Rockford Components Limited - Limited company accounts 22.3

REGISTERED NUMBER: 01838700 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021

FOR

ROCKFORD COMPONENTS LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Statement of Comprehensive Income

10

Statement of Financial Position

11

Statement of Changes in Equity

12

Statement of Cash Flows

13

Notes to the Statement of Cash Flows

14

Notes to the Financial Statements

16

DIRECTORS:

Mrs P A Marks

P A Lion

L A Betts

SECRETARY:

Mrs P A Marks

REGISTERED OFFICE:

Rockford House

Acer Road

Rendlesham

Woodbridge

Suffolk

IP12 2GJ

REGISTERED NUMBER:

01838700 (England and Wales)

AUDITORS:

Knights Lowe Limited

Eldo House

Kempson Way

Suffolk Business Park

Bury St Edmunds

Suffolk

IP32 7AR

The directors present their strategic report for the year ended 31 December 2021.

REVIEW OF BUSINESS

We consider that the company made progress during 2021 despite the ongoing financial and operational effects of the COVID-19 pandemic and some continuing supply chain issues.

The KPI's shown on page 3 show a significant improvement in the gross profit rate when compared with 2020 and this is after taking into account a further £224k provision for potentially obsolete stocks. Had the company been able to achieve its forecasted turnover for 2021 of around £8m, then the company would have returned to profit. Unfortunately, some significant supply chain issues coupled with customer design and order placement delays pushed some sales into 2022 and indeed into 2023.

The Government Defence Review had a major impact on our sales with the cancellation of the WCSP programme. The business has however had opportunity to mitigate this cancellation by its development of new customers and markets.

We remain confident of the success of the business going forward having invested into our people, facilities, and our Future Factory continuous improvement programme. We also achieved AS9100 accreditation for our Salisbury facility ensuring all site capability to the highest quality standard.

2022 has remained very challenging with numerous supply chain issues, customer delays and, as has been affecting all manufacturers, the ability to recruit skilled personnel. The company does however enter 2023 with a good and diverse order book and an encouraging pipeline of opportunities.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks to the company are the ongoing supply chain issues.

We are working to relieve these issues through diversification of our supply chain and monthly supply chain reviews with suppliers to ensure KPI's are achieved to support Rockford forecasting and planning.

We now have clarity on our core defence business following the UK Ministry of Defence Integrated Defence and Security Review and whilst some projects did not proceed that we had within our forecast, other opportunities have arisen which we are well placed to support.

We have also mitigated the cancellation of these projects through opportunities within other markets though our Growth Projects initiative.

GOING CONCERN

The ongoing financial and operational impacts of the COVID-19 pandemic, together with supply chain issues, have significantly affected the company's ability to return to profitability in 2021. Consequently there continues to be a materiality uncertainty relating to going concern and this is further described in note 3 to these financial statements.

KEY PERFORMANCE INDICATORS

Financial Year

2021

2020

Turnover

£6,739,668

6,273,456

Increase in stock obsolescence provision

£224,077

£217,264

Gross profit

£1,420,515

£621,149

Gross profit rate %

21.1%

9.9%

Gross profit rate % after adjustment for furlough claims

24.0%

17.3%

Loss before taxation

£239,659

£830,858

Loss after taxation

£115,323

£645,706

Net assets

£501,556

£616,879

ON BEHALF OF THE BOARD:

P A Lion - Director

26 January 2023

The directors present their report with the financial statements of the company for the year ended 31 December 2021.

PRINCIPAL ACTIVITIES

The principal activities of the company in the year under review were those of design, manufacture, installation and the supply of cable assemblies, wiring harnesses, electromechanical sub-assemblies and systems solutions for the Defence, Aerospace, Marine, Automotive and Industrial sectors.

DIVIDENDS

Dividends totalling £Nil (2020 - £Nil) were paid during the year.

RESEARCH AND DEVELOPMENT

The company continues to invest in product research and development and the skills base of its engineering team. This will inevitably increase our involvement with our current and new customers very early on in their projects and will enhance our visibility as an engineering based company that can deliver from conception to a manufactured product within our own broad manufacturing capability.

FUTURE DEVELOPMENTS

We have developed three separate growth plans concentrating on Technology, Systems Solutions and New Market sales and these are now progressing opportunities for the future. These growth plans will give the business a wider base of supply so reducing dependency on traditional markets and customers.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2021 to the date of this report.

Mrs P A Marks

P A Lion

L A Betts

FINANCIAL INSTRUMENTS

The company utilises within its operations financial instruments such as trade debtors, trade creditors, bank facilities, asset based facilities including invoice discounting and a director's loan.

