G_T__EMISSIONS_SYSTEMS_LI - Accounts

The directors present their strategic report and financial statements for the year ended 31 December 2023, in compliance with the Companies Act 2006.

There was a change of board directors during 2023 with the Finance Director resigning in September, and an interim replacement appointed in October whilst a permanent replacement was recruited. There were no financial issues arising from this change, and all internal and external requirements were met.

Inflation following the war in Ukraine, and subsequent supply chain issues, continued to affect the price of raw materials, freight charges and energy costs, all of which provided significant challenges to achieving the budgeted profitability. The pound also fell sharply against the Euro and dollar at the beginning of the year before recovering to similar levels from end 2022, but remained lower than previous years.

Despite the challenges, the business once more exceeded original customer forecasts, delivering increased year on year sales, and significant improvements in respect of quality. With cost improvement strategies initiated from the prior year, the management continued adapting to these challenges and building on those plans with additional strategies identified to further improve profitability.

Market risks derive from the volatile nature of some customer sectors and from the company's need to maintain its strong brand as a quality engineering service provider. For these reasons, market trends are monitored closely and diversity of the customer base is carefully preserved. Annual objectives are directed by the need for a constant focus on quality and lead to operational targets designed to reduce waste and ensure quality standards are maintained.

Operational risks are those of health, safety and environmental (HSE) performance, and the company minimises risks through its accredited quality and environmental management systems and through a robust and pro-active health and safety management system. The Board seeks to meet ethical and corporate social responsibility expectations through its company management system.

Financial risks continue to stem from import and export activity as exchange rate volatility can have a significant effect on margins. Interest rate increases through 2023 have also had an impact on the business with finance costs, including interest from parent cash pooling arrangements, lead to finance costs increasing to £500,352 (2022: £126,669). Credit control continues to be a priority and the risk of insolvent customers or suppliers is mitigated through strict internal procedures.

World raw material prices require continual monitoring, so the company continues to mitigate the effects of potential upward trends by way of long-term agreements with suppliers/customers wherever possible and continuously reviewing the best cost sourcing of materials.

The results for the year are set out on page 10.

The company continues to invest in research and development, working very closely with its customer base. This investment will continue to serve the business well in the coming years as vehicle manufacturers strive to find new and innovative ways to reduce emissions and fuel consumption, to comply with legislation as well as reducing end-user costs. It is also expected to be a competitive advantage, as the company looks to leverage its experience to attract potential new customers from existing and new markets.

Gross sales improved from 2022 with an increase of 2.9%. Whilst it was a great success to deliver the increased sales result, this brought with it many challenges. Global supply-chain issues, world commodity prices, freight costs and the knock on impact on raw material costs all had a negative effect on margins. As a result the increased turnover did not lead to a full conversion to expected EBIT margin levels, with pre-tax losses of £2.8 million.

The company's policy of substantial investment in research and development, fully supported by the parent Group, continues to provide benefits reflected in a wider and more sophisticated product portfolio, leading to sustained and increased order levels from its customer base. The market continues to be very challenging with tough competition from Asia and South America driving prices downwards, so the directors are very active in ensuring the company keeps a competitive edge through its sourcing strategies.

The company continues to invest in the development of its environmental engineering products to enable it to fulfil and exceed its growth plans to 2025 and beyond.

As part of the strategy for improving profitability, and in recognition of the ongoing challenges to deliver customer volumes, the company has made significant investment (£3.4million) in fixed asset additions; supported by the company’s ultimate parent Group, Knorr-Bremse AG. This demonstrates the company’s ambition to continue to be recognised as a Centre of Competence for Engine Air systems, and provide a platform to build on its position in the market, as well as explore new and developing technologies.

The directors do not recommend payment of a final dividend (2022: £0).

Whilst access to cash funds from the groups cash pooling arrangements is readily available at a preferential rate to external options, the rise in interest rates, alongside the additional investment in fixed assets, provides an additional challenge to profitability. This increased finance cost is reflected in future year

Under section 172 of the Companies Act 2006, the directors have a duty to act in good faith in a way that is most likely to promote the success of the company for the benefit of its members as a whole, having regard to the likely consequences of decisions for the long term, the interests of the company’s employees, the need to foster relationships with other stakeholders, the impact on the community and the environment, maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company.

Key decisions made by the board during the year ended 31 December 2023, were considered with the aforesaid duty to act in good faith.

