Notes to the Company Financial Statements continued

For the year ended 31 March 2023

C. Significant accounting policies continued Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

Share based payments

Options over shares held by the Employee Benefit Trust

The Company operates a share based payment compensation plan, under which the entity received services from employees as consideration for equity instruments (options) of the Company. In the prior year, the options were expected to be equity-settled. Therefore, the fair value of the employee service received in exchange for the grant of the options was recognised as an expense over the vesting period, with the impact of any subsequent revisions to original estimates recognised in the consolidated statement of comprehensive income and a corresponding adjustment to equity. However, it is the Directors’ expectation that in future all such options will be cash-settled and such options, which have all vested, are now measured at fair value at the balance sheet date. The Company recognises a liability at the balance sheet date based on these fair values and changes in the value of this liability are recognised in the consolidated statement of comprehensive income. The social security contributions payable in connection with the grant of options is considered an integral part of the grant itself and, therefore, the charge is treated as a cash-settled transaction.

Options over shares issued in accordance with the Company’s incentive schemes

The Company operates a share based payment compensation plan, under which the entity received services from employees as consideration for equity instruments (options) of the Company. Given that it is the Directors’ intention that such options will be settled in the form of cash, the options are accounted for as cash-settled and such options are measured at fair value at the balance sheet date. The Company recognises a liability at the balance sheet date based on these fair values, taking into account the estimated number of options that will actually vest and the current proportion of the vesting period. Changes in the value of this liability are recognised in the consolidated statement of comprehensive income. The social security contributions payable in connection with the grant of options is considered an integral part of the grant itself, and the charge is treated as a cash-settled transaction.

Pension costs

The Company makes payments for each employee to a defined contribution scheme or a scheme of their choice. The assets of the defined contribution scheme are held separately from the Company in independently administered funds. Contributions made by the Company are charged to the profit and loss account in the year to which they relate.

Management incentive plan

The Company operates a management incentive plan for all employees. Before any payment to a participant becomes due, the Company must first have returned the aggregate capital raised from shareholders, together with a compounded hurdle rate of 8% per annum. At the point at which the hurdle rate has been exceeded, a provision is included for the unrealised gain due to participants. The provision is measured by reference to consolidated net assets and the capital returned to shareholders to date, with movements in the provision charged/credited to the profit and loss account.

Operating leases

Lease payments are expensed in the profit and loss account on a straight-line basis over the initial period of the lease.

Taxation

Taxation expense comprises current and deferred tax recognised in the reporting year. Tax is recognised in the profit and loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity when the associated tax is recognised in other comprehensive income or directly in equity, respectively.

Current and deferred taxation assets and liabilities are not discounted.

Current tax

Current tax is the amount of income tax payable in respect of the taxable profit for the year or prior years. Tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the year end.

Deferred tax

Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in years different from those in which they are recognised in the financial statements.

Deferred tax is recognised on all timing differences at the reporting date except for certain exceptions. Unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Capital and reserves

Capital and reserves comprise the following: called-up share capital represents the nominal value of equity shares; share premium account reflects the excess over nominal value of the fair value of consideration received for equity; capital redemption reserve reflects the buyback of share capital; share based payment reserve represents equity-settled share based remuneration until such instruments are exercised; and retained profit/(accumulated losses) represents retained profits/(accumulated losses).

Exemptions for qualifying entities under FRS 102

The Company has not provided a statement of cash flows or certain disclosures in relation to key management and related party transactions, as this information is included in the consolidated financial statements.

D. Critical accounting estimates and judgements

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or the net asset position of the Company. Management considers that certain accounting estimates and assumptions relating to the carrying value of the Company’s investments are critical accounting estimates. The reatment of investments has been detailed above.

E. Results of the Company

The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included a profit and loss account. The Company’s profit for the year ended 31 March 2023 is £24,908,000 (2022: loss of £7,358,000).