LIQUIDITY AND CREDIT RISK

Liquidity risk is managed by the close monitoring of trade payables, trade receivables and bank and invoice discounting facilities. The company's main credit risk is that associated with trade debtors. This risk is managed by ensuring that the ongoing availability of credit facilities is supported by a regular assessment of a customers' credit status.

INTEREST RATE RISK

The financing of the company's operations is met through the management of working capital in conjunction with bank facilities, asset based facilities including invoice discounting and a director's loan. The company's bank and asset based facilities are available at agreed commercial rates and the director's loan is interest free with no fixed date for repayment.

DIRECTORS' RESPONSIBILITIES STATEMENT

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;

-	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.

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 or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Knights Lowe Limited, are deemed to be reappointed under section 487(2) of the Companies Act 2006.

ON BEHALF OF THE BOARD:

P A Lion - Director

26 January 2023

Qualified opinion

We have audited the financial statements of Rockford Components Limited (the 'company') for the year ended 31 December 2021 which comprise the Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and Notes to the Statement of Cash Flows, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion, except for the possible effects of the matter described in the basis for qualified opinion section of our report, the financial statements:

- give a true and fair view of the state of the company's affairs as at 31 December 2021 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 qualified opinion

The company's stocks at 31 December 2021 include a significant amount of items which have been held for a number of years and in respect of which their sale or utilisation in production is uncertain. Although as detailed in note 3 the directors fully consider the required provision for obsolete stocks, a key factor in their assessment is the level, timing and nature of the company's future turnover. In the absence of sufficient appropriate sales or utilisation of the relevant items after the financial year end, we were unable to satisfy ourselves as to the adequacy of the company's provision for obsolete stocks. Consequently we were unable to determine whether any further adjustment to stocks held at 31 December 2021 was necessary. In addition, were any adjustment to stocks required, the strategic report would also need to be amended.

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 qualified opinion.

Material uncertainty related to going concern

We draw attention to note 3 to the financial statements, which indicates that the company incurred a net loss of £115,323 for the year ended 31 December 2021. As stated in note 3, this along with other matters as detailed in note 3, 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.

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. 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 directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, 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.

As described in the basis for qualified opinion section of our report, we were unable to satisfy ourselves as to the adequacy of the company's provision for obsolete stocks as at 31 December 2021. We have concluded that where the other information relates to related balances such as gross profit and net assets, it may be materially misstated for the same reason.

Opinions on other matters prescribed by the Companies Act 2006

Except for the possible effects of the matter described in the basis for the qualified opinion section of our report, 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

Except for the matter described in the basis for qualified opinion section of our report, 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.

Arising solely from the limitation on the scope of our work relating to obsolete stocks, referred to above:

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

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

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

• returns adequate for our audit have not been received from branches not visited by us; or

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

• certain disclosures of directors’ remuneration specified by law are not made.

Responsibilities of directors

As explained more fully in the Directors' Responsibilities Statement set out on page five, 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.

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

We gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates and through discussions with directors and management identified laws and regulations that could reasonably be expected to have a material effect on the financial statements. The outcomes of these discussions were shared with the audit team and consideration given as to where and how fraud may occur in the company.

The laws and regulations considered as being significant to the company included UK company law and financial reporting standards, ISO9001-2015, AS9100, IPC620 and Cyber Essentials standards and certifications.

We undertook audit procedures in response to the potential risks relating to irregularities which include risks of fraud and non-compliance with laws and regulations. These procedures comprised of enquiry of management concerning any actual or potential claims or litigation, review of board minutes and relevant legal documentation, review and testing of both journal and other entries in the nominal ledger and review of transactions around the end of the accounting period, together with undertaking analytical procedures to assist in identifying any unexpected amounts and variances within the financial statements that may be an indication of fraud.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements. There are however inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. The risk of not detecting irregularities resulting from fraud is higher than the risk of not detecting irregularities resulting from an error, as fraud may involve deliberate concealment. There is therefore an unavoidable risk that material misstatements may not be detected, even though the audit has been undertaken in accordance with applicable auditing standards.

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.

James Knights FCA BSc (Senior Statutory Auditor)

for and on behalf of Knights Lowe Limited

Eldo House

Kempson Way

Suffolk Business Park

Bury St Edmunds

Suffolk

IP32 7AR

27 January 2023

TURNOVER

4

6,739,668

6,273,456

Cost of sales

5,319,153

5,652,307

GROSS PROFIT

1,420,515

621,149

Administrative expenses

1,904,762

2,017,457

(484,247

)

(1,396,308

)

Other operating income

5

319,344

647,464

OPERATING LOSS

7

(164,903

)

(748,844

)

Interest receivable and similar income

58

461

Interest payable and similar expenses

8

(74,814

)

(82,475

)

LOSS BEFORE TAXATION

(239,659

)

