REGISTERED NUMBER: 09229918 (England and Wales)

Group Strategic Report,

Report of the Directors and

Consolidated Financial Statements

for the Year Ended

31 December 2025

for

Optix (Group) Limited

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

5

Report of the Independent Auditors

7

Consolidated Profit and Loss Account

10

Consolidated Balance Sheet

11

Company Balance Sheet

12

Consolidated Statement of Changes in Equity

13

Company Statement of Changes in Equity

14

Consolidated Cash Flow Statement

15

Notes to the Consolidated Financial Statements

16

DIRECTORS:

L P Atkinson

J Reichling

REGISTERED OFFICE:

Poppleton House

Rose Avenue

Nether Poppleton

York

YO26 6RU

REGISTERED NUMBER:

09229918 (England and Wales)

AUDITORS:

Kirk Newsholme

Chartered Accountants and Statutory Auditors

4315 Park Approach

Thorpe Park

Leeds

West Yorkshire

LS15 8GB

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

REVIEW OF BUSINESS

The group is engaged in the development of business management software for high street opticians, primarily within the UK. The group licenses software to customers under a monthly recurring revenue model as part of a wider Software as a Service (SaaS) strategy, together with the provision of related goods and services.

The group continues to focus on long-term product development and innovation within the optical sector. During 2025, the business continued work on several significant concurrent software development projects aimed at enhancing the functionality, scalability and long-term competitiveness of the company's platform. Alongside these projects, the group also delivered several updates and improvements to its existing product suite to support its growing customer base.

Turnover for the year increased to £9,134,894 (2024 - £8,130,960), reflecting continued growth in the group's recurring software revenue and services. The group reported a loss before tax of £357,623 (2024 - profit £223,883).

Throughout the financial year, the group pursued an ambitious growth strategy, expanding its development and operational teams to support that roadmap, which resulted in a planned increase in operational expenditure. The group has pivoted to a more streamlined operating model post balance sheet date, following the completion of certain development initiatives. These actions optimize our cost base and align team structure with our revised strategic priorities, driving improved operational efficiencies.

Alongside this scaling, the group made targeted one-off investments in long-term product strategy consultancy and participation in sector conferences to strengthen market position. Despite the loss reported, the group maintains strong cash balances and controlled cash flows. The directors are confident that the investment made during the year will support new product capabilities, enhanced returns in future periods and improved operational efficiencies.

Key performance indicators

Note

2025

2024

Return on capital employed %

1

(8.1%)

2%

Gross margin %

2

71.5%

74.3%

EBITDA

3

£462,067

£762,833

Annualised turnover growth

4

12.3%

1.5%

Notes to KPI's

1. Return on capital employed = Operating profit as a percentage of shareholder's funds

The group aims to increase shareholder value in the long term and measures performance against this objective by measuring ROCE. Equally the business will actively invest which may reduce ROCE in the short term with a view to maximise ROCE in the longer term. Source data is taken from the audited financial statements.

2. Gross Margin = Gross profit as a percentage of turnover.

The group aims to maximise profit available for distribution to shareholders as measured by Gross Margin. Source data is taken from the audited financial statements and detailed trading account.

Notes to KPI's continued

3. EBITDA = Earnings before interest, tax, depreciation, asset disposals and amortisation.

The group aims to maximise underlying profitability and efficiency and uses EBITDA to measure this. However, the group will actively invest and accept lower levels of profitability in the short term in order to maximise EBITDA in the longer term. Source data is taken from the audited financial statements.

4. Annualised turnover growth = the annual increase in turnover as a percentage of turnover from the prior year.

The group aims to increase shareholder value through growth in revenue, linked to profitability (see gross margin above). Source data is taken from the audited financial statements.

PRINCIPAL RISKS AND UNCERTAINTIES

The board is aware of its obligations to review, manage and mitigate the risks faced by the group on a regular basis.

The principal risks are considered to be as follows:

Increasingly difficult labour market conditions

The group is exposed to the continued volatility of the labour market especially in the area of IT resource. With the increased trend towards home working, high salary demands and noticeable reductions in staff loyalty, this will remain an area that requires significant management time at least in the short term.

Major customer loss

The market for the providing software to Opticians remains competitive. The group seeks to manage the risk of losing customers to key competitors by the continual provision of new innovative software enhancements to all customers, providing the highest levels of customer service and by maintaining strong relationships and senior representation with key customers.

Cyber security and Data management

The potential of cyber security attacks are key risks for any organisation and especially for our business given the services we routinely provide to customers. This group has ISO27001 accreditation and continues to maintain and review its security measures regularly both internally and also with key IT partners.