100% of the Company’s shares are ultimately held by a single corporate body in Germany, which has significant involvement in, and exercises its authorisation over key board decisions. The Board recognises its responsibility to act fairly in the interests of all shareholders of the company.

At 31 December 2023 the company employed 221 staff at its Peterlee site, with an average of 219 through the year (a decrease of 1 head from the prior year). The senior management team communicate with all employees via regular town hall meetings as well as ad-hoc email, huddles and notice board updates. Regular on site briefings are also held by management on a daily / weekly basis. Management has implemented employee policies and procedures which are appropriate for the size of the company. The company operates under the Knorr-Bremse code of conduct, to which all staff must agree to adhere. The code includes significant direction in relation to employee engagement, development, safety and welfare. Elected employee representatives form a Works Council, which meets with management on a monthly basis, to discuss matters (raised by either side) impacting employees.

The company continues to work with its customers to develop a range of sustainable products for its markets, which are aimed at reducing emissions and fuel usage. Roadmaps have been developed to support this activity with new products being introduced to support customers’ expectations in this field.

Supplier relationships are important across all areas of the business. The company has developed key long-term relationships that have ensured a stable and sustainable supply chain.

Historically, environmental initiatives have largely been managed locally.

The largest risks to the business continue to be the supply chain and a significant plan is now underway to resource products from multiple suppliers as the global commodity impacts continue highlight the need for a more diverse portfolio of suppliers. Energy prices are another risk and management have continued to work hard on reducing this impact with the complete overhaul to LED lighting, energy consumption reduction with voltage and power optimization regulators installed. Recent significant inflation and interest rate rises also represent financial risks to the business.

The directors are confident in the ability of the company to withstand the market volatility associated with the above issues, given the strength in its balance sheet and that of its parent Group. The cost reduction strategies and business plan through to 2028 provide a basis for confidence that the business will not only withstand but thrive in future years.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2023.

The principal activity of the company continued to be that of design, development and manufacture of exhaust gas control valves, exhaust brakes and emissions control systems and other precision machined components for use in medium and heavy duty engines both on and off highway.

The results for the year are set out on page 10.

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

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

The company's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code (copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU).

The company's current policy concerning the payment of trade creditors is to:

• settle the terms of payment with suppliers when agreeing the terms of each transaction;

• ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and

• pay in accordance with the company's contractual and other legal obligations.

Trade creditors of the company at the year end were equivalent to 43.67 day's purchases, based on the average daily amount invoiced by suppliers during the year.

Our mandatory annual greenhouse gas emissions reporting, relating to the company’s physical presence, is detailed below.

The company has gathered data regarding scope one and two carbon emissions (as defined by the GHG Protocol) for the financial year 1 January 2023 to 31 December 2023 from its UK operations as defined by the requirements of the Streamlined Energy and Carbon Reporting (SECR) legislation.

The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2 per £1 million, the recommended ratio for the sector.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The directors have prepared forecasts for the periods up to 31 December 2028, which indicate that whilst the company has posted a loss in 2023, and the preceding years. In the event that three projects will be fulfilled (automation, restructuring and lower cost country sourcing), the company will start to make profits potentially in 2024 but certainly 2025 and beyond. The company has sufficient cash funds from the groups cash pooling arrangements and support from the ultimate parent company, Knorr-Bremse AG, to meet its liabilities as they fall due during this period. The financial statements have therefore been prepared on a going concern basis.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

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

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

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of G T Emissions Systems Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 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 2023 and of its loss for the year then ended;

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

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

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

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

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

• certain disclosures of remuneration specified by law are not made; or

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

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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

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

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Reviewing minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection; 

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

• Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias. 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

The Income Statement has been prepared on the basis that all operations are continuing operations.

Notes to the accounts form part of the financial statements.

G T Emissions Systems Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3 Traynor Way, Whitehouse Business Park, Peterlee, County Durham, United Kingdom, SR8 2RU. The company's principal activities and nature of its operations are disclosed in the directors' report.

The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards.

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

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

As permitted by FRS 101, the company has taken advantage of the following disclosure exemptions from the requirements of IFRS:

• inclusion of an explicit and unreserved statement of compliance with IFRS;

• presentation of a statement of cash flows and related notes;

• disclosure of the objectives, policies and processes for managing capital;

• disclosure of the categories of financial instrument and the nature and extent of risks arising on these financial instruments;

• the effect of financial instruments on the statement of comprehensive income;

• comparative period reconciliations for the number of shares outstanding and the carrying amounts of property, plant and equipment, intangible assets, investment property and biological assets;

• disclosure of the future impact of new International Financial Reporting Standards in issue but not yet effective at the reporting date;

• comparative narrative information;

• related party disclosures for transactions with the parent or wholly owned members of the group.

