SED.L Regulatory News (SED)

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 which forms part of UK law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").

19 October 2023

Saietta Group Plc

("Saietta", the "Company" or the "Group") 

Full Year Results Ending March 2023 & Operational Update

Saietta Group plc (AIM: SED), the multi-national business which designs, engineers and manufactures complete electric drivetrain (eDrive) solutions for electric vehicles, announces its full year results for the 12 months ended 31 March 2023 and provides an operational and financial update.

Since floating on the London Stock Exchange in July 2021, in 28 months Saietta has transformed from being just an axial flux technology (AFT) R&D company into a designer of a range of complete eDrive solutions for vehicle manufacturers, secured a major global OEM (original equipment manufacturer) as its launch customer for a range of their vehicle lines, established leading manufacturing facilities in both Sunderland and Delhi (through its JV partner Saietta VNA) and appointed high quality local supply chains.

The Company believes that it has reached its inflection point for its core business based on its proven AFT eDrives. The orders in place provide a firm launch pad and the Board is confident that it is now able to convert a significant proportion of its rapidly growing sales pipeline into firm commercial orders, thereby leveraging many months of development work and investment in its design and manufacturing capabilities.

This communication also sets out a very significant step-change business opportunity for Saietta by industrialising a proven all-new second model line based on its new in-house radial flux technology (RFT) motor family.

The Company has resolved the frustrating technical accountancy issues around accounting for the post balance sheet event of the new agreements with Consolidated Metco Inc ("ConMet") which were signed on 1st August 2023 and has accordingly published its fully audited accounts for the year ended 31 March 2023.

Financial highlights for FY ending March 2023

For information on the Company's current working capital position post period end, please see the Finance Update post-period section below.

Operational highlights for FY ending March 2023

Operational update post-period

As Saietta has now secured contracts from a leading OEM, the Board has high confidence that a significant proportion of the material items in the Company's sales pipeline will mature into commercial contracts in the current financial year.

Finance update post-period

As announced on 25 September 2023, at the end of August 2023 the Company had cash resources of £1.2m and stated that this, combined with additional sums receivable from key customers and JV partners would meet the requirements for its focused AFT eDrive production plan.

As part of its joint venture relationship, the Company has recently formalized the advanced payment of £1.5m for certain machinery that is scheduled to be transferred from its Sunderland facility to the Saietta VNA joint venture in India. The Company is due to receive these funds from the JV in the coming days providing a significant increase to the September-end cash balance of £0.4m and, absent other financial resources becoming available, are deemed to provide the Group sufficient working capital into December 2023.

The Board believes that the increased scale of the commercial opportunities from the current sales pipeline, described in the Operational Update above, presents a unique opportunity to make a step-change and thereby secure substantial recurring long-term revenues over a range of high-volume product lifecycles.

Consequently, the Board has concluded that the Company will need to secure additional funding in Q4 2023 for further working capital and to generate the financial resources required to fully capitalize on the potential from the anticipated additional sales contracts within its pipeline.

The Company will accordingly proactively engage with stakeholders to explore financing opportunities which may include an equity raise.

Tony Gott, Executive Chairman of Saietta, said:

"We have finally resolved frustrating technical accountancy issues around accounting for the post balance sheet event of the new agreements with Consolidated Metco Inc ("ConMet") which were signed on 1st August 2023 after our financial year end and released our fully audited accounts for the year ended 31 March 2023, which will recommence trading in our shares on AIM.

Saietta has made huge strides since the end of the last financial year and we believe we have reached the inflection point for the business. At IPO just 28 months ago we planned to build Saietta organically based on revenues from sales of our ground-breaking axial flux technology (AFT) motors before scaling up into additional product lines. However, the market is transitioning to electric propulsion much faster than even we predicted, especially in Asia.

As Saietta has now secured contracts from a leading OEM, the Board has high confidence that a significant proportion of the material items in our sales pipeline will mature into commercial contracts within the current financial year. This includes market pull from the Indian 2 wheel (2W) sector for Saietta's all-new eDrives based on our radial flux technology (RFT) motors. This is highly significant given in the 12 months to September 2023 some 835,000 electric 2W vehicles were registered in India which equated to approximately 5% of the total 2W registrations, indicating the scale of opportunity in India as this sector transitions fully to electric propulsion.

The automotive market globally stands at an unprecedented moment of disruption, arguably the biggest since vehicles were first introduced over 120 years ago. With major disruption comes major commercial opportunity. We passionately believe that Saietta has the right product breadth and depth, at the right prices, at the right time, with the right people and the right business partners to fully capitalize on this huge opportunity.

The Saietta Board has therefore taken the decision to seek step-change additional funding in part to underpin our current working capital and, importantly, to also generate the financial resources required to fully capitalize on the potential from the anticipated additional contracts within our sales pipeline, including the huge 2W sector in India. We are open on how best to achieve this and are commencing discussions with our key investors to get their advice, but we are determined to appropriately capitalize the business and maximise the ROI for our investors."

The financial information set out below does not constitute the Group's statutory accounts for the year ended 31 March 2023, but is derived from those accounts. References within the document may refer to information in the statutory accounts and these will be sent to shareholders shortly and be published on the Company's website imminently.

For any further enquiries, please contact:

About Saietta Group plc

Listed on the London Stock Exchange's AIM, Saietta is a global business that designs, develops and manufactures complete electric drivetrain (eDrive) solutions for established manufacturers of a broad range of electric vehicles. 

Saietta's breakthrough proprietary technologies include AFT (Axial Flux Technology) and RFT (Radial Flux Technology) motors, power electronics, powertrain controls, mechanical axles, transmissions and vehicle control units. Considerable flexibility is built into the core design, meaning solutions can be quickly and cost effectively tailored to a specific application.

