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

The company is a wholly owned subsidiary of Danfoss A/S, a company registered in Denmark. For the year ended 31 December 2025 the company’s principal activities are the sale of controls and variable speed drives in the electrical and refrigeration industries, refrigeration compressors, the supply of electronic and electro-mechanical heating controls, including time controls and thermostats and thermostatically regulated valves. The company also manufactures and supplies hydraulic equipment.

As shown in the company’s statement of comprehensive income, the company’s turnover for the year was £145,341k (2024 - £150,501k). The loss before taxation for the company in 2025 was £17,649k (2024 - £8,738k). As shown in the company’s balance sheet, the company’s net assets at 31 December 2025 were £19,715k (2024 - £41,434k).

We intend to continue adapting our structure to constantly changing market conditions and to continue our strict cost discipline. Through optimisation and standardisation of processes we can further improve our efficiency while simultaneously enhancing the quality of our customer service. Moreover, the optimisation of our production and logistics networks will continue to improve our cost structures.

The Danfoss Group’s central finance department is responsible for the overall monitoring and control of financial and operational risk management. Strategic/operational risk covers the following areas, supplier management, contract management, company acquisition and integration and illegal copying of Danfoss products. Financial risk covers the following areas, currency exposure, interest rate risk, liquidity risk, credit risk, other hedging and pension obligations risk.

The company’s activities expose it to various types of risk in the normal course of business. The following is not intended as a comprehensive summary of all risks.

The company is exposed to foreign currency risk on its transactions that are denominated in currencies other than Great British Pounds. It is therefore exposed to the movement in exchange rates. This risk is partially mitigated by the company having bank accounts in foreign currencies.

Interest rate risk is negligible as the company does not maintain any external debt. Exposure takes the form of customers who may not meet their obligation to agreed terms; the maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

As at 31 December 2025 the company had no cash resources (2024 - £Nil) as it uses the Danfoss Group cash pool facility for financing its operational expenses.

Going concern disclosure

Danfoss Limited forecasts demonstrate that the company will be able to operate for at least twelve months from the approval date of these financial statements.

The Company is part of the Danfoss Group cash pool facility and as part of this agreement the company’s cash is deposited with the Group. The cash pool balance is included within these financial statements as an intercompany liability. The company can access this facility on demand.

Based on the existing cash position and overdraft facility available to the company, management concludes that there is no material uncertainty associated with the going concern of the company.

The company uses key performance indicators to assess performance including turnover and operating profit. In the year under review, turnover decreased by £5,160k. Operating loss increased by £8,911k.

The success of our business is dependent on the support of all of our stakeholders. Building positive relationships with stakeholders that share our values is very important to us and working together towards shared goals helps us to deliver sustainable success.

Danfoss comprises a number of business units, all of which have extensive engagement with their unique stakeholders as well as other businesses in the Danfoss Group. The Group’s governance framework delegates authority for local decision making to local Country Leaders Teams up to certain defined levels. This allows individual businesses and Country Leadership teams to take account of the needs of their own stakeholders during the decision making process.

Through continued dialogue with key stakeholders, the individual businesses have been able to develop a clear understanding of their stakeholders needs, assess their views and monitor their impact on our strategic ambition and culture. During the business’ decision-making process, the impact of decisions on relevant stakeholders are considered. Other broader factors are also considered whilst making decisions, these include the impact of the Company’s operations on the community and environment, responsible business practices and the likely consequences of decisions in the long term.

The leadership teams of each business unit and the Country Leadership team make decisions with a long term view and with the highest standards of conduct in line with Group policies. In order to fulfil their duties, the Directors of each business and the Danfoss Group itself take care to be mindful of the consequences on all stakeholders of the decision and actions which they make. Where possible, decisions are discussed with affected groups.

Presentations are regularly made to the Group Board by the business units about the strategy performance and key decisions taken. This feedback allows the Group Board to evaluate that proper consideration is given to stakeholders. Group is also informed on the views of stakeholders through regular feedback, reporting and analysis. This feedback is used to inform the Group’s decisions and how they are determined.

The Group’s key stakeholders are as follows:

The shareholders are closely involved in the decision making process of the Group. Discussions with shareholders cover all aspects of the business activities of the Group and include, financial performance, strategy, outlook, governance and ethical practices.

There are many forums through which the Group’s management engages with employees. These include surveys, face to face briefings, town hall meetings, intranet updates, newsletters. Employees are regularly asked to complete anonymous surveys so the Group can get unbiased feedback from employees. Key areas of focus include well being and health, opportunities, pay and benefits.