G T Emissions Systems Limited is a wholly owned subsidiary of Knorr-Bremse AG and the results of G T Emissions Systems Limited are included in the consolidated financial statements of Knorr-Bremse AG which are available as set out in note 25. Where required, equivalent disclosures are given in the group accounts of Knorr-Bremse AG.

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

The company meets its day to day working capital requirements through its continued access to a group wide cash pool arrangement, with a corresponding inter-company balance owed to Knorr-Bremse AG, which it can draw down on, should the results and cash position require it to do so, to meet its liabilities as they fall due.

The directors have prepared forecasts for the periods up to 31 December 2028, which indicate that whilst the company has posted a loss in 2023, and the preceding years. In the event that three projects will be fulfilled (automation, restructuring and lower cost country sourcing), the company will start to make profits potentially in 2024 but certainly 2025 and beyond.

The company has sufficient cash funds from the groups cash pooling arrangements and support from the ultimate parent company, Knorr-Bremse AG, to meet its liabilities as they fall due during this period.

The financial statements have therefore been prepared on a going concern basis.

The company generates revenue from contracts with customers for selling goods, specifically, exhaust gas control valves, exhaust brakes and emissions controls systems for use in commercial vehicle systems.

Revenue is recognised at a point in time when the customer has obtained control over the goods and services which GT Emissions Systems Ltd is obligated to perform and provide. This is usually on despatch of goods as the finished goods are identified separately as belonging to the customer and G T Emissions Systems Ltd does not have the ability to use the product to direct it to another customer. The amount of revenue is determined based on the price set forth in framework agreements or individual contracts and the quantities delivered.

In general, there is a warranty assuring freedom from defect over the term determined by the law.

Patents are valued at cost less accumulated depreciation.

The estimated useful lives of capitalised intangible assets are:

Patents and licences        10 years straight line

Amortisation methods, useful lives and residual values are reviewed on every reporting dates and adjusted where necessary.

Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

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

Right-of-use assets held under leases for which there is no reasonable certainty that the company will obtain ownership at the end of the lease are depreciated over the shorter of the lease term and the useful life.

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.

At each reporting end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

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

Inventories held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.

Net realisable value is the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

The company reviews slow moving or obsolete inventory throughout the year. In determining the inventory valuation, any materials which have not been used for twelve months since purchase will be valued at zero or provided for in full.

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.

At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.

When any of the above-mentioned conditions for classification of financial assets is not met, a financial asset is classified as measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognized initially at fair value and any transaction costs are recognised in profit or loss when incurred. A gain or loss on a financial asset measured at fair value through profit or loss is recognised in profit or loss, and is included within finance income or finance costs in the statement of income for the reporting period in which it arises.

Financial instruments are classified as financial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash flows, and the contractual cash flows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment where necessary.

Debt instruments are classified as financial assets measured at fair value through other comprehensive income where the financial assets are held within the company’s business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to profit or loss when the debt instrument is derecognised.

The company has made an irrevocable election to recognize changes in fair value of investments in equity instruments through other comprehensive income, not through profit or loss. A gain or loss from fair value changes will be shown in other comprehensive income and will not be reclassified subsequently to profit or loss. Equity instruments measured at fair value through other comprehensive income are recognized initially at fair value plus transaction cost directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognized through other comprehensive income are directly transferred to retained earnings when the equity instrument is derecognized or its fair value substantially decreased. Dividends are recognized as finance income in profit or loss.

Financial assets carried at amortised cost and FVOCI are assessed for indicators of impairment at each reporting end date.

The expected credit losses associated with these assets are estimated on a forward-looking basis. A broad range of information is considered when assessing credit risk and measuring expected credit losses, including past events, current conditions, and reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

Impairment provisions for current trade debtors are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade debtors is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade debtors. For trade debtors, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the statement of comprehensive income. On confirmation that the trade debtor will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

Basic financial liabilities, including trade and other payables, bank loans and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

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

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

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

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

At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.

