REGISTERED NUMBER: 07264379 (England and Wales)

GROUP STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JANUARY 2025

FOR

ARCHIPELAGO LEARNING HOLDINGS UK LIMITED

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

Consolidated Statement of Comprehensive Income

8

Consolidated Balance Sheet

9

Company Balance Sheet

10

Consolidated Statement of Changes in Equity

11

Company Statement of Changes in Equity

12

Consolidated Cash Flow Statement

13

Notes to the Consolidated Cash Flow Statement

14

Notes to the Consolidated Financial Statements

15

DIRECTORS:

J A Candee

P Alphonse

R A Hamwee

M Lavelle

J Jackson

A S Duncan

M E Trimarchi

Y Mavilla

REGISTERED OFFICE:

Pera Business Park

Nottingham Road

Melton Mowbray

LE13 0PB

REGISTERED NUMBER:

07264379 (England and Wales)

AUDITORS:

Magma Audit LLP (part of the Dains Group)

Chartered Accountants

Statutory Auditor

Unit 2, Charnwood Edge Business Park

Syston Road

Leicestershire

LE7 4UZ

The directors present their strategic report of the company and the group for the year ended 31 January 2025.

REVIEW OF BUSINESS

Our key financial indicators are Invoiced Sales, Revenue, and EBITDA. The business has a slight seasonal pattern, Our key financial indicators are Invoiced Sales, Revenue, and EBITDA. The business has a slight seasonal pattern, with Q1 and Q3 being strong, linked to the budget year for most UK schools and the start of the new academic year respectively, and the remaining quarters being of broadly similar size. Our product is sold on a subscription basis, with some multi-year subscriptions. We rely significantly on our ability to achieve renewals of subscriptions, as well as sales to new customers.

In the year, we had a 86.9% increase in overall revenue in the business. UK revenue increased 185.6% compared to prior year, as our main focus was on multi-year deals and continuing to grow the international revenue, which increased by 76.6%. Cost of Sales fell 1,207k on the prior year which is primarily royalties paid to Edmentum. When excluding the impairment of the goodwill as described below, administrative expenses were down significantly compared with the prior year by £2,242k due to largely to exchange fluctuations, employee costs and ending the building lease. We continue to invest in product development, adding content to provide greater UK and US curriculum coverage for subject offerings in addition to providing international sales support to grow US offerings globally.

The UK specific product is being closed from August 2025 as the business focuses its sales and development efforts on the wider US product range. As a result we have made the decision to write off the remaining goodwill this year. This resulted in an impairment expense recognised of £4,988k in the profit and loss, resulting in the overall increase in administrative expenses.

Other operating income decreased 75.2% This income mainly comprises royalties receivable from sales in the USA by Edmentum of our own product and products to which we have contributed content. We continue to develop a significant amount of new content and new features for existing platforms and as a result the original content % fell, resulting in lower royalties.

As a result of the movements mentioned above, the operating loss for the year is £4,031k.

Interest receivable and similar income has increased due to the AFR rate increase in the US on Loans and Edmentum trading balances.

We continue to finance our business primarily through cash flow from operations and through support of Edmentum.

Looking ahead, in addition to the opportunities for growth that exist for our product in international markets, we anticipate growth opportunities arising from the sales of other Edmentum products in international markets and have started to reconfigure go-to-market in the UK. We also anticipate continuing growth in royalties receivable on sales made in the USA by Edmentum of relevant products.

PRINCIPAL RISKS AND UNCERTAINTIES

Our principle risk is the exchange rate fluctuation against the US Dollar. The weakening of sterling against the dollar impacts loan balances and royalties receivable.

INTEREST RATE RISK

The company reviews its exposure to interest rates regularly and considers the benefit (or otherwise) of hedging against adverse interest rate movements as part of these reviews.

FOREIGN CURRENCY RISK

Foreign currency exposure resulting from group loans, trade with customers and suppliers abroad is mitigated by a hedging policy adopted by the company.

CREDIT RISK

Managing cashflow and credit risk is a priority of the company. All customers are subject to credit checks to reduce exposure to bad debts and to maintain cashflow to support the working capital required for the operations within the business.

ON BEHALF OF THE BOARD:

M E Trimarchi - Director

29 October 2025

The directors present their report with the financial statements of the company and the group for the year ended 31 January 2025.

