NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2024

1.     GENERAL INFORMATION

Strix Group Plc ("the Company") was incorporated and registered in the Isle of Man on 12 July 2017 as a company limited by shares under the Isle of Man Companies Act 2006 with the registered number 014963V. The address of its registered office is Forrest House, Ronaldsway, Isle of Man, IM9 2RG.

The Company's shares were admitted to trading on AIM, a market operated by the London Stock Exchange, on 8 August 2017. The principal activities of Strix Group Plc and its subsidiaries (together, the "Group") are operating as a unique global supplier of sustainable technologies, committed to providing innovative water, beverage, and wellbeing solutions wherever people come together.

2.     MATERIAL ACCOUNTING POLICIES

The Group's material accounting policies set out below have, except for those applied for the first time, been applied consistently to all of the years presented.

Basis of preparation

The consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards as applicable to companies reporting under those standards.

The financial statements have been prepared on a historical cost basis with the exception of certain items which are measured at fair value as disclosed in the accounting policies below.

During the year, the consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards, which was changed from IFRS Accounting Standards ("IFRS") and International Financial Reporting Standards Interpretation Committee ("IFRS IC") interpretations as adopted by the European Union. This was changed to align with the AIM Listing Requirements for an Isle of Man entity. The Directors have assessed the impact on recognition and measurement of assets, liabilities, equity and comprehensive income and presentation and disclosure requirements and due to there being no impact of the change, concluded that there is no need to restate comparative information.

The preparation of consolidated financial statements in conformity with UK-adopted International Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 3.

As permitted by IAS 1, the Group has elected to present its income statement (statement of profit or loss) separately from its statement of comprehensive income as this provides more relevant details to users. The Group previously presented a single statement of profit or loss and other comprehensive income.

 

Going concern

These consolidated financial statements have been prepared on the going concern basis.

The Directors have made enquiries to assess the appropriateness of continuing to adopt the going concern basis. In making this assessment the Directors have considered the following:

·    The current and historic trading and profitability performance of the Group.

·    Income statement and cash flow forecasts for the period to 30 April 2026, including current and forecast debt covenant headroom.

·    The financial position of the Group as at 31 December 2024, including (i) cash and cash equivalents balances of £15.1m (FY23: £20.1m) and (ii) undrawn and accessible RCF facilities of £10.5m (FY23: £nil).

·    The ability to repay loan facilities due in the next 12 months.

 

Based on these considerations, the Directors have concluded that there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The key entities in the Group have traded profitably, excluding non-cash adjusted items, for an extended period of time. As a result, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements and consider there are no material uncertainties about the Group's ability to continue as a going concern.

Standards, amendments and interpretations adopted

The following standards and amendments apply for the first time in the period commencing 1 January 2024:

• Lease Liability in Sale and Leaseback - Amendments to IFRS 16.

• Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7.

• Classification of Liabilities as Current or Non-current and Non-current liabilities with covenants -Amendments to IAS 1.

The amendments listed above did not have a material impact on the Group financial statements.

Standards, amendments and interpretations which are not effective or early adopted

Standard/Interpretation	Effective date Periods beginning on or after
Amendments to IAS 21 - Lack of Exchangeability	1 January 2025
Amendments to the Classification and Measurement of Financial Instruments - Amendments to IFRS 9 and IFRS 7	1 January 2026
IFRS 19 Subsidiaries without Public Accountability: Disclosures	1 January 2027
IFRS 18 Presentation and Disclosure in Financial Statements	1 January 2027

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2024 reporting periods and have not been early adopted by the Group. These standards and amendments are outlined below.

 

The Group is currently assessing the impact of these amendments and does not expect them to have a material impact on the financial statements.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and all of its subsidiary undertakings. The financial statements of all group companies are adjusted, where necessary, to ensure the use of consistent accounting policies.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed to or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Consolidation of subsidiaries ceases from the date that control also ceases.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of financial position, respectively.

Joint ventures

Joint ventures are joint arrangements of which the Group has joint control, with rights to the net assets of those arrangements. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Interests in joint ventures are accounted for using the equity method of accounting (detailed below) after being recognised at cost in the consolidated statement of financial position. 

Equity method of accounting

Under the equity method of accounting, investments in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses from the joint venture in profit or loss, and the Group's share of movements in other comprehensive income of the joint venture in other comprehensive income. Dividends received from joint ventures are recognised as a reduction in the carrying amount of the investment.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest in these entities.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the impairment of assets policy as described below in this note.

Transactions eliminated on consolidation

Intra-Group balances, and any unrealised gains and losses or income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements.

Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date with the assets and liabilities of subsidiaries being measured at their fair values. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. The Group measures goodwill at the acquisition date as:

·	the fair value of the consideration transferred; plus
·	the recognised amount of any non-controlling interests in the acquiree; plus
·	if the business combination is achieved in stages, the fair value of the pre-existing interest in the acquiree; less
·	the fair value of the identifiable assets acquired and liabilities assumed.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis at the non-controlling interest's proportionate share of the fair value of the acquired entity's net identifiable assets. Transaction costs that the Group incurs in connection with a business combination are expensed as incurred.

If the initial accounting for a business combination is preliminary by the end of the reporting period in which the business combination occurs, provisional amounts are reported. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities recognised retrospectively where material to reflect the new information obtained about facts and circumstances that existed as at the acquisition date, and if known, would have affected the measurement of assets and liabilities recognised at that date. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.

Foreign currency translation

Functional and presentational currency

Items included in the financial information of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Pound Sterling, which is Strix Group Plc's presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are recognised in the consolidated income statement within cost of sales.

Group companies

The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·      Assets, including intangible assets and goodwill arising on acquisition of those foreign operations, and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position, or at historic rates for certain line items.

·      Income and expenses for each statement of comprehensive income presented are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions).

·      All resulting exchange differences are recognised in other comprehensive income. Such translation differences are reclassified to profit or loss only on disposal or partial disposal of the foreign operation.

