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

Introduction

The company operates almost exclusively in the prime residential market, offering a complete service from enabling, basement and structural works through to finishes and ongoing building aftercare, in London, the Home Counties and the Cotswolds. The company has 3 principal divisions; Structures, Country Projects and London Projects, all work closely together sharing common resources.

2025 saw Knowles complete major private residential new build and refurbishment projects in London and the country. The number of projects that the company undertook during the year remained constant, however turnover for the year reduced. The Board remains focussed on seeking out projects which best suit the business's unique combination of subterranean, structural, specialist building and finishes skills. It is anticipated that annual turnover is likely to continue to flex up and down in response to opportunities in the market. The business continues to actively look to win higher value, selected, projects. The company has a strong order book for the year ahead.

The business has had another profitable year. Turnover for the year of £62.385m has decreased from the previous year (2024: £67.359m), a reduction of approximately 7.4%. Gross margins, however, improved to 6.7% (2024: 5.3%), and gross profit increased to £4.204m (2024: £3.568m).

Operating profit for the year was £1.379m (2024: £2.428m) and profit before taxation was £1.336m (2024: £2.519m). Results for the year do not benefit from the £600,000 of research and development tax credits recognised as other operating income in the prior year, and include an exceptional bad debt charge of £28,152 (2024: £nil). Administrative expenses increased to £2.797m (2024: £1.740m), the prior year having benefited from a £1.124m credit within bad and doubtful debts. Profit after taxation was £1.484m (2024: £2.530m), after a deferred tax credit of £148,063 (2024: credit of £10,964).

Net assets increased to £11.554m (2024: £10.966m), after dividends of £895,000 were paid during the year (2024: £1,108,065). Cash at bank at the year end was £4.690m (2024: £5.096m). The Board remains focused on carefully managing overheads and on delivering a profit above the industry norm.

Financial Risk

In common with all construction businesses, rising labour and material costs are the principal financial risks that face the business. These impact on our ability to accurately estimate the costs of completing contracts and to accurately tender future work. Other risks include; our ability to recover increased costs under the payment terms of the contracts, the financial standing of our clients, the financial standing of our subcontractors and suppliers and their ability to discharge their obligations to us.

The Board continues to control these risks in several ways; the company is selective in the type of work that it tenders for in terms of the client, contract type, project size, location, complexity, profitability, and contract duration. The Board continues to favour “phased” contracts where work on any given project is awarded in stages; basement and structural work, then the shell and subsequently, the finishes. This minimises the risks associated with long term fixed price contracts. These criteria are constantly reviewed by the Board to ensure that risks are mitigated. The Board also has procedures in place to ensure that our supply chain is as robust as possible.

Performance Risk

The company is committed to delivering our contracts on time whilst maintaining the required levels of safety, quality, productivity, and cost control which lie at the core of our general contracting activities. To manage and control performance of the business we have bolstered our senior commercial and operational management teams and empowered key managers in all parts of the business. Processes and in-house resources are in place to support the management team including structural design, procurement, administrative support and financial control.

Health & Safety

The Board recognises the importance of the health and safety of all workers, sites and the general public, and operates policies and procedures to ensure that the risks associated with accidents and health are properly managed, controlled and reduced.

The Environment

Measures to reduce the impact on the environment of the company's activities are being actively reviewed, these are more fully addressed in notes that accompany the Holding Company's accounts.

The business monitors its sales enquiries and tracks these through to tender/bid stage. The monitoring of sales forecasts and new business is on-going and reviewed on a regular basis to manage resourcing requirements. All contracts are closely monitored to track performance against tender targets. Companywide actual performance in terms of turnover, margins and overheads, compared with budget, is closely monitored, as is cash flow and working capital requirements. Key Performance Indicators are in place throughout the business to identify any issues requiring senior management attention. The Board continually manages the exposure of the business to price risk, credit risk, liquidity risk and cash flow risk.

Consistently delivering quality in terms of both work on site and service are priorities for the Board and are subject to constant review by the directors.

The Board of Directors continues to operate in ways that they consider are going to promote the success of the company for the benefit of all its stakeholders. The Board is aware how important it is to consider the impact of their decisions on the long-term survival and success of the business and recognises that motivated, engaged employees are central to future success.

The board is focused on building strong, ongoing, relationships with all of its suppliers and subcontractors and with all of its clients and their professional teams. The business has a strong track record of repeat projects with its clients and their professional advisers and places an emphasis on long term relationships to maintain a steady flow of work into the business.