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

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

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

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

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

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

The company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The company has not made any significant judgements when applying the accounting policies. The estimates that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

The estimates that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Useful lives of property, plant and equipment

Depreciation is provided so as to write down the assets to their residual values over their estimated useful lives as set out in the company’s accounting policy. The selection of these estimated lives requires the exercise of management judgement. Useful lives are regularly reviewed and should management’s assessment of useful lives shorten then depreciation charges in the financial statements would increase and carrying amounts of property, plant and equipment would reduce accordingly. The carrying amount of property, plant and equipment by each class is included in note 13 and details of the useful lives are included within the accounting policy

Useful lives of intangible assets

Intangible assets are amortised over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue. These estimates are reviewed at least annually and changes to these estimates can result in significant variations in the carrying value and amounts charged to profit or loss. The carrying amount of intangible assets by each class is included in note 12 and details of the useful lives are included within the accounting policy.

Incremental borrowing rate

Where the interest rate implicit in the lease cannot be readily determined, lease liabilities are discounted at the lessee’s incremental borrowing rate. This is the rate of interest that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. This involves assumptions and estimates, which would affect the carrying value of the lease liabilities (note 17) and the corresponding right-of-use assets (note 13). The incremental borrowing rate the company is estimated using observable inputs (e.g., market interest rates), if these are available, in conjunction with company-specific assessments (e.g., credit assessment of the company). This is then adjusted for conditions specific to the lease such as its term and security. The company used incremental borrowing rates specific to each lease which ranged between 1.32% and 3.15%.

Warranty provisions

The measurement of the warranty provision is based on estimates regarding expected warranty claims. An important factor affecting those estimates is the expected number and size of future warranty claims. In this regard, there is a significant estimation uncertainty resulting from the large range of numbers of potential warranty claims. The carrying amount of warranty provisions at 31 December 2023 was £79,822 (2022: £43,852).

Inventory valuation

The company uses various estimates to value inventory, including a standard overhead absorption rate. This estimate takes into account the overhead costs directly incurred in producing the inventory of which these estimates and assumptions would affect the carrying value of inventory (note 14). All of the estimates used are reviewed in an annual basis and based on the directors’ historic experience and reference to actual costs incurred during the period.

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

Their aggregate remuneration comprised:

Included in staff numbers above are 49 (2022: 47) agency staff incurring wages and salaries of £1,587,651 (2022: £1,438,789 ) (which are not included within the above cost figures).

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2022 - 3).

Amounts included in relation to directors remuneration is made up of remuneration paid by GT Emissions Systems Limited. For part of the prior year, directors were remunerated by GT Group Limited, the parent company. No amounts were paid by GT Group Limited in the current year.

The charge for the year can be reconciled to the loss per the income statement as follows:

Property, plant and equipment includes right-of-use assets, as follows:

Included within raw materials above is an amount for goods in transit totalling £431,564 (2022: £1,218,593).

Included within amounts due to parent undertaking is £663,384 (2022 - £625,334) due to GT Group Limited, the immediate parent and £10,749,142 (2022 - £4,776,929) to Knorr-Bremse AG, the ultimate parent.

Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

The discount rates for the leased assets disclosed above ranged from 1.32% to 4.96%. The Company has several lease contracts that include termination options, usually through a break clause. These options are negotiated by management to provide flexibility in managing the leased asset portfolio and adapt to the Company's business needs. Management exercise judgement in determining whether these termination options are reasonably certain to be exercised.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.

Deferred tax assets and liabilities are offset in the financial statements only where the company has a legally enforceable right to do so.

The warranty provision adjustment has arisen due to the adoption of the Knorr-Bremse standard group calculation based upon historical warranty claims and customer turnover

The above warranty provision includes a general provision of £79,822 (2022: £43,852), there are no specific provisions.

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

Contributions payable to the scheme and included in creditors at the period end total £36,189 (2022: £38,470).

At 31 December 2023 the company had capital commitments as follows:

The remuneration of key management personnel, including directors, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

The above amount is made up of remuneration, including employer's pension contributions and employers national insurance contributions, for key management personnel including directors. Amounts included in relation to directors is made up of remuneration paid by GT Emissions Systems Limited. In addition, directors were remunerated by the parent company, GT Group Limited, for part of the prior year, please see note 6 for further details. The amounts paid by GT Group have not been included in the above.

The company's immediate parent undertaking is G T Group Limited, a company registered in England and Wales.

The ultimate controlling party is Knorr-Bremse AG, a company incorporated in Germany. The largest group in which the results of the company, and its subsidiaries, were consolidated was that headed by Knorr-Bremse AG. The consolidated financial statements of this group are available to the public and may be obtained from Moosacher Str. 80 D-80809 Munchen, Germany.