Property, plant and equipment

Initial recognition and measurement

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the
asset to its working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, the components are accounted for as separate items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Subsequent measurement

Depreciation is calculated using the straight-line method to allocate the cost of the assets, net of any residual values, over their estimated useful lives as follows:

 

·      Plant and machinery	3-25 years
·      Fixtures, fittings and equipment	2-10 years
·      Motor vehicles	3-5 years
·      Production tools	1-10 years
·      Right-of-use assets	3-10 years
·      Buildings (including land usage rights)	50 years
·      Point-of-use dispensers	4-10 years

 

The Group manufactures some of its production tools and equipment. The costs of construction are included within a separate category within property, plant and equipment ("assets under construction") until the tools and equipment are ready for use as intended by management at which point the costs are transferred to the relevant asset category and depreciated. Any items that are scrapped are written off to the consolidated income statement.

The assets' residual values and useful lives are reviewed at the end of each reporting period.

Fixtures, fittings and other equipment includes computer hardware.

Derecognition

Property, plant and equipment assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of property, plant and equipment, measured as the difference between net disposal proceeds and the carrying amount of the asset, are recognised in the consolidated income statement on derecognition.

Impairment

Tangible assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. 

Intangible assets

Initial recognition and measurement

The Group's intangible assets relate to goodwill, capitalised development costs, intellectual property, customer relationships, brands and computer software. Goodwill acquired is allocated to those cash-generating units ("CGUs") expected to benefit from the business combination in which the goodwill arose. Goodwill is measured at cost less any accumulated impairment losses and is held in the functional currency of the acquired entity to which it relates and remeasured at the closing exchange rate at the end of each reporting period, with the movement taken through other comprehensive income. The CGUs represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use. Internal costs that are incurred during the development of significant and separately identifiable new products and manufacturing techniques for use in the business are capitalised when the following criteria are met:

·        It is technically feasible to complete the project so that it will be available for use.

·        Management intends to complete the project and use or sell it.

·        It can be demonstrated how the project will develop probable future economic benefits.

·        Adequate technical, financial, and other resources to complete the project and to use or sell the project output are available.

·        Expenditure attributable to the project during its development can be reliably measured.

Capitalised development costs include employee, travel and other directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Refer to note 6(a) for details.

Intellectual property is capitalised where it is probable that future economic benefits associated with the patent will flow to the Group, and the cost can be measured reliably. The costs of renewing and maintaining patents are expensed in the consolidated income statement as they are incurred.

Customer relationships, intellectual property and brands are recognised on acquisitions where it is probable that future economic benefits will flow to the Group.

Computer software is only capitalised when it is probable that future economic benefits associated with the software will flow to the Group, and the cost of the software can be measured reliably. Computer software that is integral to an item of property, plant and equipment is included as part of the cost of the asset recognised in property, plant and equipment.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred.

Subsequent measurement

The Group amortises intangible assets with a limited useful life using the straight-line method over the following periods:

·      Capitalised development costs	2-10 years
·      Intellectual property	Lower of useful or legal life (8-20 years)
·      Technology and software	2-10 years
·      Customer relationships	10-15 years
·      Brands	Indefinite useful life
·      Goodwill	Indefinite useful life

 

Brands have an indefinite useful life because there is no foreseeable limit on the period during which the Group expects to consume the future economic benefits embodied in the asset.

 

The LAICA brand has been trading since inception and has been a well recognisable brand amongst the Group's trading partners, and the Group does not foresee a time limit by when these partnerships will cease.

 

The Billi brand is a well-established and competitive brand, being one of the top two brands in the Australian and New Zealand markets, and well recognised in the United Kingdom among residential and commercial clientele. The Group does not foresee a time limit by when this market presence will cease. 

 

Derecognition

Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of intangible assets, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the consolidated income statement when the asset is derecognised. Where a subsidiary is sold, any goodwill arising on acquisition, net of any impairment, is included in determining the profit or loss arising on disposal. 

Impairment

Intangible assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Intangible assets with indefinite useful lives impairment assessments

Intangible assets with indefinite useful lives arising on business combinations are allocated to the relevant CGU and are treated as the foreign operation's assets.

Impairment reviews are performed at least annually, or more frequently if there are indicators that the assets might be impaired. The Group has assessed the carrying values of goodwill and brands to determine whether any amounts have been impaired. The recoverable amount of the underlying CGU was based on a value in use model where future cashflows were discounted using a weighted average cost of capital as the discount rate with terminal values calculated applying a long-term growth rate. In determining the recoverable amount, the Group considered several sources of estimation uncertainty and made certain assumptions or judgements about the future. Future events could cause the assumptions used in the impairment review to change with an impact on the results and net position of the Group refer to note 3 for details.

Leases

Group as a lessee

The Group leases office space, workshops, warehouses, motor vehicles and factory space. Rental contracts are typically made for periods of 3 - 10 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Leases are recognised as a right-of-use ("ROU") assets and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability, finance costs and foreign exchange (where the lease is denominated in a foreign currency). The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Measurement of future lease liabilities

Liabilities arising from a lease are initially measured on a present value basis. Future lease liabilities include the net present value of the following lease payments:

·	Fixed payments (including in-substance fixed payments), less any lease incentives receivable.
·	Variable lease payments that are based on an index or a rate.
·	Amounts expected to be payable by the lessee under residual value guarantees.
·	The exercise price of a purchase option if the lessee is reasonably certain to exercise that option.
·	The payment of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

Lease payments are allocated between principal and finance cost. The finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Measurement of right-of-use assets

Right-of-use assets are measured at cost comprising the following:

·	The amount of the initial measurement of lease liability.
·	Any lease payments made at or before the commencement date less any lease incentives received.
·	Any initial direct costs.
·	Restoration costs.

They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the consolidated income statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise primarily IT equipment.

