TIDMW7L
RNS Number : 6641E
Warpaint London PLC
10 May 2017
10 May 2017
Warpaint London plc
("Warpaint", the "Group" or the "Company")
Final results for the year ended 31 December 2016
Warpaint London plc (AIM: W7L), a specialist supplier of colour
cosmetics and owner of the W7 brand, is pleased to announce its
audited results for the 12 months ended 31 December 2016.
Highlights
-- Proforma revenue increased by 21.1% to GBP27 million (2015: GBP22.3 million)
-- Proforma operating margin over 25%
-- Proforma adjusted earnings per share increased by 24.6% to 8.6p* (2015: 6.9p*)
-- Net cash at the year end of GBP3.5 million (2015: GBP1.1 million)
-- Encouraging start to e-commerce strategy
-- Brand awareness reaching global levels
-- Admission to AIM in November 2016
-- 1.5p final dividend per share recommended
*Adjusted for the GBP1.7 million of one off IPO costs incurred
in the year (2015: GBP0.06 million)
Clive Garston, Chairman of Warpaint, commented: "2016 has seen
strong progress for Warpaint, including our successful admission to
AIM, growth in revenues and the significant development of our now
global brand.
"I am delighted with the levels of interest that has been
experienced from the market in our first months of trading and
would like to thank our shareholders for their support. I believe
that the Group's prospects are encouraging and that the outlook for
the Group remains positive."
Enquiries:
Warpaint London plc
Sammy Bazini - Joint Chief Executive
Eoin Macleod - Joint Chief Executive
Neil Rodol - Chief Financial Officer 020 3053 8671
Stockdale Securities Limited (Nominated
Adviser and Broker)
Andy Crossley, Antonio Bossi, Ed
Thomas - Corporate Finance
Fiona Conroy - Corporate Broking 020 7601 6100
IFC Advisory (Financial PR & IR)
Tim Metcalfe
Heather Armstrong
Graham Herring 020 3053 8671
About Warpaint London plc
Warpaint London is a colour cosmetics business, based in Iver,
Buckinghamshire. It is made up of two divisions: close-out and
own-brand. The second and larger own-brand division consists
primarily of the Group's flagship brand, W7 - an extremely
creative, design-focussed cosmetic brand proposition with a focus
on the 16-30 age range, delivering high-quality cosmetics at
affordable prices. W7 brand has grown organically since its
inception in 2002 and now contains over 500 items which are sold
into high street retailers and independent beauty shops across the
UK, Europe, Australia and the US. In 2015, W7 was supplied to over
230 customers in more than 40 countries.
Headline proforma financial results for the year to 31 December
2016
Warpaint London plc ("Warpaint", the "Company" or the "Group")
is made up of two trading divisions; the first and largest is the
own-brand division which sells the Group's leading cosmetic brand
W7; the second and smaller division trades in close-out and excess
stock of branded cosmetics and fragrances from around the
world.
On 11 November 2016, prior to admission of the Company's shares
to trading on AIM, a new group structure was formed. This annual
report has been prepared in accordance with acquisition accounting
standards, which deem that the larger business acquired the smaller
business on that date. In order to present to shareholders a more
consistent view of the trading of the Group we have prepared
proforma consolidated statements of comprehensive income for the
years ended 31 December 2015 and 31 December 2016, with a
reconciliation between the proforma and the statutory consolidated
statement of comprehensive income.
Headline results, shown below, represent the performance
comparisons between the proforma consolidated statements of income
for the years ended 31 December 2015 and 31 December 2016. The
proforma numbers have been adjusted to take account of
restructuring changes and other non-recurring items, specifically
the inclusion of the trade of the close-out division for the years
ended 31 December 2015 and 31 December 2016. Reconciliations
between the proforma consolidated income statements and the
statutory consolidated income statements for the 12 months to 31
December 2016, and the 12 months to 31 December 2015 are included
in the Financial review.
The proforma consolidated statement of comprehensive income for
the years ended 31 December 2015 and 31 December 2016 includes the
trade of the larger own-brand division plus the trade of the
smaller close-out division for the whole of each year. The
statutory consolidated statement of comprehensive income for the
years ended 31 December 2015 and 31 December 2016, include the
trade of the larger own-brand division for the whole of each year,
plus the trade of the smaller close-out division from the
acquisition date of 11 November 2016 only.
In 2016, GBP1.7 million of expenses (2015: GBP0.06 million) have
been treated as exceptional as they were one off payments related
to the admission of the Group's shares to trading on AIM in
November 2016.
Unaudited Proforma Statutory results
results
Year ended Year Growth Year ended Year Growth
31 Dec ended % 31 Dec ended %
2016 31 Dec 2016 31 Dec
2015 2015
Revenue GBP27.0m GBP22.3m 21.1 GBP22.5m GBP16.9m 33.1
Adjusted* profit
from operations GBP6.8m GBP5.5m 23.6 GBP6.2m GBP5.6m 10.7
Adjusted* profit
from operations
margin 25.2% 24.7% 27.6% 33.1%
Adjusted* PBT GBP6.7m GBP5.4m 24.1 GBP6.1m GBP5.5m 10.9
Adjusted* EPS 8.6p 6.9p 24.6 7.9p 7.1p 11.3
Net cash GBP3.5m GBP1.1m GBP3.5m GBP1.1m
*Adjusted for the GBP1.7 million of one off IPO costs incurred
in the year (2015: GBP0.06 million)
Chairman's Statement
Results
This is the first reported annual results since our admission to
AIM in November 2016. I am delighted with the way in which the
Group has re-organised itself as a public company and also with the
strong 2016 performance. Although the majority of these results
reflect a period prior to the IPO it is pleasing to note the high
rate of growth that was achieved and in particular, that the
uncertainty caused by the UK referendum result on membership of the
EU quickly disappeared and the Group was able to take appropriate
measures to mitigate the effects of the fall in value of
Sterling.
The proforma numbers will be quoted throughout the annual report
in order to give shareholders clarity in understanding the results
for the year.
Profit before tax was GBP4.4 million (proforma GBP5.0 million)
on a turnover of GBP22.5m (proforma GBP27.0 million) with basic
earnings per share of 5.07p (proforma 5.84p). Earnings per share
adjusted to exclude IPO costs were 7.87p (proforma 8.64p). Net cash
at 31 December 2016 of GBP3.5 million underpins the balance sheet
and leaves the Group in a strong position going forward.
Dividend
As was stated at the time of the IPO, our intention is to adopt
a progressive dividend policy to allow shareholders to share in the
Group's growth in earnings and cash flow. The board is pleased to
recommend a final dividend of 1.5p per share which, if approved by
shareholders, will be paid on 21 July 2017 to shareholders on the
register at close of business on 7 July 2017. The shares will go
ex-dividend on 6 July 2017.
Board and People
I joined the board as non-executive chairman ahead of the IPO
together with Paul Hagon and Keith Sadler who were appointed as
non-executive directors and respectively chairman of the
remuneration and audit committee. The remaining members of the
board are Sam Bazini and Eoin Macleod the joint chief executives
and Neil Rodol the chief financial officer. I regard it as a
privilege to work alongside my fellow board members and
particularly the joint chief executives who founded the business
and are responsible for its success today.
In addition to the board, Warpaint has a wonderful pool of
people with real skills and who contribute enormously to its
success. A key strength of the Company is the commitment of its
employees, many of whom have been with the Group for some time. The
culture of the Group has been responsible for this and the board
recognises the importance of ensuring that the Group's culture is
appropriate for the business as it grows. Warpaint is a
progressive, energetic and dynamic company which is driven by its
executive team and all its employees. I would like to thank all of
them for their contribution to the Group's success.
AGM
Our first annual general meeting will be held on 26 June 2017 at
10.00am at the offices of DAC Beachcroft LLP, 100 Fetter Lane,
London, EC4A 1BN and I look forward to meeting all shareholders who
are able to attend.
Outlook
Warpaint has made an encouraging start to its new life as a
quoted company and has demonstrated its ability to prosper in the
public arena and build shareholder value. I am delighted with the
levels of interest that has been experienced from the market in our
first months of trading. I believe that the Group's prospects are
encouraging and that the outlook for the Group remains positive. I
look forward very much to working with my colleagues on the board
and all the Warpaint team to continue to deliver growth for
shareholders.
Clive Garston
Chairman
9 May 2017
Joint Chief Executive's Statement
We are delighted to present the Group's first annual results to
shareholders following our Admission to AIM in November 2016. 2016
was a transformational year for the business, seeing strong
progress in both domestic and international markets. We remain
committed to the Group's strategy of producing an extensive range
of high quality cosmetics at an affordable price to customers.
Business Overview
Warpaint consists of two separate divisions, own-brand and
close-out, with the own-brand business being the primary strategic
focus of the Group and currently representing over 80% of the
Group's revenue.
The W7 brand predominantly sells to high street retailers and
independent beauty shops, although the online sales channel, that
was established during the year, is a growing contributor. Sales to
overseas customers are through a combination of direct sales to
businesses or to distributors in those countries.
W7 products are manufactured by carefully selected companies in
Europe and China that also supply other leading global cosmetic
brands. We believe the key to the success of W7 is spotting trends
in cosmetic colourways or new products and then quickly launching
them onto the market at a value price point. The W7 range now
contains over 500 items and includes a broad collection of colour
cosmetics, gift sets and accessories.
Close-out, representing less than 20% of the Group's business,
buys and sells close-out and excess stock of branded cosmetics and
fragrances from around the world, which it sells to high street
outlets, wholesalers and the discount mass market retailers, mainly
in the UK. Whilst not a strategic focus, the close-out side of the
business provides a useful source of knowledge of the colour
cosmetics market and access to new market trends.
