Kensa Group Limited - Limited company accounts 22.3

REGISTERED NUMBER: 05367753 (England and Wales)

GROUP STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 APRIL 2022

FOR

KENSA GROUP LIMITED

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

5

Report of the Independent Auditors

7

Consolidated Income Statement

10

Consolidated Other Comprehensive Income

11

Consolidated Balance Sheet

12

Company Balance Sheet

13

Consolidated Statement of Changes in Equity

14

Company Statement of Changes in Equity

15

Consolidated Cash Flow Statement

16

Notes to the Consolidated Cash Flow Statement

17

Notes to the Consolidated Financial Statements

18

DIRECTORS:

M Taylor

M Adderley

M Trewhella

C F Miles

A T Rendel

R Freeborn

J Standley

SECRETARY:

M Adderley

REGISTERED OFFICE:

Mount Wellington

Chacewater

TRURO

Cornwall

TR4 8RJ

REGISTERED NUMBER:

05367753 (England and Wales)

AUDITORS:

Lang Bennetts Audit Limited

The Old Carriage Works

Moresk Road

TRURO

Cornwall

TR1 1DG

SOLICITORS:

Tozers LLP

Broadwalk House

Southernhay West

EXETER

Devon

EX1 1UA

The directors present their strategic report of the company and the group for the year ended 30 April 2022.

Introduction

The Kensa Group comprises:

Kensa Group Limited: the Group's holding company which provides group strategic direction, control and a number of shared services.

Kensa Heat Pumps Limited: a business that designs and manufactures ground source heat pumps and related accessories.

Kensa Contracting Limited: a specialist installation business which focuses on select installation projects.

Kensa Utilities Limited: a business set up to fund, own and maintain ground array assets and support the adoption of this concept by other stakeholders.

Kensa Engineering Limited: a dormant company.

Kensa Limited: a dormant company.

Our vision

The mass deployment of Ground Source Heat Pumps (GSHPs) on a street-by-street approach with split ownership.

Our core values

Clients: the outcome for our clients and the ultimate users of the systems, be that individual householders, social housing residents or businesses.

People: are key to the business and we recruit, develop and recognise talent throughout the Group, ensuring that we promote an inclusive and diverse environment.

Environment: ensure the most efficient solution to the heating, cooling and hot water demands of our customers through utilising natural and waste sources of energy having the minimum impact on the environment.

Product: continual development and enhancement of products and development of new solutions to deal with current and growing requirements.

Industry leaders: maintenance of our market leader position and continual engagement with all stakeholders to ensure the best outcome for our customers, the Government and the environment.

Our business strategy

For our clients we provide appropriate bespoke heating, cooling and hot water solutions from individual houses to large scale development schemes running in to thousands of units. Further, we provide tailored solutions for commercial and mixed applications, utilising all sources of energy to provide the best outcome for our customers and the environment.

Our business model is one of investment for continued growth and to do more of what we currently do very successfully and build capacity for the expected future growth of heat pumps. The UK places heat pumps at the heart of its plan for the decarbonisation of heat and industry growth expected through the rest of the 2020s is substantial. The initial growth from current levels of c40,000 per year to 200,000 per year and then to the target of 600,000 heat pumps per year by 2028 and 1-1.2 million heat pumps per year in the early 2030s is underpinned by the "ban" of gas boilers for new build properties in 2025.

Kensa is the UK market leader for Ground Source Heat Pumps (GSHPs) and we aim to maintain that position helping to grow the market for GSHPs allowing others to join us and prosper. We will achieve this through the formation of partnerships with other GSHP industry players and by building the case for an increasing contribution of GSHPs towards the UK's overall decarbonisation of heat.

Principal activity

The principal activity of the Group is the design, manufacture and installation of GSHPs for a wide range of applications providing heating, cooling and hot water in an environmentally friendly and cost efficient manner.

Business review

The Kensa Group experienced continued growth during the year to £28.6m of turnover, a 13.9% increase on prior year of £25.1m. Growth was triggered by an ever-increasing interest in Ground Source Heat Pump technology.

The impact of Coronavirus, although reducing during the year was significant, which makes the performance all the more impressive and reflective of the huge commitment from staff right across the business. Headcount increased to 139 from 111 and has increased further after the year end. The quality of new recruits reflects the Group's reputation in the sector.

