Final Results

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2024

The accounting policies and the notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 31 MARCH 2024

The accounting policies and the notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2024

The accounting policies and the notes form an integral part of these financial statements.

Further detail of share capital, share premium, share based payment reserve and retained earnings can be found in Note 18.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2024

The main non-cash movements in the above statement of cash flows are depreciation and amortisation of $104,000 (2023: $1,162,000); shares issued to employees in lieu of salary of $267,000 (2023: nil); share based payment credit of $147,000 (2023: $225,000 charge); and impairment of right of use assets of $92,000 (2023: nil).

The accounting policies and the notes form an integral part of these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2024

1   GENERAL INFORMATION

The principal activities of Enteq Technologies PLC ("Enteq" or "the Group" or "the Company") and its subsidiaries is that of acquiring, consolidating and operating companies providing specialist reach and recovery products and technologies to the oil and gas services market.

Enteq Technologies PLC, the Group's ultimate parent Company, is a limited liability Company incorporated and domiciled in England and Wales with its registered office at 7 Albert Buildings, 49 Queen Victoria Street, London, EC4N 4SA. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange.

2   BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The consolidated financial statements of the Group have been prepared in accordance with UK adopted international accounting standards and the requirements of the Companies Act 2006. They have been prepared under the assumption that the Group operates on a going concern basis.

The Group's financial statements have been prepared on an accrual basis and under the historical cost convention. Monetary amounts are expressed in United States Dollars ("USD or "$") and are rounded to the nearest thousand, except for earnings per share ("US cents").

The Group's financial statements are presented in USD as the Group's primary economic environment, in which it operates and generates cash flows uses this currency.

Going concern

The consolidated financial statements of the Group are prepared on a going concern basis. The Directors of the Group assert that the preparation of the consolidated financial statements on a going concern basis is appropriate, which is based upon a review of the future forecast performance of the Group for a period exceeding 12 months to 30 September 2025.

The Group monitors its funding and liquidity position throughout the year to ensure it has sufficient funds to meet its ongoing cash requirements. Cash forecasts are produced based on a number of inputs such as estimated revenues, margins, overheads, collection and payment terms, research and development spend and capital expenditure requirements. In preparing these forecasts, the Directors have considered the principal risks and uncertainties to which the business is exposed. As at 31 March 2024, the Group has available cash balances of $3.0 million (2023: $5.4 million) and no debt.

Cash flow forecasts prepared up to 30 September 2025, show sufficient cash resources to enable the funding of working capital, completing the testing of the SABER tool fleet and the completion of the build of the initial set of SABER tools in the fleet to enable the generation of revenue from this new technology. The Directors performed sensitivity analysis on the going concern assumptions to determine whether plausible downside scenarios which include cash conservation, leave the company with sufficient headroom. The cash forecasts indicate that the Group has adequate financial resources to continue to trade for the foreseeable future and meet its obligations as they fall due.

Adoption of new and revised standards

The Group applied for the first time certain standards and amendments. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2 (effective 1 January 2023)

The amendments to IAS 1 and IFRS Practice Statement 2 "Making Materiality Judgements" provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their 'significant' accounting policies with a requirement to disclose their 'material' accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.

The amendments have had no impact on the Group's disclosures, nor on the measurement, recognition or presentation of any items in the Group's financial statements.

Future standards, amendments and interpretations

The following standards, amendments and interpretations are effective subsequent to the year end (years commencing 1 January 2024), and have not been early adopted. The Directors do not expect that the adoption of the standards and amendments listed below will have a material impact on the financial statements of the Group in future periods.

·    Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current

·    Amendments to IAS 1: Classification of Liabilities as Current or Noncurrent - Deferral of Effective Date

·    Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback

·    Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with Covenants

·    Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements

3   SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements, unless otherwise stated.

Compliance with applicable law and IFRS

The consolidated Financial Statements comprise those of the Company and its subsidiaries (together the "Group"). The consolidated Financial Statements of the Group have been prepared on the going concern basis and under the historical cost convention in accordance with UK International Accounting Standards, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Basis of consolidation

The Group financial statements consolidate those of the parent Company and all of its subsidiaries as at 31 March 2024. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 31 March 2024.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-Group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Companies included in the consolidation:

The financial statements of subsidiaries are included in the consolidated financial statements from the date at which control commences to the date that control ceases. There are no non-conforming accounting policies in any of the subsidiaries.