Extension and termination options

Extension and termination options are included in a number of property leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. Management exercises judgement in determining whether these extension and termination options are reasonably certain to be exercised.

Group as a lessor

Lease income from operating leases where the Group is a lessor, and where substantially all the risks and rewards associated with the leased asset remain with the Group, is recognised in other income on a straight-line basis over the lease term. Billi rental income is recognised in revenue.

Financial assets

Classification

The Group classifies its financial assets as financial assets held at amortised cost. Management determines the classification of its financial assets at initial recognition.

The Group classifies its financial assets as at amortised cost only if both of the following criteria are met:

·      The asset is held within a business model whose objective is to collect the contractual cash flows.

·      The contractual terms give rise to cash flows that are solely payments of principal and interest.

Financial assets held at amortised cost are initially recognised at fair value and are subsequently stated at amortised cost using the effective interest method. Financial assets at amortised cost comprise cash and cash equivalents and trade and other receivables (excluding prepayments, VAT receivables and the advance purchase of commodities). Trade receivables are amounts due from customers for products sold performed in the ordinary course of business. They are due for settlement either on a cash in advance basis, or generally within 45 days, and are therefore all classified as current. Other receivables generally arise from transactions outside the usual operating activities of the Group.

Impairment of financial assets

The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The Group applies the expected credit loss model to financial assets at amortised cost. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Given the nature of the Group's receivables, expected lifetime losses are not material.

Financial liabilities

With the exception of contingent consideration, the Group initially recognises its financial liabilities at fair value net of transaction costs where applicable and subsequently they are measured at amortised cost using the effective interest method. Financial liabilities comprise trade payables, payments in advance from customers and other liabilities. They 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. Contingent consideration is measured at fair value with changes in fair value recognised in profit or loss.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Other liabilities include customer rebates.

Borrowing costs

Borrowing costs are recognised initially at fair value. Borrowing costs are subsequently measured at amortised cost.

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred.

Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, demand deposits held with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value, and bank overdrafts.

Employee benefits

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday entitlements and defined benefit and contribution pension plans.

Short-term benefits

Short-term benefits, including holiday pay and similar non-monetary benefits, are recognised as an expense in the period in which the service is rendered. The Group recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

Termination benefits

Termination benefits are payable when employment is terminated by the group before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits at the earlier of the following dates:

(a) when the group can no longer withdraw the offer of those benefits.

(b) when the Group recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of terminations benefits.

In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.

Pensions

The Group operates both defined contribution and defined benefit plans for the benefit of their employees.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. A defined benefit plan is a pension plan that is not a defined contribution plan.

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service or compensation.

The liability recognised in the consolidated statement of financial position in respect of the defined benefit scheme is the present value of the defined benefit obligation at the statement of financial position date less the fair value of the scheme assets, together with adjustments for actuarial gains or losses and past service costs. The defined benefit obligation is calculated by qualified independent actuaries using the projected unit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

The net pension finance cost is determined by applying the discount rate, used to measure the defined benefit pension obligation at the beginning of the accounting period, to the net pension obligation at the beginning of the accounting period taking into account any changes in the net pension obligation during the period as a result of cash contributions and benefit payments.

Pension scheme expenses are charged to the consolidated income statement within administrative expenses. Actuarial gains and losses are recognised immediately in the consolidated statement of comprehensive income. Net defined benefit pension scheme deficits before tax relief are presented separately in the consolidated statement of financial position within non-current liabilities.

Share-based payments

The Group has issued conditional equity settled share-based options and conditional share awards under a Long-Term Incentive Plan ("LTIP") in the parent company to certain employees. Under the LTIP, the Group receives services from employees as consideration for equity instruments of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense.

The total amount to be expensed is determined by reference to the fair value of the options granted:

·      Including any market performance conditions such as the requirement for the Group's shares to be above a certain price for a pre-determined period.

·      Excluding the impact of any service and non-market performance vesting conditions, including earnings per share targets, dividend targets, and remaining an employee of the Group over a specified period of time.

·      Including the impact of any non-vesting conditions, where relevant.

These awards are measured at fair value on the date of the grant using an option pricing model and expensed in the consolidated income statement on a straight-line basis over the vesting period, after making an allowance for the estimated number of shares that will not vest. The level of vesting is reviewed and adjusted bi-annually in the consolidated income statement, with a corresponding adjustment to equity.

If the terms of an equity settled award are modified, at a minimum, an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity award is cancelled by forfeiture, where the vesting conditions (other than market conditions) have not been met, any expense not yet recognised for that award as at the date of forfeiture is treated as if it had never been recognised. At the same time, any expense previously recognised on such cancelled equity awards is reversed, effective as at the date of forfeiture.

The dilutive effect, if any, of outstanding options is included in the calculation of diluted earnings per share.

Further details on the awards are included in note 21.

Inventories

Inventories consist of raw materials and finished goods which are valued at the lower of cost and net realisable value. Cost is determined using the following basis:

Division	Raw material	Finished Goods
Controls	FIFO	Weighted Average
Consumer Goods	FIFO	Weighted Average
Billi (previously PFS)	FIFO	FIFO

 

Cost comprises expenditure which has been incurred in the normal course of business in bringing the products to their present location and condition including applicable supplier rebates and include all related production and engineering overheads at cost. Net realisable value is the estimated selling price in the ordinary course of business, less applicable selling expenses. At the end of each reporting period, inventories are assessed for impairment. If inventory is impaired, the identified inventory is reduced to its selling price less costs to complete and an impairment charge is recognised in the consolidated income statement.

Supplier rebates

The Group enters into agreements with suppliers whereby volume-related allowances and various other fees and discounts are received in connection with the purchase of goods from those suppliers. Most of the income received from suppliers relates to commercially agreed rebates based on historic sales volumes.

Rebates are recognised when earned by the Group, which occurs when all obligations conditional for earning income have been discharged, and the income can be measured reliably based on the terms of the contract. The income is recognised as a credit within cost of sales.