Kensa Contracting achieved a revenue of £21.5m in this financial year. The end of the non-domestic Renewable Heat Incentive (NDRHI) posed a threat to the continued growth of revenue in Kensa Contracting as the lack of subsidy made it more difficult to make a financial case for our social housing clients to invest in retrofit projects. The actions taken in year to 30 April 2021 to mitigate this risk proved effective. The non-domestic sales team (established in FY20-21) won and delivered several large projects including Plymouth Marjon University (value of £3.4m), Willoughburn Leisure Centre (value of £1.9m) and several school retrofit projects for Northumberland Council (value of £1.0m). The increased focus on new build developments in the previous 3 financial years resulted in significantly increased sales to and revenue from new build developments. Both these new market sectors compensated for the reduction in revenue on social housing retrofit projects which were significantly affected by the end of the non-Domestic RHI as anticipated.

Kensa Heat Pumps continued to increase sales to the plumbing and heating sector; secured a major order from an installation contractor engaged in a major multi-year contract; grew the Research and Development function significantly; made encouraging progress on several major product developments and improved productivity in the new factory space.

Kensa Utilities recruited a Managing Director and senior management team to lead the business and is developing funding models for the mass roll-out of GSHP installations on a large scale. Work has begun on the pioneering ERDF funding "Heat the Streets" project and an operational team has been recruited to run that project which demonstrates the utility style approach in new build, social housing and private retrofit properties.

Throughout the year, the Kensa Group increased its commitment to educate many stakeholders about the appeal of ground source heat pumps especially when delivered on a 'street-by-street' basis using a 'split ownership' model. In addition, the Group developed an increasing number of opportunities where the source temperature in the underground shared ground loop infrastructure is bolstered by additional heat from space cooling and cooling of solar PV panels to further improve efficiencies and reduce running costs and carbon emissions. The impact of this improved efficiency, particularly on the coldest day, will have profound impacts on the scale and cost of necessary uplifts to generating capacity and distribution systems. Many significant entities are expressing an interest to invest in this infrastructure in return for an annual standing charge imposed on the connected households.

Principal risks and uncertainties

General

These are largely in control of the Group and are managed well, however, Covid-19 and other such risks are beyond the control of the Group and cannot be predicted. The Group has the necessary control procedures in place which enables it to act quickly and effectively to risks and managed the Covid-19 pandemic well with its clients and staff, the safety of both being paramount.

Compliance with legislation and financial intervention

In a developing and rapidly growing market which has seen, and continues to see, significant legislative and financial intervention, keeping up to date with all developments is key.

Commercial

Our strategy of heavy investment in R&D, marketing, business development and business systems is underpinned by the UK Government's published strategy of the decarbonisation of heat in buildings. Any watering down, delay or cancellation of the UK's decarbonisation strategy could significantly impact Kensa's strategy. It is mostly one of timing, our strategy is to invest early enough to take advantage of the significant growth expected but if that growth came much later than expected, Kensa could become exposed to bearing higher overheads without the associated revenue growth. The recent change of Government will be analysed with great interest to understand and adapt to any changes in focus or direction.

Staff

Staff is the key resource in the business and the continued development and growth of the business requires increasing numbers. The ability to secure new members of staff and ensure they are trained in the GSHP industry is a challenge. Good training, good rates of pay and a wide range of benefits including equity participation are seen as a given but most importantly and key is the maintenance of a great working environment and culture.

Financial

As a result of planned continued investment in to the business, the ability to secure sufficient finance is key. In 2020 the group secured a significant investment from Legal & General Capital Investment Limited and post the year end completed on a further investment, by Convertible Loan Note ("CLN") of £8m. Additional investment is being sought to further accelerate development of the Group and market.

Maintenance of margins while retaining operating costs is a major risk and as the business grows and exposure to one particular customer increases credit risk.

The Group secures some product from overseas and therefore is subject to currency fluctuation, but this is not significant.

All risks are constantly monitored and appropriate action is taken where necessary. Cash flow is monitored daily.

Key performance indicators

Financial: Turnover, gross margin, number of GSHPs manufactured and installed

Clients: Satisfaction, outcome delivered, low running and maintenance costs

Products: testing pass rates and reliability, efficiency, development

Staff: number, retention, reward and personal role fulfilment

All these performance indicators are regularly reported and reviewed by the board of directors.

ON BEHALF OF THE BOARD:

M Trewhella - Director

12 September 2022

The directors present their report with the financial statements of the company and the group for the year ended 30 April 2022.

DIVIDENDS

No dividends have been distributed for the year ended 30 April 2022.

EVENTS SINCE THE END OF THE YEAR

Information relating to events since the end of the year is given in the notes to the financial statements.

DIRECTORS

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

M Taylor

M Adderley

C F Miles

Other changes in directors holding office are as follows:

M Freeborn-Swan - resigned 5 January 2022

S Lomax - resigned 30 March 2022

J A Bromley - resigned 26 May 2021

M Trewhella - appointed 30 March 2022

A T Rendel - appointed 26 May 2021

R Freeborn - appointed 5 January 2022

J Standley was appointed as a director after 30 April 2022 but prior to the date of this report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group 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 the group and of the profit or loss of the group 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 and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group 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 the group 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 group'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 group's auditors are aware of that information.