Saietta works in a highly collaborative way with clients, driven by the belief that partnership is key to delivering world-class tailored solutions at pace. Saietta's engineering team takes time to deeply understand a client's brand, target market sector, competition and the services they require. Then Saietta develops a bespoke suite of products and services to fast-track the client to production with eDrive solutions which deliver a sustainable competitive advantage.

Chairman's Statement

Saietta has transitioned from its beginnings as an R&D motor designer to a provider of engineering design services and supplier of light-duty vehicle e-axle products to OEM's. Such a transformation within two years of raising funds through an IPO is an exceptional achievement.

Facilitated primarily by the proceeds from the IPO and subsequent fund raise, Saietta has made considerable progress in its core focus lightweight mobility market having secured orders for design and delivery of light-duty vehicle e-axles to customers in India and the United States. Saietta remains dedicated to further securing a number of long-term, high volume OEM relationships globally.

These achievements have required a considerable amount of transformation within the business and there have been changes at Board level and operating level as a consequence.

In particular, whilst the E-Traction acquisition made in November 2021 brought in new valuable intellectual property and skills to the Group, it also contained operational activities that were non-core such as the Retromotion, bus conversion category.

Successfully releasing this activity and deciding to seek an industrialisation partner to take forward the Netherlands-based marine operation, Propel, have together made it possible for the Group to reach the milestones set out with OEM's in the light duty sector.

The decision regarding Propel has led to an impairment of the assets in that business unit as there is uncertainty over the timescale to complete such a transition.

Outlook

Moving from an R&D-focused technology start-up to a large-scale manufacturer with international sales is clearly a dramatic transformation and the Group continues to encounter the challenges commensurate with such. However, its market acceptance is now firmly in place, which provides a much clearer path towards its goals and aspirations.

Saietta employees Group-wide have been integral to delivering on its ambitious growth plans and the Board is confident that our short- and long-term goals remain achievable. Saietta's ramp up of delivery of light-duty vehicle e-axle products to our customers remains firmly in place to ensure the future prosperity of the Group.

The Board has confidence that the commercial opportunities for Saietta across global markets and particularly in India remain readily apparent and the rapid scale-up of its business will allow it to access these opportunities in the near future.

Chief Executive Officer's Review

This was a challenging transitional year for the Group with commercial success and operational delivery becoming a dominant feature of the business as opposed to the research and development start up phases of the past. Our turnover in the 12 months ended 31 March 2023 increased by 50% to £2.1 million (2022: £1.4m) from continued operations.

The Group now consists of:

Our achievements during the year

Saietta VNA awarded contract with Tier 1 Indian OEM

In December 2022, the Group signed a Development Agreement with a Tier 1 Indian OEM for engineering design services of approximately £3.2m for a series of products with assumed minimum volumes across the next five years of 80,000 units and a start of production in the fourth quarter of 2023.

Ayro Inc. awarded contract and initial purchase order of USD6.0m

In April 2023, the Group received an order for 3,000 bespoke eDrive units from Ayro Inc., a US customer that commenced delivery of prototype units earlier in the year. The award reflected Ayro's confidence in Saietta's engineering design and support as well as its clear delivery capability, having secured a production facility in Sunderland in April 2022.

Strategy, recent developments and commercial opportunities

The Group's strategy has evolved throughout the year driven by market pull, particularly in the area of light-duty solutions and by resource constraints that have led to prioritization on the original AFT technology away from the ancillary areas of Marine and Heavy Duty.

The decision to find an industrialization partner for Propel and to renegotiate the arrangements with ConMet were necessary steps in this evolution.

Looking ahead, the outlook for the business with a refocused operating model is highly positive for Saietta. We envisage the growth experienced in 2022/23 will accelerate as the scaled up production of AFT and RFT motors in India and other markets will occur in the coming year.

Future growth strategy

The Group intends to invest for growth in the following areas:

· Saietta VNA scale up to meet client orders

· Securing a number of long-term, high volume OEM relationships globally; and

· Continue to secure crucial patents across all key international markets.

To make such growth possible, the Group has had to apply rigorous rationing of its capital and its subsequent renegotiation of arrangements with ConMet are an example of the discipline and refocus applied.

Saietta is quickly positioning itself to become a prominent participant in drive train systems and technology for applications across the electric vehicle segments.

Review of the Group's Business and Financial Performance

Overview

Having commenced the year acquiring a facility in Sunderland with 86,000 square feet of factory space designed specifically for electric motor production, the Group moved away from its research and development origins and pivoted towards a phase of industrialization of motor production in order to address the opportunities materializing in contract wins.

The Group delivered moderate results during the year, generating total revenue of £2.1m (2022: £1.4m) from continued operations whilst formalising its business structure and strategy for its principal divisions*:

a) Lightweight mobility division addressing India through Saietta VNA and the United States of America directly from its Sunderland plant.

b) Heavy-duty commercial division with licence revenue in place for future products.

* the marine division has now been discontinued whilst an industrialization partner is being sought.

Establishment of production facility

On 4 April 2022, the Group acquired fixtures and fittings, plant equipment and a lease for an 86,000 square feet production facility in Sunderland which will ultimately be able to produce in excess of 100,000 units per annum. The Sunderland plant will service non-India based customers through semi-automated lines for both AFT and RFT requirements. Saietta VNA, the Group's Indian joint venture, will service customers through a fully automated AFT line and RFT lines due to be in place in quarter four 2023.

Furthermore, in the event that additional contractual orders for eDrives are received in the near term (ahead of cashflows from the AFT eDrive vehicle programmes referenced above) then the Company may also require additional capital to fund the set up and production implementation of those additional contracts.

Business development - Lightweight mobility division

The development order from India with production to follow and the order from the USA confirmed the Group's strategy to concentrate on lightweight mobility as the most effective means to harness the potential of its AFT technology with a view to rapid profitable growth in the coming years.

Business development - Heavy-duty and Marine divisions

The Group has needed to concentrate its attention and capital on the areas of most substantial returns both in terms of internal rates of return and immediacy.