Where the income earned relates to inventories which are held by the Group at the year end, the income is included within the cost of those inventories, and recognised in cost of sales upon sale of those inventories. Amounts due relating to supplier rebates are recognised on a gross basis and within trade and other receivables.

Revenue

The Group primarily recognises revenue from the sale of goods and services to its customers as well as from licensing arrangements. The transaction price is based on the sales agreement with the customer. Revenue is reported net of sales taxes, discounts, rebates and after eliminating intra-group sales. Rebates are based on a certain volume of purchases by a customer within a given period and are recognised on a net basis based on an expected value approach.

Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and is recognised when the performance obligations have been fulfilled. The Group recognises revenue from the sale of goods and services either at a point in time or over time, based on the nature of the contract terms. The Group recognises revenue from three main categories namely Controls, Billi and Consumer Goods.

Controls

Revenue from the sale of goods rendered is recognised net of VAT in the consolidated income statement when the customer obtains control of the goods. Where contractual arrangements with customers include an embedded freight or storage service, an appropriate percentage of revenue is deferred until these performance obligations have also been satisfied.

All of the amounts recognised as revenue are based on the underlying terms & conditions we have in place with customers. No element of financing is deemed present as sales are made under normal credit terms and consistent with wider market practice. 

Payment terms for the majority of customers in this category are to pay cash in advance of the goods being delivered. The Group recognises the advance payments within trade and other payables on the consolidated statement of financial position as "Payments in advance from customers". At the point the revenue is recognised, these balances are transferred from "Payments in advance from customers" to revenue. For the majority of other customers payment is normally due within 30 to 45 days from the date of sale.

Billi

The Group recognises revenue from the following major sources under Billi:

·      Sale of tap systems, consumable products and spare parts.

Revenue from the sale of taps systems and consumables including spare parts is recognised once control of the goods has been transferred to the customer. Payment terms are 1 month from the invoice date and is recorded within trade receivables until payment is received.

·      Rental of tap systems.

Rental income is made up of revenue from the supply of tap systems where the Company is lessor in an operating lease. Payment for rental income is in advance of the rental period and the rental income is recognised over time, with the transaction price allocated to this service released on a straight-line basis over the period of the lease. Included in the transaction price for the rental of tap systems, in some contracts, is the installation of those tap systems. The supply and installation elements of the contract are one deliverable, as they are highly interrelated, and therefore there is no allocation of a portion of the transaction price to the installation.

Initial direct costs incurred in arranging an operating lease (except where immaterial) are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

Rental agreements run for a minimum period of twelve months and typically for three to five years. Some rental agreements have no fixed end date and may be cancelled by either party.

The average useful economic life for a Point-of-Use ("POU") water device is approximately four to ten years whilst refurbishment can extend the life of some devices to eleven years or more. For this reason, existing rental agreements are not judged to transfer substantially all of the risks and rewards of ownership to the lessee.

Revenue is recognised for the rental of tap systems from when the taps have been installed as this is the point in time that the consideration is unconditional from this point.

 

·      Servicing of tap systems.

 

The Company has taken advantage of IFRS 15, para 4 whereby they have grouped contracts for the servicing of taps into a portfolio, on the basis that applying IFRS 15 to each individual contract would not result in a material difference. This is on the basis that the underlying contracts are relatively homogenous and that under the contracts, each unit covered would be serviced twice per annum and the completion of the performance obligation, being the completion of the service, would be evenly spread throughout the period over the various contracts. Therefore the sale of services are recognised proportionally over the duration of the service period, provided a right to consideration has been established subject to a minimum notice period or early termination penalty.

 

Whilst payment terms are in advance of the service period, revenue is recognised for the servicing of tap systems from when the contracts have been entered into as this is the point in time that the consideration is unconditional.

 

Consumer Goods

Sales are either 'direct' to the end user customers or 'indirect' to wholesale and retail distributors. Revenue from the supply of goods is recognised once control of the goods has been transferred to the customer, being when goods have been delivered to a customer site or in the case of indirect sales, when the goods have been delivered to the wholesale distributor.

Deferred revenue

Revenue invoiced but not yet recognised in the consolidated income statement is held on the consolidated statement of financial position within 'Payments in advance from customers'.

Licensing income

The Group holds a substantial portfolio of issued and registered intellectual property rights relating to certain aspects of its hardware devices, accessories, goods, software and services under controls and consumer goods. This includes patents, designs, copyrights, trademarks and other forms of intellectual property rights registered in the U.K. and various foreign countries.

From time to time, the Group enters into term-based and exclusive licensing arrangements with some of its customers in respect of its intellectual property.

The licensing income is recognised at a point in time or over time based on the following assessment. Where the licensing arrangement is a distinct performance obligation, Management assess whether the licensing contract gives the customer either:

·      the right to access the Group's intellectual property as it exists throughout the licence period; or

·      right to use the Group's intellectual property as it exists at the point in time at which the licence is granted.

Revenue from a licensing contract which is considered to provide a right to the customer to access the Group's intellectual property as it exists throughout the licence period is recognised over time, as and when the related performance obligation is satisfied.

A licensing contract gives the customer the right to access the Group's intellectual property as it exists throughout the licence period when all the following are met:

·      The contract requires, or the customer reasonably expects, that we will undertake activities that significantly Affect the intellectual property to which the customer has rights.

·      The rights granted by the licence directly expose the customer to any positive or negative effects of the entity's activities identified above.

·      Those activities do not result in the transfer of a good or a service to the customer as those activities occur. 

Revenue relating to a licensing contract which does not meet the above criteria is recognised at a point in time, which is usually the point at which the licence is granted to the customer but not before the beginning of the period during which the customer is able to use and benefit from the licence.

