REGISTERED NUMBER: 08835685 (England and Wales)

GROUP STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2025

FOR

JDO GROUP LIMITED

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Consolidated Statement of Comprehensive Income

9

Consolidated Balance Sheet

10

Company Balance Sheet

11

Consolidated Statement of Changes in Equity

12

Company Statement of Changes in Equity

13

Consolidated Cash Flow Statement

14

Notes to the Consolidated Cash Flow Statement

15

Notes to the Consolidated Financial Statements

16

DIRECTORS:

P L Drake

B P Oates

S P Dives

REGISTERED OFFICE:

Royal Victoria House

51-55 The Pantiles

Tunbridge Wells

Kent

TN2 5TE

REGISTERED NUMBER:

08835685 (England and Wales)

AUDITORS:

BSR Bespoke

Chartered Accountants & Statutory Auditors

Linden House

Linden Close

Tunbridge Wells

Kent

TN4 8HH

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

REVIEW OF BUSINESS

The group provides a full global branding service from front-end Strategy, through to Design, Artwork and Print Consultancy.

The Group had a good year.

Turnover in the year was on par with the previous year

Turnover: 2024 - £14.691m 2025 - £14.571m

Net Profit had a decline from the previous year of 3% but managed exceed original expectations.

Net Profit: 2024 - £2.847m 2025 - £2.347m

The full results for the period are set out in the Profit and Loss account and statements and the position of the Group at the end of the period is detailed in the balance sheet.

The New York and Shanghai Studios both met expectations in Income and Profit in the year.

The main Group objective continues to focus on winning new clients across new sectors to alleviate any over reliance on core clients and sectors whilst continuing to service our existing clients.

The Directors are of the opinion that despite the usual challenges in the industry and current economic conditions that the current level of activity and performance is sustainable and the group will continue to have a positive financial position for the foreseeable future. The Group ensures cash at bank and current assets is kept to a level that could more than sustain a downturn in business or heavy delays in Client monies being received for many months. A minimum of 50% of the Group's cash at bank is always held in interest bearing accounts.

PRINCIPAL RISKS AND UNCERTAINTIES

The directors have reviewed and considered a number of risks:

The Group operates in a very competitive global market. Financial risks for a global design agency can include currency fluctuations, which can impact pricing and profitability; geopolitical instability, which may affect project delivery and client relationships; economic downturns that can lead to reduced client budgets; and competition in the global market, which can pressure margins and necessitate continuous innovation.

The Group mitigate these risks by fostering strong relationships with clients to ensure ongoing engagement and loyalty despite market fluctuations. Building strong client relationships is essential; regular communication and understanding client needs can lead to loyalty and repeat business, even during economic downturns. The Group believes we are strategic and provide high level bespoke services across the industry to a very high level and ensure all our staff are able to work with the best tools and training are available for their needs.

The Group has identified the upturn of AI in the industry could present a huge risk to the future of the industry, however the Group remains to be enhancing AI to work alongside our other bespoke services.

KEY PERFORMANCE INDICATORS

The Group consider that Turnover, Gross and Net Profit are the key performance indicators for showing both the Group's financial strength and performance. All of which have remained stable and have all exceeded expectation and industry standards.

The Group also considers staff growth and staff retention a performance indicator, of which, both have exceeded expectations and industry standards.

Other KPI's include setting growth targets over all media channels (Web visits, LinkedIn, Instagram etc) which have increased accordingly.

FUTURE DEVELOPMENTS

The Directors anticipate the business environment will remain competitive. The Directors believe that the Group is in a good financial position and that the risks that have been identified are being well managed. The Group remains focussed on obtaining new business and diversification of the current business, as well as enhancing AI and continuing review of the state of the market and the activities of competitors. All of this as well as maintaining core client relationships. The Group also intends to further grow the US and China Studios to continue to win and maintain clients in those territories.

FINANCIAL INSTRUMENTS

The group has a normal level of exposure to price, credit, liquidity and cash flow risks arising from the trading activities, with the foreign currency transactions being covered by suitable currency contracts to minimise exposure to exchange rate volatility. The group does not enter into any formally designated hedging arrangements.

The group assess the effectiveness of these instruments, their costs, and the impact on the agency's overall financial health. These instruments align with the agency's strategic objectives, including cash flow management and risk mitigation.

ON BEHALF OF THE BOARD:

S P Dives - Director

30 July 2026

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

PRINCIPAL ACTIVITY

The principal activity of the group in the year under review was that of a brand and design agency.

DIVIDENDS

Dividends of £2,146,042 (2024: £2,232,236 ) were paid during the financial year. The directors recommend that no final dividend be paid.

EVENTS SINCE THE END OF THE YEAR

On the 3rd of April 2026, P Drake and B Oates sold more than 50% of the shares in the parent company to the JDO Group Employee Ownership Trust, and there was no ultimate controlling party from that date.