Recognising the impact of construction projects on both the environment and on the communities in which the company works, Knowles Holdings Ltd, Knowles Construction’s holding company, has policies in place addressing carbon emissions and measures to, wherever possible, add value to the communities in which we work, through local employment and other community focussed initiatives. Knowles Construction is also a part of the “Considerate Constructors Scheme”, supporting and guiding positive change in the construction industry.

This report was approved by the board and signed on its behalf.

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

Knowles Construction Ltd is a leader in providing value-added construction services by creating successful partnerships throughout the construction process.

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

Ordinary dividends were paid amounting to £895,000. The directors do not recommend payment of a further dividend.

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

The Board believes that an innovative approach to adding value is central to continuing success. To this end the business strives to provide innovative solutions to complex structural and specialist construction problems on a wide range of projects. The company has a strong track record of innovative research and development in the field of basement construction and structural works. The Board is committed to investing in continuous development and process improvement to ensure that Knowles continues to be competitive in the marketplace. Our aim is also to offer our clients, partners, and professional teams’ greater choice through a range of high value systems, products, and solutions.

The Board have continued to invest in their relationships with key suppliers and customers, seeing these relationships as the bedrock of the business. This approach has generated significant word of mouth recommendations, resulting in the continued growth and expansion of the business.

There have been no significant events affecting the Company since the year end.

Knowles Construction is well-established as one of the principal, prime residential contractors in the south of England offering a complete construction service including major build new residences builds and substantial structural, refurbishment and extension schemes. The Board continues to focus on consistently securing a range of full construction projects in the value range £5m to £20m, whilst, at any one time, having 2 to 3, major, £40m+ contracts. The company’s structural division, “Knowles Structures” supports Knowles London and Country Contracting divisions, whilst also undertaking stand-alone basement and structural projects directly for clients.

The Board plans to build on the success of recently completed, and current, major country projects and to grow the company’s presence in the new-build residential and luxury hospitality market where the Knowles management team has extensive experience in both of these sectors.

Under section 487 (2) of the Companies Act 2006, BKL Audit LLP will be deemed to have been reappointed as auditors 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.

Emissions have been calculated using the UK Government's 2024 GHG Conversion Factors for Company Reporting, published by the Department for Energy Security and Net Zero (DESNZ).

Electricity usage has been estimated based on industry benchmarks (3,500 kWh per FTE per year), as the company operates from a serviced office and does not have direct access to electricity billing data.

The following intensity ratios are used to normalise emissions relative to the size and activity of the company.

The directors will continue to comply with all relevant UK legislation while also taking steps to further understand the Scope 3 emissions currently excluded from the above disclosure.

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;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; 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.

As permitted by section 414C(11) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, certain matters which are required to be disclosed in the Directors’ Report have been omitted as they are included in the Strategic Report instead. These matters relate to business performance, principal risks and future developments.

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 Knowles Construction Ltd (the 'company') for the year ended 31 October 2025 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 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 October 2025 and of its profit for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for 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. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

• Enquiry of management, those charged with governance around actual and potential litigation and claims.

• Enquiry of entity staff in tax and compliance functions to identify any instances of non-compliance with laws and regulations.

• Reviewing minutes of meetings of those charged with governance.

• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.

• Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Auditors' Report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Auditors' Report. However future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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.

The income statement has been prepared on the basis that all operations are continuing operations.

The notes on pages 12 to 25 form part of these financial statements.

The notes on pages 12 to 25 form part of these financial statements.

The notes on pages 12 to 25 form part of these financial statements.

Knowles Construction Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 12th Floor, Capital House, 25 Chapel Street, London, NW1 5DH.

The principal activity of the company is that of providing value-added construction services by creating successful partnerships throughout the construction process.

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 £.

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies.

The Company has taken advantage of paragraph 1.12 of FRS 102 and not disclosed the cash flow statement of the Company. The parent company's consolidated accounts are available from the registered office, 12th Floor, Capital House, 25 Chapel Street, London, NW1 5DH.

The immediate parent undertaking is Knowles Holdings Limited, a company incorporated in England and Wales.

The following principal accounting policies have been applied:

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.