Cost of sales

Cost of sales comprise costs arising in connection with the manufacture of thermostatic controls, cordless interfaces, and other products such as water dispensers, taps, jugs and filters. Cost is based on the cost of purchases on a weighted average basis and first in first out "FIFO" (for Billi) and includes all direct costs and an appropriate portion of fixed and variable overheads where they are directly attributable to bringing the inventories into their present location and condition. This also includes an allocation of non-production overheads, costs of designing products for specific customers and amortisation of capitalised development costs.

Research and development

Research expenditure is written off to the consolidated income statement within cost of sales in the year in which it is incurred. Development expenditure is written off in the same way unless the Directors are satisfied as to the technical, commercial and financial viability of the individual projects. In this situation, the expenditure is classified on the consolidated statement of financial position as a capitalised development cost.

Finance income

Finance income comprises bank interest earned on financial assets that are held for cash management purposes. Finance income is recognised using the effective interest rate method.

Finance costs

Finance costs directly attributable to the acquisition or construction of a qualifying asset are capitalised. Qualifying assets are those that necessarily take a substantial period of time to prepare for their intended use. All other borrowing cost are recognised in the consolidated income statement in finance costs. Finance costs comprise interest charges on lease liabilities, interest on borrowings, arrangement fees, the unwind of discounts on the present value of liabilities, and finance charges relating to letters of credit. Finance costs are determined using the effective interest rate method.

Taxation

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the statement of financial position date in the countries where the Company and its subsidiaries operate and generate taxable income, and any adjustment to tax payable in respect of previous years.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Share capital and share premium

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction from the proceeds. Share premium arising on the issue of shares is distributable. Share capital and share premium have been grouped for the purposes of financial statement presentation.

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the Directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the Board of Directors. The Board of Directors consists of the Executive Directors and the Non-Executive Directors.

Government grants

Subsidiary companies receive grants from the Isle of Man and Chinese governments towards revenue and capital expenditure. Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received, and all attached conditions complied with.

Revenue grants are recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. The grant income is presented within other operating income in the consolidated income statement.

Capital grants are initially recognised as other liabilities when received and subsequently recognised as other income in the consolidated income statement on a straight-line basis over the useful life of the related asset. The grants are dependent on the subsidiary company having fulfilled certain operating, investment and profitability criteria in the financial year, primarily relating to employment.

Provisions

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the consolidated income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Warranty provisions

The Group provides warranties for general repairs of defects that existed at the time of sale, as required by law. Provisions related to these warranties are recognised when the product is sold, or the service is provided to the customer. Initial recognition is based on historical experience which may vary due to the use of new materials, changes in manufacturing processes or other developments that affect product quality. The estimate of warranty-related costs is revised annually. Warranty provisions are recognised in cost of sales in consolidated income statement and presented in the consolidated statement of financial position in trade and other payables.

Non-current assets held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are measured at the lower of carrying amount and fair value less costs to sell, with the exception of assets which are scoped out of the measurement requirements of IFRS 5 'Non-current assets held for sale and discontinued operations', for example financial assets, which continue to be measured in accordance with IFRS 9 'Financial instruments'.

Where the carrying amount of a non-current asset or disposal group held for sale exceeds its fair value less costs to sell, a loss is recognised. This is allocated firstly against any goodwill attributable to the disposal group, and then to other non-current assets in the disposal group that are in scope of IFRS 5's measurement requirements. Any excess loss remaining is recognised against the remaining assets of the disposal group as a whole. Assets and liabilities classified as held for sale are presented separately in the statement of financial position.

A component of the Group that is held for sale or disposed of is presented as a discontinued operation either when it is a subsidiary acquired exclusively with a view to resale; or it represents, or is part of a coordinated plan to dispose of, a separate major line of business or geographical area of operations. The net results of discontinued operations are presented separately in the Group income statement (and the comparatives restated). Cash flows from discontinued operations are included in the consolidated statement of cash flows but are separately disclosed in the notes to the financial statements.

 

Non-GAAP alternative performance measures

In the reporting of financial information, the Directors have adopted Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA") and adjusted EBITDA when assessing the operating performance of the Group. Adjusting items are excluded from EBITDA to calculate adjusted EBITDA. The Directors primarily use the adjusted EBITDA measure when making decisions about the Group's activities.

EBITDA and adjusted EBITDA are non-GAAP measures and may not be calculated in the same way as by other entities and hence may not be directly comparable to those reported by other entities. In determining the adjusting items, the following criteria are considered: 

·      if a certain event (defined as adjusting) had not occurred, the costs would not have been incurred, or the income would not have been earned; or

·      the costs attributable to the event have been identified using a reliable methodology of splitting amounts on an ongoing basis; and economic resources have been expended or diverted in order to directly contribute towards the related activities; and

·      costs have been incurred that cannot be recovered due to the event and the related activities.

 

An item is treated as adjusting if it relates to certain costs or income that derive from events or transactions that fall within the normal activities of the Group but which, individually or, if of a similar type, in aggregate, are excluded from the Group's Alternative Performance Measures (APMs) by virtue of their nature or size, in order to better reflect management's view of the underlying trends and operating performance of the Group that is more comparable over time.

3.     CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

In the application of the Group's accounting policies, which are described in Note 2, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. There is no change in applying accounting policies for critical accounting estimates and judgements from the prior year.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the entity's accounting policies

Functional currency

The Directors consider the factors set out in paragraphs 9, 10 and 11 of IAS 21, "The effects of changes in foreign currency" to determine the appropriate functional currency of its overseas operations. These factors include the currency that mainly influences sales prices, labour, material and other costs, the competitive market serviced, financing cash flows and the degree of autonomy granted to the subsidiaries.

 This may change as the Group's operations and markets change in the future

Capitalisation of development costs

The Directors consider the factors set out in the paragraphs entitled 'Intangible assets - initial recognition and measurement' in note 2 with regard to the timing of the capitalisation of the development costs incurred. This requires judgement in determining when the different stages of development have been met. See note 6a for the amounts capitalised during the current year.

