The directors present the strategic report for the period ended 31 December 2024. All figures are in £000 unless otherwise stated.

The principal activity of the company during the period was the manufacture and distribution of precision optical equipment, and the distribution of holesaws, bandsaws and precision tools. The company sell these and other sourced products throughout the world. Our main objectives is to be the supplier of choice to our customers and to provide a satisfactory return to our investors.

The wider Starrett group was acquired by MiddleGround Capital and delisted from the New York Stock Exchange in May 2024. The company now operates as part of a privately held group under this ownership structure. In order to align with MiddleGround Capital’s portfolio company, the company amended its accounting year end date, resulting in an extended accounting period of 18 months.

In November 2024, the company implemented a new ERP system which integrated key business processes across finance, operations, sales and inventory management. The new system provides enhanced financial visibility, improved data integrity and internal controls, and a scalable platform to support the company’s ongoing operational development.

At the time of the ERP transition, a decision was taken not to extend the license for the legacy system. Whilst data necessary to meet minimum compliance requirements was retained, the company no longer had access to the underlying system and therefore did not have the ability to review the detailed transactional records within the legacy platform. As a result, the company was unable to substantiate certain cost of sales balances and pricing of stock to the level of detail required for audit purposed, and accordingly the auditors have issued a disclaimer of opinion in respect of the financial statements.

The company has undertaken a number of organisational and operational changes. These include changes to the composition of the Board, the establishment of a new finance team and the development of enhanced ERP capabilities. In addition, the company has carried out various works to our Jedburgh site, including consolidation of our internal operations into one location, allowing for future reduced operating costs and more rental space available. These actions form part of a broader programme to enhance financial control, operational performance and the overall efficiency of the business.

The Statement of comprehensive income is set out on page 9 and shows pre-tax loss of £2,250 (2023: profit £351).

The company continues to maintain a strong financial position with a positive cash balance at the period-end of £960 (2023: £887), and net assets of £3,525 (2023: £7,475) indicating a continued strong liquidity and capacity to meet short-term financial obligations.

The company has key performance indicators around sales growth and gross profit. In the period sales did increase by 33% however the gross profit percentage did decrease by 8% from 26% last year to 18% this year. This is largely due to extensive renovation and site works which are included within cost of sales. Given that the current period is 18 months compared to the previous 12 month period, these figures are not a like for like comparison. This period operating loss of £2,250 was recorded compared to an operating profit of £351 in the prior year.

The directors have reviewed the forecasts, incorporating sensitivity analysis to assess potential impacts of varying economic conditions, for the period of 12 months from the date of the approval of these financial statements which indicate that the company will remain cash positive with no external funding requirement. The company benefits from the support of its parent company, L S Starrett Company Inc, who will financially support the company if necessary for at least 12 months following the date of approval of the financial statements.

The company seeks to fund its operation using various financial instruments such as cash and liquid resources as well as trade debtors and trade creditors. The company manages foreign currency transaction exposure of both sales and purchases using currency bank accounts. No speculative currency contracts are entered into. The company’s credit risk is primarily attributable to its trade debtors, which are managed through regular internal monitoring and review processes.

The directors are confident of a sustained market for the company’s products in the long term and future profitability of the business.

However, war in Ukraine and Israel continues to have an impact on global inflation, which continues to show a slowdown in the sales of saw products. Global freight operations and costs associated are facing continued challenges from geopolitical pressures and cost of fuel.

This continued pressure on global inflation sees a significant impact on the supply chain risk, with freight and material costs volatility posing the greatest risks to the business now that saw manufacturing is completed within China, Brazil and USA.

In the current year the business has continued to execute its growth plans of the distribution facility and increase in sales market with the appointment of key sales personnel to drive the targeted sales growth strategy.

With the growing consumer awareness of climate concerns, the directors continue to review the methods of manufacture, transportation, packaging of products, business travel and energy usage for our premises. Improvements have been made to our global packaging solutions with plastic being removed where possible and a reduction in the use of cardboard.

The principal site of the business remains in Jedburgh, with the site continuing to be modernised for the future business, and to provide further rental space to the market.

On behalf of the board

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

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

The directors approved the payment of an interim dividend of £Nil during the period (2023: £2,250) with no final dividend proposed.

During the period the company's directors also took the decision to change the company's reporting period to 31 December 2024.

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

Management considers key management personnel to only be the directors of the company. The remuneration payable to the directors has been disclosed within note 8.