Foreign currencies

All companies in the Group have a functional currency of USD.

Foreign currency transactions are translated into the functional currency of the respective Group entity, using the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the financial year-end date are retranslated to the functional currency at the foreign exchange rate at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

The exchange rate used at the year-end is GBP 1.00: USD 1.26 (2023: GBP 1.00: USD 1.24).

Segmental 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 has been identified as the executive members of the Board, at which level strategic decisions are made.

Revenue

Revenue from the discontinued business arose mainly from the sale and rental of Measurement While Drilling ("MWD") equipment. The revenue generated from the SABER tool is expected to also rise from the sale and rental of equipment. To determine whether to recognise revenue, the Group follows a 5-step process:

·    Identifying the contract with a customer;

·    Identifying the performance obligations;

·    Determining the transaction price;

·    Allocating the transaction price to the performance obligations; and

·    Recognising revenue when/as performance obligation(s) are satisfied.

Revenue from contracts with customers

Revenue is derived from selling equipment and is recognised at a point in time, when the Group satisfies performance obligation by transferring the promised goods to its customers. Revenue is recognised when the transfer of control takes place; this is taken to be at the point of despatch from the Group's facilities when the full legal title is transferred. The price is fixed from when the relevant sales order is received from the customers.

Rental - Operating leases

Revenue from rentals of equipment received under operating leases is recognised in the profit and loss account as the performance obligation under the lease contracts is satisfied over time, i.e. on a straight-line basis over the period of the lease. This revenue is deemed to be outside of the scope of FRS 16 'Leases' on the basis that the lessee has the right to cancel the lease and return the equipment at any time after the minimum rental term (typically the first 3 months). Following the return of the equipment the lessee has no further financial obligations and at no time during the rental period does lessee obtain legal title to the equipment.

Interest

Interest income and expenses are reported on an accrual basis using the effective interest method.

Operating expenses

Operating expenses are recognised in profit or loss upon utilisation of the service. Expenditure for warranties is recognised and charged in the period the warranty costs are incurred.

Exceptional items

Exceptional items are items of income and expenditure that, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to an understanding of our financial performance and distort the comparability of our financial performance between periods.

Exceptional items relate to such categories as impairment charges, and severance costs.

Intangible assets

(a) Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment.

(b) Research and development expenditure

Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an expense except that expenditure incurred on development projects is capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if the Group can demonstrate all of the following:

·    its ability to measure reliably the expenditure attributable to the asset under development;

·    the product or process is technically and commercially feasible;

·    its future economic benefits are probable;

·    its ability to use or sell the developed asset;

·    the availability of adequate technical, financial and other resources to complete the asset under development; and

·    its intention to complete the intangible asset and use or sell.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period. Development expenditure is amortised on a straight-line method over the useful lives of each product from when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.

Subsequent measurement

All intangible assets including capitalised internally developed software, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described below.

Amortisation

Amortisation is charged to overheads, within total administrative expenses, in the statement of profit and loss on a straight-line basis over the estimated useful lives of the intangible assets unless such lives are indefinite. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are determined separately for each acquisition and fall within the following ranges:

In-process research and development ("IPR&D") technology                    5 to 20 years

Property, plant and equipment

Tangible property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. Depreciation is included within administrative expenses for all tangible assets at rates calculated to write off the cost, less estimated residual value of each asset on a straight-line basis over useful economic life, as follows:

Land                                         Not depreciated

Buildings                                  10 to 35 years

Assets held for rental                Over the life of the asset or the rental period, whichever is the shortest

Other assets                             1 to 7 years

Spend on the build of new tools is included in "Assets under construction". Once the new tools are build they are transferred to "Assets held for rental" and depreciated in accordance with their appropriate useful economic life.

Management review the useful economic life and residual values of all assets on an annual basis.

Impairment

The SABER tool equipment and intangible asset is 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 higher of an asset's fair value less costs to sell and value in use.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in use. To determine the value-in-use, an independent external valuation was obtained. The external valuation used management estimates of expected future cash flows from the CGU and determined a suitable interest rate in order to calculate the present value of those cash flows, taking into account management's assessment of respective risk profiles, such as market and asset-specific risks factors. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements.

