and Subject Matter

The boundary of the report includes all UK-based operations which were operational during the reporting period.

Energy and GHG sources included in the process:

- Scope 1: Fuel used in company vehicles and natural gas

- Scope 2: Purchased electricity

- 7 protocol GHGs were included: CO2, N2O, CH4, HFCs, PFCs, SF6 & NF3

The figures were calculated using UK government 2025 conversion factors, expressed as tonnes of carbon dioxide equivalent (tCO2e).

Energy Efficiency Actions

Energy efficiency and climate change are at the centre of Arneg UK's strategy. The following actions have taken place during 2025:

- Expansion of our roof mounted solar PV array.

- 12 months of 2 REGO certified 100% renewable electricity tariffs enabling market-based emissions calculations.

- Diesel and petrol company vehicles being replaced with hybrid or electric vehicles as existing contracts end

- Metal work brought in house to reduce costs and carbon emissions associated with subcontractor work and associated transport.

- PAS 2060 Carbon Neutral Award - 3rd party verified by international verification body, nqa

- 10.7% year on year reduction in emissions using Intensity ratio tCO2e/FTE

- Install of Electric Vehicle Charging Points at our Head Office in Sandy.

The following action is planned for 2025:

- 3rd Party verification of our greenhouse gas emissions to obtain the international standard for carbon neutrality, ISO 14068.

- Purchase of carbon credits to offset our carbon footprint.

Arneg UK's statements by year (in tonnes of CO2e), as follows:

Site

All UK Operations

All UK Operations

Reporting year

2025

2024

Annual Energy Consumption (KwH)

Electricity (Location based)

671,184

672,064

Electricity (Market based)

35,450

397,718

Gas

832,418

769,801

Transport fuel

295,049

347,723

Propane forklifts (FLT)

416,786

353,961

Total (Location based electricity)

2,215,437

2,143,544

Total (Market based electricity)

1,579,703

1,869,202

Annual GHG emissions (TcOzE)

Scope 1

Emissions from gas combustion

140.80

140.80

Emissions from transport fuel combustion

85.41

85.37

Emissions from propane FLT

89.69

76.16

Scope 2

Emissions from purchased electricity (location based)

152.30

139.15

Emissions from purchased electricity (market based)

6.27

82.37

Total tC02e emissions (location based electric)

428.51

395.68

Total tCO2e emissions (market based electric)

315.98

338.90

Number of full time equivalent employees (FTE's)

148

156

Intensity ratio tCO2e/FTE

2.135

2.472

Methodology

GHG Protocol Corporate Accounting and Reporting Standard

GHG Protocol Corporate Accounting and Reporting Standard

The company is proud to state that it has now achieved PAS 2060 accreditation, confirming its commitment to reducing impact on the environment through an effective, business-wide carbon management programme. In 2026 we are planning 3rd Party verification to the new ISO standard for Carbon Neutrality, ISO 14068.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board of Directors and the Management continually monitor the key risks facing the company together with the controls used for measuring these risks.

The principal risks and uncertainties facing the company are as follows:

Foreign exchange risk - a large portion of the company's income is Euro denominated. There is a risk of adverse Euro: GBP rate movements. This risk is partially offset by supplies also denominated in Euros. Uncovered exposure is subject to consideration of forward exchange contracts to minimise uncertainty of future incomes. A degree of hedging is undertaken to mitigate this risk.

Economic conditions - market uncertainty as a result of any unforeseen global issues can affect our UK markets, and can substantially impact our costs. Domestic policies more immediately affect our costs, exemplified by increases in labour and supplier costs stemming from the tightening employment legislation.

Credit risk - potential increases to interest rates are not foreseen, however a major shift in economic conditions could adversely impact the company's ability to continue to invest for growth.

KEY PERFORMANCE INDICATORS

Our Key Performance Indicators for the year to 31 December 2025 and 31 December 2024 are considered to be the following:

2025

2024

Gross profit percentage

13.5%

17.5%

Net profit before tax percentage

(1.11)%

4.88%

Average sales per employee

£195,914

£202,320

ON BEHALF OF THE BOARD:

C R O'Connor - Director

13th May 2026

The directors present their report with the financial statements of the company for the year ended 31st December 2025.

