TIDMW7L
RNS Number : 2813J
Warpaint London PLC
26 April 2022
26 April 2022
Warpaint London PLC
("Warpaint", the "Company" or the "Group")
Results for the year ended 31 December 2021
Warpaint London plc (AIM: W7L), the specialist supplier of
colour cosmetics and owner of the W7 and Technic brands is pleased
to announce its audited results for the year ended 31 December
2021.
Financial Highlights
-- Strong growth in sales, profitability and cash generation
during the year reflecting the focus on growing sales of the
Group's branded products
-- In 2021 Group sales increased by 24.1% to GBP50.0 million
in 2021 (2020: GBP40.3 million)
-- UK revenue increased by 20% to GBP25.3 million (2020:
GBP21.1 million)
-- International revenue increased by 29% to GBP24.7 million
(2020: GBP19.1 million)
-- Gross profit margin increased to 33.8% (2020: 31.1%), against
the backdrop of supply side price inflation and significant
increases in freight costs
-- EBITDA of GBP7.6 million (2020: GBP2.8 million)
-- Adjusted profit from operations of GBP7.0* million (2020:
GBP2.5* million). Statutory profit from operations of GBP3.8
million (2020 loss of GBP0.9 million)
-- Reported profit before tax of GBP3.7 million (2020 loss of
GBP1.1 million)
-- Adjusted earnings per share of 7.8p* (2020: 3.1p*)
-- Cash of GBP4.1 million at year end 2021 (2020: GBP4.9 million)
after investment in additional inventory. Inventory at 31
December 2021 of GBP18.1 million (31 December 2020 GBP14.4
million)
-- The Group was at 31 December 2021, and still is, debt free
with the remaining loans and hire purchase contracts totaling
GBP0.3 million having been repaid in full in April 2021
-- Final dividend recommended of 3.5 pence per share (2020: 3.0
pence per share), bringing the total dividend for the year
to 6.0 pence per share (2020: 5.8 pence per share, including
a 1.3 pence special dividend)
*Adjusted numbers are closer to the underlying cash flow
performance of the business which is regularly monitored and
measured by management, the adjustments made to the statutory
numbers are set out in the table below
Operational Highlights
-- Further expansion in the number of Tesco stores stocking the
Group's products and the stocking of additional W7 product
lines. W7 branded products now sold in over 1,400 Tesco stores
in the UK
-- Further product expansion in the US, including W7 products
now being stocked in over 1,200 Five Below stores. New sales
team in place in the USA to drive growth in the largest colour
cosmetics market in the world
-- Online sales continue to accelerate, with an increase of 159%
in Group e-commerce sales in 2021 to account for 2.7% of Group
sales (2020: 1.3% of Group sales)
-- Further expansion of online sales presence with the launch
in China of official W7 brand stores owned by the Group on
Taobao Mall (Tmall), the most visited B2C online retail platform
in China and Xiaohongshu (Red), one of China's foremost social
media, fashion and luxury shopping platforms. We now have
15 online distributors in China
-- The Group's expansion strategy continues with active discussions
being held with additional major retailers in the UK and internationally
Post-Period End Highlights
-- Successful launch in Boots of 45 W7 products in an initial
80 stores in February 2022
-- Record trading experienced in the first quarter of 2022 -
Group sales for the first three months of 2022 approximately
60% ahead of the same period in 2021, with sales increases
seen across all the Group brands
-- Gross margin continued to improve in the first quarter of
2022 versus both Q1 2021 and the full year 2021
-- Six new accounts opened in the USA, including CVS, where a
significant Christmas 2022 order has also been received
Commenting, Clive Garston, Chairman, said: "I am pleased that
despite much of the world having some level of lockdown during 2021
and the continued enforced temporary closure of a number of the
Group's customers' retail outlets, sales and profits increased in
2021 to exceed the 2019 pre-pandemic level.
"In the first quarter of 2022 we have enjoyed further profitable
growth as we focus on supplying additional retailers and growing
sales through our existing customers, taking more warehouse space
and adding further stores. In the UK the launch of our W7 products
in Boots in February 2022 is a particular highlight and we
anticipate adding further large store groups to our customer base
in due course.
"The global cosmetics market is increasingly seeing customers
transferring to more value orientated brands, such as those
produced by the Group, and I believe we are very well placed with
our high quality focused offering to capture further market
share.
"I am optimistic that the very encouraging trends we have seen
in 2021 and into 2022 will continue, and that we have the right
offering and strategy in place to continue to deliver profitable
future growth."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 which is part of UK law
by virtue of the European Union (Withdrawal) Act 2018
Investor Webinar
Warpaint's management will be hosting an online presentation and
Q&A session later today at 5.30 p.m. BST. This session is open
to all existing and prospective shareholders. Those who wish to
attend should register via the following link and they will be
provided with access details:
https://us02web.zoom.us/webinar/register/WN_RAnJgEoaSdiUqNkdO9yt0w
Participants will have the opportunity to submit questions
during the session, but questions are welcomed in advance and may
be submitted to: warpaint@investor-focus.co.uk .
Warpaint London c/o IFC
Sam Bazini - Chief Executive Officer
Eoin Macleod - Managing Director
Neil Rodol - Chief Financial Officer
Singer Capital Markets (Nominated Adviser
& Joint Broker)
Shaun Dobson, Jen Boorer, Alex Bond -
Investment Banking 020 7496 3000
Shore Capital (Joint Broker)
Patrick Castle, Daniel Bush - Corporate
Advisory
Fiona Conroy - Corporate Broking 020 7408 4090
IFC Advisory (Financial PR & IR)
Tim Metcalfe, Graham Herring, Florence
Chandler 020 3934 6630
Warpaint London
Warpaint sells branded cosmetics under the lead brand names of
W7 and Technic. W7 is sold in the UK primarily to retailers and
internationally to local distributors or retail chains. The Technic
brand is sold in the UK and continental Europe with a significant
focus on the gifting market, principally for high street retailers
and supermarkets. In addition, Warpaint supplies own brand white
label cosmetics produced for several major high street retailers.
The Group also sells cosmetics using its other brand names of
Man'stuff, Body Collection, Very Vegan, and Chit Chat.
HEADLINE RESULTS FOR THE YEARED 31 DECEMBER 2021
Statutory Results Year ended 31 Dec Year ended 31 Dec
2021 2020
Revenue GBP50.0m GBP40.3m
Profit / (loss) from operations GBP3.8m GBP(0.9)m
Profit margin from operations 7.6% na
Profit before tax ("PBT") GBP3.7m GBP(1.1)m
/ (Loss before tax)
Earnings per share ("EPS")/
(Loss per share) 3.7p (1.3)p
Cash and cash equivalents GBP4.1m GBP4.9m
Adjusted Statutory Results Year ended 31 Dec Year ended 31 Dec
2021 2020
Revenue GBP50.0m GBP40.3m
Adjusted profit from operations GBP7.0m* GBP2.5m*
Adjusted profit margin from 13.9%* 6.2%*
operations
Adjusted PBT GBP6.9m* GBP2.3m*
Adjusted EPS 7.8p* 3.1p*
Cash and cash equivalents GBP4.1m GBP4.9m
Adjusted numbers are closer to the underlying cash flow
performance of the business which is regularly monitored and
measured by management, the adjustments made to the statutory
numbers are as follows:
2021 2020
Statutory profit / (loss) GBP3.8m GBP(0.9)m
from operations
Exceptional items GBP0.6m GBP0.3m
Amortisation GBP2.4m GBP2.4m
Share based payments GBP0.2m GBP0.7m
*Adjusted profit from operations GBP7.0m GBP2.5m
*Adjusted profit margin from GBP7.0m / GBP50.0m GBP2.5m / GBP40.3m
operations = 13.9% = 6.2%
Statutory PBT / (LBT) GBP3.7m GBP(1.1)m
Exceptional items GBP0.6m GBP0.3m
Amortisation GBP2.4m GBP2.4m
Share based payments GBP0.2m GBP0.7m
*Adjusted PBT GBP6.9m GBP2.3m
Statutory profit / (loss) GBP2.8m GBP(1.0)m
attributable to equity holders
Exceptional items GBP0.6m GBP0.3m
Amortisation GBP2.4m GBP2.4m
Share based payments GBP0.2m GBP0.7m
Adjusted profit attributable GBP6.0m GBP2.4m
to equity holders
Weighted number of ordinary
shares 76,751,187 76,749,125
*Adjusted EPS 7.8p 3.1p
Exceptional items include GBP0.03 million of staff restructuring
and voluntary redundancy costs (2020: GBP0.24million), GBP0.19
million of non-recurring legal costs (2020: GBP0.08 million), and a
GBP0.37 million provision for content use and associated legal fees
(2020: GBPnil).
CHAIRMAN'S STATEMENT
Warpaint entered the Covid-19 pandemic in 2020 in robust health,
with a strong balance sheet and an agile management team capable of
dealing with the challenges presented. As the worst effects of the
pandemic receded in 2021, with the ending of lockdowns in most
parts of the world, the Group has emerged in an even stronger and
more focused position.
In 2021 we enjoyed a return to growth, with sales and profits
exceeding those achieved in 2019, the last full period before the
pandemic struck. During the year we focused on increasing our
presence in larger retailers globally, through expanding existing
relationships and developing new ones. This larger footprint has
provided more stability and visibility for the Group, and coupled
with our growing online presence, provides a strong platform for
the future.
Trading has continued to improve in the first quarter of 2022,
with the Group enjoying record quarterly sales and profits. We
expect demand to remain at a higher level than pre pandemic and for
sales to continue to grow, despite inflationary pressures and the
increase in commodity prices exacerbated by the dreadful events
taking place in the Ukraine. The Group has no suppliers in either
Russia or Ukraine, and no significant historic sales to either
country.
Results
2021 was a year of improvement in financial performance for the
Group as the worst of the coronavirus pandemic receded and growth
resumed. This was achieved in a time of unprecedented increases in
freight cost as well as the effect of the pandemic.
Adjusted profit from operations was GBP7.0 million (2020: GBP2.5
million) on revenue of GBP50.0 million (2020: GBP40.3 million) with
basic earnings per share of 3.7p (2020: (1.3)p) and adjusted
earnings per share of 7.8p (2020: 3.1p). Adjusted numbers exclude
exceptional costs (staff restructuring and voluntary redundancy
costs, certain non-recurring legal costs, stock relocation costs
and a provision for content use and associated legal fees),
amortisation in relation to acquisitions and share based
payments.
During the latter part of 2021, the Group increased inventory
levels to ensure anticipated demand in the first quarter of 2022
could be fulfilled, with inventories at 31 December 2021 increasing
to GBP18.1 million (31 December 2020: GBP14.4 million). The balance
sheet remains strong, with cash at 31 December 2021 of GBP4.1
million (31 December 2020: GBP4.9 million), and the Group is now
debt free with the remaining loans and hire purchase contracts
totalling GBP0.3 million having been repaid in full in April
2021.
Dividend
In accordance with the Group's policy to continue to pay
appropriate dividends, the board is pleased to recommend an
increased final dividend of 3.5 pence per share which, if approved
by shareholders at the AGM, will be paid on 5 July 2022 to
shareholders on the register at 18 June 2022. The shares will go
ex-dividend on 17 June 2022.
Board and People
The pandemic dramatically impacted the personal and working
lives of everyone. At Warpaint we quickly made the required changes
in 2020 to working practices and continued in 2021 to adapt and
modify these as appropriate. I am delighted with the way in which
everyone has met these challenges and I would like to offer my
thanks in particular to the Group's employees and my fellow board
members for their dedication, flexibility and exceptional
efforts.
On 3 August 2021 we were pleased to announce the appointment of
John Collier from 1 September 2021 as an independent non-executive
director of the Company. John is a Canadian national, based in New
York, USA, who has spent nearly 30 years in the consumer goods
industry, primarily at Revlon, the multinational cosmetics, skin
care, fragrance, and personal care company. He brings with him a
wealth of experience in the cosmetics sector that is proving
particularly beneficial as we seek to grow our North American
business and I welcome him to the board.