We strive to ensure that Danfoss is as easy as possible to deal with and therefore try to ensure that we constantly get feedback on our performance from customers and through this build strong relationships. We regularly perform customer surveys and seek feedback through customer meetings at every level. We use this knowledge to inform our decision making on the services and products we provide, to ensure that they are in line with our customers’ requirements.

Suppliers
We aim to build strong partnerships with our suppliers in order to ensure mutually beneficial relationships. We regularly seek feedback from our suppliers through various interactions which are aimed at strengthening our relationships. The Group’s management realises that strong relationships with suppliers are essential to Danfoss’ success and the Group’s management are focused on developing these relationships and are therefore briefed regularly on this area.

Communities
Local management seek to engage with the local communities in which we operate to ensure that they understand the local issues. An example of this is that a local charity committee has been set up in order to raise money for local causes. The impact of Danfoss activities on a local and national level is considered by the Local Leadership teams.

Government and regulators
Danfoss engage with the government and regulators through a number of Associations, for example BEAMA, and through meetings. Key areas of focus are compliance with laws and regulations, health and safety and product safety. The Country Leadership team is updated on legal and regulatory developments and these are taken into account when future actions are considered.

On behalf of the board

The directors present their annual report and audited financial statements for the year ended 31 December 2025.

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

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

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

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

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the company continues and that the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

As part of the directors' going concern review, the 2025 and 2026 year to date financial performance of the Company has been analysed and the financial position and performance of the Danfoss group has also been reviewed.

As part of their consideration, the directors have reviewed the cost reduction measures that have already taken place across Danfoss Limited and the wider Danfoss Group, the company’s net asset position at 31 December 2025, excluding pension surplus, of £15,565k and the Group’s overdraft facilities that are available to the company.

The directors have a reasonable expectation that the Company has adequate resources, including the group’s overdraft facility, to continue in operational existence for the foreseeable future being a period of at least 12 months from the date of these financial statements.

The auditor, S&W Audit (a trading name of S&W Partners Audit Limited), will be deemed to have been reappointed as auditor 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier, in accordance with section 487(2) of the Companies Act 2006.

The Danfoss group, of which Danfoss Limited is a member, is a globally leading technology partner in energy efficiency and sustainable solutions. The group has proven and reliable solutions to meet many of the climate, urbanisation and food challenges faced globally. It also strives to improve the sustainability of its internal operations, as well as bringing innovative greener solutions to market.

The Danfoss group provides group level reporting on sustainability initiatives and strategy within the Our Business section of its 2025 Annual Report. This annual report can be downloaded from www.danfoss.com.

The directors have reviewed the required energy and carbon reporting for the year ended 31 December 2025 and have concluded that its inclusion in this report is impractical. The directors are committed to improving collation of this data at the UK level so that the barriers to reporting are removed in future periods.

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;

• state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements

• 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.

The directors are responsible for the maintenance and integrity of the company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of financial risk objectives, future developments and disclosures regarding engagement with suppliers, customers and others in a business relationship.

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.

We have audited the financial statements of Danfoss Limited (the 'company') for the year ended 31 December 2025 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including 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 31 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 Auditor's 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 other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 our audit:

• the information given in the strategic report and the directors' report for the financial year 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.

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 directors' report.

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:

• 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.

As explained more fully in the directors' responsibilities statement, 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 objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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.

In the context of the audit, we considered those laws and regulations which determine the form and content of the financial statements and which are central to the company’s ability to conduct its business and where failure to comply could result in material penalties. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:

• the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;

• we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the sector;

• we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental and health and safety legislation;

• we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and reviewing legal and professional fee invoices.

We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

• making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and

• considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.

To address the risk of fraud through management bias and override of controls, we:

• performed analytical procedures to identify any unusual or unexpected relationships;

• tested journal entries to identify unusual transactions;

• assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and

• investigated the rationale behind significant or unusual transactions.

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.

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

Danfoss Limited is a private company limited by shares incorporated in England and Wales. The registered office is 22 Wycombe End, Beaconsfield, Buckinghamshire, HP9 1NB.

The principal place of business is Building 4, Uxbridge Business Park, Sanderson Road, Uxbridge, Middlesex, UB8 1DH.

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 presented in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £1,000.

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’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument;

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

The financial statements of the company are consolidated in the financial statements of Danfoss A/S. These consolidated financial statements are available from its registered office, 6430 Nordborg, Denmark.

The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.

Danfoss Limited forecasts that truethe company will be able to operate for at least twelve months from the approval date of these financial statements. We have considered a range of scenarios from sales being 25% lower than in 2025 to an increase in turnover.

The Company is part of the Danfoss Group cash pool facility and as part of this agreement the company’s cash is deposited with the Group. The cash pool balance is included within these financial statements as an intercompany debtor or liability. The company can access this cash on demand.