Going concern

The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. As a result the directors continue to adopt the going concern basis in preparing annual financial statements.

Please see note 1.3 for further information.

The company has made qualifying third party indemnity provisions for the benefit of its directors during the period. These provisions remain in force at the reporting date.

The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.

The company is exposed to currency exchange risk due to a significant proportion of its receivables and operating expenses being denominated in Non-Sterling currencies. The net exposure of each currency is monitored and managed by the use of currency bank accounts. There were no open foreign exchange contracts at year end.

All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.

In July 2025, the Company engaged a third-party logistics provider in the Netherlands, enabling the Company to service customers within the European Union more efficiently through reduced trade barriers and improved delivery times.

BDO LLP were appointed as auditor to the company for the period ended 31 December 2024. BDO LLP will not be re-appointed as auditors.

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

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

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

• select suitable accounting policies and then apply them consistently;

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

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

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

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

Disclaimer of opinion

We were engaged to audit the financial statements of The L. S. Starrett Company Limited (the 'Company') for the 18 month period ended 31 December 2024 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity and 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).

We do not express an opinion on the accompanying financial statements of the Company. Because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

Basis for disclaimer of opinion

The audit evidence available to us in respect of cost of sales was limited due to the Company’s transition to a new ERP system in November 2024. We were unable to satisfy ourselves by alternative means concerning the cost of sales of £11.26m included in the statement of comprehensive income. As a result of this limitation, we were unable to determine the resulting impact on the tax on loss stated at £853k in the statement of comprehensive income. In addition, management were unable to provide sufficient appropriate audit evidence to support the pricing of stock, which are stated in the statement of financial position at £4.8m.

Consequently, we were unable to determine whether any adjustments to cost of sales, stock and tax on loss was necessary or whether there were any consequential adjustments to other related balances. In addition as a result of the transition to a new ERP system we were unable to obtain all of the information and explanations we considered necessary for our audit.

Further the Directors have decided that it is in the best interests of the company to file the financial statements despite the audit being incomplete. This represents a management-imposed limitation in the scope of our audit.

The combination of the financial statement areas noted above was considered to represent a substantial portion of the financial statements for the period ended 31 December 2024 and therefore was considered to be pervasive. Accordingly, we do not express an opinion on the financial statements of the Company for the period ended 31 December 2024.

Other Companies Act 2006 reporting

Because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we have been unable to form an opinion, whether based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial period for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Notwithstanding our disclaimer of an opinion on the financial statements, in the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit performed subject to the pervasive limitation described above, we have not identified material misstatements in the strategic report or the directors’ report.

Arising from the limitation of our work referred to above:

• we have not obtained all information and explanations that we considered necessary for the purpose of our audit; and

• we were unable to determine whether adequate accounting records have been kept.

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

• 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.

As explained more fully in the Statement of directors' responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to conduct an audit of the Company’s financial statements in accordance with International Standards on Auditing (UK) and to issue an auditor’s report.

However, because of the matter described in the basis for disclaimer of opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

We are independent of the Company in accordance with the ethical requirements that are relevant for 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.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Non-compliance with laws and regulations

Based on:

• Our understanding of the Company and the industry in which it operates;

• Discussion with management and those charged with governance;

• Obtaining an understanding of the Company’s policies and procedures regarding compliance with laws and regulations.

we considered the significant laws and regulations to be UK Generally Accepted Accounting Practice, the Companies Act 2006 and UK tax legislation.

The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the health and safety legislation.

Because of the significance of the matters described in the Basis for disclaimer of opinion section of our report, our procedures in respect of the above have been limited to:

• Review of minutes of meetings of those charged with governance for any instances of non-compliance with laws and regulations;

• Review of correspondence with tax authorities for any instances of non-compliance with laws and regulations;

• Review of financial statement disclosures and agreeing to supporting documentation;

• Review of legal expenditure accounts to understand the nature of expenditure incurred.

Fraud

We assessed the susceptibility of the financial statements to material misstatement, including fraud. Because of the significance of the matters described in the Basis for disclaimer of opinion section of our report our risk assessment procedures have been limited to:

• Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;

• Obtaining an understanding of the Company’s policies and procedures relating to:

  • Detecting and responding to the risks of fraud; and

  • Internal controls established to mitigate risks related to fraud.

• Review of minutes of meetings of those charged with governance for any known or suspected instances of fraud;

• Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;

• Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

• Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these.