Annual General Meeting
The Company's annual general meeting will be held at the
Company's offices at Units B&C, Orbital Forty Six, The Ridgeway
Trading Estate, Iver, Bucks, SL0 9HW on 27 June 2022 at 10 a.m. and
after the restrictions caused by the Covid-19 pandemic over the
last two years we will be delighted to welcome those shareholders
who are able to attend in person.
Summary and Outlook
I am pleased that despite much of the world having some level of
lockdown during 2021 and the continued enforced temporary closure
of a number of the Group's customers' retail outlets, sales and
profits recovered in 2021 to exceed the 2019 pre-pandemic level.
The Warpaint team has delivered tremendous results and given this
performance the board is pleased to be recommending the payment of
an increased dividend.
In the first quarter of 2022 we have enjoyed further profitable
growth as we focus on supplying additional retailers and growing
sales through our existing customers, taking more warehouse space
and adding further stores. In the UK the launch of our W7 products
in Boots in February 2022 is a particular highlight and we
anticipate adding further large store groups to our customer base
in due course.
The global cosmetics market is increasingly seeing customers
transferring to more value orientated brands, such as those
produced by the Group, and I believe we are very well placed with
our high quality focused offering to capture further market
share.
I am optimistic that the very encouraging trends we have seen in
2021 and into 2022 will continue, and that we have the right
offering and strategy in place to continue to deliver profitable
future growth.
Clive Garston
Chairman
25 April 2022
CHIEF EXECUTIVE'S STATEMENT
2021 was a period of strong growth for the Group as most of
Warpaint's markets emerged from the worst of the Covid-19 pandemic.
Group sales increased by 24% in 2021 to GBP50.0 million, to surpass
the level achieved in 2019, before the pandemic struck. These sales
were achieved at an increased gross margin of 33.8% (2020: 31.1%)
despite cost pressures, particularly regarding freight, and
resulted in a return to a reported profit before tax of GBP3.7
million (2020: loss of GBP1.1 million).
Our strategy is to produce a wide range of high quality
cosmetics at an affordable price. We aim to increase sales to our
existing customers and to win new customers, particularly those
retailers with significant sales footprints, both in the UK and
internationally. We are also focussing strongly on growing our
online sales. This has provided more stability and visibility for
the Group and a strong platform for continued growth.
The Group has continued to reduce the focus on its close-out
business and in 2021 close-out sales accounted for 9% of revenue
(2020: 12%).
W7
The Group's lead brand remains W7, with sales in 2021 accounting
for 52% of total Group revenue (2020: 45%). Overall W7 sales
increased by 42% in 2021 to GBP25.9 million compared to GBP18.2
million in 2020 and showed an increase of 15% over 2019, the last
period not impacted by the pandemic.
In the UK, W7 revenues were up 41% in 2021 at GBP12.0 million
compared to GBP8.5 million in 2020. The UK is the most important
market for W7, having grown in importance over the last two years
to account for 46% of W7 sales in 2021, compared to 35% in
2019.
The growth in W7 UK sales has been assisted by the roll out into
Tesco, together with a growth in sales from the Group's other
larger customers in the UK. In February 2020 the Group's W7
products were in 56 Tesco stores, today they are in over 1,400
across the various store formats, with planned further expansion of
the range of W7 and accessory products being stocked by Tesco, both
in stores and online. W7 sales in the UK received a further boost
post period end with Boots starting to stock a range of
approximately 45 W7 products in an initial 80 stores from February
2022. We anticipate growth in the presence with Boots in due
course.
Internationally W7 sales were up on 2020 in all of the Group's
reported regions. In Europe sales increased by 25% compared to
2020, in the US sales increased by 83% compared to 2020, and in the
rest of the world sales increased by 92% compared to 2020.
We believe that W7 has a compelling brand proposition and will
continue to benefit from consumers wanting a high quality, but
excellent value for money product.
Technic
The Technic brands comprise Technic, Body Collection and
Man'stuff. Since the acquisition of the Technic brands, through the
acquisition of Retra Holdings in November 2017, we have focused on
increasing the sales of the all year round cosmetics sold under the
brands. The proportion of gifting sales for Retra reduced to 37% in
2021 from 47% in 2020, with single products sold under the Technic
brands accounting for 63% of sales in 2021, with an additional
shift to all year round gifting products from specific Christmas
focused gifting product.
Sales of branded Technic product in 2021 was 37% of total Group
revenue (2020: 36%). Overall Technic sales grew by 28% in 2021 to
GBP18.5 million, compared to GBP14.5 million in 2020 and GBP16.7
million in 2019.
In 2021, UK revenues were 48% of Technic's total sales and they
increased by 11% over the year returning to a similar level seen in
2019, aided by sales of Technic and Body Collection branded
products in wilko, which continue to grow.
Sales in Europe, a market almost as large for Technic as the UK,
accounted for 46% of Technic's sales and increased by 16% compared
to 2020 and were 6% higher than the level achieved in 2019.
Sales for the Technic Brands outside of the UK and Europe
accounted for 6% of Technics sales (2020 5%). In the USA, sales
decreased by 20% compared to 2020, and in the rest of the world
sales increased by 133% compared to 2020, albeit the sales were
small in these regions in the context of the Group as a whole being
2% of Group revenues.
The Retra business also produces and sells own brand white label
cosmetics for several major high street retailers, with such sales
being 2% of Group revenue (2020: 7%). We continue to assess private
label opportunities on a case by case basis, based on the return
they can deliver and they are not a strategic focus for the
Group.
As with W7 we saw a strong recovery in sales for Technic in the
UK, Europe and the rest of the world as the Covid-19 lockdowns were
ended during 2021, with growth continuing in the first quarter of
2022.
Close-out
Whilst the Group's close-out division continues to provide a
good and profitable source of intelligence in the colour cosmetics
market, taking advantage of profitable close-out opportunities as
they become available, the strategy remains to reduce close-out
sales. The close-out division was therefore a smaller proportion of
Group sales in 2021, representing 9% of the overall revenue of the
Group, down from 12% in 2020 and 16% in 2019.
New Product Development
New product development continues to be core to the Group's
proposition to provide new products that are on trend, fast to
market and that meet the consumer's quickly changing needs.
In 2021 our New Product Development Team continued to develop a
strong pipeline of new products, focused on the demands of our
customers.
Our new product development strategy continues to utilise a
variety of manufacturing partners, predominantly in China and
Europe, that provide high quality products quickly, at very
competitive prices, and meet our legal and ethical compliance
requirements, together with ensuring continuity of delivery. This
process is supported by the Group's Hong Kong based subsidiary
sourcing office and its China subsidiary (Jinhua Badgequo Cosmetics
Trading Company Ltd), with local employees able to explore new
factories and oversee quality control and ethical sourcing.
The Group is very focused on the environmental impact of its
products and all plastics have been removed from the outer
packaging of its gifting and practically all of its all year-round
products, and the Group has virtually eliminated the use of single
use packaging in its products completely. The Group's product
packaging therefore uses paper and cardboard wherever practicable,
which enables the Group, the wholesaler and end user to recycle the
waste effectively. In terms of the Group's product casings, the use
of plastic is sometimes practically unavoidable, but recyclable
packaging is used wherever possible.
All new W7 brand products are being manufactured without
parabens and the Company is reformulating existing products where
feasible. The Group is on track to be paraben free for all products
in the next 18 to 24 months. No heavy metals such as TBTO
(preservative) and other ingredients of concern are added to our
products and all raw materials comply with the strict regulations
applicable in the EU, USA, Canada and other markets in which we
operate.
e-Commerce
During 2021 we continued to focus on driving online sales.
Whilst direct online sales remain a modest proportion of the
Group's overall sales at 2.7% (2020: 1.3% of Group sales) , they
have grown from GBP0.2 million in 2019 to GBP0.5 million in 2020
and to over GBP1.3 million in 2021, an increase of 159% from 2020
to 2021.
In addition to growing sales through the W7 and Technic brands'
own bespoke e-commerce sites, the focus has continued on growing
sales of our brands in the UK and the US on Amazon, which has
helped further accelerate our online sales.
Further expansion of the Group's online sales presence was
implemented in the second half of 2021 in China, with the launch of
official W7 brand stores owned by the Group on Taobao Mall (Tmall),
the most visited B2C online retail platform in China and
Xiaohongshu (Red), one of China's foremost social media, fashion
and luxury shopping platforms.
Marketing and PR
In 2021 we continued our focus on ensuring our marketing
programmes were both fresh and innovative, focused on both customer
loyalty and showcasing our products to new potential consumers,
with a particular emphasis on social media. Our online loyalty
programme, initiated in 2020, is also helping to retain customers
and increase basket size.
Strategy
On an annual basis the board carries out a process of developing
a three-year strategic plan for the business based on market data,
experience and the Group's aims. This is targeted by year, measured
monitored and reviewed as part of the board's on-going business
throughout the year. The strategic plan has been updated for 2022,
forming the basis of the Group's development through to 2024. The
plan is designed to drive shareholder value and has defined targets
for sales, EBITDA, earnings per share and cash generation with a
particular emphasis on driving incremental EBITDA growth.
The strategic plan comprises six key pillars:
-- Develop and build the Group's brands and provide new product
development that meets changing trend and consumer needs
The Group ensures that everybody within the business has crystal
clarity of the positioning of the Group's portfolio of brands; that
there is a clear brand hierarchy; non-core brands and products are
eliminated; that close-out continues to reduce as a proportion of
sales; and the Group delivers quality new product development and
gifting sets that are on-trend and meets the consumers changing
needs.
-- Develop and nurture the current core business
A major objective of the Group is to continue to develop and
grow the presence of the Warpaint brands beyond their existing
customer base. There is still, however, significant potential to be
realised and further distribution gains in the current customer
base and the Group is committed to ensuring this potential is
maximised. The Group is focused on ensuring there is a clarity of
product offering to each customer segment and to supporting its
customers with relevant new products; by using appropriate
marketing and innovative merchandising solution to draw consumers
into customer stores; and by cross selling the Group's brands and
categories for example accessories, body mists, gifting and skin
care where appropriate.
-- Grow Market Share in the UK
The business continues to focus on increasing the presence of
the Group's brands in channels that our consumers shop in, to
increase accessibility and drive profitable market share growth. As
a result of this strategy, the Group has successfully launched the
W7 brand into Tesco, where distribution gains across all store
formats are successfully being driven, into Boots, and the Technic
and Body Collection brands into wilko. It continues to have active
discussions with other major retailers who are currently in
channels that the Group is yet to materially supply to and
expanding the UK customer base is a key focus of management. This
is particularly opportune as consumers and retailers across all
sectors alike are increasingly looking to provide quality products
to their customers at affordable prices.
-- Grow market share in the USA and China
The USA and China continue to provide a major growth opportunity
for the Group. In the USA, the Group is establishing agency
channels and using employees to directly sell to retailers. A core
product range for the USA has been established with minimum margin
requirements; whilst targeted discussions are now underway to gain
both gifting and all year around listings. In China the Group
conducts business locally through its Chinese subsidiary company.
We are also continuing to register products for sale in China in
order to grow our total offering and increase sales. This has led
to the development of relationships with distributors in the region
who have the capability to drive sales of the W7 brand via a W7
storefront on on-line market places.
-- Develop the online/e-commerce strategy for brand development and profitable sales
The Group aims to grow and maximise profitable sales across the
Group's on-line sales channels. As well as continuing to sell on
the businesses' own websites and developing its own consumer
community, plans continue to be executed to develop sales across
Amazon platforms. W7 stores have been launched in the UK, USA and
Europe on Amazon and are fulfilled by Amazon. Further on-line sales
platforms and geographies will be evaluated and, where profitable
opportunities identified, launched over the course of the three
year plan. The Group continues to develop and build its brands by
utilising brand ambassadors, influencers and make-up artists to
engage actively with its target audience. The Group wants to ensure
that consumers are adequately inspired and educated on how the
Group's products can be used to experiment and achieve different
looks. Developing the social media strategy also directly impacts
the Group's online sales strategy.