Alternative performance measures ("APMs") - Adjusting items

Management and the Board consider the quantitative and qualitative factors in classifying items as adjusting and exercise judgement in determining the adjustments to apply to IFRS measures. This assessment covers the nature of the item, cause of occurrence, frequency, predictability of occurrence of the item or related event, and the scale of the impact of that item on reported performance. Reversals of previous adjusting items are assessed based on the same criteria.

 

For the year ended 31 December 2024, the presentation as discontinued operations is a new key judgement area, due to the disposal of HaloSource (see note 28). The Group considered HaloSource to be a separate major line of business, as this represented a discrete business line for the Group, that operates outside of its normal markets in the industrial farming space, with exclusive manufacturing facilities located in Shanghai and a separate workforce. HaloSource was the first acquisition that the Group made and Management recognises that the underlying trading results of this business are therefore of specific and greater interest to stakeholders, notwithstanding its relatively low level of trading in the period (see note 28).

 

The ongoing restructuring and rebasing activities undertaken in FY24, have also led to additional new judgements and estimates being made with regards to the impact of the de-prioritisation of specific product lines & groups, predominantly within the Group's Consumer Goods division. A key area of focus being the estimation of the carrying value of underlying assets, and their related write off/impairment in the FY24 consolidated statement of financial position (see note 6b). Creditors relating to settlement claims have also been recognised in the FY24 consolidated statement of financial position where we consider that the business has a constructive obligation to pay monies over to third parties at the consolidated statement if financial position date, to the extent that amounts are considered to be reasonably certain.

 

An analysis of the adjusting items included in the consolidated income statement is disclosed in note 6(b).

Critical estimates in applying the entity's accounting policies

There are no estimates in the financial statements where a reasonably possible change in the next year could be expected to result in a material change to amounts recognised. However, an area of estimation performed by management in the year which is relevant to the financial statements is disclosed below.

Impairment of indefinite lived intangible assets and goodwill

Determining whether goodwill and intangible assets with indefinite lives are impaired requires an estimation of the value in use or the fair value less costs to sell of the cash generating unit (CGU) to which the goodwill or intangible asset has been allocated. The value in use calculation requires management's estimation of the future cash flows expected to arise from the CGU.

4.     SEGMENTAL REPORTING

Management has determined the operating segments based on the operating reports reviewed by the Board of Directors that are used to assess both performance and strategic decisions. Management has identified that the Board of Directors is the chief operating decision maker in accordance with the requirements of IFRS 8 'Operating Segments'.

The Board of Directors has identified 3 reportable segments from a product perspective, selling primarily to Original Equipment Manufacturers ("OEMs"), commercial and residential customers based in China, Italy, Australia, New Zealand and the United Kingdom:

1)     Controls consists of the design, manufacture and sale of thermostatic controls, cordless interfaces.

2)     Billi (previously premium filtration systems (PFS)) is a leading brand for the supply of premium instant boiling, chilled and sparkling filtered water systems.

3)     Consumer Goods includes products such as water dispensers, jugs, filters, water heating and temperature control, steam management and small household appliances for personal health and wellness.

The Board of Directors primarily uses a measure of gross profit to assess the performance of the operating segments, broken down into revenue and cost of sales for each respective segment which is reported to them on a monthly basis. Information about segment revenue is disclosed below.

 

	Reported gross profit
	2024
	£000s
	Controls	Billi	Consumer goods	Total
Revenue	67,264	43,052	31,452	141,768
Cost of sales	(44,676)	(22,977)	(23,166)	(90,819)
Gross profit	22,588	20,075	8,286	50,949
	Reported gross profit 2023 Restated*
	£000s
	Controls	Billi	Consumer goods	Total
Revenue	70,102	41,327	32,378	143,807
Cost of sales	(42,787)	(21,964)	(21,851)	(86,602)
Gross profit	27,315	19,363	10,527	57,205

       

* The FY23 figures have been restated as a result of discontinued operations and were all included in Billi.

 

	Adjusted gross profit*
	2024
	£000s
	Controls	Billi	Consumer goods	Total
Revenue	69,464	43,052	31,452	143,968
Cost of sales	(44,260)	(22,977)	(22,764)	(90,001)
Gross profit	25,204	20,075	8,688	53,967

 

	Adjusted gross profit* 2023 Restated
	£000s
	Controls	Billi	Consumer goods	Total
Revenue	70,102	41,327	32,378	143,807
Cost of sales	(42,746)	(21,964)	(21,827)	(86,537)
Gross profit	27,356	19,363	10,551	57,270

*Adjusted gross profit excludes adjusting items as detailed in note 6(b). Adjusted results are non-GAAP metrics used by management and are not an IFRS disclosure.

The FY23 figures have been restated as a result of discontinued operations and were all included in Billi.

 

The Group derives revenue from the transfer of goods and services over time and at a point in time. Revenue derived over time in the current year is £4.6m (FY23: £3.3m) and this is included in Billi. All other revenues are derived at a point in time.

Included within the revenue from controls is licensing fee income relating to intellectual property amounting to £nil (FY23: £0.9m). Included within the revenue from the consumer goods is licensing fee income relating to intellectual property amounting to £nil (FY23: £0.3m).

Below is the geographical analysis of revenue based on the locations of external customers.

	2024	2023 Restated
	£000s	£000s
Australia	27,301	26,985
China	66,674	67,210
Italy	13,651	14,478
UK	16,417	16,376
Others	17,725	18,758
Total	141,768	143,807

Assets and liabilities

No analysis of the assets and liabilities of each operating segment is provided to the Board of Directors as part of monthly management reporting. Therefore, no analysis of segmented assets or liabilities is disclosed in this note.

Non-current assets (i) attributed to country of domicile and (ii) attributable to all other foreign countries

In accordance with IFRS 8, the following table discloses the non-current assets located in both the Company's country of domicile (the Isle of Man) and foreign countries, primarily China, Italy, Australia, New Zealand and the United Kingdom where the Group's principal subsidiaries are domiciled.