The Company recognises revenue when contractual performance obligations are satisfied, and control is transferred over a product or service to its customer. Revenue is measured based on the transaction price specified in a contract with a customer which includes fixed and variable consideration and excludes amounts collected on behalf of third parties. Where consideration is not specified within the contract and is therefore subject to variability, the Company estimates the amount of consideration to be received from its customer. Where consideration is variable, it is included in the transaction price only to the extent that it is highly probable that a significant reversal of revenue will not occur.

Where a modification to an existing contract occurs, the Company assesses the nature of the modification and whether it gives rise to a new contract or changes to an existing contract.

The Company does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a result, the Company does not adjust its transaction price for the time value of money.

The Company’s activities are wide ranging, and as such, depending on the nature of the product or service delivered and the timing of when control is passed onto the customer, the Company will account for revenue over time and at a point in time. Where revenue is measured over time, the Company uses the input method to measure progress of delivery.

Revenue is recognised as follows:

• revenue from construction and services activities is recognised over time and the Company uses the output method to measure progress of delivery; and

• revenue is recognised by the Company from the installation of specialist systems defined as provisional sums, where scope and pricing are refined during execution.

Construction and services contracts

When the outcome of individual contracts can be estimated reliably, contract revenue is recognised over time by reference to the measure of progress at the reporting date using the output method, based on surveys of work completed.

Costs are recognised as incurred, and revenue is recognised in proportion to the physical progress of the contract, as assessed through certified valuations or independent surveys.

Estimates of the final out-turn on each contract may include cost contingencies to reflect specific risks identified during the early stages of the contract. These contingencies are reviewed regularly and adjusted as necessary. However, due to the nature of construction risks, some may only be resolved at project completion.

The estimated final out-turns are continuously reviewed, and in certain cases, recoveries from insurers are assessed and recognised where appropriate.

No margin is recognised until the outcome of the contract can be estimated with reasonable certainty. Provision is made for all known or expected losses on individual contracts as soon as they are foreseen.

Revenue in respect of variations to contracts and incentive payments is recognised only when there is an enforceable right to payment and it is highly probable that the amount will be agreed by the customer.

Variable consideration, including claims, liquidated damages, and is assessed on a contract-by-contract basis and recognised only to the extent that it is highly probable that a significant reversal will not occur. Profit includes the benefit of claims settled during the year, to the extent not previously recognised.

Revenue on specialists’ systems

Certain contracts include specialist systems that are defined as provisional sums, meaning their scope and cost are variable, are subject to constraint and subject to refinement as design and coordination progress.

Revenue recognition for these systems follows the same principles as the main construction contract, provided the performance obligations are satisfied over time and the customer benefits concurrently. Where scope or pricing is refined during execution, adjustments are made in accordance with FRS 102 ’s (2024) guidance on contract modifications and variable consideration.

Contract assets and liabilities

The Company recognises revenue based on surveys of work completed and bills customers upon receipt of certification. As the right to consideration for certified work is deemed unconditional at the point of certification, no contract asset is recognised. Instead, the amount due is recognised as a trade receivable.

A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount is due). Contract liabilities are recognised as revenue when the Company performs under the contract.

Revenue recognised may differ from amounts billed and certified. Where goods or services transferred exceed billings, the difference is recognised as a contract asset. Where billings exceed goods or services transferred, the difference is recognised as a contract liability.

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 the statement of income.

Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

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.

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.

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

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 year. 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 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 income statement, 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 Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.

The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Company in independently administered funds.

At inception, the company assesses whether a contract is, or contains, a lease. A lease arises where the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control of the use of an asset occurs where the company has both the right to direct the use of the asset, and the right to obtain substantially all the economic benefits from that use.

Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within the same line items on the Statement of financial position as owned assets.

The right-of-use asset is initially measured at cost, which comprises the initial measurement of the lease liability adjusted for lease payments made at or before the commencement date less any lease incentives or grants received, plus initial direct costs and an estimate of the cost of obligations to dismantle, remove or restore the underlying asset and the site on which it is located.

The right-of-use asset is subsequently adjusted for remeasurements of the lease liability and applies the relevant cost model, fair value model or revaluation model as set out within the accounting policies for the applicable asset class. Where the cost model is applied, the asset is depreciated from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term, and is periodically reduced by impairment losses, if any.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate or the company’s obtainable borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be payable under residual value guarantees, the exercise price of any purchase options that the company is reasonably certain to exercise, and any penalties for early termination of a lease.