As a consequence the arrangements with ConMet, the discontinuance of the Retromotion activity and the redirection of marine retail operations in the Netherlands all became necessary steps towards the focused Group strategy.

Gross profit

Saietta delivered gross profit of £0.7m (2022: £0.8m) with a lower gross profit margin of 31% (2022: 58%) from continuing operations. The fall in gross margin is driven by revenue mix and the changing nature of the ConMet contract.

Other income

£1.0m gain on disposal of the intangibles created in the ConMet projects and £1.7m (2022: £0.7) of grant income from two projects (2022: 3 projects) were recognized in the year. Grant income included the projects with Innovate UK ("APC 6" and "APC 16") which generated income of £1.0m (2022: £0.6m).

Administrative expenses

Administrative costs for the year of £21.8m (2022:£13.1m) represents an increase of £8.7m.This increase is driven by the Group expanding its operations across geographies which in turn has served to increase its fixed cost base. In particular, the Group deployed funds to grow its existing operations with the addition of the Netherlands based heavy duty division for the entire year, a Sunderland plant and expanded Propel B.V. which has caused total, average staff numbers to increase from 100 in 2022 to 189 in 2023.

The share-based payment charge decreased from £4.4m in 2022 to £2.3m in 2023, due to performance below target for the new Long-Term Incentive Plan ('LTIP') awards.

Discontinued operations

The strategic adjustment to narrow near-term focus on immediate revenue generating opportunities in the rapidly expanding global lightweight electric vehicle (EV) sector through the discontinuance of the Retromotion activity and the redirection of marine retail operations in the Netherlands lead to significant losses in the year £7.9m (2022: £0.05m)

Adjusted EBITDA

The underlying level of loss that is measured by Earnings Before Interest, Tax, Depreciation and Amortisation, discontinued operations and non-recurring expenditure, which excludes expenses associated with the Admission to AIM in the prior year and the raising of additional funds through a placement in the financial year ended March 2023 and share-based payments (adjusted EBITDA), shows an increase in adjusted EBITDA loss from £4.4m in 2022 to £14.0m in 2023.

For full details on how the adjusted EBITDA figure is calculated, please see note 4.

Consolidated statement of financial position and cash flows

Non-current assets

As at 31 March 2023, non-current assets amounted to £25.5m (2022: £15.5m), including intangible assets of £10.9m (2022: £8.4m) and property, plant and equipment of £8.1m (2022: £3.5m).

Of the increase in intangible assets, internally-generated development costs and the purchase of intangible assets accounted for £3.3m (2022: £3.6m) and £1.0m (2022: £0.5m) respectively whilst disposal groups held for sale accounted for £(1.7)m (2022: nil).

Current assets

As at 31 March 2023, current assets amounted to £14.2m (2022: £27.2m), including cash balances of £7.2m (2022: £18.4m).

The principal elements of the decrease in cash were:

Directors' Report

The Directors present their report and the consolidated financial statements for the year ended 31 March 2023. The Directors who served during the year and their beneficial interest in the Company's issued share capital at year end were:

1On 1 August 2022, Anthony Gott was appointed Executive Chairman and on the 18th April 2023 as Interim Chief Executive Officer. On 2 October 2023 David Wooley was appointed as Chief Executive Officer.

Principal Activities

Saietta Group plc is a company registered in England and Wales that has developed the innovative AFT electric motor, designed to deliver class-leading performance for its target markets whilst being low cost and built for mass market production. Saietta's initial target market is the high volume, fast-growing lightweight mobility market including motorcycles in Asia.

Review of Business

A review of the business, its development and performance for the year and its position at the year end, together with the future prospects of the Group, is contained in the Chairman & Chief Executive Officer's Report and the Strategic Report.

Going concern

The financial statements have been prepared on a going concern basis. In adopting the going concern basis, the directors have considered the financial position of the Group and the Company, their cash flows and their liquidity position. The Group and Company's financial risk management objectives and exposures to liquidity and other financial risks and uncertainties are set out on pages 15 to 18 of the Group's financial statements. The Group had net assets of £29,189,193 (2022: £32,814,791) as at 31 March 2023 and available liquidity of £7,247,267 (2022: £18,402,055) comprised of cash and cash equivalents.

The Group and Company have modelled scenarios for a period up to October 2024 from the March 2023 year end and stress tested its financial position in such scenarios. These stress tests modelled the variability in financial performance and free cash flows when incorporating certain hypothetical events such as a reduction in forecast revenue and a delay in the receipt of payments for equipment from Saietta VNA.

The Group and Company operate in markets that are rapidly growing and has strategic plans that respond to such growth. In delivering those plans, the Group is mindful of the ultimate benefits from maintaining control over the deployment of its intellectual property in applications with major OEMs and within its joint venture arrangements. In order to do so, it recognises that at times it will potentially need to co-invest or defer investment to its partners to enhance the future value it can achieve from application of its products. In such instances the commercial merits will be weighed in determining whether funding is sought.

These forecasts align to the business strategy which was based on the assumption that the Group and Company will significantly increase its revenue and be able to generate significant gross profit in the next 12 months.

Furthermore, the forecasts also include payments from Saietta VNA, the Group's joint venture in India, for equipment for fully automated production of AFT motors. The Group has spent £3m on such equipment and this amount is to be reimbursed by Saietta VNA. In the absence of such reimbursement there may also be a need to raise additional funding

Whilst the Directors expect that additional funding can be raised this is not guaranteed and when continuing with an accelerated expansion this presents a material uncertainty which may cast significant doubt over the Group's and the Company's ability to continue as a going concern and therefore its ability to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not reflect any adjustments that would be required to be made if they were prepared on a basis other than the going concern basis.

Whilst acknowledging the uncertainties described above, the Board have concluded, on the basis of all scenarios and related expected cashflows and available sources of finance, that the Group and Company will be able to continue as a Going Concern for at least twelve months from the date of signing these financial statements and therefore it remains appropriate to prepare the Group and Company's results on the basis of a going concern.