	2024	2023
		Restated*
	£000s	£000s
Country of domicile
Intangible assets	10,966	13,084
Property, plant and equipment	1,826	2,599
Total country of domicile non-current assets	12,792	15,683

 

Foreign countries
Intangible assets	52,055	58,500
Property, plant and equipment	42,317	43,616
Total foreign non-current assets	94,372	102,116
Total	107,164	117,799

       

* Prior period intangibles have been restated as a result of correction of a technical accounting error, see note 29

Major customers

In FY24, there was one major customer that accounted for at least 10% of total revenues (FY23: one customer). The revenue relating to this customer in FY24 was £17.0m (FY23: £16.9m).

5.     EMPLOYEES AND DIRECTORS

(a) Employee benefit expenses

	2024	2023
		Restated*
	£000s	£000s
Wages and salaries	39,289	36,302
Pension cost (note 5(c))	1,434	1,352
Employee benefit expenses	40,723	37,654
Share based payment transactions (note 21)	343	380
Total employee benefit expenses	41,066	38,034

* Prior period numbers have been restated as a result of discontinued operations, see note 28

The total employee benefit expense includes compensation to key management.

 

(b) Key management compensation

The following table details the aggregate compensation paid in respect of the key management, which includes the Directors and the members of the Executive team (previously called the Operational Board), representing members of the senior management team from all key departments of the Group.

 

	2024	2023
	£000s	£000s
Wages and salaries	2,159	2,325
Pension cost (note 5c)	184	175
Share based payment transactions (note 21)	279	57
	2,622	2,557

 

-There are no defined benefit schemes for key management. Pension costs under defined contribution schemes are included in the post-employment benefits disclosed above.

 

(c) Retirement benefits

(i) The Strix Limited Retirement Fund

The Strix Limited Retirement Fund is a defined contribution scheme under which the assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents costs payable by the Group to the fund and amounted to £0.6m (FY23: £0.6m).

(ii) Billi Retirement fund

The company contributes 11% of salary to an employee nominated superannuation fund, which is independent to the employing company. Billi has no post employment liability to employees. The pension cost charge represents costs payable by the Group to the fund and amounted to £0.7m (FY23: £0.6m).

(iii) LAICA S.p.A. Termination Indemnity

LAICA S.p.A. operates a defined benefit plan for its employees in accordance with the Italian Termination Indemnity (named "Trattamento di Fine Rapporto" or "TFR") provisions defined by the National Civil Code (Article 2120). In accordance with IAS 19, the TFR provision is a defined benefit plan, which is based on the principle to allocate the final cost of benefits over the periods of service which give rise to an accrual of deferred rights under each particular benefit plan.

The calculation of the liability is based on both the length of service and on the remuneration received by the employee during that period of service. Article 2120 states that severance pay is due to the employee by the companies in any case of termination of the employment contract. For each year of service, severance pay accruals are based on total annual compensation divided by 13.05. Although the benefit is paid in full by the employer, part (0.5% of pay) of the annual accrual is paid to INPS by the employer, and is subtracted from the severance pay accruals for the contribution reference period. As of 31 December, of every year, the severance pay accrued as of 31 December of the preceding year is revalued by an index stipulated by law as follows: 1.5% plus 75% of the increase over the last 12 months in the consumer price index, as determined by the Italian Statistical Institute.

In accordance with IAS 19, the determination of the present value of the liability is carried out by an independent actuary under the projected unit method. This method considers each period of service provided by workers at the company as a unit of additional right.

 

The actuarial liability must therefore be quantified based on seniority reached at the valuation date and re-proportioned based on the ratio between the years of service accrued at the reference date of the assessment and the overall seniority reached at the time scheduled for the payment of the benefit.

 

Furthermore, this method provides to consider future salary increases, due to any cause (inflation, career, contract renewals, etc.), up to the time of termination of the employment relationship.

 

The below table summarises the defined benefit pension liability of LAICA S.p.A. at 31 December 2024:

	2024	2023
	£000s	£000s
Liability as at 1 January	802	832
Service Cost	68	69
Interest Cost	21	27
Total amount recognised in profit or loss	89	96
Remeasurements
Experience losses	7	12
Loss from change in financial assumptions	1	20
Total amount recognised in other comprehensive income	8	32
Exchange differences on translation of foreign operations	(35)	(14)
Benefits paid	(240)	(144)
Liability as at 31 December	624	802

The key actuarial assumptions used in arriving at these figures include:

•       Annual discount rate of 3.2% (FY23: 3.2%).

•       Annual price inflation of 2.0% (FY23: 2.0%).

•       Annual TFR increase of 3.0% (FY23: 3.0%).

•       Demographic assumptions based on INPS published data.

 

The remainder of the post-employment benefit liability of £93k (FY23: £86k) as at 31 December 2024 is made up of contractual post-employment liabilities within LAICA S.p.A. that do not meet the definition of a defined benefit plan in accordance with IAS 19.

6.     EXPENSES

(a) Expenses by nature

	2024	2023
		Restated*
	£000s	£000s
Employee benefit expense (note 5a)	40,723	37,654
Depreciation charges	5,670	5,239
Amortisation	2,258	1,919
Adjusting items before tax (see below)	13,536	4,192
Net foreign exchange losses	259	521

* Prior period numbers have been restated as a result of discontinued operations, see note 28.

Research and development (R&D) expenditure totalled £4.3m (FY23: £4.3m), and £2.6m (FY23: £3.6m) of development costs have been capitalised during the year.

(b) Adjusting items

Adjusting items are excluded from our adjusted results by virtue of their nature, cause and predictability of occurrence, frequency, and scale of impact on underlying performance in order to better reflect management's view of the underlying trends and operating performance of the Group that is more comparable over time.