-- Develop and implement appropriate strategies that ensure
Warpaint reduces its impact on the environment
The Group recognises consumers', customers' and our own
requirement to reduce our environmental impact. The business has
already identified and implemented a number of initiatives to
reduce our environmental footprint via reduced shipping and road
mileage; removing plastics where possible from packaging and
improving recyclability; removing parabens from ingredients; and
ensuring all products are manufactured cruelty free. Further
initiatives have been identified and targeted with the aim of being
implemented across the course of the three year plan. Further
information is contained within the ESG section of this report.
Brands
As previously announced, in 2020 we undertook a review of all
our brands, removing from sale those small number of brands that
were sub-scale and did not have a compelling market position. This
exercise enabled the Group to concentrate on its core W7, Technic,
Body Collection, Man'stuff, Chit Chat and Very Vegan brands during
the year with an improved focus.
Customers & Geographies
The largest markets for sales of our Group brands are in the UK
and Europe. In 2021 our top ten customers represented 57% of
revenues (2020: 48%). Group sales are made in 43 countries (2020:
43).
UK
The UK accounted for 51% of Group sales in 2021 (2020: 53%),
with UK sales increasing by 20% to GBP25.3 million (2020: GBP21.1
million), led by the growth in sales of our lead brand W7, which
increased by 41%. Total Group sales in 2021 in the UK were also 12%
higher than the level achieved in 2019, despite continued lockdowns
in the UK for much of the first half of 2021.
The top ten UK Group customers accounted for 63% of UK sales in
2021 (2020: 63%). Particularly strong growth was seen during the
year with, Tesco (up 445%), T K Maxx (up 39%) and wilko (up
44%).
Europe
Prior to the onset of the Covid-19 pandemic in March 2020,
Continental Europe was for some time an area of excellent growth
for the Group. Following significantly reduced demand caused by
country wide lockdowns in 2020, the gradual opening up in 2021
boosted Group sales in Europe by 19% to GBP18.0 million compared to
GBP15.1 million in the same period in 2020. Sales for the Group's
brands into Europe are mainly to Denmark, Spain, France and
Sweden.
USA
USA sales, in sterling terms, increased by 39% in 2021 to GBP3.0
million (2020: GBP2.1 million) and grew by 49% in US dollar terms.
This equated to 6% of overall 2021 Group sales (2020: 5%). USA
sales remain below the 2019 level as the focus continues to be to
increase the sales of the Group's brands rather than locally
sourced close-out . In the USA 89% of sales in 2021 were from the
sale of the Group's brands (2020: 83%).
Following a successful trial with Five Below, W7 products are
now being stocked in over 1,200 of their stores in the USA.
A good performance was also seen from the Group's other major
customers in the USA, including Macys Backstage, Marshalls, and TJ
Maxx. Going forward the focus is to continue to target the larger
store groups and to focus on growing our US online sales via Amazon
FBA. Six new accounts have been added in the US post period end ,
including with CVS, where a significant Christmas 2022 order has
also been received.
Rest of the World
Sales in the rest of the world increased by 94% from GBP1.9
million in 2020 to GBP3.7 million in 2021, accounting for 7.3% of
overall Group sales (2020: 4.7%), and were 31% higher in 2021
compared to the 2019 pre-pandemic level . In Australia, which is a
key country for the Group in the rest of the world region, sales
increased by 128% in 2021 to GBP2.4 million. Since the easing of
the Covid-19 lockdowns in the rest of the world region we have seen
a strong recovery and growth in sales of our brands.
Summary and Outlook
I am pleased with the strong performance in 2021, with a
significant recovery across the Group, following a difficult 2020
for everyone and despite continuing Covid-19 lockdowns in many
countries during 2021, particularly in the first half.
We have seen particularly strong growth in the UK, with sales
increasing beyond the level achieved in 2019, aided by the growing
sales of our W7 brand through Tesco and of our Technic and Body
Collection brands through wilko. Additionally, the launch of W7
into Boots in February 2022 provides a further significant
opportunity. We have also seen an improved performance globally and
particularly in the US, aided by our successful roll out with Five
Below.
The improved profit and gross margin performance in 2021 is
despite cost headwinds, particularly with regard to freight. Group
container freight costs were GBP3 million higher in 2021 than they
were in 2020. In recent months we have seen some reduction in
freight costs, although they remain above historic levels, and with
changes to our logistics, such as direct shipping of product from
China to the USA, we anticipate this could have a further positive
impact on Group margins going forward.
Warpaint is very well positioned to take advantage of the
increasing trend for consumers to move to the type of high quality
value orientated products offered by the Group. We have a robust
supply chain and an increasing number of outlets selling our
products. We are working in partnership with our existing retailers
to grow sales further and are in active discussions with additional
major retailers globally.
Trading in 2022 has started strongly with a record first
quarter. Sales for the first three months of 2022 are approximately
60% ahead of the same period in 2021, with sales increases seen
across all of the Group's brands at improved levels of gross
margin. I am encouraged by the Group's prospects for the rest of
the year and beyond as we seek to further increase our retailer
penetration and online sales, together with looking to grow sales
through our existing customer outlets.
I look forward to updating further on our progress later in the
year and with significant opportunities for further growth I look
forward to the future with confidence.
Sam Bazini
Chief Executive Officer
25 April 2022
FINANCIAL REVIEW
In 2020 results were adversely impacted by the Covid-19
pandemic, however 2021 has seen the Group achieve results ahead of
2020 and 2019 a year not affected by the pandemic. Group revenue
increased in the year by 24% and adjusted profit before tax
increased in the year by 200%. Most pleasing in the year was the
improvement in gross margin by 2.7% to 33.8%, despite some
increased costs in the supply chain, particularly with freight. The
Group continues its strategy of building the W7 and Technic brands
in the UK and internationally, and we remain focused on margin,
being debt free, and generating cash.
The Group monitors its performance using a number of key
performance indicators which are agreed and monitored by the
board.
2021 2020
Statutory PBT / (LBT) GBP3.7m GBP(1.1)m
Exceptional Items GBP0.6m GBP0.3m
Amortisation GBP2.4m GBP2.4m
Share based payment GBP0.2m GBP0.7m
*Adjusted PBT GBP6.9m GBP2.3m
Exceptional items include GBP0.03 million of staff restructuring
and voluntary redundancy costs (2020: GBP0.24million), and GBP0.19
million of non-recurring legal costs (2020: GBP0.08 million), and a
GBP0.37 million provision for content use and associated legal fees
(2020: GBPnil).
Headline results, shown below, represent the performance
comparisons between the consolidated statements of income for the
years ended 31 December 2020 and 31 December 2021.
Revenue
Group revenue for the year increased by 24.1% from GBP40.3
million in 2020 to GBP50.0 million in 2021.
Company branded sales were GBP44.4 million in the year (2020:
GBP32.8 million). Our W7 brand had sales in the year of GBP25.9
million (2020: GBP18.2 million). Our Technic brand contributed
sales of GBP18.5 million in the year (2020: GBP14.5 million).
Our Retra subsidiary business had sales of retailer own brand
white label cosmetics of GBP1.1 million in the year (2020: GBP2.6
million). The white label business is traditionally cost
competitive and Retra chooses which projects to undertake based on
commercial viability, and in particular margin.
The close-out business revenue reduced by 8.4% from GBP4.9
million in 2020 to GBP4.5 million in 2021 as the Group, in line
with its strategy, continued to reduce its focus on close-out
opportunities.
In the UK sales increased by 19.8% to GBP25.3 million (2020:
GBP21.1 million). Internationally, revenue increased 28.9% from
GBP19.1 million in 2020, to GBP24.7 million 2021. In Europe Group
sales increased by 19.4% to GBP18.0 million (2020: GBP15.1
million). In the rest of the world Group sales increased by 93.7%
to GBP3.7 million (2020: GBP1.9 million). In the US Group sales
increased by 38.5% to GBP3.0 million (2020: GBP2.1 million).
E-commerce sales continued to grow in the year and now represent
2.7% / GBP1.3 million of group revenue (2020: 1.3% / GBP0.5
million).
Other income of GBPnil was received from the UK Government's
furlough scheme in the year (2020: GBP0.4mil)
Product Gross Margin
Gross margin was 33.8% for the year compared to 31.1% in 2020.
Since the start of 2021 we have noticed slight price increases in
US dollars coming from our supply base in China and container
freight rates have increased dramatically. We also noticed an
increase in outbound freight costs to deliver goods to our European
customers. Nevertheless, together with a weakening dollar compared
to 2020, our management teams across the Group were swift to
recognise and navigate cost headwinds so that new product
development and sourcing helped achieve a gross margin
improvement.
Container freight costs have increased as a percentage of the
cost of goods by 11% in 2021, costing an additional GBP3.0 million,
compared to container rates in 2020. As we end Q1 2022 container
rates have begun to fall, and if maintained will improve our gross
margin in the current year.
We remain focused on improving gross margin where possible in
all our businesses and are making good use of our Hong Kong buying
office to ensure this happens. To counter currency pressure, we
continue to move production to new factories of equal quality to
retain or improve margin and have a natural hedge from our US
dollar revenue.
In the USA our strategy to exit sales of locally sourced
close-out brands and to focus on the sale of our Group brands is
complete and this has helped improve the gross margin in the USA to
be more in line with the rest of the Group.
At 31 December 2020 options were in place for the purchase of
US$18 million at US$1.3260/GBP, this has helped to protect our
margin in the turbulent foreign exchange markets. Similarly, at 31
December 2021 options were in place for the purchase of US$27
million at US$1.3849/GBP. Since the start of this year we have
purchased more forward options to help protect our gross margin in
2022.
Operating Expenses
Total operating expenses before exceptional items, amortisation
costs, depreciation, foreign exchange movements and share based
payments, grew more slowly than sales, increasing by 5.7% to GBP9.2
million in the year (2020: GBP8.7 million). Operating costs as a
percentage of sales reduced from 21.6% to 18.4%.
The overall increase of GBP0.5 million in the year was necessary
to support the growth of the business. Increased costs amounted to
GBP0.7 million and were made up of increases in wages and salaries,
office costs, the spend on PR and marketing as e-commerce sales
continue to grow, professional fees and the cost of a larger sales
team based in the US. There was a decrease in the charge for bad
debts of GBP0.2 million.
Warpaint remains a business with most operating expenses
relatively fixed and evenly spread across the whole year. We
continue to monitor and examine significant costs to ensure they
are controlled and strive to reduce them. In addition, the
increased scale of the business has given the Group increased
buying power.
Adjusted EBITDA
The board considers Adjusted EBITDA (adjusted for foreign
exchange movements, share based payments and exceptional items) a
key measure of the performance of the Group and one that is more
closely aligned to the success of the business. Adjusted EBITDA for
the year was GBP7.7 million (2020: GBP4.2 million).
Profit Before Tax
Group profit before tax for the year was GBP3.7 million (2020:
GBP1.1 million loss). The material changes in profitability between
2021 and 2020 were:
Effect on Profit
Sales volume growth GBP3.0 million
Margin growth GBP1.3 million
Increase in operating expenses (GBP0.5) million
FX gain in 2021 GBP0.6 million (2020: GBP1.0 million
Loss GBP0.4 million)
Decrease in the cost of share option GBP0.5 million
schemes
Increase in exceptional costs (GBP0.3) million
Decrease in other operating income (GBP0.2) million
Exceptional Items
Exceptional items include GBP0.03 million of staff restructuring
and voluntary redundancy costs (2020: GBP0.24million), and GBP0.19
million of non-recurring legal costs (2020: GBP0.08 million), and a
GBP0.37 million provision for content use and associated legal fees
(2020: GBPnil).
The Group is currently in dispute with a third party relating to
the historic use of content on the Group's social media platforms
in the period 2018 through to early 2021. As a result of legal
advice received as to the likely quantum of liability a provision
of GBP370,000 has been made as the directors' best estimate of the
expected liability and associated legal costs. The payment and the
restriction of content use will not affect the ongoing running of
the Group's business.
Tax
The tax rate for the Group for 2021 was 24% compared to the UK
corporation tax standard rate of 19% for the year. Since the
acquisition of LMS, the Group is exposed to tax in the USA at an
effective rate of approximately 25% and in other jurisdictions the
Group operates cost centres, but these are not materially exposed
to changes in tax rates.
