Fine Organics Limited - Limited company accounts 20.1

REGISTERED NUMBER: 01532065 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements for the Year Ended 31 December 2019

for

Fine Organics Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

6

Statement of Directors' Responsibilities

8

Report of the Independent Auditors

9

Statement of Comprehensive Income

11

Balance Sheet

12

Statement of Changes in Equity

13

Notes to the Financial Statements

14

DIRECTORS:

L P Kingsbury

M Xu

J T Lightwing

REGISTERED OFFICE:

Seal Sands

Middlesbrough

Cleveland

TS2 1UB

REGISTERED NUMBER:

01532065 (England and Wales)

AUDITORS:

Shinewing Wilson Accountancy Limited

Chartered Certified Accountants

and Statutory Auditors

9 St Clare Street

London

EC3N 1LQ

The directors present their strategic report for the year ended 31 December 2019.

REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS

During the year ended 31 December 2019 the business has returned to profit of £1,640K without exceptional item

(2018: loss of £2,821K) in terms of EBITDA (earnings before interest, tax, depreciation and amortisation), the measure

used by the Board of directors and investors to track financial performance. The recovery has been led by the successful

implementation, manufacture and completion of a high value single campaign product for the Agrochemical sector. This

product, coupled with significantly improved plant utilisation in other areas, has driven an increase in revenue of 50% to

£43,739K (2018: £29,171K).

The Company's loss before taxation for the financial year is £3,137K (2018: profit of £14,494K). The business has

incurred £376K (2018: £173K) of exceptional one-off costs in the year. The costs were in relation to a safety breach

penalty and associated legal fees.

To mitigate against a fall in plant utilisation following the aforementioned single campaign completion, the business has

successfully secured substantial new business development for a Crop Protection product. The new product introduction

requires significant capital investment to bring new assets, facilities and utilities to site to support this production and

upon completion will double our site capacity as a contract manufacturer.

The business still has a stable and expanding customer base with which it works technically to implement innovative

chemistry solutions in order to drive process efficiencies and optimal performance from its manufacturing assets.

Following an extensive review of the strategic positioning of all sites within the group, the investors are satisfied with

the direction and on-going investment of the business. The company is well placed to take advantage of any upturn in the

Agrochemical markets, as well as expansion across all other market sectors served.

The financial position of the company as at the year-end is net assets of £16,443K (2018: £21,009K).

PRINCIPAL RISKS AND UNCERTAINTIES

The management of the business and the execution of the company's strategy are subject to a number of risks. The main

risks and uncertainties are as follows:

- Pricing: competition in the company's portfolio is based primarily on price, with additional weighting being placed on

product quality, reliability of supply and customer service.

- Raw material and energy prices: these are significant costs to the business. Mitigation of this exposure is actioned by

wherever practicable procuring on a global basis.

- Utilisations of assets: the Company's results are materially influenced by the degree to which assets are utilised in order

to achieve maximum production volumes.

- COVID-19: at the outbreak of the COVID-19 pandemic, the business received special dispensation to continue

operations as a Site Critical for National Infrastructure and as such we have managed to ensure stable operations and

minimise disruption by implementation of strict social distancing measures.

- Brexit: the business has acknowledged supply chain risks surrounding movement of materials in a 'no-deal' Brexit

scenario. As such the business has worked with customers and key suppliers to ensure sufficient safety stocks of material

are held for business continuity. The company maintains a 'Brexit committee' for on-going assessment of business risk.

SECTION 172(1) STATEMENT

The revised UK Corporate Governance Code ('2018 Code') was published in July 2018 and applies to accounting

periods beginning on or after 1 January 2019. The Companies (Miscellaneous Reporting) Regulations 2018 ('2018

MRR') require directors to explain how they considered the interests of key stakeholders and the broader matters set out

in section 172(1) (A) to (F) of the Companies Act 2006 ('S172') when performing their duty to promote the success of

the Company under S172. This includes considering the interest of other stakeholders which will have an impact on the

long-term success of the company. The board welcomes the direction of the UK Financial Reporting Council (the

'FRC'). This S172 statement, which is reported for the first time, explains how the directors:

- have engaged with employees, suppliers, customers and others; and

- have had regard to employee interests, the need to foster the company's business relationships with suppliers,

customers and other, and the effect of that regards, including on the principal decisions taken by the company during the

financial year.