As the group operates in relatively small markets any damage to, or loss of reputation could be a major concern. Rigorous management attention and quality control procedures are in place to maximise right first time and on time delivery. Responsibility is taken for ensuring swift remedial action on any snags and complaints.

Operational risk

Solid reporting systems and accurate and timely management information is reviewed by the directors monthly.

Financial instruments

The group's operations expose it to a variety of financial risks including credit risk and liquidity risk.

The group does not have material exposure in any of the areas identified above and, consequently does not use derivative instruments to measure these exposures.

The group's principal financial instruments comprise sterling cash and bank deposits together with trade debtors and trade creditors that arise directly from operations.

The main risks arising from the group's financial instruments can be analysed as follows:

PRINCIPAL RISKS AND UNCERTAINTIES FACING THE COMPANY continued

Credit risk

The group's principal financial assets are bank balances, cash and trade debtors, which represent the group's maximum exposure to credit risk in relation to financial assets.

The group's credit risk is primarily attributable to its trade debtors. Credit risk is mitigated in that almost all customers pay regular monthly invoices by direct debit with no true credit terms being offered. The amounts presented in the balance sheet are net of allowance for doubtful debts, estimated by the group's management based on prior experience and their assessment of the current economic environment.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

Liquidity risk

The group's policy has been to ensure continuity of funding through maintaining funding for operations through its bank balances.

Cash flow interest rate risk

Interest rate bearing assets comprise cash and bank deposits, all of which earn interest at a fixed rate.

ON BEHALF OF THE BOARD:

L P Atkinson - Director

24 April 2026

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

PRINCIPAL ACTIVITIES

The principal activities of the group in the year under review were those of sales, marketing and support of the software product known as Optix, a sophisticated business management software application for high street opticians, other software development specifically for opticians and the provision of a direct debit collection bureau service.

DIVIDENDS

The company has paid interim dividends on the Ordinary shares of nil (2024 - £1,119,556) during the year ended 31 December 2025.

The director recommends that no final dividend be paid.

DIRECTORS

The directors who have held office during the period from 1 January 2025 to the date of this report are as follows:

T A Rowley - resigned 20 August 2025

A J Harrison - resigned 20 August 2025

L P Atkinson - appointed 20 August 2025

J Reichling - appointed 20 August 2025

The company has made qualifying third party provisions for the benefit of its directors and officers.

MATTERS COVERED IN THE STRATEGIC REPORT

As permitted by Section 414c(11) of the Companies Act 2006, the directors have elected to disclose information required to be in the directors' report by Schedule 7 of the 'Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008', in the Strategic 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 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.

ON BEHALF OF THE BOARD:

L P Atkinson - Director

24 April 2026

Opinion

We have audited the financial statements of Optix (Group) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2025 which comprise the Consolidated Profit and Loss Account, 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 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 December 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 five, 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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. 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. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.

The extent to which the audit was considered capable of detecting irregularities including fraud

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

-

The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;

-

We identified the laws and regulations applicable to the group through discussions with directors and other management, and from our commercial knowledge and sector experience;

-

We focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the group, including the Companies Act 2006 and taxation legislation. The group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on the financial statements, for instance through the imposition of fines, penalties or litigation such as data protection, health and safety and employment legislation;

-

We assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and

-

Identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.

We assessed the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

-

Making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and

To address the risk of fraud through management bias and override of controls, we:

-

Performed analytical procedures to identify any unusual or unexpected relationships;

-

Tested journal entries to identify unusual transactions;

-

Assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and

-

Investigated the rationale behind any significant or unusual transactions.

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

-

Agreeing financial statement disclosures to underlying supporting documentation;

-

Enquiring of management as to actual and potential litigation and claims;

-

Reviewing correspondence with HMRC and relevant regulators websites for notice of any breaches; and

-

Review of relevant legal or professional costs within the accounting records for any evidence of previously un-detected or un-reported instances of non-compliance.

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

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.

Thomas Upton BA ACA (Senior Statutory Auditor)

for and on behalf of Kirk Newsholme

Chartered Accountants and Statutory Auditors

4315 Park Approach

Thorpe Park

Leeds

West Yorkshire

LS15 8GB

24 April 2026

TURNOVER

3

9,134,894

8,130,960

Cost of sales

2,606,155

2,092,699

GROSS PROFIT

6,528,739

6,038,261

Administrative expenses

6,993,162

5,943,817

(464,423

)

94,444

Other operating income

4

77,788

6,000

OPERATING (LOSS)/PROFIT

6

(386,635

)

100,444

Interest receivable and similar income

7

29,185

124,236

(357,450

)

224,680

Interest payable and similar expenses

8

173

797

(LOSS)/PROFIT BEFORE TAXATION

(357,623

)

223,883

Tax on (loss)/profit

9

(366

)