AUDITORS

The auditors, Lang Bennetts Audit Limited, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

M Trewhella - Director

12 September 2022

Opinion

We have audited the financial statements of Kensa Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 April 2022 which comprise the Consolidated Income Statement, Consolidated Other Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated Cash Flow Statement, 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 the financial statements:

-	give a true and fair view of the state of the group's and of the parent company affairs as at 30 April 2022 and of the group's 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 group 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 group's and the parent 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 directors are responsible for the other information. The other information comprises the information in the Group 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 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 the audit:

-	the information given in the Group 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 Group 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 group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-	the parent company 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 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 group's and the parent 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 group or the parent 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 obtained an understanding of the legal and regulatory frameworks that are applicable to the entity and determined that the most significant are those that relate to health and safety, employment matters and laws and regulations.

We assessed the risks of material misstatement in respect of fraud as follows:

- we made enquiries of the directors and management of any non-compliance of laws and regulations, potential litigation and claims or any knowledge of actual, suspected or alleged fraud.

- we considered the risk of fraud through management override.

- we considered the risk of fraud through revenue recognition, particularly with regard to the methods of quantifying contract income.

Based on the results of our risk assessment, we designed our audit procedures to identify and to address material misstatements in relation to fraud, as follows:

- we reviewed legal fees to identify any potential non-compliance with laws and regulations.

- we reviewed material manual journal entries for evidence of management override or fraud.

- we reviewed information in relation to key operating compliance matters including health and safety.

- we tested specific instances of contract revenue recognition, including that this was correctly applied as at the year end.

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.

Jonathan Mashen FCA (Senior Statutory Auditor)

for and on behalf of Lang Bennetts Audit Limited

The Old Carriage Works

Moresk Road

TRURO

Cornwall

TR1 1DG

3 October 2022

TURNOVER

3

28,616,479

25,139,100

Cost of sales

22,144,591

19,560,474

GROSS PROFIT

6,471,888

5,578,626

Administrative expenses

8,506,604

5,338,935

(2,034,716

)

239,691

Other operating income

256,111

396,498

OPERATING (LOSS)/PROFIT

5

(1,778,605

)

636,189

Interest receivable and similar income

187

632

(1,778,418

)

636,821

Interest payable and similar expenses

6

-

214

(LOSS)/PROFIT BEFORE TAXATION

(1,778,418

)

636,607

Tax on (loss)/profit

7

(96,986

)

16,954

(LOSS)/PROFIT FOR THE FINANCIAL YEAR

(1,681,432

)

619,653

(Loss)/profit attributable to:

Owners of the parent

(1,681,432

)

619,653

(LOSS)/PROFIT FOR THE YEAR

(1,681,432

)

619,653

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(1,681,432

)

619,653

Total comprehensive income attributable to:

Owners of the parent

(1,681,432

)

619,653

FIXED ASSETS

Tangible assets

9

526,199

246,487

Investments

10

-

-

526,199

246,487

CURRENT ASSETS

Stocks

11

2,085,916

980,443

Debtors

12

6,244,530

4,908,096

Cash at bank and in hand

1,441,977

3,552,615

9,772,423

9,441,154

CREDITORS

Amounts falling due within one year

13

7,603,677

5,311,788

NET CURRENT ASSETS

2,168,746

4,129,366

TOTAL ASSETS LESS CURRENT LIABILITIES

2,694,945

4,375,853

PROVISIONS FOR LIABILITIES

17

524

-

NET ASSETS

2,694,421

4,375,853

CAPITAL AND RESERVES

Called up share capital

18

133,451

133,451

Retained earnings

19

2,560,970

4,242,402

SHAREHOLDERS' FUNDS

2,694,421

4,375,853

The financial statements were approved by the Board of Directors and authorised for issue on 12 September 2022 and were signed on its behalf by:

M Trewhella - Director

FIXED ASSETS

Tangible assets

9

406,005

127,178

Investments

10

2,000,000

2,000,000

2,406,005

2,127,178

CURRENT ASSETS

Debtors

12

749,775

329,858

Cash at bank and in hand

1,191,582

1,560,269

1,941,357

1,890,127

CREDITORS

Amounts falling due within one year

13

511,170

191,840

NET CURRENT ASSETS

1,430,187

1,698,287

TOTAL ASSETS LESS CURRENT LIABILITIES

3,836,192

3,825,465

CAPITAL AND RESERVES

Called up share capital

18

133,451

133,451

Retained earnings

19

3,702,741

3,692,014

SHAREHOLDERS' FUNDS

3,836,192

3,825,465

Company's profit for the financial year

10,727

3,469

The financial statements were approved by the Board of Directors and authorised for issue on 12 September 2022 and were signed on its behalf by:

M Trewhella - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1 May 2020

131,908

(216,327

)

3,839,076

3,754,657

Changes in equity

Issue of share capital, net of

expenses

1,543

-

-

1,543

Capital reduction

-

3,839,076

(3,839,076

)

-

Total comprehensive income

-

619,653

-

619,653

Balance at 30 April 2021

133,451

4,242,402

-

4,375,853

Changes in equity

Total comprehensive income

-

(1,681,432

)

-

(1,681,432

)

Balance at 30 April 2022

133,451

2,560,970

-

2,694,421

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1 May 2020

131,908

(150,531

)

3,839,076

3,820,453

Changes in equity

Issue of share capital, net of

expenses

1,543

-

-

1,543

Capital reduction

-

3,839,076

(3,839,076

)

-

Total comprehensive income

-

3,469

-

3,469

Balance at 30 April 2021

133,451

3,692,014

-

3,825,465

Changes in equity

Total comprehensive income

-

10,727

-

10,727

Balance at 30 April 2022

133,451

3,702,741

-

3,836,192

Cash flows from operating activities

Cash generated from operations

1

(2,611,598

)

713,559

Interest paid

-

(214

)

Net cash from operating activities

(2,611,598

)

713,345

Cash flows from investing activities

Purchase of tangible fixed assets

(343,997

)

(143,975

)

Interest received

187

632

Net cash from investing activities

(343,810

)

(143,343

)

Cash flows from financing activities

Share issue

-

1,543

Government grants

237,357

308,298

Net cash from financing activities

237,357

309,841

(Decrease)/increase in cash and cash equivalents

(2,718,051

)

879,843

Cash and cash equivalents at beginning of year

2

3,552,615

2,672,772

Cash and cash equivalents at end of year

2

834,564

3,552,615

1.	RECONCILIATION OF (LOSS)/PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2022

2021

£

£

(Loss)/profit before taxation

(1,778,418

)

636,607

Depreciation charges

64,285

30,570

R&D Expenditure Credit

(18,752

)

-

Government grants

(237,358

)

(396,498

)

Finance costs

-

214

Finance income

(187

)

(632

)

(1,970,430

)

270,261

Increase in stocks

(1,105,473

)

(341,151

)

Increase in trade and other debtors

(1,220,171

)

(1,280,163

)

Increase in trade and other creditors

1,684,476

2,064,612

Cash generated from operations

(2,611,598

)

713,559

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 30 April 2022

30/4/22

1/5/21

£

£

Cash and cash equivalents

1,441,977

3,552,615

Bank overdrafts

(607,413

)

-

834,564

3,552,615

Year ended 30 April 2021

30/4/21

1/5/20

£

£

Cash and cash equivalents

3,552,615

2,672,772

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1/5/21

Cash flow

At 30/4/22

£

£

£

Net cash

Cash at bank and in hand

3,552,615

(2,110,638

)

1,441,977

Bank overdrafts

-

(607,413

)

(607,413

)

3,552,615

(2,718,051

)

834,564

Total

3,552,615

(2,718,051

)

834,564

1.	STATUTORY INFORMATION

Kensa Group 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 General Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

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

A subsidiary is an entity controlled by the company. Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the Profit and Loss Account from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statement of subsidiaries to bring their accounting policies into line with those used by the group.

The purchase method of accounting is used to account for business combinations that result in the acquisition of subsidiaries by the group. The cost of a business combination is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the business combination. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Any excess of the cost of the business combination over the acquirers interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised is recorded as goodwill.

Inter-company transactions, balances and unrealised gains on transaction between the company and it's subsidiaries, which are related parties, are eliminated in full.

Intra-group losses are also eliminated but may indicate an impairment that requires recognition in the consolidated financial statements.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholders share of changes in equity since the date of the combination.

Going concern

At the time of approving the financial statements, the directors consider that the company is a going concern and has adequate resources to continue operations for the foreseeable future. The directors continue to adopt the going concern basis of accounting in preparing the financial statements.

In determining this the directors have considered the group's and company's current trading positions in relation to their business plans post year end. The expectation for the next 12 months is that the business will continue to invest in developing capacity and market share, adequate finance is available to support these plans as outlined in the strategic report and at note 22.

Financial Reporting Standard 102 - reduced disclosure exemptions

The group has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);

•

the requirements of paragraphs 12.26, 12.27, 12.29(a), 12.29(b) and 12.29A;

•

the requirement of paragraph 33.7.