CHANGE OF NAME

At the general meeting held at 62 Sunderland Road, Sandy, Bedfordshire, SG19 1QY, the directors resolved, following the passing of a special resolution, to change the Company’s name from Manor Concepts Limited to Arneg UK Limited. This change was approved by Companies House and became effective on 11 December 2025.

DIVIDENDS

No dividends will be distributed for the year ended 31st December 2025.

DIRECTORS

The directors shown below have held office during the whole of the period from 1st January 2025 to the date of this report.

S Marzaro

F Marzaro

C R O'Connor

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.

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 company'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 company's auditors are aware of that information.

AUDITORS

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

ON BEHALF OF THE BOARD:

C R O'Connor - Director

13th May 2026

Opinion

We have audited the financial statements of Arneg UK Limited (the 'company') for the year ended 31st December 2025 which comprise the Statement of 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 31st December 2025 and of its loss 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 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 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 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 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.

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:

- Identifying and assessing the controls management has in place to prevent and detect fraud;

- Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;

- Challenging assumptions and judgments made by management in its significant accounting estimates and judgments.

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

- Assessing the extent of compliance with the relevant laws and regulations.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations are from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, 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 or intentional misrepresentations, or through collusions.

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.

Alberto Di Lorenzo FCA (Senior Statutory Auditor)

for and on behalf of HW Bedford Limited

First Floor, Woburn Court

2 Railton Road

Woburn Rd Ind Est

Kempston

Bedfordshire

MK42 7PN

13th May 2026

TURNOVER

3

28,995,337

31,561,877

Cost of sales

25,065,905

26,053,617

GROSS PROFIT

3,929,432

5,508,260

Administrative expenses

3,927,657

3,845,962

OPERATING PROFIT

6

1,775

1,662,298

Interest payable and similar expenses

8

322,385

120,514

(LOSS)/PROFIT BEFORE TAXATION

(320,610

)

1,541,784

Tax on (loss)/profit

9

577,692

(39,435

)

(LOSS)/PROFIT FOR THE FINANCIAL YEAR

(898,302

)

1,581,219

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(898,302

)

1,581,219

FIXED ASSETS

Intangible assets

10

-

-

Tangible assets

11

18,435,118

13,969,223

18,435,118

13,969,223

CURRENT ASSETS

Stocks

12

3,819,695

4,041,905

Debtors

13

5,921,255

8,397,186

Cash at bank

1,099,864

1,465,555

10,840,814

13,904,646

CREDITORS

Amounts falling due within one year

14

6,784,567

11,378,423

NET CURRENT ASSETS

4,056,247

2,526,223

TOTAL ASSETS LESS CURRENT LIABILITIES

22,491,365

16,495,446

CREDITORS

Amounts falling due after more than one year

15

(6,435,000

)

-

PROVISIONS FOR LIABILITIES

18

(905,381

)

(446,160

)

NET ASSETS

15,150,984

16,049,286

CAPITAL AND RESERVES

Called up share capital

19

13,151,960

13,151,960

Share premium

20

74,343

74,343

Retained earnings

20

1,924,681

2,822,983

SHAREHOLDERS' FUNDS

15,150,984

16,049,286

The financial statements were approved by the Board of Directors and authorised for issue on 13th May 2026 and were signed on its behalf by:

C R O'Connor - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1st January 2024

5,851,960

1,241,764

74,343

7,168,067

Changes in equity

Issue of share capital

7,300,000

-

-

7,300,000

Total comprehensive income

-

1,581,219

-

1,581,219

Balance at 31st December 2024

13,151,960

2,822,983

74,343

16,049,286

Changes in equity

Total comprehensive income

-

(898,302

)

-

(898,302

)

Balance at 31st December 2025

13,151,960

1,924,681

74,343

15,150,984

Cash flows from operating activities

Cash generated from operations

1

4,098,421

(109,851

)

Interest paid

(322,385

)

(120,514

)

Amounts owed to/from group undertakings

(2,238,727

)

1,582,371

Net cash from operating activities

1,537,309

1,352,006

Cash flows from investing activities

Purchase of tangible fixed assets

(5,234,286

)

(9,524,567

)

Net cash from investing activities

(5,234,286

)

(9,524,567

)

Cash flows from financing activities

New loans in year

7,800,000

-

Loan repayments in year

(585,000

)