Our e-commerce platform that was established in May 2016 for the
W7 brand has become increasingly important in terms of sales. We
believe this growth is supported by the colour cosmetics industry,
benefitting from a more engaged and educated customer base, driven
by the success of beauty blogs, celebrity endorsement and social
media. We have had a number of well received recent campaigns with
a number of high profile television celebrities that have
translated into increased online ordering and brand awareness.
Strategy
Our overriding goal is to provide our customers with access to
an extensive range of high quality cosmetics at an affordable
price. To achieve this, we are building an internationally
recognised brand in W7 which will help augment our future
growth.
In May 2016 an export manager was employed with the
responsibility of opening up new territories overseas and this has
already led to a number of new accounts.
As outlined at the time of the admission to AIM, we are looking
to make our offering more widely available to an international
audience, particularly in China and the US, with a focus on social
media and e-commerce activities. To accomplish this, we are soon to
launch new US and China focused e-commerce sites, with the ability
to transact in local currencies.
A priority for us throughout 2016 was to ensure that our
internal infrastructure was of a very high quality, able to cope
with increased business and the demands of being a public company.
From our sound foundations, we can look forward to supporting
future growth, new customers and markets and developing new
products to stay on trend. With selective investment, and new hires
where appropriate, we believe there is plenty of latent capacity
available within our distribution network.
Recently we have employed brand managers to develop our brand
portfolio as part of the Warpaint team.
Brands
Our key focus remains developing our flagship brand, W7, an
extremely creative, design-focused cosmetic brand proposition,
delivering high quality cosmetics at affordable prices. We
outsource manufacturing overseas to ensure competitive pricing and
rapid production.
The W7 range is characterised by eye-catching designs, bold
packaging and creative product names. Our on-trend range of
products benefits from a short lead time due to the Group's
operational structure. Our third-party supply network enables us to
offer a fast turnaround and competitive prices to our customers,
whilst also ensuring high quality. We can deliver "fast-track"
launches of products in a three to six-month time frame, which we
believe is much quicker than most other competitors in the colour
cosmetics market.
An exciting development in 2017 has been the creation of a new
range called Very Vegan. These products have been developed
specifically for vegans and others supporting an animal friendly
lifestyle. We believe that this range has great potential for
growth. The range includes nine different product lines,
encompassing 30 individual products and is scheduled to be on sale
by June 2017.
Our other brands include:
Outdoor This brand has now been developed and sales
Girl have been encouraging.
CopyCat Currently being developed as a premium product
range, to target large health and beauty
retailers.
Smooch To be developed as a prestige brand at a
higher recommended retail price, aimed at
department stores.
Taxi To satisfy bespoke ad-hoc orders from the
value sector.
Products
Warpaint is focused on colour cosmetics, which it separates into
four main categories:
-- Face make-up: foundation, blushers, illuminators,
face bronzing lotions, creams and powders and
loose and pressed powders;
-- Eye make-up: eye shadows, eyeliners, eyebrow
pencils and mascara;
-- Lip make-up: lipstick and glosses, lip pencils,
lip plumpers and palettes; and
-- Nail make-up: nail varnishes and polishes, hardeners
and strengtheners, base and top coat
As previously stated, new product additions for 2017 include
Very Vegan.
We have extended our range of cosmetic bags having sold out of
stock prior to Christmas 2016. We currently have 25 new designs on
order and will be bringing them to market soon.
W7's largest selling product categories are eye products, face
make-up and lip products, which together represented approximately
80% of the own-brand division's revenue in 2016.
Customers & Geographies
We are very pleased to be able to report that the customer base
for the Group grew from 270 customers at the end of 2015 to 319 at
the end of 2016.
The majority of our largest clients are export customers from
the US, Australia and Europe. At the end of 2016 our top ten W7
customers represented 56.3% of revenues, compared to 50.0% in 2015.
Our W7 US distributor has expanded from 3.1% of W7 revenue in 2015
to 12.3% of W7 revenue in 2016.
In 2016, the W7 own-brand business had over 280 customers (2015:
230 customers) in more than 50 countries (2015: 40 countries).
Colour Cosmetics Market
The colour cosmetics market comprises face make-up, eye make-up,
lip products, nail products and colour cosmetics sets/kits and is
typically made up of two categories; prestige and mass. Prestige
products are considered to be premium and therefore generally
command higher prices; such products are generally available
through high-end department stores. Mass products are more
affordable and widely available, generally occupying additional
routes to market such as supermarkets, pharmacies and convenience
stores. The accessible price points of the mass market see
consumers buying these brands more frequently. Currently W7
operates in the mass market.
The global mass market for colour cosmetics is expected to be
the fastest growing cosmetics market category and in mature markets
such as Western Europe and the US, consumers are increasingly
favouring low cost make-up. The US is the largest colour cosmetics
market globally, with a retail value in 2015 of around $11 billion;
this is nearly three times the second largest market of China, at
approximately $4 billion. New product innovation, in particular,
has been influential in the growth of the colour cosmetics
market.
The global beauty market (mass and prestige) continues to grow
with the mass market consistently achieving a higher annual growth
rate than the prestige market. It has also demonstrated resiliency
through economic cycles, often referred to as "the lipstick
effect", and it is expected that it will continue to show solid
growth, making it a consistent consumer category. The industry
remains relatively concentrated, with retail sales dominated by
brands owned by large multinational companies.
The UK was the fourth largest retail colour cosmetics market in
the world in 2015 and is forecast to grow from an estimated GBP1.8
billion this year, to around GBP2.4 billion in 2021.
In addition, the cosmetics industry is undergoing change.
Today's consumers are increasingly connected and influenced by
friends, beauty bloggers, social media and other online content.
The rise of beauty bloggers has been a benefit for the sector,
encouraging women to experiment with new looks and trends, driving
the uptake of a wider range of products.
Admission to AIM
The admission to AIM has been a very positive experience for the
Company in a number of ways. We have seen our profile grow and we
have also strengthened our relationships with suppliers,
distribution partners and customers. We look forward to our
continued growth on AIM and welcome our new shareholders.
The funding received at Admission has allowed Warpaint to invest
further in key staff to develop our brand portfolio and to continue
to build the key W7 brand internationally.
In addition, being a quoted company will enable us to
incentivise staff through a planned new share option scheme.
Outlook
Warpaint enjoyed many years of successful growth prior to
joining AIM and we are confident that with increasing awareness of
our brands we remain well placed to continue this expansion. The
Company remains at the forefront of developing on trend products
for its ever discerning range of customers. Overseas business will
continue to be a major driver as we aim to gain a larger share of
the global colour cosmetics market.
With a flexible supplier base and a tight control of working
capital the business remains inherently cash generative.
We would like to take this opportunity to thank our employees
for their commitment and hard work during what has been a year of
significant transition. We would also like to thank our advisors
involved in the IPO process in what was a challenging year in the
financial markets. Working with a board of non-executive directors
whose skill sets complement our entrepreneurial drive and ambition
for the W7 brand and our other brands has been fantastic.
The current year has started well and we look forward to
updating shareholders on our progress.
Sam Bazini & Eoin Macleod
Joint Chief Executive Officers
9 May 2017
Financial Review
2016 saw significant progress for the Group, both structurally
and financially, with improvement in our KPI's during a busy year
for the business.
In order to aid shareholders' understanding of the underlying
performance of the business we have focused our commentary on the
proforma consolidated statement of income for the 12 months to 31
December 2016 compared with the proforma consolidated statement of
income for the 12 months to 31 December 2015.
Headline results represent the performance comparisons between
the proforma consolidated statements of income for the years ended
31 December 2015 and 31 December 2016. The proforma numbers have
been adjusted to take account of restructuring changes and other
non-recurring items, specifically the inclusion of the trade of the
close-out division for the years ended 31 December 2015 and 31
December 2016. Reconciliations between the proforma consolidated
income statements and the statutory consolidated income statements
for the 12 months to 31 December 2016, and the 12 months to 31
December 2015 are shown below.
Proforma Headline Consolidated Income Statement
2016 2015
Unaudited Unaudited
Proforma Proforma
Statement Statement
GBP'000 GBP'000
Revenue 26,968 22,280
Cost of sales (16,745) (14,148)
Gross profit 10,223 8,132
Administrative expenses (5,205) (2,685)
Profit from operations 5,018 5,447
Analysed as:
Profit from operations
before exceptional
items 6,757 5,508
Exceptional items (1,739) (61)
------------------------- ----------- -----------
Finance expense (16) (82)
Profit before tax 5,002 5,365
Tax expense (1,384) (1,196)
Profit for the year 3,618 4,169
Reconciliation between the statutory consolidated income
statement and the proforma consolidated income statement for the 12
months to 31 December 2016
2016 Close-out Amortisation 2016
Statutory business of Intangible Unaudited
Accounts pre-acquisition assets Proforma
11th on acquisition Statement
Nov 2016 of close-out
business
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 22,483 4,485 - 26,968
Cost of sales (13,692) (3,053) - (16,745)
Gross profit 8,791 1,432 - 10,223
Administrative expenses (4,374) (787) (44) (5,205)
Profit/(loss) from operations 4,417 645 (44) 5,018
Analysed as:
Profit/(loss) from operations
before exceptional items 6,156 645 (44) 6,757
Exceptional items (1,739) - - (1,739)
------------------------------- ----------- ----------------- ---------------- -----------
Finance expense (16) - - (16)
Profit/(loss) before tax 4,401 645 (44) 5,002
Tax expense (1,260) (124) - (1,384)
Profit/(loss) for the
year 3,141 521 (44) 3,618
Weighted number of ordinary
shares 61,981,720 61,981,720
Earnings per share 5.07p 5.84p
Profit for the year 3,141 3,618
Add back exceptional items 1,739 1,739
Adjusted profit for the
year 4,880 5,357
Weighted number of ordinary
shares 61,981,720 61,981,720
Adjusted earnings per
share 7.87p 8.64p
Reconciliation between the statutory consolidated income
statement and the proforma consolidated income statement for the 12
months to 31 December 2015
2015 2015 2015
Statutory Close-out Unaudited
Accounts business Proforma
Statement
GBP'000 GBP'000 GBP'000
Revenue 16,938 5,342 22,280
Cost of sales (10,229) (3,919) (14,148)
Gross profit 6,709 1,423 8,132
Administrative expenses (1,117) (1,568) (2,685)
Profit/(loss) from operations 5,592 (145) 5,447
Analysed as:
Profit/(loss) from operations
before exceptional items 5,592 (84) 5,508
Exceptional items - (61) (61)
------------------------------- ----------- ----------- -----------
Finance expense (84) 2 (82)
Profit/(loss) before tax 5,508 (143) 5,365
Tax expense (1,123) (73) (1,196)
Profit/(loss) for the
year 4,385 (216) 4,169
Weighted number of ordinary
shares 61,722,383 61,722,383
Earnings per share 7.11p 6.75p
Profit for the year 4,385 4,169
Add back exceptional items - 61
Adjusted profit for the
year 4,385 4,230
Weighted number of ordinary
shares 61,722,383 61,722,383
Adjusted earnings per
share 7.11p 6.85p
Revenue
Total proforma revenue grew by 21.1% from GBP22.3 million in
2015 to GBP27.0 million in 2016. Warpaint has been able to focus on
sales growth in the year whilst also preparing the Group for our
IPO. Revenue continues to be driven by increased export sales into
the US and Europe, and by increased awareness of the W7 brand
globally. As we look to 2017 it is pleasing that growth continues.