The S172 statement focuses on matters of strategic importance, and the level of information disclosed is consistent with

the size and the complexity of the business.

When making decisions, each Director ensures that he/she acts in the way he/she considers, in good faith, would most

likely promote the Company's success for the benefit of its members as a whole, and in doing so have regard (among

other matters) to:

S172(1) (A) "The likely consequences of any decision in the long term"

The company's operations, including its sales, manufacturing and investment plans for the year, are set out through the

annual budget. This is prepared by the company's senior leadership team and approved by the board of the ultimate

parent company and is aligned with the long-term plans for the Site within the context of the overall group strategy.

In addition to reporting on the financials through the monthly management accounts, the board of directors is kept

informed of operational matters through monthly reports compiled by the senior leadership team. This report includes,

but is not limited to, manufacturing performance, safety statistics and quality metrics.

The board takes a view on long-term decisions based on commercial enquiries, research and development activities and

thereafter the appropriate financial and analytical modelling, which it receives in the form of detailed proposals

presented by the senior leadership team to the board and subsequently to the ultimate parent company. This could

include, but not be limited to, new product development, acquisition opportunities and strategic partnerships.

S172(1) (B) "The interests of the company's employees"

The directors recognise that the company's employees are fundamental and core to our business and delivery of our

strategic ambitions. The success of our business depends on attracting, retaining and motivating employees. From

ensuring that we remain a responsible employer, from pay and benefits to our health, safety and workplace environment,

the directors factor the implications of decisions on employees and the wider workforce, where relevant and feasible.

The board of directors' support significant levels of investment in training, online learning, paid-for external

development, and the hosting of internal learning events. This sits alongside a generous benefits package which includes

pension contributions above the statutory minimum requirement and an annual bonus scheme.

The board of directors recognises the importance of having a diverse workforce that both reflects the company's global

supply chain network, and which strengthens its business growth. The business is committed to promoting fairness and

equality in the workplace which it demonstrates through a number of policies, including: Equal Opportunities Policy;

Flexible Working Policy; Parental Leave Policy; and Maternity, Paternity and Adoption Policies.

S172(1) (C) "The need to foster the company's business relationships with suppliers, customers and others"

Delivering our strategy requires strong mutually beneficial relationships with suppliers, customers, local and national

government, regulators and other associated stakeholders.

Moreover, the directors receive information updates on a variety of topics that indicate and inform how these

stakeholders have been engaged. These range from information provided from the supply chain function (on suppliers

related to items such as sourcing project updates and supplier contract management topics) to information provided by

the commercial and development teams (on customers related to items such as business strategies, on-going

manufacturing campaigns and investment or divestment proposals).

In its relationship with suppliers, the company strives to maintain a reputation for fairness and high standards through

striving for contracts that provide mutual benefit, and ensuring that suppliers are paid on time.

The company has a zero-tolerance to human trafficking and slavery and expects its suppliers to take the same approach.

The board of directors has approved the publication of the company's Modern Slavery Act statement and will support

the senior leadership team in its review of its policies and procedures to ensure continued compliance.

In its relationship with customers, feedback can be collated by the several teams and fed back to the directors, mainly by

the Commercial Directors, whose primary focus is customer engagement, management and communication. Specifically,

with regard to contract manufacturing agreements, our customers have a direct contribution toward the supply chain,

technical development and quality parameters of our finished products, integration of customer feedback is a key input

for site operations.

S172(1) (D) "The impact of the company's operations on the community and the environment"

The directors recognise that the business has a significant responsibility when it comes to its relationship with the

environment. The site is Top-Tier COMAH (Seveso III) compliant, has a broad environmental permit and similarly has

extensive consents in place to allow us to handle a broad range of substances at a range of scales. A key consideration

for the business in this respect is with regards to its chemical substance waste management. The site has direct pipeline

access to one of the largest municipal liquid aqueous waste disposal facilities in Europe, and works closely with its sister

company Fine Environmental Services Limited, who operate one of only three, third party licensed, high temperature

thermal oxidisers for incineration of other waste streams. The business continues to work with its regulators in

maintaining compliance and striving for best practice where environmental impact is concerned.

