REGISTERED NUMBER: 05842333 (England and Wales)

GROUP STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2025

FOR

FIRST NATURAL LIMITED

Page

Group Strategic Report

1

Report of the Directors

3

Report of the Independent Auditors

4

Consolidated Statement of Comprehensive Income

6

Consolidated Balance Sheet

7

Company Balance Sheet

8

Consolidated Statement of Changes in Equity

9

Company Statement of Changes in Equity

10

Consolidated Cash Flow Statement

11

Notes to the Consolidated Financial Statements

12

The directors present their strategic report of the company and the group for the year ended 30 April 2025.

REVIEW OF BUSINESS

During the year, net sales have decreased by 17.3% to £6.4 million (2024: £7.8 million) following the material impacts of the cost of living crisis. The group does not expect a return to stability until April 2027 as the global macroeconomic position remains uncertain.

The group's main customers remain high quality UK retailers including Holland & Barrett, Boots, Waitrose and Amazon. The group sells products under its own Tisserand brand and also undertakes contract manufacturing work for selected retailers.

The group operates in the natural health and wellbeing market and remains one of the leading operators in the essential oil market. The group blends, bottles and undertakes product development work to provide natural wellbeing solutions for everyday problems such as sleep and stress. During the year, the group bottled over 3 million products and retains capacity to bottle over 10 million units.

During the year, the group exited product areas with externally made product in the home care sectors and exited low gross margin volume business in the US and UK. Performance at other customers remained broadly flat despite the material turbulent external events impacting high street stores and consumers moving to lower priced and lower margin private label brands.

The group was materially impacted during the year by one of its customers destocking without any communication leading to significant loss in the period as well as a cash flow squeeze. The Directors counteracted this with significant shareholder support and a cost reduction strategy to reduce overheads by over £1m over the long term as well as exiting over £1million of low margin, high working capital business with this customer.

Distribution and logistics costs were negatively impacted with transport costs increasing materially through the year and a fixed logistics cost which was under-utilised against the demand, as well as material excess storage charges, as commitments were forced onto the company ahead of the demand.

Overhead investment continues as the group operates under multiple globally accredited quality standards including ISO 9001, ISO 22716 and ISO 14001. The group believes achievement of these accreditations will support its position as a key supplier to UK retailers.

EBITDA has reduced to a loss of £0.17 million (2024: loss £0.24 million restated) with EBITDA margins similarly reducing to -2.6% (2024: -3.0% restated).

Key Performance indicators

KPIs

2025

2024

As restated

£

£

Sales

6,441,810

7,788,799

Cost of sales

(3,838,146

)

(5,341,922

)

Gross margin

2,603,664

2,446,877

GP%

40.4%

31.4%

Operating (loss)/profit

(528,427

)

(655,591

)

Add back: Share based payments

-

-

Add back: Depreciation

93,197

103,233

Add back: Amortisation

268,824

314,881

Add back: Exceptional costs

-

-

Less: Exceptional income

-

-

EBITDA

(166,406

)

(237,477

)

EBITDA Margin

(2.6%

)

(3.0%

)

PRINCIPAL RISKS AND UNCERTAINTIES

The group is exposed to the following principal risks and uncertainties:

Market and economic uncertainties

The group's trade can be impacted by periods of economic uncertainty over an extended period of time and their impact may be unknown. Factors beyond the company's control, including geopolitical issues would impact the group and a significant deterioration in the general economic climate may further adversely affect the group's performance. The group manages these risks in numerous ways: review of supply chains; presence in different distribution channels, especially online sales; and highly responsive teams, all contribute to its ability to face economic uncertainties.

Financial instruments

The group has bank loans and invoice discounting facilities which expose it to loss from changes in prevailing interest rates, increasing debt service costs and further straining cash flow.

Credit risk

The group is vulnerable to customer non-payment or late payment on goods sold on trade credit terms, which is exacerbated by concentration risk so that one customer's insolvency or extended payment delay could materially damage cash flow. This is mitigated by factoring receivables, tightening payment terms for weaker accounts, and monitoring customer concentration limit.

FUTURE DEVELOPMENTS

Following the end of the financial year the group has renewed its banking facilities and has extended the maturity of its principal loan to November 2027.

ON BEHALF OF THE BOARD:

R C Russell - Director

4 November 2026

The directors present their report with the financial statements of the company and the group for the year ended 30 April 2025.