A detailed commentary on our sales growth strategy and trading
performance is included in the CEO's report.
Total statutory revenue grew by 33.1% from GBP16.9 million in
2015 to GBP22.5 million in 2016.
Profit Before Tax and Exceptional Items
Group proforma Profit Before Tax ("PBT") was GBP5.0 million
(2015: GBP5.4 million), a decrease of 7.4% on the prior year.
Underlying PBT (profit before tax and exceptional items) was
GBP6.7m (2015: GBP5.4 million), an increase of 24.1% on the prior
year. In the 12-month period to 31 December 2016, GBP1.7 million of
expenses have been treated as exceptional as they related to the
admission of the Group's shares to trading on AIM in November
2016.
Group statutory Profit Before Tax ("PBT") was GBP4.4 million
(2015: GBP5.5 million), a decrease of 20.0% on the prior year.
Underlying PBT (profit before tax and exceptional items) was
GBP6.1m (2015: GBP5.5 million), an increase of 10.9% on the prior
year.
Product Gross Margin
Proforma gross margin improved by 3.9% over 2015 to 37.9%. The
cost impact of Brexit has been mitigated with a ratcheted discount
mechanism from our key supplier in China, also by growing US
revenue significantly in 2016 and from margin growth as the W7
brand gains global awareness. Further contributing to Group margin
is the close-out business which has delivered gross margin of 25.4%
(See Close-out business income statement: Appendix A) compared to
24.9% in 2015. We remain focused on improving gross margin in both
our own-brand and close-out businesses.
Statutory gross margin decreased by 1.3% over 2015 to 39.1%.
Operating Expenses
Underlying proforma operating expenses (before exceptional
items) grew 32.1% year on year, however expressed as a percentage
of proforma turnover underlying operating expenses (before
exceptional items) increased to 12.9% in 2016 from 11.8% in 2015.
Costs grew in the main because of these factors:
-- The joint CEOs of the business were paid a salary
for the first time in 2016
-- Cost of the PLC board in readiness for admission
to AIM from November 2016
-- Commercial arms length rent charged for the
first time in 2016
-- Increased staffing levels ahead of the IPO in
the financial and order processing departments
-- Increase in audit fees
Statutory operating expenses before exceptional items grew
135.9% year on year, however expressed as a percentage of statutory
turnover, operating expenses before exceptional items increased to
11.7% in 2016 from 6.6% in 2015. Statutory operating costs grew in
the main because of the factors discussed above and additional
operating costs that were reallocated from the close-out division
to the own-brand division as the Group was restructured in
2016.
Most operating expenses are relatively fixed, however we
continue to monitor and examine significant costs to ensure they
are controlled.
Exceptional Items
In 2016, GBP1.7 million of expenses (2015: GBP0.06 million) have
been treated as exceptional as they were one off legal and
professional fees and commissions incurred in relation to the
admission of the Group's shares to trading on AIM in November
2016.
Tax
The proforma tax rate for the Group for 2016 was 27.7% compared
to the UK corporation tax standard rate of 20% for the year. Some
of the costs of the admission to AIM have been disallowed for tax
purposes, which has increased the effective tax rate. We would
expect the tax rate on adjusted profits to be approximately 19.25%
in 2017 and falling in line with the UK Government measures to
reduce corporation tax to 17% by 2020.
The statutory tax rate for the Group for 2016 was 28.6% compared
to the UK corporation tax standard rate of 20% for the year.
Earnings Per Share
The underlying proforma basic earnings per share before
exceptional costs was 8.6p in 2016, an increase of 24.6% on the
6.9p achieved in 2015, as a result of improved sales and gross
margin.
The statutory basic earnings per share before exceptional costs
was 7.9p in 2016, an increase of 11.3% on the 7.1p achieved in
2015.
Dividends
The board is recommending a final dividend for 2016 of 1.5 pence
per share, making a total dividend of 6.1 pence per share of which
4.6 pence per share was paid in 2016 prior to the IPO (2015: 3.2
pence per share).
Cash flow and cash position
Net cash flow generated from operating activities was GBP3.0
million (2015: GBP2.3 million), after payment of the GBP1.7 million
exceptional items previously referred to. Management are
continually monitoring trade receivables and stock levels to avoid
working capital lock up as the business continues to grow.
The Group's net cash balance increased by GBP2.4 million to
GBP3.5 million in 2016 (2015: GBP1.1 million). The cash generated
was principally used to make dividend payments prior to the IPO.
Capital expenditure requirements of the Group remain modest and we
expect it to continue to be so. GBP0.16 million was spent in the
year on new office space for additional staff, an upgrade to our
computer systems and the purchase of a promotional double decker
bus for the W7 brand.
Balance Sheet
The Group's balance sheet remains in a very healthy position
with no debt. Net assets totaled GBP14.3 million at 31 December
2016, with the majority made up of liquid assets of stock, trade
receivables and cash. Included in the balance sheet is GBP0.5
million of goodwill and GBP1.3 million of intangible fixed assets
arising from the acquisition accounting adopted to reflect the
purchase of the close-out business by the much larger own-brand
colour cosmetics business in November 2016, in preparation of the
Group joining AIM.
On 11 November 2016 a new group structure was formed. On the 21
November 2016, the Company disposed of GBP1.4m of land and
buildings pursuant to a capital reduction to which 16,340,000 B
ordinary shares of GBP0.052 each held by Sam Bazini and Eoin
Macleod where cancelled in consideration for the transfer of the
entire issued share capital of Warpaint Cosmetics Limited to a
company owned and controlled by Sam Bazini and Eoin Macleod. This
was part of a Group reconstruction prior to admission to AIM on the
30 Nov 2016.
Admission to AIM
The admission to AIM provided investment to accelerate growth
and Warpaint's business is already benefiting from being a quoted
company on AIM. The profile of the Group and its key brand W7 has
been enhanced with the increased public awareness.
Neil Rodol
Chief Financial Officer
9 May 2017
WARPAINT LONDON PLC
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF WARPAINT LONDON
PLC
Opinion
We have audited the financial statements of Warpaint London plc
(the 'parent company') and its subsidiaries (the 'group') for the
year ended 31 December 2016 which comprise the consolidated
statement of comprehensive income, the consolidated statement of
changes in equity, the consolidated and company statements of
financial position, the consolidated cashflow statement and notes
to the financial statements, including a summary of significant
accounting policies.
The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial reporting framework that has been
applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 The Financial
Reporting Standard in the United Kingdom 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's affairs as at 31
December 2016 and of the group's profit for the year then
ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
-- the financial statements 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
Auditor's 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 as applied to listed entities, 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
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group's or the parent company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
The following matters were identified by us as the most
significant assessed risks of material misstatement:
Accounting for the group reorganisation
As explained in note 1 the Warpaint London plc group consists of
two separate subgroups previously owned by the same shareholders.
The combination of these businesses has been accounted for as a
group reconstruction with regard the larger business and an
acquisition under IFRS 3 for the smaller one, Treasured Scents. See
note 8 for further information.
The risk - Accounting for the business combinations involved
significant judgement in determining the appropriate accounting
treatment for the reconstruction and acquisition and then
determining the fair value of both the consideration paid for the
Treasured Scents group and the underlying assets and liabilities of
that group, including intangible assets such as customer
relationships. Judgement was also exercised in determining the
appropriate period over which to amortise the intangible asset in
relation to customer relationships.
How we addressed the risk - Our audit procedures included
assessing the appropriateness of the accounting treatment adopted
and challenging the Directors' assessment of the fair value of the
assets acquired and liabilities assumed with reference to evidence
provided by third party experts engaged by management. We
critically evaluated the capabilities, competence and objectivity
of the external valuers engaged by the Directors involved in
assessing the fair value of intangible assets and the fair value of
the consideration paid, as well as evaluating and concluding on the
appropriateness of their conclusions.
We used our own valuation specialists to challenge the
acquisition accounting including the identification of amounts
related to customer relationships and the valuation of the
consideration paid. We also challenged the third party experts and
management regarding the amortisation period of the intangible
asset in relation to customer relationships. In addition, we
considered the adequacy of the Group's disclosures in respect of
the business combinations.