S172(1) (E) "The desirability of the company maintaining a reputation for high standards of business conduct"

The directors recognise that the business operates within an industry where a high degree of emphasis is placed on

ensuring business decisions are economically, environmentally and socially responsible. The company periodically

reviews its policies and principles, as set out in the company Staff Handbook and other guiding documentation, to ensure

that these high standards are maintained. This, complemented by the ways the board is informed and monitors

compliance with relevant governance standards help assure its decisions are taken and that the company acts in a way

that promotes high standards of business conduct.

S172(1) (F) "The need to act fairly as between members of the company"

The directors consider which course of action best enables delivery of our strategy through the long-term, taking into

consideration the impact on stakeholders. In doing so, our directors act fairly as between the Company's members but

are not required to balance the Company's interest with those of other stakeholders, and this can sometimes mean that

certain stakeholder interests may not be fully aligned.

KEY PERFORMANCE INDICATORS

The key performance indicators of the company were as follows:

31 December 2019

31 December 2018

Change

£'000

£'000

Turnover

43,739

29,171

50%+

Gross profit

3,218

(5,217)

160%+

Operating profit / (loss)

(2,618)

(6,568)

60%+

Lost time injury rate (based on 1m man hours)

2.54

5.82

In conjunction with the management of costs and working capital to improve profit, the company uses a number of KPIs

to monitor performance. These KPIs are monitored both on a product-by-product basis and also for the Company as a

whole, compared to budget.

ON BEHALF OF THE BOARD:

L P Kingsbury - Director

10 September 2020

The directors present their report with the financial statements of the company for the year ended 31 December 2019.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of a manufacturer of fine chemicals, supplying

the pharmaceutical, agrochemical and speciality chemical industry. The Company's manufacturing plant is in the UK and

has customers in Europe, North America, South America, and the UK.

DIVIDENDS

No dividends will be distributed for the year ended 31 December 2019.

RESEARCH AND DEVELOPMENT

The company's research and development activities are focused on the safe implementation of new products coupled

with improving plant efficiency, optimisation of plant productivity, reducing waste and improving environmental

performance, satisfying both our customers and all stakeholders.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2019 to the date of this

report.

L P Kingsbury

M Xu

Other changes in directors holding office are as follows:

Dr N C Parkinson - resigned 31 December 2019

J T Lightwing was appointed as a director after 31 December 2019 but prior to the date of this report.

CHARITABLE DONATIONS AND EXPENDITURE

The total amount of charitable donations made in the United Kingdom by the company during the financial year was

£4,379 (2018: £2,689).

FINANCIAL RISK MANAGEMENT

The company's operations expose it to a variety of financial risks that include the effects of changes in price risk, credit

risk and liquidity risk. The company has in place a risk management programme that seeks to limit the adverse effects on

the financial performance of the company where appropriate.

Price risk

The Company is exposed to commodity price risk as a result of its operations. However, given the size of the company's

operations, the costs of managing exposure to commodity price risk exceed any potential benefits. The directors will

revisit the appropriateness of this policy should the company's operations change in size or nature. The company has no

exposure to equity securities price risk as it holds no listed or other equity investments.

Credit risk

The Company has implemented policies that require appropriate credit checks on potential customers before sales are

made. Where debt finance is utilised, this is subject to pre-approval by the board of directors.

Liquidity risk

The Company actively manages its risk profile on a regular basis to ensure the company has sufficient available funds

for operations and planned expansions.

Cashflow risk

The business actively manages it's cash flow with the assistance of the group's treasury department, seeking to

effectively manage working capital and minimise exposure to foreign exchange movements.

ENGAGEMENT WITH EMPLOYEES

Disabled Employees

The group is committed to employment policies, where following best practice, based on equal opportunities for all

employees, irrespective of sex, race, colour, disability or marital status. The group gives full and fair consideration to

applications for employment for disabled persons, having regard to their particular aptitudes and abilities. Appropriate

arrangements are made for the continued employment and training, career development and promotion of disabled

persons employed by the group. If members of staff become disabled the group continues employment, either in the

same or an alternative position, with appropriate retraining being given where necessary.