For impairment assessment purposes, an impairment test has been carried out associated with the intangible asset relating to the SABER project which is considered to be the only remaining cash generating unit ("CGU") within the Group. Further detail of the impairment review can be found in Note 10. It was concluded that the intangible asset does not need to be impaired (2023: nil).

Leases

For any new contracts entered into, the Group considers whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

·    the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group

·    the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract

·    the Group has the right to direct the use of the identified asset throughout the period of use.

The Group assess whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease 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 Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases that are short term and/or of low-value items. Lease payments associated with these leases is recognised as an expense on a straight-line basis over the lease term.

Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and initial measurement of financial assets

Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Financial assets are classified into the following categories:

·    amortised cost

·    fair value through profit or loss (FVTPL)

·    fair value through other comprehensive income (FVOCI).

In the periods presented the corporation does not have any financial assets categorised as either FVTPL or FVOCI.

All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.

Subsequent measurement of financial assets

Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

·    they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows

·    the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

After initial recognition, these are measured at amortised cost using the effective interest method.  Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Impairment of financial assets

IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.

Trade and other receivables and contract assets

The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. As the Group has so few customers with significant outstanding receivable balances the expected credit losses can be assessed on an individual customer by customer basis.

Classification and measurement of financial liabilities

The Group's financial liabilities include borrowings and trade and other payables. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, for inventory items that involve significant manufacturing time, includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. The cost of inventory that do not incur significant levels of manufacturing time are held at material cost only.   Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Taxation

The charge for current income tax is based on the results for the period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the year-end date.

Deferred income tax is the income 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 Statement of Financial Position liability method. Deferred income tax is provided in full and is recognised on temporary 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. Deferred income tax liabilities are generally recognised on 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 any discount on acquisition) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred income tax is measured on an undiscounted basis at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Deferred income tax is charged or credited in the statement of profit and loss, except when it relates to items charged or credited directly to equity or other comprehensive income, in which case the deferred tax is also dealt with in equity or other comprehensive income. Deferred income tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Trade and other payables

Trade and other payables are not interest-bearing and are recognised initially at fair value. Subsequently they are carried at amortised cost.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Retained earnings include all current and prior period retained profits. All transactions with owners of the parent are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

Share based payment reserve

Represents the total accumulated share-based payment charge less any amounts transferred following the issue of the relevant shares.

Pensions and short-term employee benefits

Pensions

The Group does not operate its own pension scheme but makes contributions to an individual's personal pension scheme, where appropriate.

Share based payments

The group operates two equity settled compensation plans, the Performance Share plan and the Enterprise Management Incentive plan. The fair value determined at the grant date of the equity settled share based payments is expensed over the vesting period, based on

the Group's estimate of awards that will eventually vest. Fair value is measured by the use of the Black-Scholes and Monte Carlo option

pricing models.

Both these schemes have options that vest three years after the date of grant and expire ten years after that date. The total amounts to be expensed to the Profit and Loss account over the vesting period of the options is determined by reference to the fair value at the date of granting and the number of awards that are expected to vest. The charge is annually reassessed, based on the total number of options expected to vest. The movement in cumulative expense is recognised in the profit and loss, with a corresponding entry to the share-based payment reserve. The Enterprise Management Incentive plan does not have any performance conditions attached whereas the Performance Share plan does. 

The Performance Share plan contained either a combination or market and non-market based elements or solely market based elements which are defined as follows:

Market based

The grant date fair value granted takes into account the impact of any market conditions and does not take into account service and non-market conditions. The fair value is not adjusted for subsequent changes in the fair value and differences between estimated and actual outcome of market conditions. If a market condition is not met, then the share based payment cost is nevertheless recognised, assuming that all other vesting conditions are met and even though an employee would not be entitled to receive the share based payment.

Non-market based

Recognition is initially based on the number of instruments for which any required non-market conditions are expected to be met. Subsequently, recognition of share based payment cost is trued-up for changes in estimates regarding the achievement of the conditions at each reporting date and at vesting date so that to reflect the number of instruments for which non-market conditions actually satisfied.  If a non-market condition is not met, then no share based payment cost is recognised on cumulative basis and any previously recognised cost is reversed.