Carrying value of inventory
See accounting policy in note 1.
The risk - The group holds significant levels of inventory and a
number of estimates are involved in valuing slow moving and
obsolete inventories, some of which have a limited shelf life.
There are inherent uncertainties in consumer preferences and
spending patterns, which are primarily driven by wider trends in
the fashion and cosmetics industry. There is a recoverability risk
associated with new product launches as well as with close out
stock purchased at the end of ranges or seasons with judgement
required in forecasting demand.
How we addressed the risk - Our procedures included assessing
the principles and appropriateness of the Group's inventory
provisioning policies based on our understanding of the business
and the accuracy of previous provisioning estimates. In assessing
inventory provisions our procedures included testing the
methodology applied by management in preparing their provision
including the identification of slow moving and obsolete items. We
considered the inventory write off figure during the year and
compared this to the Group's expected recoveries brought forward
and to the position at the year end date. Further, we substantively
tested the unprovided inventory balance to review sales volumes and
values after the balance sheet date. In addition, we assessed the
adequacy of the disclosures in respect of amounts recognised as
provision against inventory during the period.
Our application of materiality and overview of the scope of our
audit
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality
which, together with qualitative considerations, help us to
determine the nature, timing and extent of our audit procedures on
the individual financial statement areas and disclosures and in
evaluating the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
We determined materiality for the financial statements as a
whole to be GBP515,000 which represents 8.5% of profit before tax
before exceptional items relating to the listing. We agreed with
the audit committee that we would report to them misstatements
identified during our audit above GBP25,000.
We used profit before tax before listing expenses as a benchmark
given the importance of profit as a measure for shareholders in
assessing the performance of the Group.
The group consists of two trading subgroups, both of which are
run from the UK. In establishing the overall approach to the group
audit, we completed full scope audits on the underlying subgroups.
The group audit team obtained an understanding of the internal
control environment related to the financial reporting process and
assessed the appropriateness, completeness and accuracy of group
journals and other adjustments performed on consolidation.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report 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 there is a
material misstatement in the financial statements or a material
misstatement of the other information. 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 strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report 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
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which 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 directors' responsibilities
statement as set out in the Directors' report, 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 is 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.
Auditor's responsibilities for the audit of the financial
statements
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
an auditor's report 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.
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 an
auditor's report 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.
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 auditor's report.
Mark RA Edwards (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
9 May 2017
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
Year ended 31
December
2016 2015
Note GBP'000 GBP'000
Revenue 1,2 22,483 16,938
Cost of sales (13,692) (10,229)
Gross profit 8,791 6,709
Administrative expenses 3,5 (4,374) (1,117)
Profit from operations 3 4,417 5,592
Analysed as:
Profit from operations before
exceptional items 6,156 5,653
Exceptional items 3 (1,739) (61)
----------------------------------------- ----- --------- ---------
Finance expense 5 (16) (84)
Profit before tax 4,401 5,508
Tax expense 6 (1,260) (1,123)
Profit for the year attributable
to equity holders of the parent
company 3,141 4,385
Other comprehensive income (net - -
of tax)
Total comprehensive income attributable
to equity holders of the parent
company 3,141 4,385
Basic and diluted earnings per
share (pence) 25 5.07 7.11
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Year ended 31
December
2016 2015
Note GBP'000 GBP'000
Non-current assets
Goodwill 9 513 -
Intangibles 10 1,403 65
Property, plant and equipment 11 237 1,475
Total non-current assets 2,153 1,540
Current assets
Inventories 12 7,669 5,296
Trade and other receivables 13 5,364 4,170
Derivative financial instruments 21 37 -
Cash and cash equivalents 3,503 1,758
Total current assets 16,573 11,224
Total assets 18,726 12,764
Current liabilities
Trade and other payables 14 (2,841) (1,715)
Loans and borrowings 15 - (201)
Corporation tax liability (1,329) (1,420)
Total current liabilities (4,170) (3,336)
Non-current liabilities
Bank loan 15 - (425)
Deferred tax liability 16 (278) (12)
Total non-current liabilities (278) (437)
Total liabilities (4,448) (3,773)
NET ASSETS 14,278 8,991
2016 2015
GBP'000 GBP'000
Equities
Share capital 18 16,135 15,000
Share premium 1,806 -
Merger reserve (17,995) (20,000)
Retained earnings 14,332 13,991
TOTAL EQUITY 14,278 8,991
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Share Share Merger Retained Total
Capital Premium Reserve Earnings Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2015 15,000 - (20,000) 11,559 6,559
Profit for the
year - - - 4,385 4,385
Dividends paid 17 - - - (1,953) (1,953)
As at 31 December
2015 15,000 - (20,000) 13,991 8,991
Share issue for
cash 18 644 1,806 - - 2,450
Share issue for
Treasured Scents 18 1,340 - 2,005 - 3,345
Share capital reduction 18 (849) - - - (849)
Profit for the
year - - - 3,141 3,141
Dividends paid 17 - - - (2,800) (2,800)
As at 31 December
2016 16,135 1,806 (17,995) 14,332 14,278
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
Year ended
31 December
2016 2015
Note GBP'000 GBP'000
Operating activities
Profit before tax 4,401 5,508
Interest paid 5 16 84
Amortisation of intangible assets 10 57 4
Depreciation of property, plant
and equipment 11 58 51
Loss/(profit) on disposal of property, 8 -
plant and equipment
Increase in trade and other receivables (289) (1,457)
Increase in inventories (1,413) (1,965)
Increase in trade and other payables 1,601 236
Cash generated from operations 4,439 2,461
Tax paid (1,465) (132)
Interest paid (16) (84)
Net cash flows from operating activities 2,958 2,245
Investing activities
Purchase of intangible assets 10 (77) (28)
Purchase of property, plant and
equipment 11 (163) (49)
Proceeds received from investment
in LLP - 138
Bank balances acquired 98 -
Sale of investments (6) -
Net cash (used in)/generated by
investing activities (148) 61
Financing activities
Proceeds from new share capital 2,500 -
subscribed
Share issue costs (53) -
(Reduction)/increase in borrowings (712) 411
Dividends 17 (2,800) (1,953)
Net cash used in financing activities (1,065) (1,542)
Net increase in cash and cash equivalents 1,745 764
Cash and cash equivalents at beginning
of period 1,758 994
Cash and cash equivalents at end
of period 3,503 1,758
Cash and cash equivalents consists:
Cash and cash equivalents 3,503 1,758
3,503 1,758
The financial statements of Warpaint London Plc were approved
and authorised for issue by the Board of Directors on 9 May 2017
and were signed on its behalf by:
Neil Rodol
Chief Financial Officer
WARPAINT LONDON PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
1. Significant accounting policies
Basis of preparation
The financial statements of Warpaint London plc (the "Company"
or "Warpaint") and its subsidiaries (together the "Group") for the
year ended 31 December 2016 were authorised for issue by the board
of directors on 9 May 2017 and the statement of financial position
was signed on the board's behalf by Neil Rodol.
Warpaint London plc is a public limited Company incorporated and
domiciled in England and Wales. Its registered office is Units
B&C, Orbital Forty Six, The Ridgeway Trading Estate, Iver,
Bucks., SL0 9HW.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements are presented in pounds sterling because
that is the currency of the primary economic environment in which
the Group operates.
The annual financial statements have been prepared on the
historical cost basis, except for certain financial assets and
liabilities which are carried at fair value or amortised cost as
appropriate.
The preparation of financial statements in conformity with
International Financial Reporting Standards adopted by the European
Union requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reported period. Although these estimates are based on
management's best knowledge of current events and actions, actual
results ultimately may differ from those estimates. The principal
accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporates the financial
statements of the Group and all of its subsidiary undertakings. The
financial statements of all Group companies are adjusted, where
necessary, to ensure the use of consistent accounting policies.
Acquisitions are accounted for under the acquisition method from
the date control passed to the Group. On acquisition, the assets
and liabilities of a subsidiary are measured at their fair values.
Any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill.
The group was formed after the company, prior to its IPO and
listing on AIM, completed share for share transactions for two
separate groups owned by the same shareholders. The Board have
taken the view that the most appropriate way to account for these
in line with IFRS is to deem the share for share exchange with the
Warpaint Group (the own brand business) as a group reconstruction.
This has been accounted for under the basis of merger accounting
given that the ultimate ownership before and after the transaction
remained the same. Merged subsidiaries undertakings are treated as
if they have always been a member of the Group. Any difference
between the nominal value of the shares acquired by the Company and
those issued by the Company to acquire them is taken to the merger
reserve.
There is currently no specific guidance on accounting for group
reconstructions such as this transaction under IFRSs. In the
absence of specific guidance, entities should select an appropriate
accounting policy and IFRS permits the consideration of
pronouncements of other standard-setting bodies. This group
reconstruction as scoped out of IFRS 3 has therefore been accounted
for using predecessor accounting principles resulting in the
following practical effects;
a. The net assets of the two companies are combined using
existing book values, with adjustments made as necessary to ensure
that the same accounting policies are applied to the calculation of
the net assets of both companies;
b. No amount is recognised as consideration for goodwill or negative goodwill;
c. The consolidated profit and loss account includes the profits
or losses of each company for the entire period, regardless of the
date of the reconstruction, and the comparative amounts in the
consolidated financial statements are restated to the figures
presented by the predecessor company Warpaint Cosmetics Group
Limited;
d. The retained earnings reserve includes the cumulative results
of each company, regardless of the date of the reconstruction, and
the comparative amounts in the statement of financial position are
restated to the presented by the predecessor company Warpaint
Cosmetics Group Limited
The share for share exchange of the other group of companies,
namely Treasured Scents (the close-out business) was acquired on 11
November 2016 and has been treated as an acquisition under IFRS
3.