Based on our risk assessment, we considered the areas most susceptible to fraud to be management override of controls, posting manual journals to increase revenue and manipulation of timing of revenue recognition to recognise revenue pre year end .

Because of the significance of the matters described in the Basis for disclaimer of opinion section of our report our procedures in respect of the above have been limited to:

• Testing a sample of journal entries throughout the year, which met a defined risk criteria, by agreeing to supporting documentation;

• Assessing significant estimates made by management for bias; this included the estimates and judgements used by management in valuing the defined benefit pension scheme liabilities ; and

• Testing a sample of revenue transactions recognised prior to the year end to determine appropriate cut off.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that 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, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and 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. In addition, the extent to which the audit was capable of detecting irregularities, including fraud was limited by the matter described in the Basis for disclaimer of opinion section of our report.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

All activities in the current period and prior year relate to continuing operations.

There were no recognised gains and losses for 2024 or 2023 other than those included in the Statement of comprehensive income.

The notes on pages 13 to 33 form part of these financial statements.

The notes on pages 13 to 33 form part of these financial statements.

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

The notes on pages 13 to 33 form part of these financial statements.

The L. S. Starrett Company Limited is a private company limited by shares incorporated in Scotland. The registered office is Oxnam Road, Jedburgh, Roxburghshire, TD8 6LR.

The company's directors took the decision to change the company's reporting period. The current period is the 18 months to 31 December 2024, whereas the comparative is for the 12 months to 30 June 2023. As a result, the comparative amounts presented in the financial statements (including related notes) are not entirely comparable.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest thousand (£000) except where otherwise stated.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

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

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

• Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

The financial statements of the company are consolidated in the financial statements of L S Starrett Company Inc as at 31 December 2024. These consolidated financial statements are available from its registered office, Athol, Massachusetts, United States of America and online from SEC.gov.

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

This is despite the significant loss that occurred in the period to 31 December 2024. Management have prepared cashflow forecasts covering more than 12 months from the sign off of the audit. The company has a positive net asset position and has the support of its parent company The L S Starrett Company Inc.

Revenue comprises sales of goods to customers net of value added tax and other sales taxes, less an appropriate deduction for actual and expected returns and discounts. Revenue is recognised when performance obligations are satisfied and the control of goods is transferred to the buyer. Where the performance obligation is satisfied over time, revenue is recognised in accordance with its progress towards complete satisfaction of that performance obligation.

When cash inflows are deferred and represent a financing arrangement, the promised consideration is adjusted for the effects of the time value of money, which is recognised as interest income.

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

Revenue from rents received are recognised in the period to which they relate and are net of any deposits received.

Intangible fixed assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible fixed 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 fixed asset arises from contractual or other legal rights; and the intangible fixed asset is separable from the entity.

Amortisation 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:

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

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

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

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.

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.

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible fixed 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 are stated at the lower of cost and estimated selling price less costs to complete and sell on a first in first out basis. 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 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 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, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

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

Financial assets, 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.

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

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

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

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

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

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

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

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

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

The tax currently payable is based on taxable profit for the period. Taxable profit differs from 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 calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The 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.

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

The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice.

The change in the net defined benefit liability arising from employee service during the period is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.

The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.

Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.

The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

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.

Controlling party

The company's ultimate parent company is The L S Starrett Company Inc, which is incorporated in the United States of America and prepares group financial statements. The group financial statements of the parent company are the only financial statements which include the results of The L.S. Starrett Company Limited. Copies of the group financial statements of The L S Starrett Company Inc are available from The L S Starrett Company Inc, Athol, Massachusetts, United States of America and from SEC.gov.

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

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

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

In respect of tangible fixed assets, judgement is applied in determining useful economic lives and residual values, which impact the level of depreciation recognised. These estimates are based on expected asset utilisation and are reviewed annually. Where indicators of impairment exist, the recoverable amount is determined using value in use calculations, which require estimates of future cash flows, long-term growth rates and appropriate discount rates. For specialised properties, fair value is assessed using depreciated replacement cost where market evidence is not readily available.

Valuation of Investment Property

Investment properties are held within the Statement of financial position at fair value, as estimated by an external market report which is updated periodically. The investment properties are also revalued based on the directors assessment of any movements in valuation in relation to the investment properties in the interim periods between when the external market reports are prepared. Any changes in the fair value are recognised in the Statement of comprehensive income and within the revaluation reserve within the Statement of financial position.