8,007

(LOSS)/PROFIT FOR THE FINANCIAL YEAR

(357,257

)

215,876

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(357,257

)

215,876

(Loss)/profit attributable to:

Owners of the parent

(357,257

)

215,876

Total comprehensive income attributable to:

Owners of the parent

(357,257

)

215,876

FIXED ASSETS

Intangible assets

12

3,252,801

3,589,743

Tangible assets

13

1,611,294

1,366,486

Investments

14

-

-

4,864,095

4,956,229

CURRENT ASSETS

Stocks

15

11,764

11,964

Debtors

16

1,463,652

1,566,574

Cash at bank

1,240,588

1,064,502

2,716,004

2,643,040

CREDITORS

Amounts falling due within one year

17

2,594,389

2,266,074

NET CURRENT ASSETS

121,615

376,966

TOTAL ASSETS LESS CURRENT LIABILITIES

4,985,710

5,333,195

PROVISIONS FOR LIABILITIES

19

222,623

212,851

NET ASSETS

4,763,087

5,120,344

CAPITAL AND RESERVES

Called up share capital

20

1,200

1,200

Other reserves

21

900

900

Retained earnings

21

4,760,987

5,118,244

SHAREHOLDERS' FUNDS

4,763,087

5,120,344

The financial statements were approved by the Board of Directors and authorised for issue on 24 April 2026 and were signed on its behalf by:

L P Atkinson - Director

FIXED ASSETS

Intangible assets

12

1,343,770

1,468,770

Tangible assets

13

-

-

Investments

14

2,144,978

2,145,078

3,488,748

3,613,848

CURRENT ASSETS

Debtors

16

104,414

496,135

Cash at bank

19,911

1,614

124,325

497,749

CREDITORS

Amounts falling due within one year

17

1,691,543

3,337,676

NET CURRENT LIABILITIES

(1,567,218

)

(2,839,927

)

TOTAL ASSETS LESS CURRENT LIABILITIES

1,921,530

773,921

CAPITAL AND RESERVES

Called up share capital

20

1,200

1,200

Retained earnings

21

1,920,330

772,721

SHAREHOLDERS' FUNDS

1,921,530

773,921

Company's profit for the financial year

1,147,609

1,037,125

The financial statements were approved by the Board of Directors and authorised for issue on 24 April 2026 and were signed on its behalf by:

L P Atkinson - Director

Called up

share

Retained

Other

Total

capital

earnings

reserves

equity

£

£

£

£

Balance at 1 January 2024

1,200

6,021,924

900

6,024,024

Changes in equity

Dividends

-

(1,119,556

)

-

(1,119,556

)

Total comprehensive income

-

215,876

-

215,876

Balance at 31 December 2024

1,200

5,118,244

900

5,120,344

Changes in equity

Total comprehensive income

-

(357,257

)

-

(357,257

)

Balance at 31 December 2025

1,200

4,760,987

900

4,763,087

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2024

1,200

855,152

856,352

Changes in equity

Dividends

-

(1,119,556

)

(1,119,556

)

Total comprehensive income

-

1,037,125

1,037,125

Balance at 31 December 2024

1,200

772,721

773,921

Changes in equity

Total comprehensive income

-

1,147,609

1,147,609

Balance at 31 December 2025

1,200

1,920,330

1,921,530

Cash flows from operating activities

Cash generated from operations

26

1,022,845

2,343,795

Interest paid

(173

)

(797

)

Tax paid

(118,473

)

(437,860

)

Net cash from operating activities

904,199

1,905,138

Cash flows from investing activities

Purchase of tangible fixed assets

(757,298

)

(99,472

)

Purchase of subsidiary (Note 29)

-

(1,723,107

)

Interest received

29,185

124,236

Net cash from investing activities

(728,113

)

(1,698,343

)

Cash flows from financing activities

Equity dividends paid

-

(1,119,556

)

Net cash from financing activities

-

(1,119,556

)

Increase/(decrease) in cash and cash equivalents

176,086

(912,761

)

Cash and cash equivalents at beginning of year

27

1,064,502

1,977,263

Cash and cash equivalents at end of year

27

1,240,588

1,064,502

1.	STATUTORY INFORMATION

Optix (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.

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.

The functional and presentational currency of the company is considered to be pounds sterling.

Financial Reporting Standard 102 - reduced disclosure exemptions

The parent company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".

-

the requirements of Section 7 Statement of Cash Flows;

-

the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d);

-

the requirements of Section 11 Financial Instruments paragraphs 11.39 to 11.48A;

-

the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.29;

-

the requirement of Section 33 Related Party Disclosures paragraph 33.7.

Basis of consolidation

The group financial statements consolidate the financial statements of the company and its subsidiary undertakings drawn up to 31 December each year.