Results and Dividends

The Group loss for the year, before taxation (including discontinued operations), amounted to £28,041,921 (2022: 10,782,252). The Directors do not recommend a final dividend this year (2022: £nil).

Research and development costs

In accordance with the policy outlined in note 2, the Group incurred research and development expenditure of £3.3m (2022: £3.8m) in the year. Commentary on the major activities is given in the Strategic Report.

Financial instruments

The use of financial instruments and financial risk management policies is covered in the Strategic Report and also in note 33 of the financial statements.

Substantial shareholdings

At 31 March 2023, the Company had been notified that (other than Directors) the following were interested in 3% or more of the issued capital of the Company:

At 18 October 2023, there were 102,917,675 Ordinary shares in issue.

Governance and the Board

The Board's governance system provides balanced support for the executive management team in the development of the Group's strategy and with the need to ensure effective monitoring of its implementation. The Board and its committees have considered the significant events of the year and their impact on the Group's business and reputation.

During the year the Audit & Risk Committee was chaired by David Wilkinson, the Remuneration Committee was chaired by Devyani Vaishampayan (previously David Wilkinson) and the Nomination Committee was chaired by Devyani Vaishampayan (previously David Wilkinson). The Board remains confident in the work of those committees and the overall system of governance.

Events after the reporting period

The events after the year end of 31 March 2023 are detailed in note 36 to the financial statements.

Strategy and future developments

The Group's strategy and future developments is covered in the Chief Executive Officer's Report.

Major macroeconomic impacts

Covid-19 and its aftershocks: We are mindful that the legacy of the COVID-19 pandemic and the friction it placed into international trade continues to have a notable impact on global supply chains; however, after negotiation and supplier development we currently do not anticipate that our production and sales volumes projections will be adversely affected in FY2023/24.

Economic and geopolitical factors: Inflationary pressures have been increasing throughout the first half of 2023, with major economies across the globe experiencing high energy prices linked to the conflict in Ukraine. This has fed through into higher interest rates and inflation on supplier costs. This has directly impacted the business as some prices we pay our suppliers are directly indexed to market rates which then puts pressure onto profit margins. Cost down measures to reduce the bill of materials and labour requirement have been pursued during the year to mitigate the effect of the increased raw material costs. Looking ahead, we will continue to monitor the impact of changes in material costs on our margins and continue to review areas where cost can be taken out of the manufacturing through process engineering. Ultimately, we may also look to adjust sales prices if we cannot avoid passing cost increases on to our consumers.

Auditors

Each of the persons who is a director at the date of approval of this annual report confirms that:

· so far as the director is aware, there is no relevant audit information of which the company's auditors are unaware; and

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

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. The auditors, BDO LLP, will be proposed for reappointment in accordance with section 489 of the Companies Act 2006.

Saietta Group plc has not included the requirements of Streamlined Energy and Carbon Reporting (SECR) due to the Group and its subsidiaries not meeting the threshold for reporting.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2023

The notes on pages 48 to 92 form part of these financial statements.

Steven Harrison

Chief Financial Officer

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2023

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2023

The cash and cash equivalents balance includes cash from discontinued operations which are included in the held for sale line on the balance sheet. The cash for this is disclosed separately in note 38.

Notes to the Consolidated Financial Statements

1.  General information

Saietta Group plc ("the Company") and its subsidiaries are collectively referred to as "the Group". The Company is a public limited company, registered in England and Wales. The address of its registered office is Riverbank House, 2 Swan Lane, London, EC4R 3TT.

The principal activity of the company is the provision of electric drive solutions including the manufacture of prototype and production electric motors for vehicles.

2.  Basis of preparation and significant accounting policies

The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The financial statements have been prepared under the historical cost convention. The presentation currency used is sterling and amounts have been presented rounded to the nearest £.

Where the company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

?  The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights

?  Substantive potential voting rights held by the company and by other parties

?  Other contractual arrangements

?  Historic patterns in voting attendance

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The subsidiaries are consolidated from the date on which they were incorporated or acquired.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

(i) New standards, amendments to standards or interpretations

No new standards, interpretations and amendments adopted in the year have had a material impact on the Group.

(ii) New standards, amendments to standards or interpretations not yet applied

There have been amendments to some accounting standards:

IFRS 3 Business Combinations: Reference to the Conceptual Framework IAS 16 Property, Plant and Equipment-Proceeds before Intended Use IAS 37 Onerous Contracts - Cost of Fulfilling a Contract

There are no new standards, interpretations or amendments not yet applied which the Directors anticipate will have a material impact on the Group.

(c)  Significant accounting policies

 Revenue recognition

Performance obligations and timing of revenue recognition

A portion of the Group's revenue is derived from selling goods with revenue recognised at a point in time when control of the goods has transferred to the customer. This is generally when the goods are delivered to the customer. However, for export sales, control might also be transferred when delivered either to the port of departure or port of arrival, depending on the specific terms of the contract with a customer. There is limited judgement needed in identifying the point control passes: once physical delivery of the products to the agreed location has occurred, the Company no longer has physical possession, usually will have a present right to payment (as a single payment on delivery) and retains none of the significant risks and rewards of the goods in question.

Some goods sold by the Group include warranties which require the Group to either replace or mend a defective product during the warranty period if the goods fail to comply with agreed-upon specifications. In accordance with IFRS 15, such warranties are not accounted for as separate performance obligations and hence no revenue is allocated to them. Instead, a provision is made for the costs of satisfying the warranties in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. On some product lines, a customer is able to take out extended warranties. These are accounted for as separate performance obligations, with the revenue earned recognised on a straight-line basis over the term of the warranty.