DIVIDENDS

No dividends will be distributed for the year ended 30 April 2025.

EVENTS SINCE THE END OF THE YEAR

Information relating to events since the end of the year is given in the notes to the financial statements.

DIRECTORS

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

R C Russell

S Shah

M R Palmer resigned as a director on 1 July 2024.

QUALIFYING THIRD PARTY INDEMNITY PROVISIONS

The directors benefit from a qualifying indemnity provision in the form permitted by Section 234 of the Companies Act 2006 in respect of certain third party actions against the directors. No claim or notice of claim in respect of these indemnities has been received in the year. The qualifying indemnity provision was in force throughout the financial year and up to the date of approval of the Directors' 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:

R C Russell - Director

4 November 2026

Opinion

We have audited the financial statements of First Natural Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 April 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 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 30 April 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.

Material uncertainty related to going concern

We draw attention to the Going Concern paragraph in Note 2 of the financial statements, which states that the group is reliant on the continued support of its bank and has breached its covenants. The bank has extended the maturity of its principal loan to November 2027, without waiving its covenants. Due to the reliance on bank support a material uncertainty exists that may cast significant doubt on whether the group will continue as a going concern for the foreseeable future. Our opinion is not modified in respect of this matter.

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.

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 considered the risk 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. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls). Audit procedures performed included:

- Enquiring of management whether there were instances of non-compliance with laws and regulation or fraud;

- Review of legal expenses for evidence of fees relating to non-compliance;

- Review of accounting records to identify related party transactions;

- Review of non-routine journal entries, non-sales bank receipts and non-purchase bank payments for unusual accounting entries; and

- Substantive revenue testing to confirm occurrence of revenue and ensure that it is recognised in the correct period.

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.

Christian Heeger BSc BFP FCA (Senior Statutory Auditor)

for and on behalf of Galloways Accounting

Statutory Auditors

15 West Street

Brighton

East Sussex

BN1 2RL

4 November 2026

TURNOVER

3

6,441,810

7,788,799

Cost of sales

(3,838,146

)

(5,341,922

)

GROSS PROFIT

2,603,664

2,446,877

Distribution costs

-

(13,724

)

Administrative expenses

(3,150,240

)

(3,088,744

)

(546,576

)

(655,591

)

Other operating income

18,149

-

OPERATING LOSS

5

(528,427

)

(655,591

)

Interest payable and similar expenses

6

(506,249

)

(501,272

)

LOSS BEFORE TAXATION

(1,034,676

)

(1,156,863

)

Tax on loss

7

(372,884

)

200,000

LOSS FOR THE FINANCIAL YEAR

(1,407,560

)

(956,863

)

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(1,407,560

)

(956,863

)

Prior year adjustment

9

22,606

TOTAL COMPREHENSIVE INCOME SINCE LAST ANNUAL REPORT

(1,384,954

)

Loss attributable to:

Owners of the parent

(1,407,560

)

(956,863

)

Total comprehensive income attributable to:

Owners of the parent

(1,384,954

)

(956,863

)

FIXED ASSETS

Intangible assets

10

750,726

861,175

Tangible assets

11

272,083

352,889

Investments

12

-

-

1,022,809

1,214,064

CURRENT ASSETS

Stocks

13

1,303,756

1,683,489

Debtors

14

1,394,355

2,475,067

Cash at bank and in hand

235,882

230,989

2,933,993

4,389,545

CREDITORS

Amounts falling due within one year

15

5,414,130

5,282,726

NET CURRENT LIABILITIES

(2,480,137

)

(893,181

)

TOTAL ASSETS LESS CURRENT LIABILITIES

(1,457,328

)

320,883

CREDITORS

Amounts falling due after more than one year

16

-

531,364

NET LIABILITIES

(1,457,328

)

(210,481

)

CAPITAL AND RESERVES

Called up share capital

20

118,188

94,554

Share premium

2,496,393

2,359,314

Other reserves

76,580

76,580

Retained earnings

(4,148,489

)

(2,740,929

)

SHAREHOLDERS' FUNDS

(1,457,328

)

(210,481

)

The financial statements were approved by the Board of Directors and authorised for issue on 4 November 2026 and were signed on its behalf by:

R C Russell - Director

FIXED ASSETS

Intangible assets

10

60,855

78,765

Tangible assets

11

-

-

Investments

12

500,000

1,465,206

560,855

1,543,971

CURRENT ASSETS

Debtors

14

1,017

668,583

Cash at bank

98,896

53,639

99,913

722,222

CREDITORS

Amounts falling due within one year

15

807,039

166,326

NET CURRENT (LIABILITIES)/ASSETS

(707,126

)

555,896

TOTAL ASSETS LESS CURRENT LIABILITIES

(146,271

)

2,099,867

CREDITORS

Amounts falling due after more than one year

16

-

530,536

NET (LIABILITIES)/ASSETS

(146,271

)

1,569,331

CAPITAL AND RESERVES

Called up share capital

20

118,188

94,554

Share premium

2,496,393

2,359,314

Other reserves

115,715

115,715

Retained earnings

(2,876,567

)

(1,000,252

)

SHAREHOLDERS' FUNDS

(146,271

)

1,569,331

Company's (loss)/profit for the financial year

(1,876,315

)

62,890

The financial statements were approved by the Board of Directors and authorised for issue on 4 November 2026 and were signed on its behalf by:

R C Russell - Director

Called up

share

Retained

Share

Other

Total

capital

earnings

premium

reserves

equity

£

£

£

£

£

Balance at 1 May 2023

32,950

(1,784,066

)

1,928,086

76,580

253,550

Changes in equity

Deficit for the year

-

(979,469

)

-

-

(979,469

)

Total comprehensive income

-

(979,469

)

-

-

(979,469

)

Issue of share capital

61,604

-

431,228

-

492,832

Balance at 30 April 2024

94,554

(2,763,535

)

2,359,314

76,580

(233,087

)

Prior year adjustment

-

22,606

-

-

22,606

As restated

94,554

(2,740,929

)

2,359,314

76,580

(210,481

)

Changes in equity

Deficit for the year

-

(1,407,560

)

-

-

(1,407,560

)

Total comprehensive income

-

(1,407,560

)

-

-

(1,407,560

)

Issue of share capital

23,634

-

137,079

-

160,713

Balance at 30 April 2025

118,188

(4,148,489

)

2,496,393

76,580

(1,457,328

)

Called up

share

Retained

Share

Other

Total

capital

earnings

premium

reserves

equity

£

£

£

£

£

Balance at 1 May 2023

32,950

(1,063,142

)

1,928,086

115,715

1,013,609

Changes in equity

Profit for the year

-

62,890

-

-

62,890

Total comprehensive income

-

62,890

-

-

62,890

Issue of share capital

61,604

-

431,228

-

492,832

Balance at 30 April 2024

94,554

(1,000,252

)

2,359,314

115,715

1,569,331

Changes in equity

Deficit for the year

-

(1,876,315

)

-

-

(1,876,315

)

Total comprehensive income

-

(1,876,315

)

-

-

(1,876,315

)

Issue of share capital

23,634

-

137,079

-

160,713

Balance at 30 April 2025

118,188

(2,876,567

)

2,496,393

115,715

(146,271

)

Cash flows from operating activities

Cash generated from operations

24

805,702

(119,644

)

Interest paid

(9,135

)

-

Net cash from operating activities

796,567

(119,644

)

Cash flows from investing activities

Purchase of intangible fixed assets

(161,341

)

(232,511

)

Purchase of tangible fixed assets

(15,392

)

(21,077

)

Sale of tangible fixed assets

-

750

Net cash from investing activities

(176,733

)

(252,838

)

Cash flows from financing activities

Proceeds from new loans

918,003

414,485

Capital repayments on loans

(716,614

)

(140,997

)

Invoice discounting facility

(466,942

)

142,396

Repayment of finance lease obligations

(12,987

)

(9,528

)

Proceeds from issue of shares

160,713

492,833

Interest paid

(497,114

)

(501,272

)

Net cash from financing activities

(614,941

)

397,917

Increase in cash and cash equivalents

4,893

25,435

Cash and cash equivalents at beginning of year

25

230,989

205,554

Cash and cash equivalents at end of year

25

235,882

230,989

1.	COMPANY INFORMATION

First Natural Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address are as below:

Registered number:

05842333

Registered office:

Millennium House

Unit 2, King Business Centre

Reeds Lane, Sayers Common

Hassocks

West Sussex

BN6 9LS

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.