Adjusting items have been broken down as follows:

	2024
Adjusting items	Continuing operations	Discontinued operations	Total
	£000s	£000s	£000s
Non-recurring items:
Restructuring/rebasing1:
Controls	1,529	-	1,529
Consumer Goods	6,433	-	6,433
Billi (previously PFS)	-	2,830	2,830
Central costs	580	-	580
Mergers and acquisitions	28	-	28
Settlements2	3,296	-	3,296
Total (A)	11,866	2,830	14,696
Recurring items:
Share based payments	343	-	343
Amortisation charges on acquired intangible assets	1,327	-	1,327
Total (B)	1,670	-	1,670
Total adjusting items before tax(A+B)3	13,536	2,830	16,366
Deferred taxation credits relating to amortisation charges on acquired intangible assets	(271)	-	(271)
Total adjusting items	13,265	2,830	16,095

 

	2023
Adjusting items	Continuing operations	Discontinued operations	Total
	£000s	£000s	£000s
Non-recurring items:
Restructuring/rebasing1:
Controls	278	-	278
Billi (previously PFS)	-	34	34
Consumer Goods	186	-	186
COVID-19 related costs	14	-	14
Mergers and acquisitions	2,073	-	2,073
Total (A)	2,551	34	2,585
Recurring items:
Share based payments	380	-	380
Amortisation charges on acquired intangible assets	1,261	-	1,261
Total (B)	1,641	-	1,641
Total adjusting items before tax(A+B)	4,192	34	4,226
Deferred taxation credits relating to amortisation charges on acquired intangible assets	(329)	-	(329)
Total adjusting items	3,863	34	3,897

¹ £0.8m (FY23: £0.1m) of adjusting items from restructuring are included in cost of sales. The balance of all other adjusting items are in administrative expenses.

²£2.2m (FY23: £nil) of adjusting items in settlements are against controls revenue, in line with IFRS 15 Revenue from Contracts with Customers.

³£10.5m (FY23: £4.1m) of total adjusting items for continuing operations are included in administrative expenses.

Adjusting items in segmental reporting:

	2024
	£000s
	Controls	Billi	Consumer goods	Total
Revenue: settlements	2,200	-	-	2,200
Cost of sales: restructuring	416	-	402	818
	2,616	-	402	3,018

 

	2023 Restated*
	£000s
	Controls	Billi	Consumer goods	Total
Cost of sales: restructuring	65	-	-	65
	65	-	-	65

 

* Prior period numbers have been restated as a result of discontinued operations, see note 28

As announced in our FY23 presentations and as part of the Group's subsequent updates to the market, restructuring and rebasing of the business has continued into FY24 to build strong foundations for medium-term growth opportunities as the market continues to recover. The Board is focused on maximising cash generation to support debt reduction, allocating resources to optimise commercial success and realigning efforts from commercially less sustainable projects to commercially more attractive ones.

A key part of this process has been the ongoing commercial review of product lines/ groups (predominantly within the Consumer Goods division) with the intention of providing the business with the flexibility to selectively invest time and resources in those projects with higher returns. As a result of this process, the business has approved the cessation of a number of product lines/groups and associated capital development projects, which has resulted in the write off/impairment of certain items on the balance sheet, including capital development assets, stock and some licensing debtors. The Group has also consequently disposed of the HaloSource business in the current year.

Adjusting items non-recurring from continuing operations:

1. Restructuring/rebasing of £8.5m (FY23: £0.5m), includes the following:

a) Consumer Goods £6.4m (FY23: £0.2m) - £5.9m (FY23: £nil) write off/impairments including tooling/intangibles, inventories and licensing agreements associated with product lines in the Consumer Goods division where the group does not intend to place further commercial focus or allocate resources. Decisions have been made based on the level of additional investment in both time and resources required to get to an end product that can be successfully marketed, including the provision of a suitable marketing and promotional strategy versus the expected timing and profitability of that product line/group.

Additional personnel costs relate to the restructuring of the Consumer Goods division totalling £0.5m (FY23: £0.2m). 

b) Controls £1.5m (FY23: £0.3m) - Certain controls capital expenditure projects were deferred to allow the business to retain additional cash within the Group and reduce net debt levels. This timing change has resulted in the £0.9m (FY23: £nil) write off/impairment of specific fixed term licensing debtors that related to this technology.

Additional restructuring costs related to the announced part-closure of our Ramsey manufacturing site totalled £0.6m (FY23: £0.3m)

c) Central costs of £0.6m (FY23: £nil) - Additional personnel costs relating to the restructuring of the central team totalling £0.6m (FY23: £nil).

2. Settlements - The £3.3m (FY23: £nil) of non-recurring adjusting costs relates predominantly to a commercial settlement of £2.2m with one of the Group's key OEM customers of which a payment of £1.0m was made prior to year end with a remaining balance of £1.2m to be settled subsequently. £0.7m relates to a final settlement agreement with all parties to the LAICA acquisition, regarding the transfer of a Taiwanese property. The remaining £0.4m relates to provisions for legal costs and other supplier settlements.

3. Mergers and Acquisitions - Current year M&A cost of £28k is not significant when compared with previous year cost of £2.1m which was mainly related to legal and consultancy fees and other acquisition related costs incurred on transition from previous shareholders and integration of the Billi entities into the group.

Adjusting items from discontinued operations:

Following a comprehensive review of the Group's business unit HaloSource (part of our Premium Filtration Systems division, now classified as Billi), it was concluded that, as an industrial farming filtration product, the Halopure technology does not fit well with the rest of the group's focus on smaller scale domestic filtration products. The business was loss making since acquisition and was forecast to continue to be for the medium term, whilst requiring additional investment to support ongoing growth. HaloSource was subsequently disposed of via sale at a nominal value which led to HaloSource being disclosed as a discontinued operation. The £2.8m adjusting costs relates to write off/impairments of £2.3m of assets before classification as held for sale, redundancy costs of £0.3m and loss on disposal of £0.2m