The Group's Lightweight and Heavy-duty divisions both carry out design (consultancy-type) services for clients, with revenue recognised typically on an over time basis. This is because the designs created have no alternative use for the Group and the contracts would require payment to be received for the time and effort spent by the Group on progressing the contracts in the event of the customer cancelling the contract prior to completion for any reason other than the Group's failure to perform its obligations under the contract. On partially complete design contracts, the Group recognises revenue based on stage of completion of the project which is estimated by comparing the number of hours actually spent on the project with the total number of hours expected to complete the project (i.e. an input based method). This is considered a faithful depiction of the transfer of services as the contracts are initially priced on the basis of anticipated hours to complete the projects and therefore also represents the amount to which the Group would be entitled based on its performance to date. These design contracts include commitment fees which are fees payable by customers in order to secure exclusive access to certain goods and services of the Group and thus precludes the Group from offering those goods and services to other customers. They are recognised over the period of the contract.

Determining the transaction price

Most of the Group's revenue is derived from fixed price contracts and therefore the amount of revenue to be earned from each contract is determined by reference to those fixed prices.

 Revenue recognition (continued)

Allocating amounts to performance obligations

For most contracts for goods, there is a fixed unit price for each product sold, with reductions given for bulk orders placed at a specific time. Therefore, there is no judgement involved in allocating the contract price to each unit ordered in such contracts (it is the total contract price divided by the number of units ordered). Where a customer orders more than one product line, the Group is able to determine the split of the total contract price between each product line by reference to each product's standalone selling prices (all product lines are capable of being, and are, sold separately).

For most contracts for design services, revenue is recognised over time in accordance with percentage completion. Accordingly, the transaction price is allocated in accordance by reference to the actual costs incurred as a proportion of the total expected cost of the products and services to be provided for each performance obligation. Allocation of transaction price may include allocation of discounts, which are applied on a proportionate basis to all performance obligations based on the stand-alone selling price of each performance obligation (observable or estimated).

In order to win significant repeat business with key customers, the Group might enter into contracts entitling them to discounts if it places repeat orders in the future. Such discounts constitute a 'material right' and result in some of the consideration received for the initial sale being deferred and recognised as revenue when subsequent sales are fulfilled or (if later) when the rights to receive a discount expire. The Group estimates both the probability that the customer will take up its future discount offer and the value of future purchases that might be made in order to estimate the value of the rights granted. This has to be done on a contract-by-contract basis for each customer to whom material rights have been granted. The Directors do not consider past experience an appropriate basis for estimating the amount of total contract revenue to allocate to future discount rights for two reasons. Firstly, there is not a significant number of such contracts on which past experience can be extrapolated. And secondly, each customer has unique circumstances which will impact both the probability and value of additional orders being placed. Therefore, the estimates are made by reference to discussions had with the relevant customers as to the extent the discount options will be taken up when the original contracts were negotiated.

Costs of fulfilling contracts

The costs of fulfilling contracts do not result in the recognition of a separate asset because:

· for RetroMotion contracts, where the Group retrofits existing diesel-engine powered buses with in-wheel electric motor technology, revenue is recognised over time by reference to the stage of completion with control of the asset remaining with the customer for the duration of the contract. Consequently, no asset for work in progress is recognised.

· such costs are included in the carrying amount of inventory for contracts involving the sale of goods; and

· for engineering design service contracts, revenue is recognised over time by reference to the stage of completion meaning that control of the asset (the design service) is transferred to the customer on a continuous basis as work is carried out. Consequently, no asset for work in progress is recognised.

Practical expedients

The company has taken advantage of the practical expedients:

· not to account for significant financing components where the time difference between receiving consideration and transferring control of goods (or services) to its customer is one year or less; and

· to expense the incremental costs of obtaining a contract when the amortisation period of the asset otherwise recognised would have been one year or less.

Grant income

The Group enters into consortiums with partners who together will apply for grant income to be paid out against a project that contains defined deliverables, clear outcomes and a set level of expenditure.

Expenditure comprises both capital purchases for equipment and operational expenditure for labour and supplies.

Each partner agrees a set level of expenditure at the start of the project and a level of grant income paid for by the grant provider is allocated for payment against the expenditure incurred, however the deliverables on the project for each partner are linked. Such projects are sought by the Group as they provide funding over one or more work streams that form part of the Group's programme(s) to deliver increased production capacity.

The Group recognises the costs of a project in the period in which they are incurred when related to qualifying expenditure. The grant income that is provided against this total expenditure is recognised as income when received from the issuing authority. Recognition occurs at this point as its release is subject to the issuer's review and confirmation of compliance with all conditions for release. The grant related to assets is deferred and recognised as income in the same period in which the grant-related asset is being depreciated.

Assets acquired for use in such projects are depreciated in accordance with the Group's depreciation policy.

The grant programmes that the Group participates in typically operate on a three month cycle, with recoverable income over each three month period paid in the month following that period.

Expenditure

Expenditure is recognised in respect of goods and services received when supplied in accordance with contractual terms. Provisions are made when a present obligation exists for a future liability relating to a past event and where the amount of the obligation can be reliably estimated.

Foreign currencies

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in 'sterling', which is also the Group's functional currency.

Transactions entered into by the Group in a currency other than the functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income or expense'.

Intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

The significant externally acquired intangibles recognised by the company and their useful economic lives are as follows: Intellectual property patents 10% straight line

Software 25% reducing balance

Intangible assets (continued)

Expenditure on internally developed products is capitalised if it can be demonstrated that:

? it is technically feasible to develop the product for it to be sold;

? adequate resources are available to complete the development;

? there is an intention to complete and sell the product;

? the company is able to sell the product;

? sale of the product will generate future economic benefits; and

? expenditure on the project can be measured reliably.

Capitalised development costs are subsequently amortised on a straight line basis over the periods the company expects to benefit from selling the products developed, which ranges from 8 to 10 years. The amortisation expense is included within the administrative expenses in the statement of comprehensive income.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the statement of comprehensive income as incurred.