Based on the existing cash position and the scenarios analysis stated above, management concludes that there is no material uncertainty associated with the going concern.

Turnover is measured at the fair value of the consideration received or receivable for the sale of goods and the rendering of services in the normal course of business, and is shown net of discounts and VAT.

Sale of goods

Revenue arises from the sale of goods. Revenue is recognised when the customer accepts delivery of the goods.

Rendering of services

Revenue arises from the provision of services. Revenue is recognised proportionally over the performance of the service contract, by reference to the stage of completion of the transaction at the end of the financial year.

Goodwill represents the excess of the cost of acquisition of businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised through the profit and loss on a systematic basis over its expected life, which is 10 to 15 years.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. At each balance sheet date, the cash-generating unit to which goodwill has been allocated is assessed to determine whether there is any indication that the cash-generating unit may be impaired. If there is such an indication, the recoverable amount of the cash-generating unit is compared to the carrying amount of the cash-generating unit.

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

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

Freehold land and assets in the course of construction are not depreciated.

At each financial year end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

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

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.

The company sells products for a number of markets and is subject to changing consumer demands. As a result, it is necessary to consider the recoverability of the cost of stock and the associated provisioning required. When calculating the stock provision, management considers the nature and condition of the inventory, as well as applying assumptions around anticipated saleability of finished goods and future usage in production of raw materials.

The company has elected to apply the provisions of Section 11 ”Basic Financial Instruments” to all of its financial instruments.

Financial instruments are recognised in the company’s balance sheet when the company becomes party to the contractual provisions of the instrument.

Short term debtors are measured at transaction price less any provision for impairment. Loans receivable are measured initially at fair value, net of transaction costs and are subsequently carried at amortised costs using the effective interest method, less any provision for impairment.

Short term creditors are measured at transaction price. Other financial liabilities, including bank loans and other loans, are measured initially at fair value, net of transaction costs and are subsequently carried at amortised costs using the effective interest method.

The tax expense represents the sum of the tax currently payable and deferred tax. Tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account 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.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation.

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 year 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.

Defined contribution schemes

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

Defined benefit schemes

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 year 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 year 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 year as a result of contribution and benefit payments. The net interest is recognised in profit or loss as interest 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 year in which they occur and are not reclassified to profit and loss in subsequent financial years.

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.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

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 are included in the profit and loss account for the year.

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 year in which the estimate is revised where the revision affects only that year, or in the year of the revision and future financial years where the revision affects both current and future years.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The standard costing methodology involves elements of judgement in methods of overhead and labour cost absorption.

Overhead rates, freight and duty rates are calculated based on the country of origin, allocating costs on a weighted basis.

Labour rates are calculated using the average cost per labour hour and estimated routing times for production tasks.

Fixed and variable costs are calculated for the respective plants and these costs are allocated to a product using the expected annual hours and an application of effort percentage.

In July 2024, the Court of Appeal issued a judgment in the Virgin Media case concerning amendments to contracted-out defined benefit pension schemes between 6 April 1997 and 5 April 2016. The judgment held that such amendments are void unless accompanied by the required section 37 actuarial confirmation.

This ruling introduces uncertainty for all affected schemes, including the potential for historic benefit amendments to be invalid. If any amendments within the Plan are impacted, member benefits may need to be recalculated, which could result in additional liabilities and costs. At present, the Trustees have not completed a review of historic amendments or opt-outs, and it is not possible to quantify any potential exposure.

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.

The company revenue recognition policy is to recognise sales of goods upon arrival with the customer. Management have monitored the average shipping times to customers and have built an estimated 3 day delivery period into the invoicing system so that invoices are raised on the anticipated arrival date with the customer, unless specific alternative arrangements are sought by the customer. However, this use of a universal estimated delivery period will inevitably result in some variability in accuracy of revenue recognition.

The company makes provisions for rebate and claim back accruals based on the expected outcome of future promotional activity. The ultimate performance of any promotional activity is not known at the time of sale and estimates to the value of the accrual could vary significantly as a result. However, promotional activity is closely monitored and tracked, and past experience is used to strengthen the provisions and estimates made.

The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the ageing profile of debtors and historical experience and market knowledge. Further details can be found in the Debtors note.

The company has an obligation to pay benefits to certain employees. The cost of these benefits and the present value of the obligation depend on a number of factors, including; life expectancy, salary increases, asset valuations and the discount rate on corporate bonds. Management estimates these factors in determining the net pension obligation in the balance sheet. The assumptions reflect historical experience and current trends. Further details can be found elsewhere in these accounting policies, or within the Retirement Benefit Schemes note.