(830,858

)

Tax on loss

9

(124,336

)

(185,152

)

LOSS FOR THE FINANCIAL YEAR

(115,323

)

(645,706

)

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(115,323

)

(645,706

)

FIXED ASSETS

Intangible assets

10

-

-

Tangible assets

11

645,583

648,997

645,583

648,997

CURRENT ASSETS

Stocks

12

2,879,737

3,174,250

Debtors

13

1,221,297

1,258,721

Cash at bank and in hand

216,584

148,376

4,317,618

4,581,347

CREDITORS

Amounts falling due within one year

14

3,995,382

4,013,851

NET CURRENT ASSETS

322,236

567,496

TOTAL ASSETS LESS CURRENT LIABILITIES

967,819

1,216,493

CREDITORS

Amounts falling due after more than one year

15

466,263

599,614

NET ASSETS

501,556

616,879

CAPITAL AND RESERVES

Called up share capital

21

100

100

Retained earnings

22

501,456

616,779

SHAREHOLDERS' FUNDS

501,556

616,879

The financial statements were approved by the Board of Directors and authorised for issue on 26 January 2023 and were signed on its behalf by:

P A Lion - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2020

100

1,262,485

1,262,585

Changes in equity

Total comprehensive income

-

(645,706

)

(645,706

)

Balance at 31 December 2020

100

616,779

616,879

Changes in equity

Total comprehensive income

-

(115,323

)

(115,323

)

Balance at 31 December 2021

100

501,456

501,556

Cash flows from operating activities

Cash generated from operations

1

(68,495

)

209,143

Interest paid

(74,814

)

(82,475

)

Taxation refund

309,488

251,992

Net cash from operating activities

166,179

378,660

Cash flows from investing activities

Purchase of tangible fixed assets

(53,873

)

(13,013

)

Sale of tangible fixed assets

300

150

Interest received

58

461

Net cash from investing activities

(53,515

)

(12,402

)

Cash flows from financing activities

New loans in year

-

50,000

Loan repayments in year

(112,975

)

(80,357

)

Invoice discounting facilities

167,660

(501,078

)

Amount introduced by directors

-

273,037

Amount withdrawn by directors

(99,141

)

-

Net cash from financing activities

(44,456

)

(258,398

)

Increase in cash and cash equivalents

68,208

107,860

Cash and cash equivalents at beginning of year

2

148,376

40,516

Cash and cash equivalents at end of year

2

216,584

148,376

1.	RECONCILIATION OF LOSS BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2021

2020

£

£

Loss before taxation

(239,659

)

(830,858

)

Depreciation charges

57,287

69,185

(Profit)/loss on disposal of fixed assets

(300

)

68

Finance costs

74,814

82,475

Finance income

(58

)

(461

)

(107,916

)

(679,591

)

Decrease in stocks

294,513

299,432

(Increase)/decrease in trade and other debtors

(147,728

)

554,620

(Decrease)/increase in trade and other creditors

(107,364

)

34,682

Cash generated from operations

(68,495

)

209,143

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:

Year ended 31 December 2021

31.12.21

1.1.21

£

£

Cash and cash equivalents

216,584

148,376

Year ended 31 December 2020

31.12.20

1.1.20

£

£

Cash and cash equivalents

148,376

40,516

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1.1.21

Cash flow

At 31.12.21

£

£

£

Net cash

Cash at bank and in hand

148,376

68,208

216,584

148,376

68,208

216,584

Debt

Debts falling due within 1 year

(529,126

)

(171,827

)

(700,953

)

Debts falling due after 1 year

(583,405

)

117,142

(466,263

)

(1,112,531

)

(54,685

)

(1,167,216

)

Total

(964,155

)

13,523

(950,632

)

1.	STATUTORY INFORMATION

Rockford Components Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

2.	STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006.

3.	ACCOUNTING POLICIES

Basis of preparing the financial statements

The financial statements have been prepared under the historical cost convention.

Going concern

Whilst the company made progress in 2021 by increasing its gross profit rate and reducing overheads, the ongoing impacts of the COVID-19 pandemic and supply chain issues resulted in the company not achieving its forecasted turnover. This factor, together with a further provision of £224,077 in respect of potentially obsolete stocks, caused the company to incur a loss after tax for the year of £115,323. Although this loss is considerably less than that reported in 2020, it has nevertheless further weakened the net assets position and financial resources of the company. Consequently such conditions continue to give rise to a material uncertainty related to going concern and therefore whether the company may be unable to realise its assets and settle its liabilities in the normal course of business.

Trading remained very challenging throughout 2022 as supply chain issues and customer sales order placement and design delays continued to have a detrimental affect on turnover. However, following the recent resolution of many of these issues, a considerable amount of the delayed turnover has now been re-programmed to be delivered during 2023. Furthermore the company has a good and varied order book and the directors are progressing a number of new market opportunities.