Employee Involvement

The group systematically provides employees with information on matters of concern to them, consulting them or their

representatives regularly, so that their views can be taken into account when making decisions that are likely to affect

their interests. Employee involvement in the group is encouraged, as achieving a common awareness on the part of all

employees of the financial and economic factors affecting the group plays a major part in maintaining its effective

management.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken

as a director in order to make himself aware of any relevant audit information and to establish that the company's

auditors are aware of that information.

AUDITORS

The auditors, Shinewing Wilson Accountancy Limited, will be proposed for re-appointment at the forthcoming Annual

General Meeting.

ON BEHALF OF THE BOARD:

L P Kingsbury - Director

10 September 2020

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements

in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors

have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not

approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the

company and of the profit or loss of the company for that period. In preparing these financial statements, the directors

are required to:

-	select suitable accounting policies and then apply them consistently;

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

-	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-	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.

Opinion

We have audited the financial statements of Fine Organics Limited (the 'company') for the year ended

31 December 2019 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in

Equity and Notes to the Financial Statements, including a summary of significant accounting policies. The financial

reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting

Standards, including Financial Reporting Standard 101 'Reduced Disclosure Framework' (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 2019 and of its loss for the year then ended;

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

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.

Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the

financial statements section of our report. We are independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard,

and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw your attention to note 2 in the financial statements, which indicates that the Company incurred a loss before tax

of £3,137K during the year, and had a net current liability of £2,896K at the year ended 31 December 2019. The

Company fully depends on its ultimate parent's support. As stated in note 2, these events or conditions, indicate that a

material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our

opinion is not modified in respect of this matter.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the

Company's ability to continue as a going concern. For example, the terms on which the United Kingdom withdraw from

European Union and current Covid 19 situation, are not clear. It is difficult to evaluate all of the potential impacts on the

Company's trade.

Other matters

The financial statements for the Company for the year ended 31 December 2018 were audited by another auditor, who

expressed an unqualified opinion on those statements on 26 June 2019.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic

Report, the Report of the Directors and the Statement of Directors' Responsibilities, but does not include the financial

statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing

so, consider whether the other information is materially inconsistent with the financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or

apparent material misstatements, we are required to determine whether there is a material misstatement in the financial

statements or a material misstatement of the other information. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact. We have nothing to

report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,

we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you

if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page eight, the directors are

responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and

for such internal control as the directors determine necessary to enable the preparation of financial statements that are

free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic

alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with

ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting

Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those

matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent

permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's

members as a body, for our audit work, for this report, or for the opinions we have formed.

Julie Zhuge Wilson (Senior Statutory Auditor)

for and on behalf of Shinewing Wilson Accountancy Limited

Chartered Certified Accountants

and Statutory Auditors

9 St Clare Street

London

EC3N 1LQ

10 September 2020

TURNOVER

4

43,739

29,171

Cost of sales

40,521

34,388

GROSS PROFIT/(LOSS)

3,218

(5,217

)

Distribution costs

363

270

Administrative expenses

5,573

1,144

5,936

1,414

(2,718

)

(6,631

)

Other operating income

5

100

63

OPERATING LOSS

(2,618

)

(6,568

)

Waiver of intercompany balance

7

-

21,370

Cost of fundamental reorg

7

-

(173

)

Exceptional items

7

(376

)

-

(2,994

)

14,629

Interest receivable and similar income

8

9

28

(2,985

)

14,657

Interest payable and similar expenses

9

152

163

(LOSS)/PROFIT BEFORE TAXATION

10

(3,137

)

14,494

Tax on (loss)/profit

11

1,429

(405

)

(LOSS)/PROFIT FOR THE FINANCIAL YEAR

(4,566

)

14,899

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(4,566

)

Prior year adjustment

845

TOTAL COMPREHENSIVE INCOME SINCE LAST ANNUAL REPORT

15,744

FIXED ASSETS

Owned

Tangible assets

13

20,089

26,966

Right-of-use

Tangible assets

13, 20

406

412

Investments

14

19,572

-

40,067

27,378

CURRENT ASSETS

Stocks

15

30,348

13,975

Debtors

16

14,598

8,284

Cash at bank

24,656

2,548

69,602

24,807

CREDITORS

Amounts falling due within one year

17

72,498

30,345

NET CURRENT LIABILITIES

(2,896

)