Earnings Per Share
The statutory basic and diluted earnings per share was 3.69p and
3.68p respectively in 2021 (2020: 1.31 loss).
The adjusted basic and diluted earnings per share before
exceptional items, amortisation costs and share based payments was
7.80p and 7.79p respectively in 2021 (2020: 3.14p).
Dividends
The board is recommending a final dividend for 2021 of 3.5 pence
per share, making a total dividend for the year of 6.0 pence per
share of which 2.5 pence per share was paid on 26 November 2021
(2020: total dividend of 5.8 pence per share, of which the interim
dividend was 2.8 pence per share that included a special dividend
of 1.3 pence per share to reflect that no final dividend was
declared for 2019, and the final dividend which was 3.0 pence per
share). The dividend for the year was covered 1.3 times by adjusted
earnings per share.
Cash Flow and Cash Position
Net cash flow generated from operating activities was GBP5.1
million (2020: GBP7.5 million). The Group's cash balance decreased
by GBP0.8 million to GBP4.1 million in 2021 (2020: GBP4.9 million).
The cash generated was principally used to make dividend payments
in the year.
We expect capital expenditure requirements of the Group to
remain low, however as part of our strategy to grow market share in
the UK and US there will be occasions where investment in store
furniture is required to secure that business. In 2021 GBP0.49
million was spent on store furniture for Tesco and wilko (2020:
GBP0.66 million), and GBP0.11 million was spent on new computer
software and equipment, and other general office fixtures and
fittings and plant upgrades (2020: GBP0.18 million).
LTIP, EMI & CSOP Share Options
On 25 May 2021 CSOP share options were granted over a total of
400,000 ordinary shares of 25p each in the Company under the
Warpaint London PLC Company Share Option Plan and the Warpaint
London plc Enterprise Management Incentive Scheme. The options
provide the right to acquire 400,000 ordinary shares at an exercise
price of 122.0p per ordinary share.
The LTIP, EMI & CSOP share options had no dilutive impact on
earnings per share in the period. The share-based payment charge of
the LTIP, EMI and CSOP share options for the year was GBP0.18
million (2020: GBP0.66 million) and has been taken to the share
option reserve.
Balance Sheet
Inventory was GBP3.7 million higher at the year end at GBP18.1
million (2020: GBP14.4 million). The rise in inventory is a
function of growth in the business and to ensure delivery
disruption is avoided for our customers. One of the Group's unique
selling propositions is that it can deliver a full range of colour
cosmetics to our customers, in good time all year round. Having
appropriate inventory levels is vital to providing that service.
The provision for old and slow inventory was GBP0.52 million, 2.8%
at the year end (2020: GBP0.52 million, 3.5%). Across the Group we
have worked hard in the year to sell through older stock lines,
allowing for our provision for old and slow inventory to fall 0.7%
in percentage terms in the year. Our Group policy is to provide for
50% of the cost of perishable items that are over two years old.
However, we remain comforted by the fact that many such items in
the normal course of business are eventually sold through our
close-out division without a loss to the Group.
Trade receivables are monitored by management to ensure
collection is made to terms, to reduce the risk of bad debt and to
control debtor days, which have improved on the prior year. At the
year end trade receivables, excluding other receivables, were
GBP8.8 million (2020: GBP7.8 million), the increase on 2020 due to
the rise in sales year on year. T he provision for bad and doubtful
debts carried forward at the year end was GBP0.07 million, 0.8% of
gross trade receivables (2020: GBP0.04 million, 0.6%).
Included within borrowings and lease liabilities is an invoice
and stock finance facility used to help fund imports in our gifting
business, and term loans and hire purchase contracts . At the year
end no invoice finance remained outstanding (2020: GBP0.3 million).
The balance outstanding on the term loans and hire purchase
contracts at the year end totalled GBPnil million, having been
repaid in full in April 2021 (2020: GBP0.3 million). The Group was
therefore debt free at the year end and does not expect to utilise
its GBP8.5 million invoice and stock finance facility during
2022.
Working capital increased by GBP0.9 million in the year, to
GBP26.2 million. The main components were an increase in inventory
of GBP3.7 million, an increase in trade and other receivables of
GBP1.1 million, a decrease in cash at the year end of GBP0.8
million, and an increase in trade and other payables of GBP3.1
million.
Free cash flow (cash from operating activities less capital
expenditure) remained strong at GBP4.5 million (2020: GBP6.6
million).
The Group's balance sheet remains in a very healthy position.
Net assets totalled GBP36.2 million at 31 December 2021 , a
decrease of GBP1.2 million from 2020, as a consequence of GBP4.2
million of dividends paid in the year. Most of the balance sheet is
made up of liquid assets of inventory, trade receivables and cash.
Included in the balance sheet is GBP7.3 million of goodwill (2020:
GBP7.3 million) and GBP2.3 million of intangible fixed assets
(2020: GBP4.7 million) arising from acquisition accounting. As at
the year end cash totalled GBP4.1 million (31 December 2020: GBP4.9
million).
The balance sheet also includes GBP3.1 million of right-of-use
assets. GBP3.1 million is the inclusion of the Group leasehold
properties, now recognised as right-of-use assets as directed by
IFRS 16. An equivalent lease liability is included of GBP3.2
million at the balance sheet date.
Foreign Exchange
The Group imports most of its finished goods from China paid for
in US dollars, which are purchased throughout the year at spot as
needed, or by taking forward purchase foreign exchange options when
rates are deemed favourable, and with consideration for the budget
rate set by the board for the year. Similarly, foreign exchange
options are taken to sell forward our expected Euro income in the
year to ensure our sales margin is protected.
We started 2021 with 42 options in place for the purchase of
US$18 million at US$1.3260, and the sale of EUR5.1 million @
EUR1.1077. During 2021 when currency rates were favourable, we
purchased 40 foreign exchange options which were outstanding at 31
December 2021, for the purchase of US$27 million at US$1.3849, and
the sale of EUR3.9 million @ EUR1.1558.
The Group has a natural hedge from sales to the US which are
entirely in US dollars, in 2021 these sales were $4.08 million
(2020: $2.74 million). Together with sourcing product from new
factories where it makes commercial sense to do so and by buying US
dollars when rates are favourable, we are able to mitigate the
effect of a strong US dollar against sterling.
Neil Rodol
Chief Financial Officer
25 April 2022
WARPAINT LONDON PLC
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF WARPAINT LONDON
PLC
Opinion on the financial statements
In our opinion:
-- t he 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 2021 and of the Group's profit for the year then
ended;
-- the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
-- 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.
We have audited the financial statements of Warpaint London Plc
(the 'Parent Company') and its subsidiaries (the 'Group') for the
year ended 31 December 2021 which comprise the consolidated
statement of comprehensive income, the consolidated and parent
company statements of changes in equity, the consolidated and
parent company statements of financial position, the consolidated
statement of cash flows 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
UK adopted international accounting standards. 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).
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 believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors' assessment of the Group and the Parent
Company's ability to continue to adopt the going concern basis of
accounting included:
- A critical evaluation of the Directors' assessment of the
entity's ability to continue as a going concern, covering the
period of at least 12 months from the date of approval of the
financial statements by;
-- Evaluating the process the Directors followed to make their
assessment, including confirming the assessment and underlying
projections were prepared by appropriate individuals with
sufficient knowledge of the detailed figures as well as an
understanding of the Group's markets, strategies and risks;
-- Understanding, challenging and corroborating the key
assumptions included in their cash flow forecasts against prior
year, our knowledge of the business and independent market data,
along with the findings from other areas of our audit;
-- Consideration of the susceptibility of the Group to any
counterparty default or significant delay in settlement of
payments. This included corroborating post year end sales values
and cash receipts;
-- Evaluating via inquiry with the Directors, review of board
minutes and review of external resources the potential impact of
any a) macroeconomic influences (including inflationary pressures)
and b) one-off cash outflows that may have been omitted from cash
flow forecasts and assessing the impact these could have on future
cash flows and cash reserves;
-- Assessing appropriateness of stress test scenarios, and
challenging whether other reasonably possible scenarios could occur
and considering whether the assumptions included within these were
appropriate; In doing so we also challenged the mitigations
provided by the Directors in the event of a reasonable downside
scenario occurring; and
-- Considering the adequacy of the disclosures relating to going
concern included within the annual report against the requirements
of the accounting standards and consistency of the disclosures
against the forecasts and going concern assessment.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group and the Parent Company's ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage 92% (2020: 87%) of Group profit before tax
96% (2020: 94%) of Group revenue
95% (2020: 98%) of Group total assets
Key audit 2021 2020
matters Impairment of intangible assets P P
and goodwill
Net realisable value of inventory P P
Going concern P P
Going concern is no longer considered to be a key audit
matter as a result of the improved performance in the
year and the resultant impact on our risk assessment.
Materiality Group financial statements as a whole
We determined a materiality of GBP364,000 (2020: GBP245,000)
based on 7% of profit before interest, tax, and amortisation
(2020: 5% before interest, tax, amortisation and adjustments).
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
The Group consists of three trading subgroups, all of which are
run from the UK except for Marvin Leeds Marketing Services Inc.
which is based in the USA. In establishing the overall approach to
the Group audit, we completed full scope audits on the underlying
subgroups and the parent company as significant components, except
for Marvin Leeds Marketing Services Inc, on which we performed
specific audit procedures on certain account balances. Marvin Leeds
Marketing Services Inc. was not deemed to be a significant
component therefore our work was tailored to focus on specific risk
areas. All audit work was carried out by the Group audit team.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, 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) that 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.
Aside from the going concern key audit matter identified above,
we identified the following areas as the key audit matters relevant
to our audit of the financial statements.
Key audit matter How the scope of our audit
addressed the key audit
matter
Impairment of intangible The Directors perform Our procedures included
assets and goodwill annual impairment reviews the following:
(with reference to of goodwill for all We considered management's
notes 1, 9 and 10) cash generating units impairment assessment and
("CGUs"), which is carried evaluated its compliance
at GBP7.3m in the Statement with the requirements of
of Financial Position. IAS 36 "Impairment of Assets"
Impairment reviews are as follows:
also performed over - We obtained management's
the carrying value of impairment model and confirmed
other intangible assets its mechanical accuracy;
of the CGUs (totalling - We assessed management's
GBP2.3m at 31 December allocation of assets for
2021) where indicators each CGU based on our knowledge
of impairment were deemed of the Group and its operations
to exist. and assessed whether it
The estimated recoverable met the requirements of
amount of these balances the applicable accounting
is subjective due to standard;
the inherent uncertainty - We challenged management
involved in forecasting and their third party experts
and discounting future regarding the assumptions
cash flows, which form made in the model including
the basis of the Group's forecast free cash flows,
value in use calculation the long term growth rate
and assessment of the applied and the discount
carrying value of goodwill rate used. We benchmarked
and intangible asset the key assumptions applied
values. against a variety of similar
We have determined as businesses and considered
part of our risk assessment whether these fell within
that the value-in-use our acceptable ranges;
calculation, determined We considered whether the
by management with the revenue, and where relevant
assistance of an independent associated costs (including
third party expert, capital expenditure and
used in the assessment working capital requirements),
of carrying value of used to estimate free cash
goodwill and intangible flows were reasonable in
assets has a high degree light of historic performance,
of estimation uncertainty, macroeconomic conditions
with a potential range and current performance
of reasonable outcomes in FY22. This included
greater than our materiality challenge of key assumptions
for the financial statements made by the Directors incorporating
as a whole. sensitivity analysis thereon.
Key assumptions include Specific areas of challenge
revenue, gross margin, included the projected
and resultant cash flow economic growth and cost
forecast assumptions inflation, margin and known
over the five year period or probable changes in
from 31 December 2021. the business environment;
The valuation is also - We used our own internal
based on key assumptions valuation experts to challenge
in respect of the appropriate management's determined
discount rates applied discount rate and assessed
to the cash flows and the competence, independence
long-term growth rates. and objectivity of the
As a result of their third party expert used
review, management did by management in formulating
not identify any impairments. the value-in-use model;
and
- Having assessed management's
impairment review, we considered
whether the disclosures
presented in the financial
statements were in line
with the requirements of
IAS 36 "Impairment of Assets".