The company works very closely with its key suppliers and customers. With their continued support and that of the company's other stakeholders, the directors have a reasonable expectation that the company will continue in operational existence for the foreseeable future and the company therefore continues to adopt the going concern basis in preparing its financial statements.

Significant judgements and estimates

In preparing these financial statements the directors have made the following significant judgements and estimates:

Tangible fixed assets

Tangible fixed assets are depreciated over their estimated useful economic lives taking into account, where relevant, their estimated residual values. Useful economic lives and residual values are re-assessed annually and amended as considered necessary to reflect economic utilisation and physical condition of the assets.

Stocks

The allowance made by the company for obsolete stock items is determined by taking into account a number of factors such as technical obsolescence, traceability issues and likelihood of future use in production.

Turnover

Turnover represents sales of goods and services, derived from ordinary activities, net of VAT and trade discounts. Turnover is recognised either on delivery or, when appropriate, where there is a right to consideration based on contract performance.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life.

Freehold land

-

not provided

Freehold property

-

over 50 years

Long leasehold land

-

not provided

Improvements to property

-

10% on cost

Plant and machinery

-

25% on reducing balance,

Motor vehicles

-

25% on reducing balance

Computer equipment

-

33% on cost

Government grants

Grants are accounted for using the accrual model.

Grants relating to revenue are recognised in the Statement of Comprehensive Income in the same period as the related costs for which the grant is intended to compensate. Where there are no related costs the grant is recognised in the period in which it becomes receivable.

Grants relating to assets are recognised in the Statement of Comprehensive Income over the expected useful life of the asset.

Stocks

Stocks relate to materials, components and consumables which have not been utilised in the manufacture of product as at the statement of financial position date. Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete items.

The directors determine the allowance for obsolete stock items by way of a three stage process. The first stage is to identify obsolete stock items relating to particular major contracts. The second stage involves the identification of stock items which are not commonly used across any recent or current contracts. Obsolete stock items identified at stages one and two are written down to nil.

The third stage of the process is based on the directors view that most large projects have a four year production cycle with a further period of high spares usage due to intense testing. After the first five years relevant stock items usage reduces over a period of a further five years and hence on this basis a 20% write down is made each year.

Financial instruments

The company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, bank overdrafts, asset based facilities including invoice discounting and loans with related parties.

Debt instruments that are payable or receivable within one year, such as trade payables or receivables, are measured at the undiscounted amount of the cash or other consideration expected to be paid or received. Debt instruments that are repayable or receivable after one year are initially measured at the present value of the future cash flows and subsequently at amortised cost using the effective interest method.

Financial assets that are measured at cost and amortised cost are assessed at the end of each financial year for evidence of impairment. If objective evidence of impairment is found an impairment loss is recognised in the Income Statement.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the statement of financial position date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

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 statement of financial position 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.

Amounts recoverable on contracts

Amounts recoverable on contracts relate to part complete contracts where the company has gained a right to consideration based on contract performance. The value attributed to amounts recoverable on contracts includes the cost of materials, labour, and an appropriate allocation of overheads.

Impairment of non-financial assets

Assets not measured at fair value are reviewed for any indication that the asset may be impaired at each statement of financial position date. If such indication exists, the recoverable amount of the asset is compared to the carrying amount. Where the carrying amount exceeds its recoverable amount, an impairment loss is recognised in the statement of comprehensive income.

Pension costs and other post-retirement benefits

The company operates a defined contribution plan for the benefit of its employees. Contributions are expensed as they become payable.

4.

TURNOVER

The turnover and loss before taxation are attributable to the principal activities of the company.

An analysis of turnover by geographical market is given below:

2021

2020

£

£

United Kingdom

6,503,254

5,959,108

Europe

62,202

208,918

Rest of the World

174,212

105,430

6,739,668

6,273,456

5.	OTHER OPERATING INCOME

2021

2020

£

£

COVID-19 Additional Relief Fund income

48,541

-

Other income

-

4,324

Coronavirus Job Retention Scheme grants

270,282

642,411

Bounce Back Loan interest covered by government

521

729

319,344

647,464

6.	EMPLOYEES AND DIRECTORS

2021

2020

£

£

Wages and salaries

2,743,893

3,301,220

Social security costs

233,429

253,611

Other pension costs

53,238

58,670

3,030,560

3,613,501

The average number of employees during the year was as follows:

2021

2020

Office, technical and management

37

40

Production

90

117

127

157

2021

2020

£

£

Directors' remuneration

166,869

169,361

Directors' pension contributions to money purchase schemes

2,638

2,854

Compensation to director for loss of office

-

30,000