(5,538

)

TOTAL ASSETS LESS CURRENT LIABILITIES

37,171

21,840

CREDITORS

Amounts falling due after more than one year

18

20,728

831

NET ASSETS

16,443

21,009

CAPITAL AND RESERVES

Called up share capital

21

1

1

Share premium

47

47

Capital redemption reserve

120

120

Other reserves - IFRS16

(120

)

(120

)

Retained earnings

16,395

20,961

SHAREHOLDERS' FUNDS

16,443

21,009

The financial statements were approved by the Board of Directors and authorised for issue on 10 September 2020 and were signed on its behalf by:

L P Kingsbury - Director

Called up

share

Retained

Share

capital

earnings

premium

£'000

£'000

£'000

Balance at 1 January 2018

-

5,217

47

Prior year adjustment

-

845

-

As restated

-

6,062

47

Changes in equity

Issue of share capital

1

-

-

Total comprehensive income

-

14,899

-

Balance at 31 December 2018

1

20,961

47

Changes in equity

Total comprehensive income

-

(4,566

)

-

Balance at 31 December 2019

1

16,395

47

Capital

Other

redemption

reserves

Total

reserve

- IFRS16

equity

£'000

£'000

£'000

Balance at 1 January 2018

120

(120

)

5,264

Prior year adjustment

-

-

845

As restated

120

(120

)

6,109

Changes in equity

Issue of share capital

-

-

1

Total comprehensive income

-

-

14,899

Balance at 31 December 2018

120

(120

)

21,009

Changes in equity

Total comprehensive income

-

-

(4,566

)

Balance at 31 December 2019

120

(120

)

16,443

1.	STATUTORY INFORMATION

Fine Organics Limited (the "Company") is a private company incorporated, domiciled and registered in England

and Wales, registration number 1532065, the registered address is Seal Sands, Middlesbrough, Cleveland TS2

1UB. The Company acts as an investment holding company.

The presentation currency of the financial statements is the Sterling. All amounts in the financial statements and

notes have been rounded off to the nearest thousand Sterling Pound, unless otherwise stated.

2.	ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Financial Reporting Standard 101 "Reduced Disclosure Framework" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

The company has taken advantage of the following disclosure exemptions in preparing these financial

statements, as permitted by FRS 101 "Reduced Disclosure Framework":

•

the requirements of IFRS 7 Financial Instruments: Disclosures;

•

the requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement;

•

the requirements of paragraph 52, the second sentence of paragraph 89, and paragraphs 90, 91 and 93 of IFRS 16 Leases;

the requirements of paragraph 58 of IFRS 16;

•

the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of:

-

paragraph 79(a)(iv) of IAS 1; and

-

paragraph 73(e) of IAS 16 Property, Plant and Equipment;

•

the requirements of paragraphs 10(d), 10)(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1 Presentation of Financial Statements;

•

the requirements of paragraphs 134 to 136 of IAS 1 Presentation of Financial Statements;

•

the requirements of IAS 7 Statement of Cash Flows;

•

the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;

•

the requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures;

•

the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group;

•

the requirements of paragraphs 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 Impairments of Assets.

Consolidation

The Company is a part of a larger group and included in the consolidated financial statements of a parent of

which the accounts were prepared in an equivalent GAAP. The ultimate parent undertaking Lianhe Chemical

Technology Co.Limited, is the smallest and largest group to consolidate these financial statements. Therefore,

the company is exempt, by virtue of section 400 of the Companies Act 2006, from the requirement to prepare

consolidated financial statements. Group consolidation under Chinese GAAP are available from the website:

http://www.cninfo.com.cn/new/fulltextSearch?notautosubmit=&keyWord=300662.

The English version of the consolidated financial statements are available upon request at the address of the

ultimate parent's registered office: 8 Yongjiao Road, Huangyan Economic Development Zone, Taizhou, Zhejiang

Province, P.R.China 318020.