Key observations:
Based on the procedures
we performed, no issues
arose from our work that
suggested managements assessment
of the impairment of goodwill
and intangible assets was
inappropriate.
Net realisable value The Group has significant Our procedures included
of inventory levels of inventory, the following:
(with reference to and as such there is - We assessed whether inventory
notes 1 and 13) significant estimation was valued appropriately
uncertainty in the valuation at the lower of cost and
of slow moving and obsolete net realisable value through
inventories, some of testing a sample of items
which have a limited to their unit cost and
shelf life. There is then to the average sale
also some uncertainty price in the period leading
over changes in consumer up to and around the year
preferences and spending end. Where there were indicators
patterns, which are of negative margin or zero
primarily driven by margin, we determined whether
wider trends in the these balances were considered
fashion industry as appropriately in the inventory
well as seasonality, provision balance;
which could impact the In addition, we considered
saleability of inventory. the principles and appropriateness
There is a valuation of the Group's inventory
risk associated with provisioning policies based
new product launches on our understanding of
and judgement is required the business and the accuracy
in forecasting demand of previous provisioning
which can lead to obsolete estimates. We assessed
inventory if not performed the appropriateness of
accurately. the inventory provision
Given the level of judgement by testing the completeness
and estimation involved and accuracy of inventory
by management, along ageing report as at 31
with the materiality December 2021 by agreeing
of the balance at GBP19.4m, a sample to supporting
the carrying value of documentation to check
inventory is considered the ageing and value and
to be a key audit matter. checked the arithmetic
accuracy of the overall
calculation.
We considered the inventory
write off figure during
the year and compared this
to the Group's provision
in the prior year to assess
managements accuracy in
determining the provision.
- Furthermore, we tested
the unprovided inventory
balance, including new
product launches, agreeing
the sales volumes and values
after the balance sheet
date for a sample of inventory
items to supporting documentation
to determine if it was
appropriate not to include
these in the year end provision.
- We also performed a number
of counts at certain of
the Group's inventory holding
locations, and considered
whether there were any
indications of impairment
or obsolescence.
Key observations:
Based on the procedures
we performed, no issues
arose from our work that
suggested the net realisable
value of inventories was
inappropriate.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent Company financial
statements
2021 2020 2021 2020
GBP GBP GBP GBP
Materiality 364,000 245,000 327,600 150,000
Basis for determining 6% of profit before 90% (2020: 61%) of Group
materiality interest, tax, and materiality
amortisation (2020:
5% of profit before
interest, tax, amortisation
and adjustments).
Rationale for We considered adjusted Capped at 90% (2020:61%)
the benchmark profit before tax (profit of Group materiality
applied before interest, tax, given the assessment
and amortisation) to of the components aggregation
be the most appropriate risk.
measure for the basis
of materiality given
the importance of underlying
trading profit as a
measure for users of
the financial statements
in assessing the performance
of the Group.
Performance
materiality 254,800 183,750 229,320 112,500
Basis for determining 70% (2020: 75%) of 70% (2020: 75%) of Parent
performance Group materiality, Company materiality,
materiality based on our overall based on our overall
risk assessment. In risk assessment. In setting
setting the level of the level of performance
performance materiality, materiality, we considered
we considered a number a number of factors including
of factors including the control environment,
the control environment, our testing strategy,
our testing strategy, the expected total value
the expected total of known and likely misstatements
value of known and (based on past experience
likely misstatements and other factors) and
(based on past experience management's attitude
and other factors) towards proposed adjustments.
and management's attitude
towards proposed adjustments.
Component materiality
We set materiality for each component of the Group based on a
percentage of between 70% and 90% (2020: 47% and 90%) of Group
materiality dependent on the size and our assessment of the risk of
material misstatement of that component.
Component materiality ranged from GBP254,800 to GBP327,600
(2020: GBP116,000 to GBP221,000). In the audit of each component,
we further applied performance materiality levels of 70% (2020:
75%) of the component materiality to our testing to ensure that the
risk of errors exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP18,200 (2020:
GBP12,250). We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report and financial statements 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. 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 course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken
report and in the course of the audit:
Directors' -- the information given in the Strategic report
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.
In the light of the knowledge and understanding
of the Group and 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.
Matters on We have nothing to report in respect of the following
which we matters in relation to which the Companies Act
are required 2006 requires us to report to you if, in our
to report opinion:
by exception -- 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, 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
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.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and the industry in
which it operates. We determined that the most significant laws and
regulations which are directly relevant to specific assertions in
the financial statements are those related to the applicable
accounting frameworks, the Companies Act 2006, industry specific
regulation and employment and taxation laws and regulations in the
jurisdictions in which the Group operates.
Our procedures included the following:
-- We involved our internal taxation specialists to review the
adequacy and appropriateness of tax provisioning;
-- Agreement of the financial statement disclosures to underlying supporting documentation; and
-- We understood how the Group is complying with those legal and
regulatory frameworks, by making enquiries of management and those
responsible for legal and compliance procedures. We corroborated
our enquiries through our review of board minutes and reviewing
summary of claims, litigations and regulatory inquiries that we
have obtained from the Group's Compliance Officer.
We assessed the susceptibility of the Group's financial
statements to material misstatement, including how fraud might
occur, by meeting with management from across the Group to
understand where they considered there was a susceptibility to
fraud. We identified fraud risks in relation to management override
of controls and appropriateness of revenue recognition around the
year end where incentive might exist to accelerate (or decelerate)
earnings.
Our procedures included the following:
-- We obtained an understanding the processes and controls that
the Group has established to address risks identified, or that
otherwise prevent, deter and detect fraud, and how management
monitors those processes and controls;
-- We considered management's estimates and judgements applied
in the preparation of the financial statements throughout the
audit, individually and in aggregate, to evaluate whether there
were any indications of bias in the application of these
judgements. This included those set out in the key audit matters
section of our report;
-- Performed journal entry testing, focusing on journal entries
containing defined characteristics and on large or unusual
transactions based on our knowledge of the business by agreeing to
supporting documentation; and
-- Testing appropriateness of revenue recognised around year
end, by agreeing a sample of revenue recognised to despatch notes
to identify any revenue recognised in the incorrect period.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
David Perry FCA (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
25 April 2022
BDO LLP is a limited liability partnership registered in England
and Wales (registered in England and Wales (with registered number
OC305127).
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2021
Year ended 31 December
2021 2020
Notes GBP'000 GBP'000
Revenue 2 50,003 40,286
Cost of sales 2 (33,095) (27,742)
Gross profit 16,908 12,544
Administrative expenses 4,5 (13,095) (13,807)
Other operating income 3 2 361
Analysed as:
Adjusted profit from operations(1) 6,972 2,514
Amortisation 4,10 (2,394) (2,443)
Exceptional items 4 (586) (317)
Share based payments 23 (177) (656)
Profit/(loss) from operations 3,815 (902)
Finance expense 6 (90) (212)
Profit/(loss) before tax 3,725 (1,114)
Tax (expense) / credit 7 (895) 111
Profit/(loss) for the year attributable
to equity holders of the parent Company 2,830 (1,003)
U
Other comprehensive income:
Item that will or may be reclassified
to profit or loss:
Exchange (loss) / gain on translation
of foreign subsidiary (4) 53
Total comprehensive income/(loss) attributable
to equity holders of the parent Company
, net of tax 2,826 (950)
Basic earnings / (loss) per share (pence) 28 3.69 (1.31)
Diluted earnings / (loss) per share (pence) 28 3.68 (1.31)
Note 1 - Adjusted profit from operations is calculated as
earnings before interest, taxation, amortisation of intangible
assets, any impairment costs relating to non-current assets, share
based payments and exceptional items.
The notes form part of these financial statements.
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
As at 31 December
2021 2020
Notes GBP'000 GBP'000
Non-current assets
Goodwill 9 7,274 7,274
Intangibles 10 2,260 4,651
Property, plant, and equipment 11 1,385 1,149
Right-of-use assets 12 3,073 3,799
Deferred tax assets 19 500 581
Total non-current assets 14,492 17,454
Current assets
Inventories 13 18,139 14,413
Trade and other receivables 14 10,322 9,187
Cash and cash equivalents 15 4,072 4,875
Derivative financial instruments 25 545 40
Total current assets 33,078 28,515
Total assets 47,570 45,969
Current liabilities
Trade and other payables 16 (6,293) (3,121)
Borrowings and lease liabilities 18 (610) (914)
Derivative financial instruments 25 - (400)
Corporation tax liability 7 (1,050) (119)
Provisions 17 (370) -
Total current liabilities (8,323) (4,554)
Non-current liabilities
Borrowings and lease liabilities 18 (2,537) (3,045)
Deferred tax liabilities 19 (557) (1,000)
Total non-current liabilities (3,094) (4,045)
Total liabilities (11,417) (8,599)
NET ASSETS 36,153 37,370
2021 2020
GBP'000 GBP'000
Equities
Share capital 21 19,188 19,187
Share premium 19,360 19,359
Merger reserve (16,100) (16,100)
Foreign exchange reserve 85 89
Share option reserves 22 1,810 1,633
Retained earnings 11,810 13,202
TOTAL EQUITY 36,153 37,370
The financial statements of Warpaint London PLC were approved
and authorised for issue by the Board of Directors and were signed
on its behalf by:
Neil Rodol
Chief Financial Officer
Date: 25 April 2022
The notes form part of these financial statements.
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2021
Share Share Merger Foreign Share Retained Total
Capital Premium Reserve exchange Option Earnings Equity
reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 19,187 19,359 (16,100) 36 977 16,354 39,813
Comprehensive income
for the year
On translation of
foreign subsidiary - - - 53 - - 53
Loss for the year - - - - - (1,003) (1,003)
Total comprehensive
income for the year - - - 53 - (1,003) (950)
Transactions with
owners
Share based payment
charge - - - - 656 - 656
Dividends paid - - - - - (2,149) (2,149)
Total transactions
with owners - - - - 656 (2,149) (1,493)
As at 31 December
2020 19,187 19,359 (16,100) 89 1,633 13,202 37,370
Comprehensive Income
for the year
Equity shares issued 1 1 - - - - 2
On translation of
foreign subsidiary - - - (4) - - (4)
Profit for the year - - - - - 2,830 2,830
Total comprehensive
income for the year 1 1 - (4) - 2,830 2,828
Transactions with
owners
Share based payment
charge - - - - 177 - 177
Dividends paid - - - - - (4,222) (4,222)
Total transactions
with owners - - - - 177 (4,222) (4,045)
As at 31 December
2021 19,188 19,360 (16,100) 85 1,810 11,810 36,153
The notes form part of these financial statements.
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2021
Year ended 31 December
2021 2020
Notes GBP'000 GBP'000
Operating activities
Profit/(loss) before tax 3,725 (1,114)
Finance expense 6 90 212
Amortisation of intangible assets 10 2,394 2,443
Depreciation of property, plant, and equipment 11/12 1,338 1,252
Loss on disposal of property, plant, and
equipment - 2
Share based payments 23 177 656
(Increase)/decrease in trade and other receivables (1,135) 3,437
(Increase)/decrease in inventories 13 (3,726) 1,781
Increase/(decrease) in trade and other payables 3,542 (812)
Fair value (gain)/loss on derivative financial
instruments (905) 399
Other adjustments 18 (84) -
Foreign exchange translation differences (4) 53
Cash generated from operations 5,412 8,309
Tax paid (325) (853)
Net cash flows from operating activities 5,087 7,456
Investing activities
Purchase of intangible assets 10 (3) (12)
Purchase of property, plant, and equipment 11 (596) (869)
Proceeds from sale of property, plant, and
equipment - 21
Net cash used in investing activities (599) (860)
Financing activities
Repayment of borrowings 18 (48) (90)
Lease payments 18 (933) (810)
Repayment of stock and invoice finance facilities - (1,191)
Proceeds from issued share capital 21 2 -
Interest paid 6 (90) (212)
Dividends 20 (4,222) (2,149)
Net cash used in financing activities (5,291) (4,452)
Net (decrease)/increase in cash and cash
equivalents (803) 2,144
Cash and cash equivalents at beginning of
period 4,875 2,731
Cash and cash equivalents at end of period 15 4,072 4,875
Cash and cash equivalents consist of:
Cash and cash equivalents 15 4,072 4,875
4,072 4,875
The notes form part of these financial statements.