At each reporting period end date, the directors reviews the carrying amounts of its goodwill 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 group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2024 - 1).

During the year, one director was remunerated by the company (2024 - 1). The emoluments of the other directors were paid by the parent company. The services provided by these directors to this company and fellow subsidiaries are of a non-executive nature and their emoluments are deemed to be wholly attributable to their services to the parent company. Accordingly, the above details include no emoluments in respect of their services.

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

During the year, management performed an impairment review of the goodwill associated with the hydraulics manufacturing cash-generating unit. The review indicated that the recoverable amount of the cash-generating unit was lower than its carrying value, primarily due to lower forecast trading performance than previously anticipated. Consequently, an impairment charge of £9,410k has been recognised in the profit and loss account. The recoverable amount was determined using a value-in-use calculation based on management's forecast cash flows and an appropriate discount rate.

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

In addition to the amount charged/(credited) to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:

More information on impairment movements in the year is given in note 10.

Trade debtors are stated after provision for impairment of £436,000 (2024 - £441,000).

Amounts owed by group undertakings are repayable on demand. Interest is charged at a variable market rate.

Amounts owed to group undertakings are unsecured and repayable on demand. Interest is charged at a variable market rate.

The provision for warranties relates to expected warranty claims on products sold at the balance sheet date. It is expected that the majority of this expenditure will be incurred over the next year.

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

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The company operated a defined benefit scheme for qualifying employees; this scheme was closed to members in 2010, upon which all members were transferred to the defined contribution scheme. This is a separate trustee administered fund holding the pension scheme assets to meet long term pension liabilities.

A full actuarial valuation was carried out at 31 March 2021 and updated to 31 December 2025 by a qualified actuary, independent of the scheme's sponsoring employer.

The actuarial valuation as at 31 March 2018 showed a deficit of £5,737,000. The company previously agreed with the trustees that it would aim to eliminate the deficit over a period of 10 years from 1 July 2019 by the payment of one contribution of £4.2m on or before 31 March 2019, followed by annual contributions of £207,000 until 31 March 2028. In addition, the company has agreed with the trustees that it will meet expenses of the plan and levies to the Pension Protection Fund.  The valuation as at 31 March 2021 showed a surplus of £5,901,000.

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

None of the fair values of the assets shown above include any direct investments in the company’s own financial instruments or any property occupied by, or other assets used by the, company.

The expected rates of return on plan assets are determined by reference to the historical returns, without adjustment, of the portfolio and not on the sum of the returns on individual asset categories.

The Company has one class of ordinary shares which carry no rights to fixed income. All shares carry equal voting and capital distribution rights.

Guarantees

At the reporting date, amounts of £4,000,000 (2024 - £4,000,000) were guaranteed to H M Revenue & Customs by the parent company's banking facility.

Contingent liabilities

In July 2024, the Court of Appeal issued a judgment in the Virgin Media case concerning amendments to contracted-out defined benefit pension schemes between 6 April 1997 and 5 April 2016. The judgment held that such amendments are void unless accompanied by the required section 37 actuarial confirmation.

The Trustees of the Danfoss Limited Defined Benefit Plan have not yet completed a review of historic amendments or opt-outs to determine whether any exposure exists under this judgment. If any amendments are found to be invalid, member benefits may need to be recalculated, which could result in additional liabilities for the Plan and/or the sponsoring employer.

At the reporting date, it is not possible to reliably estimate the financial impact of this matter due to:

• Uncertainty over whether any affected amendments exist within the Plan.

• The potential for legislative or regulatory intervention to address the judgment.

• The outcome of any negotiations with the buy-in insurer regarding coverage of additional liabilities.

No provision has been made in these financial statements for any potential liability arising from the Virgin Media judgment. The matter is disclosed as a contingent liability due to the high level of uncertainty and the inability to quantify the potential impact at this stage.

The immediate parent company is Danfoss International A/S, a Danish corporation.

The ultimate controlling party is the Bitten and Mads Clausen Foundation, a commercial foundation based in Denmark.

The smallest group in which the results of the company are consolidated is a group headed by Danfoss A/S, a Danish corporation which is the immediate parent company of Danfoss International A/S. The consolidated financial statements of this group are available to the public and may be obtained from Danfoss A/S, 6430 Nordborg, Denmark.

The largest group in which the results of the company are consolidated is headed by the ultimate controlling party, Bitten & Mads Clausen's Foundation, a Danish commercial foundation. The consolidated financial statements of this group are available to the public and may be obtained from Bitten & Mads Clausens Fond, Nordborgvej 81, 6430 Nordborg, Denmark.