Critical accounting estimates and judgements

The preparation of the financial statements in conforming with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and contingent liabilities. These will seldom equal the related actual results and adjustments will consequently be necessary. Estimates are continually evaluated based on experience, consultation with experts and reasonable expectations of future events. The carrying value of both the inventory and intangible assets are the key areas where significant judgement are required.

The areas of critical estimates include inventory valuation and impairment assessments and cost recognised relating to  the R&D projects capitalised within intangible assets. Accounting judgements are applied in determining the carrying amounts of the following significant assets and liabilities:

Impairment of intangible assets

An impairment test is carried out annually and involves a significant level of judgement and estimates regarding factors such as future growth rates. Senior management base this judgement on the best available industry and market data at that point in time. The critical judgements and estimates are set out in Note 10. As the Group strategy unfolds, these assumptions may change. Any significant downward variance in the assumptions may result in an impairment.

Costs recognised relating to R&D projects capitalised

The Group has to apply judgement in determining whether costs incurred on R&D projects should be capitalised within intangible assets or expensed. The Group has a policy of capitalising development costs as set out above. The judgement is based on the assessment of the nature of capitalised costs and the level of these costs are considered to be directly related based on the criteria set out above, including some of the salary costs. This includes a portion of directors' and employees' salaries as stated in the Note 5.

Discontinued operations

The Group classifies a component of its business as a discontinued operation when it has either been disposed of or is classified as held for sale, and that component represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.

Discontinued operations are presented separately in the statement of profit and loss, showing the results of the discontinued operations, net of tax, distinct from continuing operations. Assets and liabilities of discontinued operations are measured in accordance with the applicable IFRS standards before reclassification as held for sale. Gains or losses on the disposal of discontinued operations are recognised in the period in which the disposal occurs.

Assets held for sale

Non-current assets, or disposal groups, are classified as held for sale when their carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use, and a sale is considered highly probable.

Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Depreciation or amortisation on these assets ceases upon classification as held for sale. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in the statement of profit and loss.

4   SEGMENTAL REPORTING

For management purposes, the Group is currently organised into a single business unit, the Drilling Tools division, which is currently based solely in the United States.

The principal activities of the Group is the design, manufacture and selling of specialised products for Directional Drilling and Measurement While Drilling ("MWD") operations for use in the oil, gas, geothermal and other energy transition sectors around the world. Revenue in the year was generated from the discontinued business and arose from the sale of MWD equipment.

Following disposal of the XXT business in April 2023, at present, there is only one operating segment relating to SABER and the information presented to the board is consistent with the consolidated profit and loss statement and the consolidated statement of financial position.  

The revenues, net assets and non-current assets of the Group can be analysed by geographic location (post-consolidation adjustments) as follows:

Revenues

Net assets

Non-current assets

All revenue generated in the year is from discontinued operations. Refer to Note 20 for details on performance of discontinued operations.

5   OPERATING LOSS

Operating losses are stated after charging/(crediting):

Other significant administrative expenses are detailed below. Depreciation and amortisation charges for 2023 are related to discontinued operations (Note 20).

The total employee benefit expenses which are either capitalised or included in administrative expenses are noted below. During the year $0.4 million of the below salaries were capitalised as part of intangible assets (2023: $0.7 million).

Disclosures on directors' remuneration, share options, long-term incentive schemes and pension entitlements required by the Companies Act 2006 are contained in the tables and notes within the Remuneration Committee report.

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

Services provided by the Group's auditor:

6   FINANCE INCOME AND FINANCE EXPENSES

Finance income

Finance expenses

7   TAXATION

No corporation tax charge arose on ordinary activities for the year. The tax assessed for the year differs from the standard rate of corporation tax in the United Kingdom. The differences are explained below:

Tax losses for which no deferred tax balances have been recognised are disclosed in Note 8.

8   DEFERRED TAXATION

No deferred taxation balances have been recognised in the financial statements on the basis that the only material balances relate to taxable losses carried forward, which are uncertain as to the recoverability.

The total losses available to the Group in the relevant tax jurisdictions are as follows: United Kingdom $1.7 million; United States $21.1 million (2023: United Kingdom nil; United States $22.6 million), these tax losses have no expiry date. There were no significant deferred tax liabilities.