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 the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".

-

the requirements of Section 7 Statement of Cash Flows

-

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

-

the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);

-

the requirements of Section 33 Related Party Disclosures paragraph 33.7.

Going concern

These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the directors are aware of material uncertainties which may cast significant doubt on the group's ability to continue as a going concern, as set out in the following paragraph.

Presently the group is in breach of its renegotiated loan covenants with regards to amounts owing to its bankers, Santander plc, who have continued to support the group through the extension and renewal of its loan facilities to November 2027, though they have not waived the covenant breaches. The group is dependent upon the continuing support of its bankers.

The directors have reviewed the ongoing cash flows of the business without the benefits of the increased consumer marketing and no new customers or new products and the group continues to operate. The directors have therefore formed a judgement that at the time of the approving of these financial statements there is a reasonable expectation that the group has sufficient financial resources to operate for the foreseeable future and for at least 12 months from the date of this report. The group had cash balances of £235,882 and undrawn facilities of £121,245 at the year end.

The group made a pre-tax loss in the year of £1.0 million. The directors have initiated a cost reduction plan to reduce overheads by over £1m in the next 12 months and have converted over £500,000 of shareholder debt to preference shares.

The directors therefore consider it appropriate to prepare the financial statements on a going concern basis.

Basis of consolidation

The group consolidated financial statements include the financial statements of the company and its subsidiary undertaking.

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

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

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

Revenue is measured at the fair value of the consideration received or receivable and represents the amount receivable for goods supplied or services rendered, net of returns, discounts and rebates allowed by the group and value added taxes.

i. Sale of goods - wholesale

The group produces and sells a range of essential oils and personal care products in the wholesale market.

Sales of goods are recognised on delivery to the wholesaler, when the wholesaler has full discretion over the channel and price to sell the product and there is no unfulfilled obligation that could affect the wholesaler's acceptance of the product. Delivery occurs when the goods have been shipped to the location specified by the wholesaler, the risks of obsolescence or loss have been transferred to the wholesaler, the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or the group has objective evidence that all criteria for acceptance have been satisfied.

Goods sold to wholesalers are sometimes sold with volume rebates. Sales are measured net of estimated volume rebates and returns.

ii. Sale of goods - internet based transactions

The group sells goods via its website for delivery to the customer. Revenue is recognised when the risks and rewards of the stock is passed to the customer. For deliveries to the customer this is the point of acceptance of the goods by the customer. Transactions are settled by credit or payment card.

Provision is made for credit notes.

Intangible assets

Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated, using the straight-line method, to allocate the depreciable amount of the assets to their residual values over their estimated useful lives, as follows:

Intellectual property

20 years

Patents and licences

2-5 years

Development costs

10 years

Tangible fixed assets

Tangible assets are stated at cost (or deemed cost) less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use, dismantling and restoration costs.

Depreciation on tangible assets is calculated, using the straight-line method, to allocate the depreciable amount to their residual values over their estimated useful lives, as follows:

Leasehold improvements

over the lease term

Plant and equipment

7 - 10 years

Fixtures and fittings

5 - 10 years

Computer equipment

5 - 10 years

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Stocks are recognised as an expense in the period in which the related revenue is recognised.

Cost is determined on the first-in, first-out (FIFO) method. Cost includes the purchase price, including taxes and duties and transport and handling directly attributable to bringing the stock to its present location and condition.

At the end of each reporting period stocks are assessed for impairment. If an item of stock is impaired, the identified stock is reduced to its selling price less costs to complete and sell and an impairment charge is recognised in the profit and loss account. Where a reversal of the impairment is recognised the impairment charge is reversed, up to the original impairment loss, and is recognised as a credit in the profit and loss account.

Financial instruments

i. Financial assets

Basic financial assets, including trade and other receivables, cash and bank balances and investments in commercial paper, 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.

At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

ii. Financial liabilities

Basic financial liabilities, including trade and other payables, bank loans, loans from fellow group companies and preference shares that are classified as debt, 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 receipts discounted at a market rate of interest.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down.

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 tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Research and development

In the research phase of an internal project, it is not possible to demonstrate that the project will generate future economic benefits and, hence, all expenditure on research is recognised as an expense when it is incurred.

Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits, and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight line basis over their useful economic lives.

If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.

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.