Where necessary adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations in the form of group reconstructions are accounted for using merger accounting. Acquisitions are accounted for under the purchase method. The cost of the acquisition includes the estimated amount of consideration that is expected to be paid contingent on future events and that can be measured reliably, and is subsequently adjusted for changes in expectations regarding sums payable after the acquisition date.

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 represents net invoiced sales of goods and services supplied, excluding value added tax.

Revenue from the sale of goods is recognised when the significant risks and benefits of ownership of the product have transferred to the buyer, which is upon shipment.

Revenue from the sale of services is recognised on the supply of the service to the customer. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of creditors due within one year.

Agency commissions in respect of direct debit collection services are recognised on receipt of the transactions.

Client monies

The group acts as an agent in providing a direct debit collection bureau service.

The group has therefore followed generally accepted accounting practice, whereby assets and liabilities may not be offset unless net settlement is legally enforceable. As such creditors and cash balances relating to the agent services undertaken by the company are shown gross as assets and liabilities of the company itself.

Intangible assets - goodwill

Goodwill arising on the acquisition of subsidiary undertakings, representing any excess of fair value of the consideration given over the fair value of the identifiable assets, liabilities and contingent liabilities acquired. This is being amortised over the estimated useful life of 10 years.

Intangible assets - other

Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses, unless the residual value of the asset is equal to its net book value.

Intellectual property rights

20 years

Where factors, such as technological advancement or changes in market price, indicate that residual value or useful life have changed, the residual value, useful life or amortisation rate are amended prospectively to reflect the new circumstances.

The assets are reviewed for impairment if the above factors indicate that the carrying amount may be impaired.

Tangible fixed assets

Tangible fixed assets are stated at purchase cost together with any incidental expenses of acquisition, net of depreciation and any provision for impairment. Depreciation is provided on all tangible assets at rates calculated to write off the cost less estimated residual value of each asset on a straight line basis over its expected useful life.

Fixtures and fittings

15% on cost

Computer equipment

20% - 33% on cost

Leasehold improvements

10% on cost

Residual value represents the estimated amount which would currently be obtained from disposal of an asset after deducting estimated costs of disposal, if the asset were already at an age and in the condition expected at the end of its estimated useful life.

The need for any fixed asset impairment write down is assessed by comparison of the carrying value of the assets against the higher realisable value and value in use.

The gain or loss arising on the disposal of an asset is determined on the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

Investments

Investments held in subsidiaries are measured at cost less impairment.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to sell, which is equivalent to the net realisable value. Cost includes materials based on actual purchase prices. Provision is made for obsolete, slow-moving or defective items where appropriate.

Taxation

Current tax, including UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to the reversal of the timing difference.

Research and development

Expenditure on research and development is written off in the year in which it is incurred.

Retirement benefits

The group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the company. The annual contributions payable are charged to the profit and loss account.

Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense.

Where material, the cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination payments.

Lease commitments

Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such basis.

Government grants

Government grants are recognised based on the accrual model and are measured at the fair value of the asset received or receivable. Grants are classified as relating either to revenue or to assets. Grants relating to revenue are recognised in income over the period in which the related costs are recognised. Grants relating to assets are recognised over the expected useful life of the asset. Where part of a grant relating to an asset is deferred, it is recognised as deferred income.

Dividends

Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders. Dividends receivable from subsidiaries are recognised when declared.

Financial instruments

Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the instrument.

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

All financial assets and liabilities are initially measured at transaction price (including transaction costs). If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

The following assets and liabilities are classified as basic financial instruments - trade debtors, other debtors, cash and bank balances, trade creditors, other creditors, directors current account, accruals and deferred income and inter-company balances are measured at the amortised cost equivalent to the undiscounted amount of cash or other consideration expected to be paid or received.

Impairment of assets

Assets are assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognised in profit and loss as described below.

Non financial assets

An asset is impaired when there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.

Financial assets

For financial assets carried at cost less impairment, the impairment loss is the difference between the asset's carrying amount and the best estimate of the amount that would be received for the asset if it were sold at the reporting date.

Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had the impairment loss not been recognised.

Critical accounting judgements and sources of estimation uncertainty.

In the application of the group's accounting policies, management is required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

The critical judgements that the directors have made in applying the group's accounting policies and the key sources of estimation uncertainty that have had the most significant effect on the amounts recognised in the financial statements are described below:

Useful economic lives of assets

The annual depreciation and amortisation charge for tangible and intangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets.

Contingent consideration

In respect of the group's acquisition, for the previous period, the directors have reviewed the customer base of the acquired company for the relevant period in order to determine their best estimate of the conversion measures that will likely trigger the payment of elements of the contingent consideration, which is factored into the cost of acquisition.