At each financial period end, the lease liability is adjusted to reflect payments made and interest accrued. Also, the lease liability is remeasured to reflect lease modifications and any changes to the factors considered at initial measurement, as set out above. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or recognised in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

Dividends

Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.

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

The Company’s revenue and margin recognition policies, as set out in Notes 1.3, require significant judgement in assessing the financial performance of long-term construction contracts.

Judgement is applied in determining whether the outcome of a contract can be estimated reliably, and whether revenue should be recognised over time. This includes assessing the enforceability of rights to payment for variations, claims, and incentive payments, and evaluating whether it is highly probable that such amounts will not significantly reverse. For cost-reimbursable contracts, judgement is required to assess the level of disallowable costs, determining whether such costs are recoverable under the terms of the contract and therefore eligible for revenue recognition.

Within the Company’s portfolio, a limited number of long-term involve significant judgement over contractual entitlements relating to recoveries of claim income from customers and suppliers, and liquidated damages levied by customers. These recoveries are recognised only when considered highly probable not to significantly reverse.

The Company determines the lease term as the non-cancellable period of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised.

As a lessee, the Company applies judgement in evaluating whether it is reasonably certain to exercise renewal or termination options embedded in lease contracts. This includes consideration of economic incentives, The Company reassesses the lease term if a significant event or change in circumstances occurs that is within its control and affects its ability to exercise, or not to exercise, the relevant option.

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 makes estimates in forecasting the outcomes of individual contracts, including total contract costs, income, and timing of recognition. In respect of costs, estimates are made regarding the final out-turn of each contract, including potential costs associated with maintenance and defects liabilities. On the income side, estimates are made in respect of variations to consideration, including scope changes, recoveries of claim income, and potential liquidated damages.

These estimates are reviewed regularly throughout the life of each contract and adjusted where necessary based on the latest available information.

Due to the level of uncertainty, the combination of cost and income variables, and the timing across a large portfolio of contracts at various stages of completion, it is impracticable to provide a quantitative analysis of the aggregated estimates applied at a portfolio level.

At each period end debtors are assessed for recoverability. If there are doubts over the recoverability of a debtor, a provision is made against the balance.

All turnover arose within the United Kingdom.

The company has taken advantage of the exemption not to disclose amounts paid for non-audit services as these are disclosed in the consolidated accounts of the parent company.

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 5 (2024 - 5).

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

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

The profit and loss account is made up of all prior year profits and losses less dividends paid.

Share premium account

The share premium account is made up of amounts paid over the nominal value for issued share capital.

Capital redemption reserve

The capital redemption reserve is made up of the nominal value of the shares repurchased by the company.

The Company forms part of a VAT group with other 100% controlled subsidiaries of Knowles Holdings Limited. The Company carries a joint and several liability for all group VAT balances.

Included within other debtors is a balance of £650,283 due from M Knowles. This is made up of an opening balance of £640,283, advances of £237,500, repayments of £87,500 and unpaid dividends of £140,000. This balance is unsecured with no fixed repayment date. Interest is charged on this loan at 2.25%.

Included within other debtors is a balance of £1,036,930 due from R Knowles. This is made up of an opening balance of £459,655, advances of £804,775, repayments of £87,500 and unpaid dividends of £140,000. This balance is unsecured with no fixed repayment date. Interest is charged on this loan at 2.25%.

Included within other debtors is a balance of £52,936 due from P Kilbane. This is made up of an opening balance of £272,936, advances of £220,000, repayments of £220,000 and unpaid dividends of £220,000. This balance is unsecured with no fixed repayment date. Interest is charged on this loan at 2.25%.

Included within other debtors is a balance of £15,749 due from M Macdonald Johnston. This is made up of an opening balance of £21,271 and repayments of £5,522. This balance is unsecured with no fixed repayment date. Interest is charged on this loan at 2.25%.

Where possible, the company has taken advantage of the exemption within s33.1A of FRS 102 not to disclosre related party transactions with other wholly owned group undertakings.

The directors are considered key management and their salaries are disclosed in note 8 to the financial statements.

The immediate parent undertaking is Knowles Holdings Limited, a company incorporated in England and Wales.

Knowles Holdings Limited prepare group financial statements and copies can be obtained from the Registered Office at 12th Floor, Capital House, 25 Chapel Street, London, NW1 5DH.

The ultimate controlling party are R & M Knowles by virtue of their majority shareholding in the parent entity.