WARPAINT LONDON PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS ATED 31 DECEMBER 2021
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 2021 were authorised for issue by the board
of directors 25(th) April 2022.
Warpaint London PLC is a public limited Company incorporated and
registered in England and Wales. Its registered office is Units
B&C, Orbital Forty-Six, The Ridgeway Trading Estate, Iver,
Buckinghamshire, SL0 9HW.
The Group's financial statements have been prepared in
accordance in accordance UK adopted international accounting
standards and in conformity with the requirements of the Companies
Act. The functional currency of the parent and its subsidiaries is
pounds sterling because that is the currency of the primary
economic environment in which the Group operates. The financial
statements are also presented in pounds sterling. All values are
rounded to the nearest thousand (GBP'000) except where otherwise
indicated.
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 accordance with UK
adopted international accounting standards 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
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries as if they formed a single entity.
Intercompany transactions and balances between Group companies are
therefore eliminated in full. All subsidiaries have a reporting
date of December.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
On consolidation, the results of overseas operations are
translated into pounds sterling at rates approximating to those
ruling when the transactions took place. All assets and liabilities
of overseas operations, including goodwill arising on the
acquisition of those operations, are translated at the rate ruling
at the reporting date. Exchange differences arising on translating
the opening net assets at opening rate and the results of overseas
operations at actual rate are recognised in other comprehensive
income and accumulated in the foreign exchange reserve.
Exchange differences recognised profit or loss in Group
entities' separate financial statements on the translation of
long-term monetary items forming part of the Group's net investment
in the overseas operation concerned are reclassified to other
comprehensive income and accumulated in the foreign exchange
reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the
profit or loss on disposal.
Going concern
The Directors have concluded that it is reasonable to adopt a
going concern basis in preparing the financial statements. This is
based on a reasonable expectation that the Group has adequate
resources to continue in operational existence for at least twelve
months from the date of signing of these accounts. The Group made a
statutory profit of GBP2.8 million in the year to 31 December 2021
(2020: GBP1.0 million loss) and had net current assets of GBP24.8
million at 31 December 2021 (2020: GBP24.0 million). The Group
occasionally makes use in its Retra subsidiary of a GBP8.5 bank
million facility that can be used for confidential invoice
discounting and stock finance, the facility renews each year at the
end of August. As at the year end GBPnil of the bank facility was
utilised. At the 31(st) March 2022 the Group had cash of GBP2.3
million, GBPnil hire purchase and term debt having repaid these in
full during 2021, and had used GBPnil of its bank facility.
The Directors have prepared forecasts covering the period to
December 2023, built from the detailed Board-approved budget for
2022. The forecasts include a number of assumptions in relation to
varying levels of sales revenue. Whilst the Group's trading and
cash flow forecasts have been prepared using current trading
assumptions, the operating environment presents a number of
challenges which could negatively impact the actual performance
achieved. Excluding the potential impact of a pandemic, which is
considered below, these risks include, but are not limited to,
achieving forecast levels of sales and order intake, the impact on
customer confidence as a result of general economic conditions and
leaving the European Union, achieving forecast margin improvements,
supply side price inflation, increases in freight costs, and the
director's ability to implement cost saving initiatives in areas of
discretionary spend where required. The forecasts used in the
analysis of the Group's ability to continue in operational
existence for the foreseeable future include both the base plan and
downside scenarios which although the Group has no significant
connections with Russia or Ukraine through its operations (no
employees located there nor any major customers or suppliers in the
region), include assumptions taking into account macro-economic
potential indirect impacts of the events unfolding.
The Group's cash flow forecasts and projections, taking account
of reasonable and possible changes in trading performance excluding
the potential impact of a pandemic (which is considered below),
offset by mitigating actions within the control of management
including reductions in areas of discretionary spend, show that the
Group will be able to operate comfortably through to the end of
December 2023, and in Retra within the level of its facility.
The uncertainty as to the future impact on the Group of a
pandemic has been separately considered as part of the directors'
consideration of the going concern basis of preparation. In the
stress test scenario analysis performed, the directors have
considered the reasonably plausible impact of another significant a
pandemic outbreak on the Group's trading and cash flow forecasts,
together with supply side cost inflation and further increases in
freight costs.
In preparing this analysis, a number of scenarios were modelled
with the benefit of experience having come through the three
COVID-19 lockdowns in the UK in 2020. The scenarios modelled were
all based on varying levels of sales revenue, including one that
assumes no growth for 2022 and 2023 as a reasonable downside
scenario, and more extreme falls in revenue of up to 30% in both
years as a worst-case scenario. In each scenario, mitigating
actions within the control of management have been modelled. Under
each of the scenarios modelled, the Group has sufficient cash to
meet its liabilities as they fall due and consequently, the
directors believe that the Group has sufficient financial strength
to withstand the possible disruption to its activities.
Based on the above indications the directors believe that it
remains appropriate to prepare the financial statements on a going
concern basis.
Revenue Recognition
Performance obligations and timing of revenue recognition
The Group's revenue is derived from selling goods with revenue
recognised at a point in time when control of the goods has
transferred to the customer. This is generally when the goods are
delivered to the customer. However, for export sales, control might
also be transferred when delivered either to the port of departure
or port of arrival, depending on the specific terms of the contract
with a customer. There is limited judgement needed in identifying
the point control passes: once physical delivery of the products to
the agreed location has occurred, the Group no longer has physical
possession, usually will have a present right to payment (as a
single payment on delivery) and retains none of the significant
risks and rewards of the goods in question.
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
Group's warehouse according to the terms of sale.
Where the Group has entered into distributor arrangements the
satisfaction of performance obligations and transfer of control to
the distributor is from the date of dispatch from either the
Group's overseas supplier or from the Group's UK warehouse. Revenue
is therefore recognised on the date of dispatch.
Customer loyalty
The Group operates a loyalty reward scheme for 'digital'
customers where points are earned for products purchased online,
with 10 points equivalent to GBP1. The Group accounts for loyalty
points when redeemed as a sales discount on the sales transaction.
A sales discount provision is recognised in the accounts in
relation to points issued but not yet redeemed. When estimating
this provision, the Group considers the likelihood that the
customer will redeem the points. At the year-end there were 2.8
million points yet to be redeemed, leading to a provision of
GBP14,000.
Under IFRS 15, volume rebates and early settlement discounts
represent variable consideration and is estimated and recognised as
a reduction to revenue as performance obligations are satisfied.
Management recognises revenue based on the amount of estimated
rebate to the extent that revenue is highly probably of not
reversing. Management monitors this estimate at each reporting date
and adjusts it as necessary.
Determining the transaction price
Most of the Group's revenue is derived from fixed price
contracts and therefore the amount of revenue to be earned from
each contract is determined by reference to those fixed prices.
Exceptions are as follows:
-- Some contracts provide customers with a limited right of
return. These relate predominantly, but not exclusively, to online
sales direct to consumers and retailers. Historical experience
enables the Group to estimate reliably the value of goods that will
be returned and restrict the amount of revenue that is recognised
such that it is highly probable that there will not be a reversal
of previously recognised revenue when goods are returned.
-- Variable consideration relating to volume rebates has been
considered in estimating revenue in order that it is highly
probable that there will not be a future reversal in the amount of
revenue recognised when the amount of volume rebates has been
determined.
Allocating amounts to performance obligations
For most contracts, there is a fixed unit price for each product
sold, with reductions given for bulk orders placed at a specific
time. Therefore, there is no judgement involved in allocating the
contract price to each unit ordered in such contracts (it is the
total contract price divided by the number of units ordered). Where
a customer orders more than one product line, the Group is able to
determine the split of the total contract price between each
product line by reference to each product's standalone selling
prices (all product lines are capable of being, and are, sold
separately).
Practical Exemptions
The Group has taken advantage of the practical exemptions:
-- not to account for significant financing components where the
time difference between receiving consideration and transferring
control of goods (or services) to its customer is one year or less;
and
-- expense the incremental costs of obtaining a contract when
the amortisation period of the asset otherwise recognised would
have been one year or less.
Government Grants
Grants from the government are recognised at their fair value
where there is reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Government
grants which are revenue in nature are recognised on a systematic
basis within Other operating income in the Statement of
Comprehensive income over the period in which the Group recognises
as expenses the related costs for which the grants are intended to
compensate.
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 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 and Alternative Performance Measures
Exceptional items which have been disclosed separately on the
face of the Consolidated Statement of Comprehensive Income in order
to summarise the underlying results. Exceptional items in the
current period relate to restructuring costs and legal and
professional fees. Neither 'underlying profit or loss' nor
'exceptional items' are defined by IFRS however the directors
believe that the disclosures presented in this manner provide a
clearer presentation of the underlying financial performance of the
Group.
Alternative performance measures (APM's) are used by the Board
to assess the Group's performance and are applied consistently from
one period to the next. They therefore provide additional useful
information for shareholders on the underlying performance and
position of the Group. Additionally, adjusted profit from
operations is used to determine adjusted EPS which is used as a key
performance indicator for the Long-Term Incentive Plan (LTIP) and
the Company Share Option Scheme (CSOP). These measures are not
defined by IFRS and are not intended to be a substitute for IFRS
measures. The Group presents underlying profit / (loss) from
operations, profit / (loss) before tax and EPS which are calculated
as the statutory measures stated before non-underlying items,
including exceptional items, amortisation of intangible assets and
share-based payments where applicable.
Underlying results are used in the day-to-day management of the
Group. They represent statutory measures adjusted for items which
could distort the understanding of performance and comparability
year on year. Non-underlying items include the amortisation of
intangible assets, exceptional items and share-based payments.
Exceptional items are those items which the Group consider to be
significant in nature and not in the normal course of business or
are consistent with items that were treated as exceptional in prior
periods.
Intangible assets
Patents
Patents are used by the Group in order to generate future
economic value through normal business operations. Patents are
acquired separately and carried at cost less amortisation and
impairment. 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.
Amortisation is provided on Licences and Website costs so as to
write off the carrying value over the expected useful economic life
of five years.
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 and brands so as to
write off the carrying value over the expected useful economic life
of five years. Other details of the acquisition are detailed in
note 10.
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given, liabilities
assumed, and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree. Contingent consideration
is included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss.
Goodwill is considered to have an indefinite useful economic
life and is capitalised as an intangible asset with any impairment
in carrying value being charged to the consolidated statement of
comprehensive income. Where the fair value of identifiable assets,
liabilities and contingent liabilities exceed the fair value of
consideration paid, the excess is credited in full to the
consolidated statement of comprehensive income on the acquisition
date.
Impairment of non-financial assets (excluding inventories and
deferred tax assets)
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of an asset exceeds its recoverable amount (i.e.
the higher of value in use and fair value less costs to sell), the
asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest Group of assets to which it belongs for which there are
separately identifiable cash flows; its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the
extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is
not reversed.
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, 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:
Plant and machinery - 25% reducing balance and 20% straight
line
Fixtures and fittings - 25% reducing balance and 20% straight
line
Computer equipment - 25% reducing balance and 33.33% straight
line
Motor vehicles - 20% straight line
Right-of-Use Assets
Right-of-use assets are measured at cost, which is made up of
the initial measurement of the lease liability adjusted for any
lease payments made at or before the commencement date, plus any
initial direct costs incurred and an estimate of costs to dismantle
and remove the asset at the end of the lease, less any lease
incentives received.
The Group depreciates the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term.
The Group also assesses the right-of-use asset for impairment
when such indicators exist.