PRINCIPAL ACTIVITY

The group continues to be a leading provider of educational content and provides online educational software targeted at children aged 3 - 12 years. The product covers English, Maths and Science.

DIVIDENDS

No dividends will be distributed for the year ended 31 January 2025.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 February 2024 to the date of this report.

J A Candee

P Alphonse

R A Hamwee

M Lavelle

J Jackson

A S Duncan

M E Trimarchi

Other changes in directors holding office are as follows:

Y Mavilla was appointed as a director after 31 January 2025 but prior to the date of this report.

R Vig ceased to be a director after 31 January 2025 but prior to the date of this report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

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

-	select suitable accounting policies and then apply them consistently;

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

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

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

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS

The auditors, Magma Audit LLP (part of the Dains Group), will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

M E Trimarchi - Director

29 October 2025

Opinion

We have audited the financial statements of Archipelago Learning Holdings UK Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 January 2025 which comprise the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the group's and of the parent company affairs as at 31 January 2025 and of the group's loss for the year then ended;

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

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

Basis for opinion

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

Conclusions relating to going concern

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

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

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

Other information

The directors are responsible for the other information. The other information comprises the information in the Group Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

-	the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Group Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Report of the Directors.

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

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

-	the parent company financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

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

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page three, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Based on our understanding of the company and industry, we identified the principal risks of non-compliance with laws and regulations, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006 and tax legislation. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries and management bias in accounting estimates. Audit procedures performed included:

- Enquire with management including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;

- Challenging assumptions made by management in their significant accounting estimates, in particular in relation to the useful economic lives of tangible assets, impairment of debtors and recoverability of amounts due by related undertakings.

- Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations, journal entries crediting cash and journal entries with specific defined descriptions.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

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

Luke Turner FCA FCCA (Senior Statutory Auditor)

for and on behalf of Magma Audit LLP (part of the Dains Group)

Chartered Accountants

Statutory Auditor

Unit 2, Charnwood Edge Business Park

Syston Road

Leicestershire

LE7 4UZ

29 October 2025

TURNOVER

4

5,524,316

2,955,405

Cost of sales

(156,762

)

(1,364,226

)

GROSS PROFIT

5,367,554

1,591,179

Administrative expenses

(9,726,237

)

(6,980,302

)

(4,358,683

)

(5,389,123

)

Other operating income

5

328,120

1,320,954

OPERATING LOSS

7

(4,030,563

)

(4,068,169

)

Interest receivable and similar income

9

597,884

540,075

(3,432,679

)

(3,528,094

)

Interest payable and similar expenses

10

(323,620

)

(343,837

)

LOSS BEFORE TAXATION

(3,756,299

)

(3,871,931

)

Tax on loss

11

12,673

1,906

LOSS FOR THE FINANCIAL YEAR

(3,743,626

)

(3,870,025

)

OTHER COMPREHENSIVE INCOME

Currency translation differences

(331,456

)

428,961

Income tax relating to other comprehensive income

-

-

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

(331,456

)

428,961

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(4,075,082

)

(3,441,064

)

Loss attributable to:

Owners of the parent

(3,743,626

)

(3,870,025

)

Total comprehensive income attributable to:

Owners of the parent

(4,075,082

)

(3,441,064

)

FIXED ASSETS

Intangible assets

14

-

4,988,149

Tangible assets

15

49,773

48,877

Investments

16

-

-

49,773

5,037,026

CURRENT ASSETS

Debtors

17

15,896,096

16,299,967

Cash at bank and in hand

270,669

381,183

16,166,765

16,681,150

CREDITORS

Amounts falling due within one year

18

(18,497,443

)

(19,739,295

)

NET CURRENT LIABILITIES

(2,330,678

)

(3,058,145

)

TOTAL ASSETS LESS CURRENT LIABILITIES

(2,280,905

)

1,978,881

CREDITORS

Amounts falling due after more than one year

19

(1,725,528

)

(1,896,299

)

PROVISIONS FOR LIABILITIES

22

(2,767

)

(16,700

)

NET (LIABILITIES)/ASSETS

(4,009,200

)

65,882

CAPITAL AND RESERVES

Called up share capital

23

180

180

Share premium

46,875,911

46,875,911

Retranslation reserve

(2,542,003

)