This is the first year that the Group has presented its results
under IFRS. No reconciliation has been provided because there are
no material differences.
On 21 November 2016, the Company also undertook a capital
reduction pursuant to which 16,340,000 B ordinary shares of
GBP0.052 each held by Sam Bazini and Eoin Macleod where cancelled
in consideration for the transfer of the entire issued share
capital of Warpaint Cosmetics Limited to a company owned and
controlled by Sam Bazini and Eoin Macleod.
Going concern
The Directors have prepared a detailed forecast with a
supporting business plan for the foreseeable future. The forecast
indicates that the Group will remain in a positive cash position
throughout the forecast period. As such, the Directors have a
reasonable expectation the Company and Group will have adequate
resources to continue in operational existence for the foreseeable
future. As such, they continue to prepare the financial statements
on the basis of going concern.
Revenue Recognition
Revenue for the Group is measured at the fair value of the
consideration received or receivable. The Group recognises revenue
for goods sold when the amount of revenue can be reliably measured
and it is probable that future economic benefits will flow to the
entity.
Sale of goods
Revenue from the sale of goods is recognised when all of the
following conditions are satisfied:
-- the Group has transferred the significant risks and rewards of ownership to the buyer;
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold;
-- the amount of revenue can be measured reliably;
-- it is probable that the Group will receive the consideration due under the transaction; and
-- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
UK sales are recognised and invoiced to the customer once the
goods have been delivered to the customer. Overseas sales are
recognised and invoiced to the customer once the goods have been
delivered to the customer, or collected by the customer from the
company's warehouse according to the terms of sale.
Where the company has entered in to distributor arrangements the
risk and rewards are considered to be with the distributor from the
date of dispatch from either the company's overseas supplier or
from the company's UK warehouse. Revenue will therefore be
recognised from the date of dispatch.
Expenditure and provisions
Expenditure is recognised in respect of goods and services
received when supplied in accordance with contractual terms.
Provision is made when an obligation exists for a future liability
relating to a past event and where the amount of the obligation can
be reliably estimated.
Retirement Benefits: Defined contribution schemes
Contributions to defined contribution schemes are charged to the
consolidated statement of comprehensive income in the year to which
they relate.
Exceptional items
Exceptional items which have been disclosed separately on the
face of the income statement in order to summarise the underlying
results. Exceptional items include costs incurred by the Group in
relation to IPO costs. Neither 'underlying profit or loss' nor
'exceptional items' are defined by IFRS however the directors
believe that the disclosures presented in this manner provide clear
presentation of the financial performance of the Group.
Intangible assets
Patents
Patents are used by the Group in order to generate future
economic value through normal business operations. The underlying
assets are amortised over the period from which the Group expects
to benefit, which is typically between five to ten years.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives. The
estimated useful life and amortisation method are reviewed at the
end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis. Intangible
assets with indefinite useful lives that are acquired separately
are carried at cost less accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised at
their fair value at the acquisition date (which is regarded as
their cost). Subsequent to initial recognition, intangible assets
acquired in a business combination are reported at cost less
accumulated amortisation and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
Amortisation is provided on customer lists so as to write off the
carrying value over the expected useful economic life of five
years.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal. Gains
or losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds and
the carrying amount of the asset, and are recognised in profit or
loss when the asset is derecognised.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment so as to write off their carrying value over the expected
useful economic lives. It is provided at the following rates:
Land and buildings - 50 years
Plant and machinery - 25% reducing balance
Fixtures, fittings and equipment - 25% reducing balance
Computer equipment - 25% reducing balance
Motor vehicles - 25% reducing balance
Financial assets
The Group classifies its financial assets into the categories,
discussed below, due to the purpose for which the asset was
acquired. The Group has not classified any of its financial assets
as held to maturity.
Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the provision of services to customers
(e.g. trade receivables), but also incorporate other types of
contractual monetary asset. They are initially recognised at fair
value plus transactions costs that are directly attributable to
their acquisition or issue, and are subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
The Group's loans and receivables comprise of trade and other
receivables included within the combined statement of financial
position.
Cash and cash equivalents include cash held at bank and bank
overdrafts. Bank overdrafts are shown within loans and borrowings
in current liabilities in the combined statement of financial
position.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the income
statement. On confirmation that the trade receivables will not be
collectable, the gross carrying value of the asset is written off
against the associated provision.
Financial liabilities
The Group classifies its financial liabilities as other
financial liabilities which include the following:
-- Bank loans which are initially recognised at fair value net
of any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost ensuring the interest element of the
borrowing is expensed over the repayment period at a constant
rate.
-- Trade payables, other borrowings and other short-term
monetary liabilities, which are initially recognised at fair value
and subsequently carried at amortised cost using the effective
interest method.
Leased assets
Assets obtained under hire purchase contract and finance leases
are capitalised as tangible fixed assets. Assets acquired by
finance lease are depreciated over the shorter of the lease term
and their useful lives. Assets acquired by hire purchase are
depreciated over their useful lives. Finance leases are those where
substantially all of the benefits and risks of ownership are
assumed by the company. Obligations under such agreements are
included in creditors net of the finance charge allocated to future
periods. The finance element of the rental payment is charged to
the profit and loss account so as to produce a constant periodic
rate of charge on the net obligation outstanding in each
period.
Operating Leases
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an 'operating lease'),
the total rentals payable under the lease are charged to the
combined statement of comprehensive income on a straight-line basis
over the lease term. The aggregate benefit of lease incentives is
recognised as a reduction of the rental expense over the lease term
on a straight-line basis.
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from 'profit before tax' as reported
in the consolidated statement of profit or loss and other
comprehensive income because of items of income or expense that are
taxable or deductible in other years and items that are never
taxable or deductible.
The Group's current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting
period.
Deferred taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the combined statement
of financial position differs from its tax base, except for
differences arising on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
balance sheet date and are expected to apply when the deferred tax
liabilities or assets are settled or recovered. Deferred tax
balances are not discounted.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company; or
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of the cost and net realisable value. Cost comprises
all costs of purchase, costs of conversion and other costs incurred
in bringing the inventories to their present location and
condition.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
Sterling at the rates of exchange ruling of the Statement of
Financial Position date. Transactions in foreign currencies are
translated into Sterling at the rate of exchange ruling at the date
of the transaction. Exchange differences are taken into account in
arriving at operating profit.
Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
management team including the Chief Executive Officers and the
Chief Financial Officer.
The Board considers that the Group's project activity
constitutes two operating and two reporting segments, as defined
under IFRS 8. Management reviews the performance of the Group by
reference to total results against budget.
The total profit measures are operating profit and profit for
the year, both disclosed on the face of the combined income
statement. No differences exist between the basis of preparation of
the performance measures used by management and the figures in the
Group financial information.
Derivative financial instruments
The Group enters into a variety of derivative financial
instruments to manage its exposure to foreign exchange rate risk,
through the use of foreign exchange rate forward contracts.
Derivatives are initially recognised at fair value at the date
the derivative contracts are entered into and are subsequently
re-measured to their fair value at the end of each reporting
period. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a
hedging instrument, in which event the timing of the recognition in
profit or loss depends on the nature of the hedge relationship.
Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders of the parent by the weighted
average number of ordinary shares outstanding during the year,
excluding treasury shares and shares in employee benefit trusts,
determined in accordance with the provisions of IAS 33 earnings per
Share. Diluted earnings per share is calculated by dividing
earnings attributable to ordinary shareholders of the parent by the
weighted average number of ordinary shares outstanding during the
year adjusted for the potentially dilutive ordinary shares.
Changes in accounting policies
This is the first year the Group has prepared financial
statements under International Financial Reporting Standards,
therefore all relevant IFRS's have been adopted.
New standards, interpretations and amendments not yet
effective
The following new standards, interpretations and amendments,
which have not been applied in this financial information, will or
may have an effect on the Group's future financial information:
-- IFRS 9 Financial Instruments (July 2014 amendments) - This
standard incorporates requirements for classification and
measurement, impairment, general hedge accounting and derecognition
of financial instruments.
-- IFRS 15 Revenue from Contracts with Customers (May 2014,
September 2015 and April 2016 amendments) - This standard replaces
IAS 18, 'Revenues' and introduces a five step approach to revenue
recognition based on performance obligations under customer
contracts.
-- IFRS 16 Leases (January 2016 amendments) - This standard
replaces IAS 17, 'Leases' and introduces leases with the objective
of ensuring that lessees and lessors provide relevant information
that faithfully represents those transactions.
The effect of these standards is under review but has not yet
been quantified.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectations
of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Judgements and accounting estimates and assumptions
a) Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of the cost and net realisable value. There is
judgement involved in assessing the level of inventory provision
required in respect of slow moving inventory.
b) Fair value of consideration
Goodwill arising on the acquisition of Treasured Scents (2014)
Limited is calculated using consideration which is measured at fair
value. The Group has used the earnings method in calculating fair
value of the consideration being the EBITDA (earnings before
interest, tax, depreciation and amortisation) multiplied by an
'earnings multiple'. The directors have used judgement in
calculating the level of the earnings multiple.
c) Intangible assets acquired
On acquisition of Treasured Scents (2014) Limited the group has
recognised the customer list also obtained in the business
combination. The valuation of the customer list is based on
judgement involved in assessing the projected future cashflows
arising from those customers. Further judgement is involved in
assessing the life of the intangible asset and a suitable discount
rate to be used to measure the future revenues to present
value.