DIRECTORS

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

P L Drake

B P Oates

S P Dives

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 ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS

The auditors, BSR Bespoke, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

S P Dives - Director

30 July 2026

Opinion

We have audited the financial statements of JDO Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 October 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 October 2025 and of the group's profit 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 four, 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:

We obtained a general understanding of the group's legal and regulatory framework through enquiry of management concerning their understanding of relevant laws and regulations, the group's policies and procedures regarding compliance, and how they identify, evaluate and account for litigation claims. We also drew on our existing understanding of the group's industry and regulation.

We understand that the group complies with the framework through:

- Outsourcing accounts preparation and tax compliance to external experts.

- Subscribing to relevant updates from external experts, and making changes to internal procedures and controls as necessary.

In the context of the audit we considered those laws and regulations which determine the form and content of the financial statements, which are central to the group's ability to conduct its business and where there is a risk that failure to comply could result in material penalties. We identified the following laws and regulations as being of significance in the context of the group:

- UK, US and Chinese taxation law

- UK, US and Chinese employment law

- The Companies Act 2006 and FRS 102 in respect of the preparation and presentation of the financial statements

The senior statutory auditor led a discussion with all members of the engagement team regarding the susceptibility of the entity's financial statements to material misstatement, including how fraud might occur. The areas identified in this discussion were:

- Manipulation of the financial statements, especially revenue recognition and deferred and accrued revenue via fraudulent journal entries or inappropriate estimates as a result of the incentive the reduce corporation tax liabilities.

The procedures we carried out to gain evidence in the above areas included:

- Challenging management regarding assumptions used in the estimates identified above, and comparison to underlying supporting data as appropriate.

- Substantive work on material areas affecting profit.

- Testing journal entries, focusing particularly on postings to unexpected or unusual accounts and those posted by unusual personnel.

Overall, the senior statutory auditor was satisfied that the engagement team collectively had the appropriate competence and capabilities to identify or recognise irregularities.

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.

Rachael Avon FCA CTA (Senior Statutory Auditor)

for and on behalf of BSR Bespoke

Chartered Accountants & Statutory Auditors

Linden House

Linden Close

Tunbridge Wells

Kent

TN4 8HH

30 July 2026

TURNOVER

4

14,571,078

14,691,224

Cost of sales

9,118,412

8,988,112

GROSS PROFIT

5,452,666

5,703,112

Administrative expenses

3,112,647

2,854,926

2,340,019

2,848,186

Other operating income

41,977

14,839

OPERATING PROFIT

6

2,381,996

2,863,025

Interest receivable and similar income

9,603

13,641

2,391,599

2,876,666

Interest payable and similar expenses

7

43,724

29,309

PROFIT BEFORE TAXATION

2,347,875

2,847,357

Tax on profit

8

699,335

796,906

PROFIT FOR THE FINANCIAL YEAR

1,648,540

2,050,451

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

1,648,540

2,050,451

Profit attributable to:

Owners of the parent

1,648,540

2,050,451

Total comprehensive income attributable to:

Owners of the parent

1,648,540

2,050,451

FIXED ASSETS

Tangible assets

11

146,740

223,412

Investments

12

2,268

2,268

149,008

225,680

CURRENT ASSETS

Debtors

13

4,653,469

5,210,521

Cash at bank and in hand

1,093,939

1,741,821

5,747,408

6,952,342

CREDITORS

Amounts falling due within one year

14

2,609,940

3,368,002

NET CURRENT ASSETS

3,137,468

3,584,340

TOTAL ASSETS LESS CURRENT LIABILITIES

3,286,476

3,810,020

PROVISIONS FOR LIABILITIES

16

80,000

80,000

NET ASSETS

3,206,476

3,730,020

CAPITAL AND RESERVES

Called up share capital

17

100

100

Capital redemption reserve

100

100

Retained earnings

3,206,276

3,729,820

SHAREHOLDERS' FUNDS

3,206,476

3,730,020

The financial statements were approved by the Board of Directors and authorised for issue on 30 July 2026 and were signed on its behalf by:

S P Dives - Director

FIXED ASSETS

Tangible assets

11

-

-

Investments

12

14,494

40,536

14,494

40,536

CURRENT ASSETS

Cash at bank

44,124

145,153

CREDITORS

Amounts falling due within one year

14

58,418

159,447

NET CURRENT LIABILITIES

(14,294

)

(14,294

)

TOTAL ASSETS LESS CURRENT LIABILITIES

200

26,242

CAPITAL AND RESERVES

Called up share capital

17

100

100

Capital redemption reserve

100

100

Retained earnings

-

26,042

SHAREHOLDERS' FUNDS

200

26,242

Company's profit for the financial year

2,146,042

2,232,236

The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the Board of Directors and authorised for issue on 30 July 2026 and were signed on its behalf by:

S P Dives - Director

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 November 2023

100

3,893,222

100

3,893,422

Changes in equity

Total comprehensive income

-

2,050,451

-

2,050,451

Dividends

-

(2,232,236

)

-

(2,232,236

)

Share option reserve movement

-

18,383

-

18,383

Balance at 31 October 2024

100

3,729,820

100

3,730,020

Changes in equity

Total comprehensive income

-

1,648,540

-

1,648,540

Dividends

-

(2,146,042

)

-

(2,146,042

)

Share option reserve movement

-

(26,042

)

-

(26,042

)