The aggregate value of the capitalised development expenditure for each product is reviewed at the end of each accounting period and where the circumstances which have justified the deferral of the expenditure set out above no longer apply, or are considered doubtful, the expenditure, to the extent to which it is considered to be irrecoverable, is impaired. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Intangible assets that are yet to be amortised are tested for impairment annually.

Property, plant and equipment

Plant, machinery, fixtures and fittings are stated at cost less accumulated depreciation and accumulated impairment loss. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Short leasehold Remaining lease term Plant and machinery 25% reducing balance Fixtures and fittings 25% reducing balance

Motor vehicles Four years

Useful lives are based on management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness and events which may cause the estimate to be revised. At the end of the initial period, asset lives reach a residual value at which they are either suitable for replacement or extended life after maintenance and overhaul.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

 Property, plant and equipment (continued)

Assets under construction relates to the construction of an automated production line which at 31 March 2023 was not yet ready for use.

Assets under construction are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items.

Any costs not capitalised as part of the factory cost will be expensed to the statement of profit or loss as incurred. Depreciation on assets under construction does not commence until they are complete and available for use.

When necessary, the entire carrying amount of the assets under construction is tested for impairment in accordance with IAS 36 Impairment of assets as a single asset by comparing its recoverable amount (the higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

 Inventories Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

 Financial instruments

Financial assets and financial liabilities are recognized in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

The Group carries its financial assets at amortised cost.

Amortised Cost

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

 Financial instruments (continued)

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

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

The Group's financial assets measured at amortised cost comprise trade and other receivables and accrued income, and cash and cash equivalents in the balance sheet. Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less.

The Group does not have any borrowings or liabilities held for trading nor does it voluntarily classify any financial liabilities as being at fair value through profit or loss.

Trade payables and other short-term monetary liabilities are initially recognised at fair value and are subsequently carried at amortised cost using the effective interest method.

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of:

·  the amount determined in accordance with the expected credit loss model under IFRS 9 Financial Instruments; and

· the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15 Revenue from Contracts with Customers.

The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or other payables of associates are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

 Financial instruments (continued)

Financial assets and liabilities are offset and the net amount reported in the statement of financial position sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

When the Group exchanges with the existing lender one debt instrument into another one with substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between: (1) the carrying amount of the liability before the modification; and (2) the present value of the cash flows after modification is recognised in profit or loss as the modification gain or loss within other gains and losses.

 Taxation Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.

Deferred tax is recognised on the difference between the carrying amount of an asset or liability and the amount at which that asset or liability is assessed for tax purposes (tax base). Historical accumulated tax losses would give rise to a net deferred tax asset for the Group. However, due to the uncertainty on future recovery the Directors considered it prudent not to recognize such asset at this time.

 Investments in associates and joint ventures An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The results and assets and liabilities of associates or joint ventures are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5.

Under the equity method, an investment in an associate or a joint venture is recognised initially in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group's share of losses of an associate or a joint venture exceeds the Group's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

 Investments in associates and joint ventures (continued) An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

If there is objective evidence that the Group's net investment in an associate or joint venture is impaired, the requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture. When the Group retains an interest in the former associate or a joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IFRS 9. The difference between the carrying amount of the associate or a joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or a joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the associate or joint venture is disposed of.

When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

When a Group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group's consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.

The Group applies IFRS 9, including the impairment requirements, to long-term interests in an associate or joint venture to which the equity method is not applied and which form part of the net investment in the investee. Furthermore, in applying IFRS 9 to long-term interests, the Group does not take into account adjustments to their carrying amount required by IAS 28 Investments in Associates and Joint Ventures (i.e. adjustments to the carrying amount of long-term interests arising from the allocation of losses of the investee or assessment of impairment in accordance with IAS 28).

 Non-current assets held for sale Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

When the Group is committed to a sale plan involving disposal of an investment in an associate or, a portion of an investment in an associate, the investment, or the portion of the investment in the associate that will be disposed of is classified as held for sale when the criteria described above are met. The Group then ceases to apply the equity method in relation to the portion that is classified a held for sale. Any retained portion of an investment in an associate that has not been classified as held for sale continues to be accounted for using the equity method.

 Prepayments

Prepayments are recognised as assets in the statement of financial position when:

- The Group has made an advance payment for goods or services to be received in the future,

- It is probable that economic benefits associated with the prepayment will flow to the Group, and

- the amount of the prepayment can be measured reliably.

Prepayments are initially measured at the amount paid, and are released over the period over which the related goods or services are consumed or utilised.

Prepayments are presented as current assets in the statement of financial position to the extent that they are expected to be realised within the following 12 months. The portion of prepayments to be realised following one year from the reporting date is presented in non-current assets.

Prepayments are derecognised when the related goods or services are received or consumed, or when the right to receive the goods or service no longer exists. Any remaining balance is removed from the statement of financial position and the relevant expense is recognised in the statement of comprehensive income.

 Accrued income Accrued income represents revenue and grant income that has become due to the Group but has not been claimed or received at the reporting date.

Accrued income is recognised when:

- There is an unconditional right to receive the income

- The income can be reliably measured, and

- It is probable that the economic benefits associated with the income will flow to the company.

Accrued income is presented in current assets as it is expected to be realised within 12 months of the reporting date.

 Leases At inception of a contract, the Group assesses whether a contract is, or contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

-  The contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

- The Group has the right to substantially all of the economic benefits from the use of the asset throughout the period of use; and

- The Group has the right to direct the use of the asset. The Group has this right when it has the decision making rights that are most relevant to changing how and for what purposes the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either:

· The Group has the right to operate the asset; or

· The Group designed the asset in a way that predetermines how and for what purposes it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is allocated, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method over the shorter of the useful life of the leased asset and the expected lease term. If ownership of the leased asset is automatically transferred at the end of the lease term or the exercise of a purchase option is reflected in the lease payments,the right-of-use asset is amortised on a straight-line basis over the expected useful life of the leased asset.

