During the year, the Directors completed an impairment review of the Company’s factory production facility (the related freehold building and plant and equipment), which is assessed as a single cash-generating unit, in accordance with FRS 102 Section 27 (Impairment of Assets). The review was undertaken in light of impairment indicators, including the Company’s loss-making trading performance since commencement of operations in 2020 and an independent open market valuation of the building which was below its carrying amount at the reporting date.

The Directors prepared a value-in-use assessment using board-approved forecasts over the next four years, reflecting the planned increase in production volumes and anticipated improvements in efficiency and operating margins, and applied an appropriate discount rate to the forecast cash flows. The Directors also performed sensitivity analysis to assess the effect of reasonably possible changes in key assumptions. The outcome of the assessment is inherently judgemental and is sensitive to the timing and scale of forecast growth, margins and the discount rate applied; accordingly, if actual performance does not develop in line with forecasts, this could result in a material adjustment to the carrying values of these assets in future periods. The Directors will continue to monitor trading performance, market conditions and forecast assumptions as part of the ongoing impairment review process.

On the basis of the assessment performed, the Directors have concluded that the recoverable amount of the cash-generating unit supported the carrying values at the reporting date and, accordingly, no impairment charge has been recognised in the financial statements

As described in note 11 to the financial statements, the directors have not recognised any impairment loss in respect of the Company’s factory production facility cash-generating unit (“CGU”), comprising the freehold building and related plant and equipment. At 31 December 2025, the CGU is stated at a combined carrying amount of £16.40m, including the building at £10.52m (depreciated book value) and plant and equipment at £5.88m (depreciated book value).

FRS 102 Section 27 requires an entity to assess at each reporting date whether there is any indication that an asset may be impaired and, where such an indication exists, to estimate the recoverable amount. The recoverable amount is defined as the higher of fair value less costs to sell and value in use, and where the recoverable amount is less than the carrying amount, the carrying amount must be reduced and an impairment loss recognised in profit or loss.

In our judgment, indicators of impairment existed at 31 December 2025. In particular:

• The building’s open market valuation of £7.15m is £3.37m lower than its carrying amount of £10.52m, representing a significant decline in market value consistent with an indicator of impairment.

• The Company has been loss-making since commencing operations in 2020, which is evidence from internal performance reporting that the economic performance of the asset/CGU is worse than expected and therefore an indicator of impairment.

The directors’ conclusion that no impairment is required is based on a value-in-use (“VIU”) calculation prepared for the CGU. FRS 102 defines VIU as the present value of future cash flows expected to be derived from an asset/CGU and requires those cash flows and the discount rate to reflect the factors and risks relevant to the asset/CGU. However, the VIU model relies on significant projected business growth over the next four years that is not supported by the Company’s trading history to date. Our audit procedures included challenging the key assumptions underpinning the VIU and performing stress testing of the model. The results of that work demonstrated that the VIU outcome is highly sensitive to reasonably possible adverse changes in key assumptions (including the timing and scale of forecast growth and associated margins), such that relatively small changes eliminate the forecast headroom and result in the CGU’s recoverable amount falling below its carrying amount. In these circumstances, we do not consider that the directors have applied the requirements of Section 27 with sufficient reliability to support their conclusion that the CGU is not impaired.

Accordingly, Property, Plant and Equipment and total equity are overstated and the loss for the year is understated due to the absence of an impairment charge. Based on the available audit evidence, including the property’s open market valuation, we consider that an impairment loss is required. The minimum quantifiable effect is that the building’s carrying amount exceeds its open market valuation by £3.37m; therefore, non-current assets and equity are overstated, and the loss for the year understated, by at least £3.37m (before any related taxation effects). We have not been able to quantify any additional impairment that may be required in respect of the plant and equipment, as this would depend on the determination of the CGU’s recoverable amount based on supportable cash flow projections and discount rate assumptions.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Our evaluation of the directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included, amongst other procedures, assessing the reasonableness of the cash flow forecasts prepared by management, considering the Company’s trading performance and loss-making history since commencing operations in 2020, and evaluating the availability of funding to meet liabilities as they fall due for a period of at least twelve months from the date of approval of the financial statements.

As stated in Note 4, the Company is dependent on continued financial support from its parent undertaking to meet its obligations as they fall due. We obtained and evaluated a written commitment from the parent undertaking to continue to provide financial support to the Company for at least twelve months from the date of approval of these financial statements, and we assessed the parent undertaking’s ability to meet this commitment by reference to the financial information available to us. Based on the audit evidence obtained, we have not identified a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.

Our approach was as follows:

- The Primary audit team obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant are those that relate to the reporting framework (FRS 102 and the Companies Act 2006), the relevant tax compliance regulations in the jurisdictions in which the Company operates and General Data Protection Regulation (GDPR).

- We understood how the Company is complying with those frameworks by making enquiries of management, those responsible for legal and compliance procedures and the company secretary. We corroborated our enquiries through our review of board minutes, as well as consideration of the results of our audit procedures across the Company.