-

Share issue

-

7,300,000

Net cash from financing activities

7,215,000

7,300,000

Increase/(decrease) in cash and cash equivalents

3,518,023

(872,561

)

Cash and cash equivalents at beginning of year

2

(2,418,159

)

(1,545,598

)

Cash and cash equivalents at end of year

2

1,099,864

(2,418,159

)

1.	RECONCILIATION OF (LOSS)/PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2025

2024

£

£

(Loss)/profit before taxation

(320,610

)

1,541,784

Depreciation charges

768,391

488,271

Loss on disposal of fixed assets

-

84,385

Warranty provision movement

-

65,086

Finance costs

322,385

120,514

770,166

2,300,040

Decrease/(increase) in stocks

222,210

(730,434

)

Decrease/(increase) in trade and other debtors

2,357,460

(2,899,506

)

Increase in trade and other creditors

748,585

1,220,049

Cash generated from operations

4,098,421

(109,851

)

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 31st December 2025

31/12/25

1/1/25

£

£

Cash and cash equivalents

1,099,864

1,465,555

Bank overdrafts

-

(3,883,714

)

1,099,864

(2,418,159

)

Year ended 31st December 2024

31/12/24

1/1/24

£

£

Cash and cash equivalents

1,465,555

242,723

Bank overdrafts

(3,883,714

)

(1,788,321

)

(2,418,159

)

(1,545,598

)

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1/1/25

Cash flow

At 31/12/25

£

£

£

Net cash

Cash at bank

1,465,555

(365,691

)

1,099,864

Bank overdrafts

(3,883,714

)

3,883,714

-

(2,418,159

)

3,518,023

1,099,864

Debt

Debts falling due within 1 year

-

(780,000

)

(780,000

)

Debts falling due after 1 year

-

(6,435,000

)

(6,435,000

)

-

(7,215,000

)

(7,215,000

)

Total

(2,418,159

)

(3,696,977

)

(6,115,136

)

1.	STATUTORY INFORMATION

Arneg UK 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 Company 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" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

The financial statements are presented in sterling which is the functional currency of the company and rounded to the nearest £.

The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.

Preparation of consolidated financial statements

The financial statements contain information about Arneg UK Limited as an individual company and do not contain consolidated financial information as the parent of a group. The company is exempt under Section 400 of the Companies Act 2006 from the requirements to prepare consolidated financial statements as it and its subsidiary undertaking are included by full consolidation in the consolidated financial statements of its parent, Arneg S.p.A, Via Venezia, 58, 35010 Campo San Martino PD, Italy.

Significant judgements and estimates

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

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Critical accounting judgements and key sources of estimation uncertainty

Included in the stocks held at the year end is a provision for obsolete stock. This provision is based on a judgement made by the directors using their opinion of items that are no longer saleable and based on knowledge of components that are no longer used in the manufacturing process.

Revenue

Revenue is recognised when it is probable that future economic benefit will flow to company and the revenue can be reliably measured. Revenue is measured as the fair value of consideration received or receivable, excluding any discounts, rebates and value added tax. Listed below are revenue categories and their corresponding revenue recognition policies which must be met before revenue can be recognised:

Cabinets Sales

Revenue for Cabinets sales is recognised when the goods have been dispatched.

Refurbishment or Installation Sales

Revenue for sales relating to refurbishment or installation sales is recognised when the work in relation to refurbishment or installation has been completed.

Commission Income

Commission income is recognised as and when it is received from Arneg Portugal.

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.

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

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Freehold property

-

3% on cost

Plant and machinery

-

10% on cost and 5% on cost

Fixtures and fittings

-

12% and 20% on cost

Motor vehicles

-

5% on cost

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost includes all costs of purchase, costs of conversion, overhead absorption rate and other costs incurred in bringing stock to its present location and condition. Cost is calculated using the average for the last 6 months. A provision of £139,067 (2024: £96,224) has been made for damaged, obsolete and slow-moving stock.

Financial instruments

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

Other financial assets

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

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 when the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit and loss.

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 of 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.

Other financial liabilities

Other financial liabilities, including debt instruments that do not meet the definition of a basic financial instrument, are measured at fair value through profit or loss.

Equity instruments

Equity instruments issued by the company are recorded at the proceeds received or receivable, net of transaction costs. Dividends payable or equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Research and development

Expenditure on research and development is written off in the year in which it is incurred.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.