9   EARNINGS PER SHARE AND DIVIDENDS

Basic earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number

of ordinary shares in issue during the year.

Diluted earnings per share

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive

potential ordinary shares. The Group has dilutive potential ordinary shares arising from share options granted to employees under the

share schemes as detailed in Note 18 of these financial statements.

As the Group is loss making, any potential ordinary shares have the effect of being anti-dilutive. Therefore, the diluted earnings per share is the same as the basic earnings per share.

Dividends

During the year the Group did not pay any dividends (2023: nil).

10 INTANGIBLE ASSETS

Developed technology is technology which is currently commercialised and embedded within the current product offering. In-process research and development ("IPR&D") technology relates to technology which is in the final stages of field testing, has demonstrable commercial value and is expected to be launched within the foreseeable future.

Intangible assets are amortised on a straight-line basis over their respective useful lives. The SABER project will have its useful life assessed once the field trials have been completed which will give a better estimate of the useful life of this asset.

Impairment review

Due to the sale of the XXT business assets, the SABER project is now considered to be only main cash generating unit ("CGU"). This CGU is in the carried forward value for IPR&D technology in the table above with a value of $8.3 million (2023: $6.5 million).

An independent third party valuation of the IP was done by a reputable professional services firm in this field to affirm the Directors' confidence in the valuation of the IP. The recoverable amount of the CGU at the year-end date was assessed on the basis of this valuation and is determined from value in use calculations both where the asset is currently in use or will be in the near future. The Directors have applied the income to determine the carrying value for the SABER project and intangible assets being carried in these financial statements.

The Income Approach involves calculating the value of an intangible asset based on the aggregate stream of net economic benefits that ownership of such asset entails. That benefit stream, net of any costs associated with its generation, is discounted to its net present value ("NPV") to determine the value of the intangible asset at the time of the valuation. The application of this approach requires the projection of economic benefits (incremental net income, or net cost savings) that are directly generated by the asset over its economic life. These projections are converted into NPV by using a present value discount rate, which represents the required rate of return on the intangible asset.

The key assumptions made by the directors for the discounted cash flow workings are:

·    projected revenue from the specific application of the IP;

·    expected royalty savings based on the selected market royalty rates;

·    the expected royalty payments to the Shell Entities;

·    the duration of the License Agreements (term); and

·    the applicable discount rate.

The valuation of the IP was conducted under four (4) scenarios using a combination of different fleet sizes and capital expenditures.

Changes to the above assumptions would impact the valuation assessment. For each of the four scenarios a sensitivity analysis was conducted, varying the two variables that the model is most sensitive to:

·    Royalty rates; and

·    Discount rates.

A royalty rate of 7.5% was used for the valuation and a sensitivity analysis done on the ranges of royalty rates of 5.0% and 10.0%. A lower royalty rate of 5.0% will result in a lower valuation by 47.3% whilst a higher royalty rate of 10.0% will result in a higher valuation by 47.3%.

A discount rate of 13.0% was used for the valuation and a sensitivity analysis done on the ranges of discount rates of 10.0% and 16.0%. A lower discount rate of 10.0% will result in a higher valuation by 34.4% whilst a higher discount rate of 16.0% will result in a lower valuation by 24.0%.

None of the sensitivities above result in an impairment of the net book value of the intangibles held in the financial statements at year end. There still remains a buffer of 53.0% over the net book value of the intangibles when using the lowest value point in the sensitivity analysis above.

The Directors have not accounted for the possibility of any onerous obligations arising with the contracts as there is no reason to expect that these will arise at this stage in the business life cycle.

Currently the SABER project is towards the end of the development phase and is forecast to be cash generating from Q3 of calendar year 2024.

11 PROPERTY, PLANT AND EQUIPMENT

Assets under construction relates to SABER fleet build expenditure.

12 TRADE AND OTHER RECEIVABLES

The Directors consider that the carrying amount of trade receivables and accrued income approximates to fair value. Information about the Group's exposure to credit and market risks, and impairment losses for trade receivables is included in Note 24.

13 CASH AND CASH EQUIVALENTS

The Directors consider that the carrying amount of cash and cash equivalents equates to fair value.

14 INVENTORIES

15 TRADE AND OTHER PAYABLES