The lease liability is initially measured at the present value of the lease payments that are not paid at commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as a discount rate. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Lease payments include fixed payments, i.e. amounts expected to be payable by the Company under residual value guarantee, the exercise price of a purchase option and lease payments in relation to lease extension option if the Company is reasonably certain to exercise purchase or extension options and payment of penalties for terminating the lease if the lease term considered reflects that the Company shall exercise termination option.

 Provisions The Group applies IAS 37 Provisions, Contingent Liabilities and Contingent Assets in accounting for non-financial liabilities. A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. When the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Provisions are held for product warranty as detailed in note 29 to the consolidated financial statements.

Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products, at the directors' best estimate of the expenditure required to settle the Group's obligation.

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

 Employee benefit costs The Group operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to the consolidated income statement in the period to which they relate.

 Share-based payments The Group also enters into arrangements that are equity-settled, share-based payments with certain employees (including directors) in the form of share options. During the period covered by the financial statements, the Group operated a HM Revenue and Customs approved share option scheme. This scheme is an Enterprise Management Incentive scheme where equity options are made to certain qualifying employees to reward and incentivise them. The equity share based payments are measured at the fair value of the equity at the grant date.

The scheme was open to all qualifying employees who are an employee within the Group working 25 hours per week for the Group, or if less, at least 75% of their working time.

The Listing was a necessary condition for exercise.

Employees who leave the Group are entitled to exercise their vested options after they leave the employment of the Group if they meet the requirements of a "good leaver", defined to be exit from the business for grounds other than dismissal.

The value of the share options is determined using the Black Scholes option pricing model and Monte Carlo simulation, and recorded as a share option reserve in the consolidated statements of financial position, with movements in the reserve treated as operating expenditure in the respective year.

The options have varying vesting periods from one month up to four years, with exercise of vested shares immediately in advance of a proposed Listing.

 Share-based payments (continued)

The Group operated a share-based payment LTIP arrangement for certain employees. The scheme awards share options to the employee based on a specific number of shares at grant date and the share price of Saietta Group plc at the vesting date, subject to profitability and employment conditions. These were accounted for as equity-settled arrangements. For these awards, fair value is to be measured at the date of grant and charged to the profit and loss over the vesting period. The vesting period is the period of time before shares in an employee plan are unconditionally owned by an employee. Fair value at the date of grant is determined using the Black-Scholes model or the Monte Carlo Simulation model where appropriate.

 Share capital Financial instruments issued by the company are treated as equity only to the extent that they do not meet the definition of a financial liability. The company's ordinary shares are classified as equity instruments.

 Going concern The financial statements have been prepared on a going concern basis. In adopting the going concern basis, the directors have considered the financial position of the Group and the Company, their cash flows and their liquidity position. The Group and Company's financial risk management objectives and exposures to liquidity and other financial risks and uncertainties are set out on pages 15 to 18. The Group had net assets of £29,189,193 (2022: £32,814,791) as at 31 March 2023 and available liquidity of

£7,247,267 (2022: £18,402,055) comprised of cash and cash equivalents.

The Group and Company have modelled scenarios for a period up to October 2024 from the March 2023 year end and stress tested its financial position in such scenarios. These stress tests modelled the variability in financial performance and free cash flows when incorporating certain hypothetical events such as a reduction in forecast revenue and a delay in the receipt of payments for equipment from Saietta VNA.

The Group and Company operate in markets that are rapidly growing and has strategic plans that respond to such growth. In delivering those plans, the Group is mindful of the ultimate benefits from maintaining control over the deployment of its intellectual property in applications with major OEMs and within its joint venture arrangements. In order to do so, it recognises that at times it will potentially need to co-invest or defer investment to its partners to enhance the future value it can achieve from application of its products. In such instances the commercial merits will be weighed in determining whether funding is sought.

These forecasts align to the business strategy which was based on the assumption that the Group and Company will significantly increase its revenue and be able to generate significant gross profit in the next 12 months.

Furthermore, the forecasts also include payments from Saietta VNA, the Group's joint venture in India, for equipment for fully automated production of AFT motors. The Group has spent £3m on such equipment and this amount is to be reimbursed by Saietta VNA. In the absence of such reimbursement there may also be a need to raise additional funding.

Whilst the Directors expect that additional funding can be raised this is not guaranteed and when continuing with an accelerated expansion this presents a material uncertainty which may cast significant doubt over the Group's and the Company's ability to continue as a going concern and therefore its ability to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not reflect any adjustments that would be required to be made if they were prepared on a basis other than the going concern basis.

Whilst acknowledging the uncertainties described above, the Board have concluded, on the basis of all scenarios and related expected cashflows and available sources of finance, that the Group and Company will be able to continue as a Going Concern for at least twelve months from the date of signing these financial statements and therefore it remains appropriate to prepare the Group and Company's results on the basis of a going concern.

3.  Critical Accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances and any further evidence that arises relevant to judgements taken. In the future, actual experience may differ from these estimates and assumptions. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Property, plant and equipment are depreciated over the estimated useful lives of the assets: Short leasehold Remaining lease term

Plant and machinery 25% reducing balance Fixtures and fittings 25% reducing balance

Motor vehicles Four years

Useful lives are based on management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness and events which may cause the estimate to be revised. At the end of the initial period, asset lives reach a residual value at which they are either suitable for replacement or extended life after maintenance and overhaul. The key areas of estimation uncertainty regarding depreciation is the determination of the life time capacity; risk of obsolescence from technological and regulatory changes; and required future capital expenditure (refurbishment or replacement of key components).

The carrying amount of property, plant and equipment at 31 March 2023 is £8,113,009 (2022: £3,498,541) and a reasonable adjustment sensitivity if assets were to have a reduced useful life of a year would be a reduction in carrying value of £358,800.