2. Segmental information
For management purposes, the Group is organised into two
operating segments; W7 Branded and close-out. The segment 'W7
Branded' relates to the sale of own branded products whereas
'close-out' relates to the purchase of third party stock which is
then repackaged for sale. These segments are the basis on which the
Group reports internally to the Board. Revenue and costs not
included in one of these operating segments, for example
administrative expenses, have not been allocated to an operating
segment.
Year ended 31 December 2016 2016 2016 2015
W7 Branded Close-out Total W7 Branded
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 21,862 621 22,483 16,938
Cost of sales (13,078) (614) (13,692) (10,229)
Gross profit 8,784 7 8,791 6,709
Administrative expenses (2,483) (152) (2,635) (1,117)
Exceptional items (1,739) - (1,739) -
Segment result 4,562 (145) 4,417 5,592
Reconciliation of segment
result to profit before
tax:
Segment result 4,562 (145) 4,417 5,592
Finance expense (16) - (16) (84)
Profit before tax 4,546 (145) 4,401 5,508
Analysis of total revenue
by geographical market:
UK 11,841 9,135
USA 2,880 526
Rest of World 7,762 7,277
Total 22,483 16,938
Information regarding segment assets and liabilities as at 31
December 2016 and capital expenditure for the period then
ended:
W7 Brand Close-out Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000
Total assets 21,694 4,293 (7,261) 18,726
Total liabilities (9,056) (2,653) 7,261 (4,448)
Tangible asset additions 163 14 - 177
Intangible asset additions 1,394 - - 1,394
Total capital expenditure 1,557 14 - 1,571
3. Operating profit
Operating profit for the period is stated after charging/
(crediting):
Year ended 31
December
2016 2015
GBP'000 GBP'000
Foreign exchange movement (28) (2)
Depreciation and amortisation 115 55
Loss on disposal of fixed asset 8 -
Operating lease 263 -
Exceptional IPO costs 1,739 61
Exceptional costs relate to legal and professional fees and
commissions incurred in listing the company on AIM in the year
ended 31 December 2016 were GBP1,739,000 (2015: GBP61,000).
Analysis of auditor's remuneration is as follows:
Year ended 31
December
2016 2015
GBP'000 GBP'000
Fees payable to the Company's auditor
for the audit of the Group's annual
accounts 13 18
Fees payable to the Company's auditor 49 -
for the audit of subsidiary companies
62 18
2016 2015
GBP'000 GBP'000
Other services pursuant to legislation:
Tax compliance - -
Tax advice 30 -
Services relating to IPO 308 -
Total non-audit fees 338 -
4. Staff costs
Year ended 31
December
2016 2015
GBP'000 GBP'000
Wages and salaries 1,413 387
Social security costs 159 40
Pension costs 6 6
1,578 433
The average monthly number of employees during the period was as
follows:
Year ended 31
December
2016 2015
No. No.
Directors 3 2
Administrative 5 3
Finance 2 2
Warehouse 22 4
Sales 4 1
Other 4 -
40 12
2016 2015
Directors' remuneration, included GBP'000 GBP'000
in staff costs
Salaries 330 -
Bonus 150 -
Pension contributions - -
480 -
Information regarding the highest
paid director is as follows:
Emoluments 167 -
167 -
5. Finance expense
Year ended 31
December
2016 2015
GBP'000 GBP'000
Finance expense
Loan interest 16 84
16 84
6. Income tax
Year ended 31
December
2016 2015
GBP'000 GBP'000
Current tax expense
Current tax on profits for the period 1,225 1,116
Adjustment in respect of previous 19 -
periods
1,244 1,116
Deferred tax expense
Origination and reversal of temporary
differences 16 7
Total tax expense 1,260 1,123
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the United
Kingdom applied to profit for the year as follows:
Year ended 31
December
2016 2015
GBP'000 GBP'000
Profit for the period before tax 4,401 5,508
Expected tax charge based on corporation
tax rate of 20% in 2016 (20.25% in
2015) 880 1,115
Expenses not deductible for tax purposes 361 1
Other adjustments 3 2
Prior year adjustments 19 -
Deferred tax (3) 5
Total tax expense 1,260 1,123
The UK corporation tax at the standard rate for the year is
20.0% (2015: 20.25%).
In July 2015 the UK government announced its intention to reduce
the standard corporation tax rate to 18% by 2020. The measure to
reduce the rate to 19% for the financial year beginning 1 April
2017 and to 18% for the financial year beginning 1 April 2020 were
substantively enacted on 26 October 2015 and have been reflected in
the calculation of deferred tax in the December 2016 numbers.
7. Subsidiaries
At the period end, the Group has the following subsidiaries:
Subsidiary name Nature of Place of Percentage
business incorporation owned
Warpaint Cosmetic England and
Group Limited Holding company Wales 100%
Warpaint Cosmetics England and
(2014) Limited* Wholesaler Wales 100%
Treasured Scents England and
(2014) Limited Wholesaler Wales 100%
Treasured Scents England and
Limited* Wholesaler Wales 100%
* indicates indirect interest
On 11 November 2016, the Company acquired 100% of the issued
share capital of Treasured Scents (2014) Limited and its subsidiary
undertaking Treasured Scents Limited. All the other entities
detailed above have been in existence for the whole of the
reporting period.
The registered office for all the above-named subsidiaries is 2
Park Court, Pyrford Road, West Byfleet, Surrey, KT14 6SD.
8. Acquisitions
Treasured Scents (2014) Limited
On 11 November 2016, the Group acquired the entire share capital
of Treasured Scents (2014) Limited ("Treasured Scents (2014)"), a
close-out cosmetics wholesaler based in the UK. The principal
reason for acquiring Treasured Scents was due to the company
operating in the same industry and the client relationships
maintained by the directors, Mr E. Macleod and Mr S. Bazini.
Treasured Scents (2014) has contributed GBP621,260 to revenue
for the period between the date of acquisition and the balance
sheet date. Had Treasured Scents been consolidated from 1 January
2016, the consolidated income statement for the year ended 31
December 2016 would show revenue of GBP26,968,000 and profit before
tax of GBP4,927,000.
The provisional fair value of the net assets at the acquisition
date is as follows:
GBP'000
Client relationships 1,318
Property, plant and equipment 14
Stock 960
Trade and other receivables 1,142
Cash and cash equivalents 98
Trade and other payables (334)
Current tax liabilities (116)
Deferred tax liabilities (250)
Net assets acquired 2,832
Goodwill arising on acquisition 513
Consideration 3,345
The gross contractual amount of trade receivables is equal to
the fair value.
Goodwill comprises the value of expected synergies and other
opportunities arising from the acquisition, management know how,
the skilled work force employed by Treasured Scents (2014) Limited
and other intangible assets that do not qualify for separate
recognition. None of the goodwill recognised is expected to be
deductible for tax purposes. The fair value of consideration has
been calculated by means of an EBITDA multiple supported by a
discounted cashflow model.
The fair value of consideration paid is as follows:
GBP'000
Share consideration 3,345
3,345
The profit and loss for Treasured Scents (2014) Limited from the
date of acquisition to 31 December 2016 is as follows:
GBP'000
Revenue 615
Cost of sales (614)
Gross profit 1
Administrative expenses (152)
Loss before tax (151)
Tax expense 19
Total comprehensive loss for the period (132)
9. Goodwill
Cost GBP'000
Arising on business combination 513
At 31 December 2016 513
Amortisation
At 31 December 2015 and 31 December -
2016
Net book value
At 31 December 2016 513
At 31 December 2015 -
Goodwill represents the excess of consideration over the fair
value of the Group's share of the net identifiable assets of the
acquired subsidiary at the date of acquisition.
Goodwill arising on acquisition in the year ended 31 December
2016 relates to the Group's acquisition of Treasured Scents (2014)
Limited.
Impairment is calculated by comparing the carrying amounts to
the value in use derived from discounted cash flow projections for
Treasured Scents. A CGU is deemed to be an individual fascia and
these have been grouped together into similar classes for the
purpose of formulating operating segments as reported in note 2.
Value in use calculations are based on a discounted cash flow model
("DCF") for the subsidiary, which discounts expected cash flows
over a five-year period using a pre-tax discounts rate of 15%
(2015: nil). Cash flows beyond the five-year period are
extrapolated using the average growth rate of 0.5% (2015: nil).
Management have performed the annual impairment review as
recognised by IAS 36 and have concluded that no impairment is
indicated with the fair value of goodwill exceeding book value.
Key Assumptions and sensitivity to changes in assumptions
The key assumptions are based upon management's historical
experience. The calculation of VIU is most sensitive to the
following assumptions:
-- Sales and EBITDA- this is based on reasonable forecasts for
the first year. These have been forecasted for years two to five
based on expected sales trends
-- Discount Rate - pre-tax discount rate of 15% reflects the
Directors' estimate of an appropriate rate of return, taking into
account the relevant risk factors
-- Growth Rate - used to extrapolate beyond the budget period
and for terminal values based on a long term average growth rate of
0.5%.
Management believe that no reasonably possible change in key
assumptions would lead to an impairment of goodwill.