Balance at 31 October 2025

100

3,206,276

100

3,206,476

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 November 2023

100

-

100

200

Changes in equity

Total comprehensive income

-

2,232,236

-

2,232,236

Dividends

-

(2,232,236

)

-

(2,232,236

)

Share option reserve movement

-

26,042

-

26,042

Balance at 31 October 2024

100

26,042

100

26,242

Changes in equity

Total comprehensive income

-

2,146,042

-

2,146,042

Dividends

-

(2,146,042

)

-

(2,146,042

)

Share option reserve movement

-

(26,042

)

-

(26,042

)

Balance at 31 October 2025

100

-

100

200

Cash flows from operating activities

Cash generated from operations

1

2,600,380

2,438,604

Interest paid

(43,725

)

(29,309

)

Tax paid

(900,557

)

(400,754

)

Net cash from operating activities

1,656,098

2,008,541

Cash flows from investing activities

Purchase of tangible fixed assets

(65,000

)

(203,253

)

Interest received

9,603

13,641

Rents received

41,977

14,839

Net cash from investing activities

(13,420

)

(174,773

)

Cash flows from financing activities

Amount withdrawn by directors

(144,518

)

160,787

Equity dividends paid

(2,146,042

)

(2,232,236

)

Net cash from financing activities

(2,290,560

)

(2,071,449

)

Decrease in cash and cash equivalents

(647,882

)

(237,681

)

Cash and cash equivalents at beginning of year

2

1,741,821

1,979,502

Cash and cash equivalents at end of year

2

1,093,939

1,741,821

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

31.10.25

31.10.24

£

£

Profit before taxation

2,347,875

2,847,357

Depreciation charges

141,673

139,928

Share based payment charge

(26,042

)

18,382

Movement in provisions

-

63,262

Rental income

(41,977

)

(14,839

)

Finance costs

43,724

29,309

Finance income

(9,603

)

(13,641

)

2,455,650

3,069,758

Decrease/(increase) in trade and other debtors

557,052

(1,171,605

)

(Decrease)/increase in trade and other creditors

(412,322

)

540,451

Cash generated from operations

2,600,380

2,438,604

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 October 2025

31.10.25

1.11.24

£

£

Cash and cash equivalents

1,093,939

1,741,821

Year ended 31 October 2024

31.10.24

1.11.23

£

£

Cash and cash equivalents

1,741,821

1,979,502

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1.11.24

Cash flow

At 31.10.25

£

£

£

Net cash

Cash at bank and in hand

1,741,821

(647,882

)

1,093,939

1,741,821

(647,882

)

1,093,939

Total

1,741,821

(647,882

)

1,093,939

1.	STATUTORY INFORMATION

JDO Group Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the General Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

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.

Basis of consolidation

The consolidated financial statements present the results of the Company and its own subsidiaries (the "group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance Sheet, 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 control ceases.

The company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.

Turnover

Turnover is recognised when it is probable that future economic benefits will flow to the company from the provision of contracts for the sale of services and is measured as the fair value of consideration which the company expects to receive from those transactions. Turnover is recognised from the provision of services as the value of services provided is delivered to the customer.

When the outcome of a services contract can be estimated reliably, contract turnover and associated expenditure are recognised by reference to the stage of completion of the contract at the reporting date.

When the outcome of a services contract cannot be estimated reliably, contract turnover shall only be recognised to the extent of the amount of associated expenditure incurred and it is probable that the contract turnover will be recoverable.

Provision will be made for all losses arising from a services contract where it is probable that current and future contract expenditure exceeds contract turnover.

Turnover is recognised net of returns and of trade discounts and is shown exclusive of value added tax.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Short leasehold

-

in accordance with the lease term

Plant and machinery

-

25% on cost

Fixtures and fittings

-

25% on cost

Computer equipment

-

50% on cost

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the prevailing tax rates at the balance sheet date.

Leasing commitments

Rentals paid 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.

Debtors

Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, less any impairment.

Cash

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.

Creditors

Short-term creditors are measured at the transaction price. Other financial liabilities are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

Provisions for liabilities

Provisions are made where an event has taken place that gives the group a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to profit or loss in the year that the group becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet.

Fixed asset investments

Investments in unlisted shares are initially measured at transaction price and are subsequently measured at transaction price less accumulated impairment.

Financial instruments

The group only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors, trade creditors, loans from related parties and investments in ordinary shares.

Equity settled share-based payments

Group

The fair value of the current cost of share options granted to employees is recognised as an expense charged to profit or loss and the corresponding increase in equity is recorded within retained earnings.

The fair value of the options is determined at the date of grant and charged to profit or loss over the vesting period. The fair value is based upon the Black-Scholes model which is a widely-accepted model for the valuation of share options where there are no market conditions attached. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.

Upon the exercise of the share options a transfer is made from retained earnings to share capital within reserves.

Company

The current cost of options to purchase shares of the parent company granted to employees of subsidiary undertakings is recognised as a capital contribution within retained earnings, with a corresponding increase in the investment cost of the relevant subsidiary.

Upon the exercise of the share options a transfer is made from retained earnings to share capital within reserves.