In respect of intangible assets, the assessment of recoverable amount requires the use of value in use models incorporating estimates of future cash flows, growth rates, discount rates and expected selling prices. Judgement is also required in determining whether assets have finite or indefinite useful lives and, where applicable, the appropriate amortisation period. Where valuation techniques are applied, these involve assumptions relating to future revenues and discount factors. Changes in these assumptions could result in material adjustments to the carrying value of assets.

Provision for doubtful debts is made based on a review of all outstanding accounts as at the balance sheet date. A considerable amount of judgement and estimate is required in assessing the ultimate realisation of these receivables, including the creditworthiness, the past collection history of each customer and subsequent collection up to date of report. The provision is updated as and when required to ensure any doubtful balance has been fully accounted for.

Stock is valued at the lower of cost and net realisable value based on average wholesaler list prices and taking into account average wholesaler discounts. Stock will be valued at wholesaler net price where prices can be supplied or at a competitive market value from the stocktake price list compiled from various suppliers each month.

Stock has been valued at the lower of cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete stocks. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, recent levels of sales, the promotional, competitive and economic environment and inventory loss trends.

Defined Benefit Pension Scheme

The surplus/deficit on the defined pension benefit scheme is included in the Statement of financial position in line with FRS 102. The deficit has been arrived at by obtaining a valuation from the Scheme Actuary. In deriving the valuation, a number of judgements have been made my management, which are outlined in note 27.

Geographical analysis of turnover by destination:

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

Their aggregate remuneration comprised:

The actual charge for the period can be reconciled to the expected (credit)/charge for the period based on the profit or loss and the standard rate of tax as follows:

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

Based on the directors' assessment, the fair value of intangible assets exceeds their carrying value. Therefore, no impairment loss has been recognised in the current or prior year.

The company rents two properties to third parties. One property attracted a peppercorn rent to a local organisation and the other property a commercial rent.

Based on the directors' assessment, the fair value of tangible assets exceeds their carrying value. Therefore, no impairment loss has been recognised in the current or prior year.

The fair value of £1.35m was determined by independent valuers on 20 July 2023 on an open market basis using observable market evidence. Management has assessed whether any indicators of material change have arisen between 1 July 2023 and 31 December 2024 and has identified none. There have been no capital additions, disposals, damage, lease restructures, or other events affecting value, and market conditions have remained broadly stable. Accordingly, management considers the 2023 external valuation to remain an appropriate and reasonable estimate of fair value at 31 December 2024.

Details of the company's subsidiaries at 31 December 2024 are as follows:

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

The deferred tax asset set out above relates to the utilisation of tax losses against future expected profits of the same period.

Revaluation Reserve - consist of investment property revaluations.

Called-up share capital - represents the nominal value of shares that have been issued.

Other reserves - general reserve of £650,000 and capital reserve of £186,000.

Profit and loss account - includes all current and prior period retained profits and losses.

The operating leases represent leases of occupied property.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

The operating leases represent leases of investment properties to third parties.

The company had £72,657 capital commitments as at 31 December 2024 (2023: £Nil).

The company has elected to take advantage of the exemption from disclosure of transactions with investees of the company qualifying as related parties, available to wholly owned subsidiaries under Section 33 of FRS 102.

During the period, the company engaged the consultancy services of a business of a closely connected person, connected with the business due to their close family relationship. The total amount paid to the company was £1,493 (2023: £24,668). No amounts are outstanding (2023: £Nil).

The company ceased future accrual on its defined benefit pension scheme at 31 March 2014. The assets of the scheme are held separately from those of the company. Company contributions to the scheme are charged to the profit and loss account so as to spread the cost of pensions over employees' working lives with the company. The contributions are determined by a qualified actuary on the basis of triennial valuations using the projected unit method. The most recent valuation was 31st December 2024 by a qualified independent actuary.

The amounts included in the statement of financial position arising from the company's obligations in respect of defined benefit plans are as follows:

On 31 October 2025, the Trustees of the LS Starrett Company Retirement Benefits Scheme ("the Scheme") purchased a bulk annuity insurance policy with Aviva Life & Pensions UK Limited ("Aviva").

The policy was purchased using the Scheme's assets which were sold to fund the purchase of the policy.  In order to facilitate the purchase of the policy, the Company made a special one-off contribution of £1.3m.