(2,210,547

)

Retained earnings

(48,343,288

)

(44,599,662

)

SHAREHOLDERS' FUNDS

(4,009,200

)

65,882

The financial statements were approved by the Board of Directors and authorised for issue on 29 October 2025 and were signed on its behalf by:

M E Trimarchi - Director

FIXED ASSETS

Intangible assets

14

-

-

Tangible assets

15

-

-

Investments

16

15,709,991

15,709,991

15,709,991

15,709,991

CREDITORS

Amounts falling due within one year

18

(18,650,226

)

(17,772,647

)

NET CURRENT LIABILITIES

(18,650,226

)

(17,772,647

)

TOTAL ASSETS LESS CURRENT LIABILITIES

(2,940,235

)

(2,062,656

)

CAPITAL AND RESERVES

Called up share capital

23

180

180

Share premium

46,875,911

46,875,911

Retranslation reserve

(2,764,013

)

(2,432,557

)

Retained earnings

(47,052,313

)

(46,506,190

)

SHAREHOLDERS' FUNDS

(2,940,235

)

(2,062,656

)

Company's loss for the financial year

(546,123

)

(329,158

)

The financial statements were approved by the Board of Directors and authorised for issue on 29 October 2025 and were signed on its behalf by:

M E Trimarchi - Director

Called up

share

Retained

Share

Retranslation

Total

capital

earnings

premium

reserve

equity

£

£

£

£

£

Balance at 1 February 2023

180

(40,729,637

)

46,875,911

(2,639,508

)

3,506,946

Changes in equity

Total comprehensive income

-

(3,870,025

)

-

428,961

(3,441,064

)

Balance at 31 January 2024

180

(44,599,662

)

46,875,911

(2,210,547

)

65,882

Changes in equity

Total comprehensive income

-

(3,743,626

)

-

(331,456

)

(4,075,082

)

Balance at 31 January 2025

180

(48,343,288

)

46,875,911

(2,542,003

)

(4,009,200

)

Called up

share

Retained

Share

Retranslation

Total

capital

earnings

premium

reserve

equity

£

£

£

£

£

Balance at 1 February 2023

180

(46,177,032

)

46,875,911

(2,639,508

)

(1,940,449

)

Changes in equity

Total comprehensive income

-

(329,158

)

-

206,951

(122,207

)

Balance at 31 January 2024

180

(46,506,190

)

46,875,911

(2,432,557

)

(2,062,656

)

Changes in equity

Total comprehensive income

-

(546,123

)

-

(331,456

)

(877,579

)

Balance at 31 January 2025

180

(47,052,313

)

46,875,911

(2,764,013

)

(2,940,235

)

Cash flows from operating activities

Cash generated from operations

1

(461,174

)

(320,069

)

Interest paid

(323,620

)

(343,837

)

Tax paid

-

(86,024

)

Taxation refund

117,568

-

Net cash from operating activities

(667,226

)

(749,930

)

Cash flows from investing activities

Purchase of tangible fixed assets

(38,955

)

(13,955

)

Sale of tangible fixed assets

958

376

Interest received

597,884

540,075

Net cash from investing activities

559,887

526,496

Decrease in cash and cash equivalents

(107,339

)

(223,434

)

Cash and cash equivalents at beginning of year

2

381,183

311,059

Effect of foreign exchange rate changes

(3,175

)

293,558

Cash and cash equivalents at end of year

2

270,669

381,183

1.	RECONCILIATION OF LOSS BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2025

2024

£

£

Loss before taxation

(3,756,299

)

(3,871,931

)

Depreciation charges

38,059

46,880

(Profit)/loss on disposal of fixed assets

(958

)

131

Impairment of tangible fixed assets

4,988,149

-

Foreign exchange gains/(losses)

424,832

(398,262

)

Amortisation charges

-

763,242

Finance costs

323,620

343,837

Finance income

(597,884

)

(540,075

)

1,419,519

(3,656,178

)

Increase in trade and other debtors

(429,643

)

(791,277

)

(Decrease)/increase in trade and other creditors

(1,451,050

)

4,127,386

Cash generated from operations

(461,174

)

(320,069

)