The right-of-use assets are included in a separate line within
non-current assets on the Consolidated Balance Sheet
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. Other than financial assets in a qualifying
hedging relationship, the Group's accounting policy for each
category is as follows:
Fair value through profit or loss
This category comprises in-the-money derivatives and
out-of-money derivatives where the time value offsets the negative
intrinsic value (see "Financial liabilities" section for
out-of-money derivatives classified as liabilities). They are
carried in the statement of financial position at fair value with
changes in fair value recognised in the consolidated statement of
comprehensive income in the finance income or expense line. Other
than derivative financial instruments which are not designated as
hedging instruments, the Group does not have any assets held for
trading nor does it voluntarily classify any financial assets as
being at fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction 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.
Financial assets (continued)
Impairment requirements use an 'expected credit loss' ('ECL')
model to recognise an allowance. Impairment is measured using a 12-
month ECL method unless the credit risk on a financial instrument
has increased significantly since initial recognition in which case
the lifetime ECL method is adopted. For receivables, a simplified
approach to measuring expected credit losses using a lifetime
expected loss allowance is available and has been adopted by the
Group. During this process the probability of the non-payment of
the trade receivables is assessed. This probability is then
multiplied by the amount of the expected loss arising from default
to determine the lifetime expected credit loss for the trade
receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the
loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation
that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated
provision.
The Group's financial assets measured at amortised cost comprise
trade and other receivables, and cash and cash equivalents in the
consolidated statement of financial position.
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short term highly liquid investments with
original maturities of three months or less, and - for the purpose
of the statement of cash flows - bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities on the
consolidated statement of financial position.
Financial liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which the liability was
acquired. The Group's accounting policy for each category is as
follows:
Fair value through profit or loss
This category comprises out-of-the-money derivatives where the
time value does not offset the negative intrinsic value (see
"Financial assets" for in-the-money derivatives and out-of-money
derivatives where the time value offsets the negative intrinsic
value). They are carried in the consolidated statement of financial
position at fair value with changes in fair value recognised in the
consolidated statement of comprehensive income. The Group does not
hold or issue derivative instruments for speculative purposes, but
for hedging purposes. Other than these derivative financial
instruments, the Group does not have any liabilities held for
trading nor has it designated any financial liabilities as being at
fair value through profit or loss.
Other financial liabilities
Other financial liabilities include the following items:
-- 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.
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.
Foreign currencies
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in profit or loss, except for foreign currency
borrowings qualifying as a hedge of a net investment in a foreign
operation, in which case exchange differences are recognised in
other comprehensive income and accumulated in the foreign exchange
reserve along with the exchange differences arising on the
retranslation of the foreign operation.
Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the Group's incremental borrowing rate
on commencement of the lease is used. Variable lease payments are
only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement
of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments
are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favour
of the Group if it is reasonably certain to assess that option;
and
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Leases (continued)
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease
incentives received, and increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset.
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the same
discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is
revised. In both cases an equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying
amount being amortised over the remaining (revised) lease term.
When the Group renegotiates the contractual terms of a lease
with the lessor, the accounting depends
on the nature of the modification:
-- if the renegotiation results in one or more additional assets
being leased for an amount commensurate with the standalone price
for the additional rights-of-use obtained, the modification is
accounted for as a separate lease in accordance with the above
policy
-- in all other cases where the renegotiated increases the scope
of the lease (whether that is an extension to the lease term, or
one or more additional assets being leased), the lease liability is
remeasured using the discount rate applicable on the modification
date, with the right-of-use asset being adjusted by the same
amount
-- if the renegotiation results in a decrease in the scope of
the lease, both the carrying amount of the lease liability and
right-of-use asset are reduced by the same proportion to reflect
the partial of full termination of the lease with any difference
recognised in profit or loss. The lease liability is then further
adjusted to ensure its carrying amount reflects the amount of the
renegotiated payments over the renegotiated term, with the modified
lease payments discounted at the rate applicable on the
modification date. The right-of-use asset is adjusted by the same
amount.
For contracts that both convey a right to the Group to use an
identified asset and require services to be provided to the Group
by the lessor, the Group has elected to account for the entire
contract as a lease, i.e. it does allocate any amount of the
contractual payments to, and account separately for, any services
provided by the supplier as part of the contract.
Nature of leasing activities (in the capacity as lessee )
The Group leases a number of property, plant and equipment in
the jurisdictions from which it operates with a fixed periodic rent
over the lease term. The Group has a total of 6 property leases and
1 plant and machinery lease.
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 comprehensive income 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 end of
the reporting period 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.
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 the two operating and two reporting segments presented
in Note 2, 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.
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.
Share Capital
The Group's ordinary shares are classified as equity
instruments.
Share-based payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are considered by adjusting
the number of equity instruments expected to vest at each reporting
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. As long as all
other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition or where a non-vesting condition
is not satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
Where equity instruments are granted to persons other than
employees, the consolidated statement of comprehensive income is
charged with the fair value of goods and services received.
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
declared by the directors. In the case of final dividends, this is
when approved by the shareholders at the annual general
meeting.
Changes in accounting policies
New standards, interpretations and amendments effective from 1
January 2021.
There were no new standards or interpretations impacting the
Group that will be adopted in the annual financial statements for
the year ended 31 December 2021, and which have given rise to
changes in the Group's accounting policies.
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published by the IASB and adopted by the EU but
are not yet effective and have not been adopted early by the Group.
Management anticipates that all of the relevant pronouncements will
be adopted in the Group's accounting policies for the first period
beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that
are expected to be relevant to the Group's financial statements is
provided below. Certain other new standards and interpretations
have been issued but are not expected to have a material impact on
the Group's financial statements.
Effect annual periods
beginning before
or after
IFRS Amendments updating a reference to the Conceptual 1(st) January 2022
3 Framework
IFRS Amendments regarding the expiry date of 1(st) January 2023
4 the deferral approach
IFRS Amendments resulting from the annual improvements 1(st) January 2022
9 to IFRS Standards 2018-2020 (fees in the
'10 per cent' test for derecognition of
financial liabilities)
IFRS Insurance contracts 1(st) January 2023
17
IAS 1 Amendments to defer the effective date of 1(st) January 2023
January 2020 amendments
Amendments regarding the disclosure of accounting
policies
IAS 8 amendments regarding the definition of accounting 1(st) January 2023
estimates
IAS 12 Amendments regarding deferred tax on leases 1(st) January 2023
and decommissioning obligations
IAS 16 Amendments prohibiting a Company from deducting 1(st) January 2022
from the cost of property, plant and equipment
amounts received from selling items while
the Company is preparing the asset for its
intended use
IAS 37 Amendments regarding the costs to include 1(st) January 2022
when assessing whether a contract is onerous
Critical accounting judgements and key sources of estimation
uncertainty
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.
Key sources of estimation uncertainty
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. Inventory is carried
at a value of GBP18,139,000 at the year end.
The Group makes a 50% provision for perishable items of stock
that are greater than two years old. Should the Group increase the
provision to 100% of perishable items that are greater than two
years old, this would decrease profit by GBP382,955. The Group does
not provide any provision on its non-perishable goods that are
greater than two years old on the basis that the products have long
shelf life. Should the Group increase the provision to 100% of
non-perishable items that are greater than two years old, this
would decrease profit by GBP112,370.
b) Valuation of goodwill
The assessment of the recoverable amount of goodwill allocated
to Retra Holdings Limited, Marvin Leeds Marketing Services, Inc.
and Treasured Scents Limited, as detailed in note 9, was based on
fair value less costs to sell and value in use calculations which
involved judgements over the assumptions applied. For Retra
Holdings Limited, a 1% increase in the discount rate from 10.0% to
11.0% would reduce the value in use by approximately GBP3.9 million
leaving headroom of GBP22.2m above the carrying value. For Marvin
Leeds Marketing Services, Inc., a 1% increase in the discount rate
from 11.4% to 12.4% would reduce the value in use by approximately
GBP0.8 million leaving headroom of GBP4.6m above the carrying
value. For Treasured Scents Limited, a 1% increase in the discount
rate from 10% to 11% would reduce the value in use by approximately
GBP0.3 million leaving headroom of GBP1.6m above the carrying
value. None of these scenarios would therefore result in any
impairment of the goodwill.
c) Provision for content use and associated legal costs
The Group have recorded a provision of GBP370,000 at 31 December
2021 in respect of a claim relating to historic content use and
associated legal costs (see note 17). The estimation of this
provision is by its nature subject to some uncertainty, and whilst
the Directors are satisfied that they have recorded their best
estimate of the value of the potential outflow, it is nevertheless
considered to be a key source of estimation uncertainty.
Critical accounting judgements
a) Deferred tax assets
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. The carrying
amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part
of the assets to be recovered.
2. Segmental information
For management purposes, the Group is organised into two
operating segments; Branded and Close-out. The segment 'Branded'
relates to the sale of the Group's 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.
Year ended 31 December 2021 2021 2021 2020 2020 2020
Group Close-out Total Group Close-out Total
Brands Brands
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 45,525 4,478 50,003 35,397 4,889 40,286
Cost of sales (30,131) (2,964) (33,095) (24,375) (3,367) (27,742)
Gross profit 15,394 1,514 16,908 11,022 1,522 12,544
Administrative expenses (11,389) (1,120) (12,509) (11,853) (1,637) (13,490)
Exceptional items (586) - (586) (279) (38) (317)
Other operating income 2 - 2 317 44 361
Segment result 3,421 394 3,815 (793) (109) (902)
Reconciliation of segment
result to profit before
tax:
Segment result 3,421 394 3,815 (793) (109) (902)
Finance expense (90) - (90) (212) - (212)
Profit / (loss) before
tax 3,331 394 3,725 (1,005) (109) (1,114)
Analysis of total revenue
by geographical market:
UK 21,358 3,965 25,323 16,909 4,233 21,142
Europe - Other 5,627 41 5,668 5,271 48 5,319
Europe - Spain 5,484 138 5,622 4,555 72 4,627
Europe - Denmark 6,741 8 6,749 4,987 171 5,158
Rest of World - USA 2,650 326 2,976 1,790 358 2,148
Rest of World - Australia
and New Zealand 2,567 - 2,567 1,206 - 1,206
Rest of World - Other 1,098 - 1,098 679 7 686
Total 45,525 4,478 50,003 35,397 4,889 40,286
During the year ended 31 December 2021, revenues of
approximately GBP5,033,980 were derived from a single external
customer based in Denmark (10%). During the year ended 31 December
2020, there was no single material external customer from which
revenues were derived exceeding 10% of annual sales.
The Directors are not able to attribute the Group's assets and
liabilities by reportable business segment.
Analysis of non-current
assets by geographical
market.
Year ended 31 December 2021 2021 2021 2020 2020 2020
UK USA Total UK USA Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Goodwill 6,720 554 7,274 6,720 554 7,274
Customer lists 1,072 374 1,446 2,454 585 3,039
Brand 683 - 683 1,456 - 1,456
Patents 127 - 127 148 - 148
Website 4 - 4 8 - 8
Property, plant and
equipment 1,379 6 1,385 1,142 7 1,149
Right of use assets 2,995 78 3,073 3,684 115 3,799
12,980 1,012 13,992 15,612 1,261 16,873
3. Other operating income
Year ended 31 December
2021 2020
GBP'000 GBP'000
Government grants receivable - 361
Interest received 2 -
2 361
The Group did not apply for government support programs in 2021
(2020: GBP361,000).
Included within the consolidated statement of comprehensive
income is GBP1,745 of interest received during the year ended 31
December 2021.
4. Operating profit / (loss)
Operating profit / (loss) for the period is stated after
charging:
Year ended 31 December
2021 2020
GBP'000 GBP'000
Foreign exchange (gain)/loss (614) 420
Depreciation 648 385
Amortisation of right-of-use assets 690 867
Amortisation of intangible assets 2,394 2,443
Movement of inventories at net realisable value (5) 312
Exceptional costs 586 317
The expenditure incurred within the table above falls wholly
within Administrative expenses except movement of inventories which
falls within cost of sales.