10. Intangible assets
Customer Patents Website Licences Total
list
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2015 - 63 - - 63
Additions - 28 - - 28
At 31 December 2015 - 91 - - 91
On acquisition of
subsidiaries 1,318 - - - 1,318
Additions - 41 30 6 77
At 31 December 2016 1,318 132 30 6 1,486
Accumulated amortisation
At 1 January 2015 - 22 - - 22
Charge for the year - 4 - - 4
At 31 December 2015 - 26 - - 26
Charge for the year 44 8 4 1 57
At 31 December 2016 44 34 4 1 83
Net book value
At 31 December 2016 1,274 98 26 5 1,403
At 31 December 2015 - 65 - - 65
At 1 January 2015 - 41 - - 41
11. Property, plant and equipment
Land Plant Fixtures Computer Motor Total
and and and equipment vehicles
buildings machinery fittings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Costs
At 1 January
2015 1,400 80 10 5 - 1,495
Additions - 3 16 30 - 49
At 31 December
2015 1,400 83 26 35 - 1,544
Additions - 6 43 42 72 163
On acquisition
of subsidiary - 2 4 - 8 14
Disposals (1,400) - - (9) - (1,409)
At 31 December
2016 - 91 73 68 80 312
Accumulated
depreciation
At 1 January
2015 9 8 1 - - 18
Charge for year 28 18 2 3 - 51
At 31 December
2015 37 26 3 3 - 69
Charge for year 14 14 9 10 11 58
On disposals (51) - - (1) - (52)
At 31 December
2016 - 40 12 12 11 75
Net book value
At 31 December
2016 - 51 61 56 69 237
At 31 December
2015 1,363 57 23 32 - 1,475
At 1 January
2015 1,391 72 9 5 - 1,477
The disposal of land and buildings occurred as part of the
capital reduction exercise referred to in note 18 pursuant to which
the entire issued share capital of WCL was transferred to a company
owned and controlled by Sam Bazini and Eoin Macleod.
12. Inventories
As at 31 December
2016 2015
GBP'000 GBP'000
Finished goods 7,669 5,296
The cost of inventories recognised as an expense and included in
'cost of sales' amounted to GBP11,690,172 in the year ended 31
December 2016 (2015: GBP8,987,787).
13. Trade and other receivables
As at 31 December
2016 2015
GBP'000 GBP'000
Trade receivables - gross 2,674 3,204
Allowance for doubtful debts (110) (100)
Trade receivables - net 2,564 3,104
Other receivables 16 607
Prepayments and accrued income 2,784 459
Total 5,364 4,170
The directors consider that the carrying value of trade and
other receivables measured at book value and amortised cost
approximates to fair value
14. Trade and other payables
As at 31 December
2016 2015
GBP'000 GBP'000
Current
Trade payables 2,537 634
Social security and other taxes - 284
Other payables 23 603
Accruals and deferred income 281 194
Total 2,841 1,715
The directors consider that the carrying value of trade and
other payables measured at book value and amortised cost
approximates to fair value. Included in other payables are amounts
owed to directors of GBP16,918 as at 31 December 2016 (2015:
GBP602,966). The amounts owed to the directors are interest free
and are repayable on demand.
15. Loans and borrowings
As at 31 December
2016 2015
GBP'000 GBP'000
Bank loans
Repayable within 1 year - 201
Repayable within 2 - 5 years - 425
- 626
Total
Repayable within 1 year - 201
Repayable within 2 - 5 years - 425
- 626
The bank loan was secured over the assets of the Company and
transferred out of the Group as part of the capital reduction.
Refer to note 18.
16. Deferred Tax
Deferred tax is calculated in full on temporary differences
under the liability method using tax rate of 19%-20%.
The movement on the deferred tax account is as shown below:
Year ended 31 December
2016 2015
GBP'000 GBP'000
Opening balance 11 5
On acquisition of subsidiary 251 -
Recognised in profit and loss:
Tax expense 16 7
Closing balance 278 12
The deferred tax has arisen due to the timing difference on
accelerated capital allowances and on the intangible assets
acquired in a business combination.
In July 2015 the UK government announced its intention to reduce
the standard corporation tax rate to 18% by 2020. The measure to
reduce the rate to 19% for the financial year beginning 1 April
2017 and to 18% for the financial year beginning 1 April 2020 were
substantively enacted on 26 October 2015 and have been reflected in
the calculation of deferred tax in the December 2016 numbers.
17. Dividends
Year to December 2016 Paid Amount per Total
share GBP'000
4 April
Interim dividend 16 GBP12,000 1,200
25 Nov
Interim dividend 16 9.79p 1,600
2,800
Year to December 2015 Paid Amount per Total
share GBP'000
1 Jan
Interim dividend 15 GBP1,090 109
31 Jan
Interim dividend 15 GBP1,430 143
1 May
Interim dividend 15 GBP1,600 160
10 Oct
Interim dividend 15 GBP6,100 610
1 Dec
Interim dividend 15 GBP9,310 931
1,953
The payment of dividends prior to the group restructuring on 11
November 2016 were based on 100 ordinary shares in issue.
18. Called up share capital
As at 31
December
Date 2016 2015 2016 2015
No of No of
shares shares
'000 '000 GBP'000 GBP'000
Allotted and issued
Ordinary shares of GBP1
each
11 Nov
Share issue on incorporation 16 16,340 - 16,340 -
Sub-division to A and 15 Nov 16,340 - - -
B shares 16
21 Nov
Cancellation of B shares 16 (16,340) - (849) -
Consolidation and subdivision 24 Nov 45,621 - - -
of shares into ordinary 16
shares 25p
Ordinary shares of GBP0.25
each 61,961 - 15,491 -
30 Nov
New share issue 16 2,577 - 644 -
Preference shares of
GBP1 each 15,000 - 15,000
64,538 15,000 16,135 15,000
At the date of incorporation, 2 ordinary shares of GBP1 were
issued.
On 11 November 2016, the Company issued a further 16,339,998
ordinary share of GBP1 each in exchange for 15,000,100 ordinary
shares in WCGL and 1,339,900 ordinary shares in TS 2014.
On 15 November 2016, the Company re-designated and subdivided
the ordinary shares of GBP1 in issue into 16,340,000 A ordinary
shares of GBP0.948 each and 16,340,000 B ordinary shares of
GBP0.052 each.
On 21 November 2016, the Company undertook a capital reduction
pursuant to which 16,340,000 B ordinary shares of GBP0.052 each
held by Sam Bazini and Eoin Macleod where cancelled in
consideration for the transfer of the entire issued share capital
of WCL to a company owned and controlled by Sam Bazini and Eoin
Macleod and the allotment and issue by that company to Sam Bazini
and Eoin Macleod 16,340,000 B ordinary shares of GBP0.052.
On 24 November 2016, the Company consolidated each A ordinary
share of GBP0.948 each into 1,000 A ordinary shares of GBP948 each
and then subdivided each A ordinary share of GBP948 each into 3,792
A ordinary shares of GBP0.25 each. Each A ordinary share of GBP0.25
each was then re-designated into an ordinary share of GBP0.25
each.
On 30 November 2016 in an initial public offering Warpaint
London Plc issued 2,577,320 ordinary GBP0.25 shares at a price of
GBP0.97, resulting in an increase in share capital of GBP644,330
and share premium of GBP1,855,670 and directly attributable share
issue costs of GBP50,000.
All ordinary shares carry equal rights.
19. Other Reserves
Share premium
The share premium reserve contains the premium arising on the
issue of equity shares, net of issue expenses incurred by the
company. On 30 November 2016 in an initial public offering Warpaint
London Plc issued 2,577,320 ordinary GBP0.25 shares at a price of
GBP0.97, resulting in share premium of GBP1,855,670 and share issue
costs of GBP50,000.
Retained earnings
Retained earnings represent cumulative profits or losses, net of
dividends and other adjustments.
Merger reserve
The effect of the application of merger accounting principles on
the merger reserve is that the share capital and other
distributable reserves that existed in Warpaint Cosmetics Group
Limited (the company) as at the point Warpaint London Plc legally
acquired Warpaint Cosmetics Group Limited is accounted for as if it
had been in existence as at the comparative period end, 31 December
2015 and as at the opening balance sheet date, 1 January 2015. The
corresponding entry being the merger reserve so the overall net
assets as at the comparative dates are not affected.
The movement on the merger reserve during the period arose due
to the acquisition of Treasured Scent (2014) Limited on 11 November
2016. The shareholders of Treasured Scent (2014) Limited
transferred their shares to Warpaint London Plc in exchange for
shares in Warpaint London Plc, the difference in fair value of the
consideration was GBP2,005,233. This is adjusted through the merger
reserve as it is considered part of the consideration paid by
Warpaint London Plc to acquire Treasured Scents (2014) Limited.
20. Related party transactions
Transactions between the company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
Compensation of key management personnel (including Directors)
is disclosed in note 5 with the exception of dividends and drawings
which are disclosed in note 18.
During 2016, Treasured Scents (2014) Ltd paid rent in the sum of
GBP123,750 (2015: GBP31,250) to Trading Scents Group Limited, of
which Mr Macleod is a director. At the year end the amount due to
Trading Scents Group Limited was GBPNil (2015: GBPNil).
During 2016, Warpaint Cosmetics (2014) Ltd paid rent in the sum
of GBP30,000 (2015: GBPNil) to Trading Scents Group Limited, of
which Mr Macleod is a director. At the year end the amount due to
Trading Scents Group Limited was GBPNil (2015: GBPNil).
During 2016, Warpaint Cosmetics (2014) Ltd paid rent in the sum
of GBP153,750 (2015: GBP31,250) to Direct Supplies (2014) Group
Limited, of which Mr Bazini is a director. At the year end the
amount due to Direct Supplies (2014) Group Limited was GBPNil
(2015: GBPNil).
During 2016, Warpaint Cosmetics (2014) Ltd paid consultancy fees
in the sum of GBP150,000 to Outdoor Girl Limited, of which Mr Rodol
is a director.
During 2016 as part of the restructure the group sold its
subsidiary company Warpaint Cosmetics Limited by way of sale and
purchase agreement to Johnhenlon Limited, a company which is owned
jointly by Mr Bazini and Mr Macleod. This led to the cancellation
of the ordinary B shares as noted by the capital reduction in the
share capital note.
During the year, the company advanced GBP15,000 to Mr S Bazini,
a director of the company. During the year, the director repaid
GBP93,803. Mr S Bazini incurred expenses on behalf of the company
totalling GBP2,002. At the year end the company owed the sums of
GBP15,779 (2015: GBP200,015) to Mr S Bazini.