The carrying values of these assets are tested for impairment when there is an indication that the value of the assets might not be realisable or impaired either at an individual cash generating unit level or for the company as a whole. An intangible asset with an indefinite useful life or an intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test may be performed at any time during an annual period, provided it is performed at the same time every year. Different intangible assets may be tested for impairment at different times. However, if such an intangible asset was initially recognised during the current annual period, that intangible asset shall be tested for impairment before the end of the current annual period.

Patents are recognised at cost and development costs include both purchases and capitalized employee costs directly attributable to the development.

3. Critical Accounting estimates and judgements (continued)

 Useful lives and carrying value of intangible assets (continued) The nature of the estimation uncertainty is both to the eventual integration of such an intangible asset into commercial production and the successful cash generation from such production. The underlying assumption is that an impairment occurs if either the achievement of project milestones that meet client's roadmaps to commercialization are not met (and thereby indicate uncertainty over the viability to start of production ("SOP")), or if the commercial potential is reduced to such an extent that recovery of all invested amounts are uncertain.

The carrying amount is sensitive to both write-off of any intangible asset that is impaired and to amortisation either before all criteria to amortise are met, or after such criteria have been met. When carrying out impairment tests these are based upon future cash flow forecasts and these forecasts include management estimates.

Future events or changes in the market could cause the assumptions to change, therefore this could also have an adverse effect on the future results of the group.

Recognition of internally generated intangible assets arising from the development phase of a project is dependent upon application of specific criteria detailed in note 2. Management judgement is required as to the extent that each of the criteria is met and to the point where development is complete.

The carrying amount of intangible assets at 31 March 2023 was £10,916,016 (2022: £8,365,506). If the Group were to require amortisation for an additional year for patents and immediately at the start of the year for development costs this would have an impact of £99,088.

 Research and Development ("R&D") credits Research and Development credits arising in the United Kingdom under Corporation Tax Act 2009 Section 1308 claims are recognised upon success and recognised within Accrued Income. Successful Section 1308 R&D credits are considered to be UK

Government grants arising as a direct result of the Company's investment in its R&D assets and for which no further obligation

exists upon the Company. The R&D credits are charged to the P&L at the same time that the asset is expensed to P&L, therefore amortised over 8 years as their benefit is derived over the use of the Company's R&D assets.

 Expected credit losses and asset impairment Expected credit losses are assessed under IFRS9 using reasonable information about past events and current conditions and forecasts of future events. Asset impairment considers the likely returns from financial assets owned by the Group and their recoverability, based on market values and management's judgement of any other relevant factors.

Please refer to Note 33 for further detail.

 Incremental borrowing rate used to measure lease liabilities Where the interest rate implicit in the lease cannot be readily determined, lease liabilities are discounted at the lessee's incremental borrowing rate. This is the rate of interest that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. This involves assumptions and estimates, which would affect the carrying value of the lease liabilities (note 26) and the corresponding right-of-use assets (note 16).

To determine the incremental borrowing rate the company uses recent third-party financing as a starting point, and adjusts this for conditions specific to the lease such as its term and security. The company used incremental borrowing rates specific to each lease which ranged from 4.1% to 7.25%. A 5% increase in the rate would cause the lease liability to reduce by £839,673 with a corresponding movement in the 'cost' of the right-of-use asset which would reduce the associated amortisation.

3. Critical Accounting estimates and judgements (continued)

The valuation of share options issued in the year has been based on a Black Scholes model for options with no market based vesting conditions and a Monte Carlo simulation for options with market based vesting conditions. The inputs to both models represent the Director's best estimates for the likely exercise behaviour of the option holders. The expected future share price volatility was estimated based on the historical volatility of the Company's share price and a representative peer group of similar companies. For the share options with market based vesting conditions an independent specialist consultant was engaged to simulate the impact on the market-based conditions on the fair value of the options issued.

The Group's revenue recognition policies, which are set out under Revenue recognition in Note 2, are central to how the Group measures the work it has performed in each financial year. Management is required to form a number of key judgements in the determination of the amount of revenue and profits to record, and related statement of financial position items such as contract assets, accrued income and deferred income to recognise. This includes an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised, as well as assessments of when key changes to contracts occurred, in order to appropriately recognise and measure revenue.

The key estimation judgements are in the forecasting of costs to complete deliverables under contracts as these impact the timings and amounts of revenue recognised through the percentage of completion method.

4. Alternative Performance Measures ("APMs")

In reporting financial information, the Group presents alternative performance measures ("APMs") that are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business. The APMs used within this Annual Report are defined below.

Alternative performance measures

Adjusted EBITDA Adjusted EBITDA is defined as the Group's earnings before interest, tax, depreciation, amortisation, share of profit/loss from equity accounted investments and exceptional items. These include the share-based payment charges, the gain on bargain purchase, costs related to Saietta Group plc's admission to the AIM and subsequent share issue costs, legal fees related to Saietta Group plc's investment in its equity- accounted associate, professional fees in respect of share options issued pre-Admission, legal fees in respect of company reorganisations,the write-off of related party receivables, provision for loss allowance on financial guarantee, a write-off of inventory, pension scheme set-up costs and losses from discontinued operations.

Gross proceeds raised through

Gross proceeds are the amount that a seller receives from the sale of a shares. These proceeds include all costs and expenses.

Working capital Changes in assets and liabilities as presented in the Consolidated Statement of Cash Flows. This comprises movements in assets and liabilities excluding movements relating to financing or investing cash flows or non-cash items that are not included in adjusted EBIT or adjusted EBITDA.

4.  Alternative Performance Measures ("APMs") (continued)

The Group uses adjusted EBITDA as an APM to review and measure the underlying profitability of the Group on an ongoing basis for comparability as it recognises that increased capital expenditure year on year will lead to a corresponding increase in depreciation and amortisation expense recognised within the consolidated income statement. Working capital is considered by the Group to be a key measure in assessing short-term assets and liabilities that are expected to be converted into cash within the next 12-month period.

Reconciliations between these alternative performance measures and statutory reported measures are shown below.