Going concern

The Company incurred a loss before tax of £3,137K during the year, and had a net current liability of £2,896K at

the year ended 31 December 2019. The whole UK group relies on its ultimate parent's financial support. The

directors considered available funding facilities, and concluded that the UK group has sufficient resource for

next 12 months from the date of signing these financial statements. The financial statements are therefore

prepared on a going concern basis, without reflecting the material uncertainty existence that may cast significant

doubt on the company’s ability to continue as a going concern.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation.

Turnover

The Company adopted IFRS 15 "Revenue from contracts with customers" in 2018. IFRS 15 establishes the

principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of

revenue and cash flows from a contract with a customer.

To recognise revenue under IFRS 15, the Company applies the following five steps:

- identify the contract(s) with a customer.

- identify the performance obligations in the contract.

- determine the transaction price, which is normally agreed in advance.

- allocate the transaction price to each performance obligation on the basis of each stage of product processing,

which is promised in the contract.

- recognise revenue when a performance obligation is satisfied. A performance obligation is satisfied at the point

when a quality control of the product is proved by a customer, and continued for the next process.

Tangible fixed assets

Tangible fixed assets are stated at historic purchase cost less accumulated depreciation. The cost includes the

original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its

intended use. Depreciation is calculated so as to write off the cost of a fixed asset on a straight line basis over its

estimated useful economic life, taking into account any contractual relationships, using the following rates:

Freehold land - not depreciated

Freehold building - maximum of 25 years

Plant and machinery - maximum 10 years

Construction in progress - not deprecated until completion and fully in use

Stocks

Stocks and work in progress are valued at the lower of cost and net realisable value, after making due allowance

for obsolete and slow moving items.

Cost includes all direct expenditure and an appropriate proportion of fixed and variable overheads.

Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax

rules, using tax rates enacted or substantially enacted by the balance sheet date.

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

sheet date where transactions that result in an obligation to pay more tax in the future or a right to pay less tax in

the future have occurred at the balance sheet date. An asset is not recognised to the extent that the transfer of

economic benefits in the future is uncertain. Deferred tax is measured at the average tax rates that are expected to

apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have

been substantially enacted by the balance sheet date. Deferred tax assets and liabilities which have been

recognised have not been discounted.

Research and development

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

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the

balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at

the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Leases

Leases are recognised as finance leases. The lease liability is initially recognised at the present value of the lease

payments which have not yet been made and subsequently measured under the amortised cost method. The initial

cost of the right-of-use asset comprises the amount of the initial measurement of the lease liability, lease

payments made prior to the lease commencement date, initial direct costs and the estimated costs of removing or

dismantling the underlying asset per the conditions of the contract.

Where ownership of the right-of-use asset transfers to the lessee at the end of the lease term, the right-of-use

asset is depreciated over the asset’s remaining useful life. If ownership of the right-of-use asset does not transfer

to the lessee at the end of the lease term, depreciation is charged over the shorter of the useful life of the

right-of-use asset and the lease term.

The company leases various equipment and vehicles. Rental contracts are typically made for fixed periods of 3 to

5 years. If the contracts contain both lease and non-lease components, the Company allocates the consideration

in the contract to the lease and non-lease components based on their relative stand-alone prices.

Until the 2018 financial year, leases of equipment and vehicles were classified operating leases. From 1 January

2019, these leases are recognised as a right-of-use asset and a corresponding liability at the date at which the

leased asset is available for use by the Company.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include

the net present value of the following lease payments:

- Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

- Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the

commencement date;

- Amounts expected to be payable by the company under residual value guarantees;

- The exercise price of a purchase option if the company is reasonably certain to exercise that option; and

- Payments of penalties for terminating the lease, if the lease term reflects the company exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily

determined, which is generally the case for leases in the Company, the lessee's incremental borrowing rate is

used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset

of similar value to the right-of-use asset in a similar economic environment with similar terms, security and

conditions.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are

recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term

of 12 months or less.

Employee benefit costs

The company operates a defined contribution pension scheme. Contributions payable to the company's pension

scheme are charged to the income statement in the period to which they relate.

Government grants

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable

assurance that the grant conditions will be met and the grants will be received.

Government grants relating to turnover are recognised as income over the periods when the related costs are

incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life.

If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's

carrying amount.