During the year, the company advanced GBP15,000 to Mr E Macleod,
a director of the company. During the year, the director repaid
GBP84,803. Mr E Macleod was reimbursed expenses on behalf of the
company totalling GBP2,663. At the year end the company owed the
sums of GBP1,140 (2015: GBP402,952) to Mr E MacLeod.
Dividends paid to Mr S Bazini prior to the company listing on
AIM totalled GBP600,000 (2015: GBP976,500). Dividends paid to Mr E
Macleod prior to the company listing on AIM totalled GBP600,000
(2015: GBP976,500).
21. Financial instruments
Capital risk management
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies. The overall
objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's
competitiveness and flexibility. The Group reports in Sterling. All
funding requirements and financial risks are managed based on
policies and procedures adopted by the Board of Directors.
The Group manages its capital to ensure its ability to continue
as a going concern and to maintain an optimal capital structure to
reduce cost of capital. The capital structure of the Group
comprises equity attributable to equity holders of the Company
consisting of invested capital as disclosed in the Statement of
Changes in Equity and cash and cash equivalents.
The Group's invested capital is made up of share capital and
retained earnings totalling GBP16,013,479 as at 31 December 2016
(2015: GBP8,990,992).
The Group maintains or adjusts its capital structure through the
payment of dividends to shareholders and issue of new shares.
Year ended 31
December
2016 2015
GBP'000 GBP'000
Financial assets
Loans and receivables at amortised
cost including cash and cash equivalents:
Cash and cash equivalents 3,503 1,758
Trade and other receivables 2,617 3,711
6,120 5,469
Financial liabilities
Trade and other payables (2,841) (1,431)
Bank loan - (626)
(2,841) (2,057)
Net 3,279 3,412
Cash and cash equivalents
This comprises cash and short-term deposits held by the Group.
The carrying amount of these assets approximates their fair
value.
General risk management principles
The Group's activities expose it to a variety of risks including
market risk (interest rate risk), credit risk and liquidity risk.
The Group manages these risks through an effective risk management
programme and through this programme, the Board seeks to minimise
potential adverse effects on the Group's financial performance. The
Directors have an overall responsibility for the establishment of
the Group's risk management framework. A formal risk assessment and
management framework for assessing, monitoring and managing the
strategic, operational and financial risks of the Group is in place
to ensure appropriate risk management of its operations.
The following represent the key financial risks that the Group
faces:
Market risk
The Group's activities expose it to the financial risk of
interest rates.
Interest rate risk
The Group's interest rate exposure arises mainly from its
interest-bearing borrowings. Contractual agreements entered into at
floating rates expose the entity to cash flow risk. Interest rate
risk also arises on the Group's cash and cash equivalents. The
Group does not enter into derivative transactions in order to hedge
against its exposure to interest rate fluctuations. An increase in
the rate of interest by 100 basis points would decrease profits by
GBPNil (2015: GBP1,000) with an increase in profits by the same
amount for a decrease in the rate of interest by 100 basis
points.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or a counterparty to a financial instrument fails to meet
its contractual obligations.
The Group's principal financial assets are trade and other
receivables and bank balances and cash. 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's credit risk is primarily attributable to trade
receivables. The Group has a policy of assessing credit worthiness
of potential and existing customers before entering into
transactions. There is ongoing credit evaluation on the financial
condition of accounts receivable using independent ratings where
available or by assessment of the customer's credit quality based
on its financial position, past experience and other factors. The
Group manages the collection of its receivables through its ongoing
contact with customers so as to ensure that any potential issues
that could result in non-payment of the amounts due are addressed
as soon as identified.
The maximum exposure to credit risk in respect of the above is
the carrying value of financial assets recorded in the financial
statements. At 31 December 2016, the Group has trade receivables of
GBP2,564,383 (2015: GBP3,104,231).
The following table provides an analysis of trade receivables
that were due, but not impaired, at each financial year end. The
Group believes that the balances are ultimately recoverable based
on a review of past impairment history and the current financial
status of customers.
As at 31 December
2016 2015
GBP'000 GBP'000
Current 1,296 1,012
1 - 30 days 1,084 1,087
31 - 60 days 112 406
61 - 90 days 89 140
91 + days 93 559
Total trade receivables - gross 2,674 3,204
The Directors are unaware of any factors affecting the
recoverability of outstanding balances at 31 December 2016 and,
consequently, no further provisions have been made for bad and
doubtful debts.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due. The Group's
policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. To achieve
this aim, it closely monitors its access to bank and other credit
facilities in comparison to its outstanding commitments on a
regular basis to ensure that it has sufficient funds to meet the
obligations as they fall due.
The Board receives regular forecasts which estimate cash flows
over the next eighteen months, so that management can ensure that
sufficient funding is in place as it is required.
The tables below summarise the maturity profile of the combined
group's non-derivative financial liabilities at each financial year
end based on contractual undiscounted payments, including estimated
interest payments where applicable:
Year ended 31 December 2016
Between
6 months Between
Less than and 1 1 and
6 months year 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 2,537 - - 2,537
Other payables 23 - - 23
Bank loans - - - -
2,560 - - 2,560
Year ended 31 December 2015
Between
6 months Between
Less than and 1 1 and
6 months year 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 634 - - 634
Other payables 284 - - 284
Bank loans 101 100 425 626
1,019 100 425 1,544
Foreign exchange risk
The Group operates in a number of markets across the world and
is exposed to foreign exchange risk arising from various currency
exposure in respect of cash and cash equivalents, trade receivables
and trade payables, in particular with respect to the US dollar.
The Group mitigates its foreign exchange risk by negotiating
contracts with key suppliers that offer a flexible discount
structure to offset any adverse foreign exchange movements and
through the use of forward currency contracts.
2016 2015
GBP'000 GBP'000
Derivatives designated and effective
as hedging instruments carried at
fair value:
Exchange gain on forward foreign currency 37 -
contracts
Forward contracts and options
The Group enters into forward foreign exchange contracts and
options to manage the risk associated with anticipated sale and
purchase transactions which are denominated in foreign
currencies.
As at 31 December 2016, the group has 2 (31 December 2015: Nil)
forward foreign exchange contracts outstanding. Derivative
financial instruments are carried at fair value.
The following table details the USD foreign currency contracts
outstanding as at the balance sheet date.
a) Contracted exchange rate GBP/$ 2016 2015
rate
3 months or less 1.2411 -
- 1.266
3 to 6 months - -
2016 2015
b) Contract value GBP'000 GBP'000
3 months or less 1,398 -
3 to 6 months - -
1,398 -
2016 2015
c) Foreign currency $'000 $'000
3 months or less 1,750 -
3 to 6 months - -
1,750 -
Fair value of financial assets and liabilities
The Directors consider that there is no significant difference
between the book value and fair value of the Group's financial
assets and liabilities.
22. Pension costs
The Group operates a defined contribution pension scheme.
Contributions payable to the company's pension scheme are charged
to the statement of comprehensive income in the period to which
they relate. The amount charged to profit in each period was
GBP6,228 (2015: GBP5,746).
23. Operating lease commitments - Group company as lessee
The group leases offices and warehouses under non-cancellable
operating lease agreements. The lease terms are between 5-10 years,
and are renewable at the end of the lease period at market
rate.
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
Land and buildings 2016 2015
GBP'000 GBP'000
Not later than 1 year 360 -
Later than 1 year and not later than 1,440 -
5 years
Later than 5 years 1,650 -
Total 3,450 -
24. Controlling party
In the opinion of the Directors there is no ultimate controlling
party.
25. Earnings per share
Basic earnings per share are calculated by dividing profit or
loss attributable to ordinary equity holders by the weighted
average number of ordinary shares in issue during the period.
The acquisition of Warpaint Cosmetics Group Limited by Warpaint
London plc on 11 November 2016 has been accounted for using merger
accounting principles. The effect of using merger accounting
principles on share capital is that the capital that existed as at
the point Warpaint London plc legally acquired Warpaint Cosmetics
Group Limited is accounted for as if it had been in existence as at
the comparative period end (31 December 2015) and as at the opening
balance sheet date (1 January 2015).
The weighted average number of shares in issue for the current
and prior year has therefore been stated to reflect the post IPO
share capital structure, this adjustment assumes the total shares
issued during the IPO were in issue throughout the whole of the
current and previous period presented. The weighted average number
of shares includes the shares issued as consideration for the
acquisition of Treasured Scents (2014) Limited on 11 November
2016.
2016 2015
Basic earnings per share (pence) 5.07 7.11
The calculation of basic earnings
per share is based on the following
data:
2016 2015
Earnings GBP'000 GBP'000
Earnings for the purpose of basic
earnings per share, being the net
profit 3,141 4,386
Number of shares 2016 2015
Weighted number of ordinary shares
for the purpose of basic earnings
per share 61,981,720 61,722,383
WARPAINT LONDON PLC
APPENDIX A
TREASURED SCENTS (2014) LIMITED
UNAUDITED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER
2016
Year ended 31
December
2016 2015
GBP'000 GBP'000
Revenue 5,676 5,271
Cost of sales (4,233) (4,601)
Gross profit 1,443 670
Administrative expenses (969) (722)
Profit from operations 474 (52)
Analysed as:
Profit from operations before
exceptional items 477 (52)
Exceptional items (3) -
----------------------------------- -------- --------
Finance income - 2
Profit before tax 474 (50)
Tax expense (105) 8
Total comprehensive profit/(loss)
for the financial year 369 (42)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUWCAUPMGRB
(END) Dow Jones Newswires
May 10, 2017 02:00 ET (06:00 GMT)
Warpaint London (LSE:W7L)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Warpaint London (LSE:W7L)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