- We assessed the susceptibility of the Company's financial statements to material misstatement, including how fraud might occur by meeting with management from various parts of the business to understand where it considered there was susceptibility to fraud; and assessing whistleblowing incidences for those with a potential financial reporting impact. We also considered performance targets and their propensity to influence on efforts made by management to manage revenue and earnings. We considered the programmes and controls that the Company has established to address risks identified, or that otherwise prevent, deter and detect fraud, and how senior management monitors those programmes and controls.

- Based on our understanding, our procedures involved: enquiries of management and those charged with governance; journal entry testing, with a focus on manual journals and journals indicating large or unusual transactions based on our understanding of the business; and challenging the assumptions and judgements made by management in respect of significant one-off transactions in the financial year and significant accounting estimates.

- Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk or other risk of material misstatement. These procedures included those on revenue recognition referred to in the key audit matter section above and testing manual journals and were designed to provide reasonable assurance that the financial statements were free from fraud or error.

The company reviews the carrying amounts of non-financial assets (including property, plant, and equipment) at each reporting date to determine whether there is any indication that an asset may be impaired. If such an indication exists, the recoverable amount of the asset is estimated as the higher of its fair value less costs to sell and its value in use.

In determining value in use, the company estimates future cash flows generated by the asset, applies an appropriate discount rate to reflect the time value of money and risks associated with the asset, and considers the remaining useful economic life.

If the recoverable amount is lower than the carrying amount, an impairment loss is recognised in profit or loss. If no impairment is required, the company discloses the key judgments and assumptions made in arriving at this conclusion.

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 trade and other creditors, bank overdrafts and amounts due to group undertakings 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. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Derecognition of financial liabilities

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

The Company incurred a loss in the current financial year of -£2,675,041 (2024: -£3,142,324) and had Net Assets at the year-end of £3,027,220 (2024: £1,309,761).    

New customer supply contracts had previously been secured at group level on behalf of the company, and following a significant capital investment to fulfil these contracts, sales are now being generated. As a result, the company incurred a smaller loss in 2025 compared to the prior year.  

The directors have prepared budgets for the business which show significantly improved trading in the coming years. These budgets are predicated on a significant ramping up of production as a result of changing product requirements in the marketplace, the fulfillment of contracts to existing customers within the wider United Caps Group by the company, and a further capital investment program which will introduce new products which will meet perceived future market requirements.

Overall, the Directors remain positive about the future prospects of the Company. The Parent company, United Caps Holding S.A. has committed to provide continuing financial support and other resources to the company to enable it to achieve profitability.

The financial statements have been prepared on a Going Concern basis.

During the financial year, an external valuation of the company’s Factory Property and Land was obtained by the directors, which indicated an open market valuation of £7.15 million, compared to its carrying value of £10.52 million.

This valuation represents a potential indication of impairment under FRS 102 Section 27 (Impairment of Assets).

In accordance with FRS 102, the directors have assessed the recoverable amount of the production assets of the company as a single Cash Generating Unit (CGU, to include the Company, Property, Plant and Equipment, by determining the higher of fair value less costs to sell and value in use. The value in use of the property has been calculated based on the present value of future cash flows expected to be generated from its continued use, using a discount rate of 5%, which reflects the current market conditions and risks associated with the asset.

The directors have concluded that the value in use of the CGU exceeds its carrying amount, and therefore, no impairment has been recognised in these financial statements. The key assumptions used in the value in use calculation include:

- Projected average annual cash flows of €3.16m million over a period of 10 years;

- Terminal value of the company's property based on an estimated residual value of £8 million at the end of the period;

- Discount rate of 5%, based on the company’s weighted average cost of capital and asset-specific risks; and

- Sensitivity analysis, which indicates that even under reasonably possible adverse scenarios, the recoverable amount remains above the carrying value.

The directors will continue to monitor the CGU’s valuation and operational performance to assess whether any future impairment adjustments are required.

Having considered the expectations for the company to generate taxable profits in the next 3-5 year window, the company believe that the current Deferred Tax Asset provision, as included in Note 14 above, should not be reversed or impaired.  

However, based on those expected profitability levels, the directors do not consider it appropriate to increase the Deferred Tax Asset recognised in the Balance Sheet to take into account the tax effect of the losses incurred in the current financial year, as the timing as to when such an increase would be reversed cannot be ascertained at this time.

The Company has entered into a number of interest rate swap contracts to receive interest at GBP-LIBOR and pay interest at a fixed rate. The swaps are based on total original principal amounts of £10,725,000, reducing each year in line with borrowing balances, and mature in September 2026. The instruments are used to hedge the Group’s exposure to interest rate movements on some if its senior debt facilities.  

As a result of a number of interest rate increases imposed by the Bank of England (BoE) since the company entered into the swap contracts, the market value of the swap contracts are in favour of the Company. Given that BoE is expected to continue its policy to maintain higher interest rates in the foreseeable future, the directors do not expect any potential liability for the company will arise on the maturity of the contracts.

Cashflows on both the loan and the interest rate swap contracts are paid quarterly.

The company has availed of the exemption under FRS 102 in relation to the disclosure of transactions with group undertakings.

Accruals include £448,062 of interest due to United Caps Holding SA.