2.	CASH AND CASH EQUIVALENTS

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

Year ended 31 January 2025

31/1/25

1/2/24

£

£

Cash and cash equivalents

270,669

381,183

Year ended 31 January 2024

31/1/24

1/2/23

£

£

Cash and cash equivalents

381,183

311,059

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1/2/24

Cash flow

At 31/1/25

£

£

£

Net cash

Cash at bank and in hand

381,183

(110,514

)

270,669

381,183

(110,514

)

270,669

Debt

Debts falling due within 1 year

(12,241,818

)

(584,550

)

(12,826,368

)

(12,241,818

)

(584,550

)

(12,826,368

)

Total

(11,860,635

)

(695,064

)

(12,555,699

)

1.	STATUTORY INFORMATION

Archipelago Learning Holdings UK Limited is a group, registered in England and Wales. Its registered office address and the registered number can be found on the company information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

These financial statements have been prepared in accordance with FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" ("FRS 102") and the requirements of the Companies Act 2006.

The company's functional currency is US Dollars. The financial statements are presented in pound sterling due to the company being a UK company and owning a trading UK subsidiary. Amounts are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.

Basis of consolidation

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

The consolidated financial statements incorporate those of Archipelago Learning Holdings UK Ltd and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using

the purchase method. Their results are incorporated from the date that control passes.

All financial statements are made up to 31 January 2025. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Educationcity Limited has been included in the group financial statements using the purchase method of accounting. Accordingly, the group profit and loss account and statement of cash flows include the results and cash flows of Educationcity Limited.

Going concern

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

The validity of this assumption relies on the continued support of the US group companies. The group owed US group companies a total of £15,323,754 at 31 January 2025.

The UK group was owed £12,776,357 at 31 January 2025 and is deemed to be recoverable.

The directors have prepared forecasts that reflect the current trading expectations and these show that the UK group will be able to satisfy its financial commitments with ongoing support from the US group companies.

Related party exemption

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

Transactions between group entities which have been eliminated on consolidation are not disclosed within the financial statements.

Turnover

Turnover in the financial statements is recognised on the accruals basis and represents amounts receivable for goods and services net of VAT and discounts. The company's income comprises the sales of licenses for a period of 12 months and in some cases longer, invoiced at inception of the agreement. Income relating to the future periods is deferred based on the length of the license and released into the period to which it relates, usually on a monthly basis.

Other operating income includes royalties receivable. This relates to royalties received, or receivable, from fellow group companies selling the company's software.

Deferred income is disclosed separately in creditors in the financial statements.

From February 2024, income has been recognised in respect of transfer pricing adjustments to account for a mark-up on costs incurred by the company on behalf of it's ultimate controlling party. Benchmarking analysis was provided by an independent third party and an appropriate percentage was used to ensure that transactions between the two parties are priced on arm's length terms.

Goodwill

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 20 years.

Goodwill is assessed for impairment when there are indicators of impairment and any impairment is charged to the profit and loss account. No reversals of impairment are recognised.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Computer software is being amortised evenly over its estimated useful life of three years.

Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

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

Fixtures, fittings & equipment

25% & 33% straight line

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Fixed asset investments

Interests in subsidiaries, are initially measured at transaction price excluding transaction costs, and are subsequently measured at fair value at each reporting date. Changes in fair value are recognised in profit or loss. Transactions costs are expended to profit or loss as incurred.

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

Financial instruments

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Debtors

Basic financial assets, including trade and other debtors, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at amortised cost using the effective interest method, less any impairment.

Cash and cash equivalents

Cash and cash equivalents are represented by cash in hand, deposits held at call with financial institutions, and other short-term highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

Creditors

Basic financial liabilities, including trade and other creditors, loans from third parties and loans from related parties, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Such instruments are subsequently carried at amortised cost using the effective interest method, less any impairment.

Taxation

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

Current tax

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

Deferred tax

Deferred taxation is provided in full in respect of taxation deferred by timing differences between the treatment of certain items for taxation and accounting purposes. The deferred tax balance has not been discounted.

Research and development

Research and development expenditure is written off to the profit and loss account in the year in which it is

incurred.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Operating leases

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Leases that do not transfer all the risks and rewards of ownership are classified as operating leases. Payments under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to profit or loss in the period to which they relate.