Exceptional costs
Year ended 31 December
2021 2020
GBP'000 GBP'000
Non-recurring legal and professional fees 187 76
Content use and associated legal fees (See note
below) 370 -
Restructuring costs 29 241
586 317
Non-recurring costs of GBP187,000 relate to the costs associated
with a historic legal claim connected to an acquisition that the
Group is pursuing.
The Group is currently in dispute with a third party relating to
the historic use of content on our social media platforms, in the
period 2018 through to early 2021. As a result of legal advice
received as to the likely quantum of liability a provision of
GBP370,000 at 31 December 2021 has been made as the directors' best
estimate of the expected liability and associated legal costs. The
payment and the restriction of content use will not affect the
ongoing running of the business.
Restructuring costs of GBP29,000 are considered exceptional as
they form the conclusion of a restructuring process that was
initiated in the previous period.
Auditor's Remuneration
Analysis of auditor's remuneration is as follows:
Year ended 31 December
2021 2020
GBP'000 GBP'000
Fees payable to the Company's auditor for the
audit of the Group's annual accounts 64 60
Fees payable to the Company's auditor for the
audit of subsidiary companies 101 89
165 149
Other services pursuant to legislation:
Tax advice 28 26
Other assurance 2 3
Total non-audit fees 30 29
5. Staff costs
Year ended 31 December
2021 2020
GBP'000 GBP'000
Wages and salaries 5,232 4,889
Social security costs 553 407
Pension costs (note 26) 90 83
5,875 5,379
The average monthly number of employees during the period was as
follows:
Year ended 31 December
2021 2020
No. No.
Directors 7 6
Administrative 27 27
Finance 8 7
Warehouse 48 53
Sales 11 8
Other 12 12
113 113
2021 2020
Directors' remuneration, included in staff costs GBP'000 GBP'000
Salaries 858 838
Share based payments (note 23) 117 545
Benefits 20 18
Pension contributions 4 3
999 1,404
Remuneration in respect of Directors was as follows:
Salary/fees Share based Benefits Pension 2021 2020
and bonus payment contribution
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Executive Directors
S Bazini 230 40 11 - 281 480
E Macleod 230 40 9 - 279 478
N Rodol 185 36 - 2 223 244
S Craig 60 1 - 2 63 61
P Hagon 40 - - - 40 -
Non-executive Directors
C Garston 60 - - - 60 60
K Sadler 40 - - - 40 40
P Hagon - - - 40
J Collier 13 - - - 13 -
858 117 20 4 999 1,403
Number Number Number Number Exercise Earliest Exercise
of Share of Share of Share of Share Price Exercise Expiry
options options options options Date Date
at January awarded lapsed at December
2021 in the in the 2021
year year
105,262
@237.5p 29/06/2020 29/06/2027
306,996
@254.5p 21/09/2021 21/09/2028
24,590
@122.0p 24/05/2024 24/05/2031
225,410
N Rodol 412,258 250,000 - 662,258 @122.0p 24/05/2024 24/05/2031
S Bazini 1,534,986 - - 1,534,986 254.5p 21/09/2021 21/09/2028
E Macleod 1,534,986 - - 1,534,986 254.5p 21/09/2021 21/09/2028
10,000
@237.5p 29/06/2020 29/06/2027
10,000
S Craig 20,000 - 20,000 @49.5p 20/05/2023 20/05/2030
Total share
options 3,502,230 250,000 - 3,752,230
The directors of the Group are the only key management
personnel.
6. Finance expense
Year ended 31 December
2021 2020
GBP'000 GBP'000
Loan interest 5 18
Lease liability interest (note 18) 84 143
Other interest 1 51
90 212
7. Income tax
Year ended 31 December
2021 2020
GBP'000 GBP'000
Current tax expense
Current tax on profits for the period 1,262 429
1,262 429
Deferred tax expense
Origination and reversal of temporary differences (367) (544)
Total tax expense / (credit) 895 (111)
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
2021 2020
GBP'000 GBP'000
Profit/(loss) for the period before taxation 3,725 (1,114)
Expected tax charge based on corporation tax
rate of 19% (2020: 19%) 708 (212)
Expenses not deductible for tax purposes 74 29
Other adjustments 1 2
Different tax rates applied in overseas jurisdiction 30 (69)
Adjustments in relation to prior year - -
Adjustment to deferred tax 82 139
Total tax expense / (credit) 895 (111)
The UK corporation tax at the standard rate for the year is
19.0% (2020: 19.0%).
On 24 May 2021, the UK Government enacted that from 1 April 2023
the corporation tax rate would increase to 25% for companies with
profits of over GBP250,000. A small profits rate will also be
introduced for companies with profits of GBP50,000 or less so that
they will continue to pay corporation tax at 19%. From this date
companies with profits between GBP50,000 and GBP250,000 will pay
tax at the main rate reduced by a marginal relief providing a
gradual increase in the effective corporation tax rate.
Deferred tax balances in these financial statements account for
the change in the UK Corporation Tax rate from 19% to 25% based on
enacted legislation.
The Group's effective tax rate for the year is 24.03% (2020:
9.96%).
8. Subsidiaries
At the period end, the Group has the following subsidiaries:
Subsidiary name Nature of business Place of incorporation Percentage
owned
Warpaint Cosmetics Group
Limited Holding Company England and Wales 100%
Warpaint Cosmetics (2014)
Limited* Wholesaler England and Wales 100%
Treasured Scents (2014)
Limited Holding Company England and Wales 100%
Treasured Scents Limited* Dormant England and Wales 100%
Warpaint Cosmetics Inc. Holding Company U.S.A. 100%
Retra Holdings Limited Holding Company England and Wales 100%
Badgequo Limited* Wholesaler England and Wales 100%
Retra Own Label Limited* Dormant England and Wales 100%
Badgequo Deutschland GmbH* Supply chain management Germany 100%
Badgequo Hong Kong Limited* Supply chain management Hong Kong 100%
Jinhua Badgequo Cosmetics People's Republic
Trading Co., Ltd* Wholesaler of China 100%
Marvin Leeds Marketing
Services, Inc.* Wholesaler U.S.A. 100%
Warpaint Cosmetics (ROI)
Limited Wholesaler Republic of Ireland 100%
* indicates indirect interest
All entities detailed above have been in existence for the whole
of the reporting period.
The registered office for all UK incorporated subsidiaries is
Units B&C, Orbital Forty-Six, The Ridgeway Trading Estate,
Iver, Bucks. SL0 9HW.
The registered office for Warpaint Cosmetics Inc.is 445 Northern
Boulevard - Great Neck, New York 11021.
The registered office for Badgequo Deutschland GmbH is
Robert-Bosch-Straße 10, Haus 1, 56410 Montabaur, Germany.
The registered office for Badgequo Hong Kong Limited is 12F, 3
Lockhart Road, Wanchai, Hong Kong.
The registered office for Jinhua Badgequo Cosmetics Trading Co.
Ltd is Room 1401, Gongyuan Building No. 307 South Shuanglong
Street, Wucheng District, Jinhua, Zhejiang, China 321000.
The registered office for Marvin Leeds Marketing Services, Inc.
is 34W. 33rd St. - Suite 301, New York NY 10001.
The registered office for Warpaint Cosmetics (ROI) Limited is
6(th) Floor, South Bank House, Barrow Street, Dublin 4, D04
TR29.
9. Goodwill
Cost GBP'000
At 1 January 2020 8,086
At 31 December 2020 8,086
At 1 January 2021 8,086
At 31 December 2021 8,086
Impairment
At 1 January 2020 812
Impairment during the year -
At 31 December 2020 812
At 1 January 2021 812
Impairment during the year -
At 31 December 2021 812
Net book value
At 31 December 2021 7,274
At 31 December 2020 7,274
Goodwill represents the excess of consideration over the fair
value of the Group's share of the net identifiable assets of the
acquired business/CGU at the date of acquisition. The carrying
value at 31 December 2021 includes Treasured Scents Limited
(Close-out business) of GBP513,000, Retra Holdings Limited
GBP6,207,000 and Marvin Leeds Marketing Services, Inc.
GBP554,000.
Impairment is calculated by comparing the carrying amounts to
the recoverable amount being the higher of value in use derived
from discounted cash flow projections or the fair value less costs
to sell. A CGU is deemed to be an individual division, 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 post tax discount rate of 10.0% (2020:
10.1%) for Retra Holdings Limited and 11.4% (2020: 8.0%) for Marvin
Leeds Marketing Services, Inc. and 10% for Treasured Scents
Limited. Cash flows beyond the five-year period are extrapolated
using a long-term average growth rate of 2.0% (2020: 2.0%). The
average growth rate beyond the five-year period is lower than
current growth rates and is in line with Management's expectations
for the business.
The fair value less costs to sell was based on a multiple of
earnings less estimated costs to sell. Management have performed
the annual impairment review as required by IAS 36 and have
concluded that no impairment is indicated for Treasured Scents
Limited, Retra Holdings Limited or Marvin Leeds Marketing Services,
Inc. as the recoverable amount exceeds the carrying 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 gross margin - for LMS this is based on forecasts
incorporating a compound annual growth rate of 19.3% revenue over
the next five years. For Retra, the compound annual growth rate
over the next five years is anticipated to be 4.8%. For Treasured
Scents the compound annual growth rate over the next five years is
anticipated to be 4%. The gross margins for LMS, Retra and
Treasured Scents are based on historical rates achieved.
-- Administrative expenses are expected to increase by 18% in
LMS, 23% in Retra and 5% in Treasured Scents in the year ending 31
December 2022 with 5% incremental increases annually
thereafter.
-- Discount Rate - pre-tax discount rate of 10.0% for Retra
Holdings Limited, 11.4% for Marvin Leeds Marketing Services, Inc.
and 10% for Treasured Scents reflects the Directors' estimate of an
appropriate rate of return, considering the relevant risk
factors.
-- Growth Rate - used to extrapolate beyond the budget period (5
years from year end date) and for terminal values based on a
long-term average growth rate of 2.0%.
Sensitivity to changes in assumptions
The impairment review of the Group is sensitive to changes in
the key assumptions, most notably the pre-tax discount rate, the
terminal growth rate, the projected operating cash flows.
Reasonable changes to these assumptions are considered to be:
-- 1.0% increase in the pre-tax discount rate;
-- Reduction in the terminal growth rate to 1%;.and
-- 10.0% reduction in projected operating cash flows
Reasonable changes to the assumptions used, considered in
isolation, would not result in an impairment of goodwill for LMS,
Retra or TS2014.
10. Intangible assets
Brands Customer Patents Website Licences Total
lists
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2020 3,802 8,240 252 45 6 12,345
Additions - - 12 - - 12
At 31 December 2020 3,802 8,240 264 45 6 12,357
Additions - - 3 - - 3
At 31 December 2021 3,802 8,240 267 45 6 12,360
Accumulated amortisation
At 1 January 2020 1,585 3,554 92 28 4 5,263
Charge for the year 765 1,644 24 9 1 2,443
At 31 December 2020 2,350 5,198 116 37 5 7,706
Charge for the year 765 1,600 24 4 1 2,394
At 31 December 2021 3,115 6,798 140 41 6 10,100
Net book value
At 31 December 2021 687 1,442 127 4 - 2,260
At 31 December 2020 1,452 3,042 148 8 1 4,651
11. Property, plant and equipment
Plant Fixtures Computer Motor Total
and machinery and fittings equipment vehicles
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Costs
At 1 January 2020 250 848 302 141 1,541
Additions 2 825 42 - 869
Disposals - - - (21) (21)
At 31 December 2020 252 1,673 344 120 2,389
Additions 15 558 23 - 596
Transfer from right-of-use
assets * 760 - - - 760
At 31 December 2021 1,027 2,231 367 120 3,745
Accumulated depreciation
At 1 January 2020 59 528 181 89 857
Charge for year 41 257 70 17 385
On disposals - - - (2) (2)
At 31 December 2020 100 785 251 104 1,240
Charge for year 189 410 39 11 649
Transfer from right-of-use
assets * 471 - - - 471
At 31 December 2021 760 1,195 290 115 2,360
Net book value
At 31 December 2021 267 1,036 77 5 1,385
At 31 December 2020 152 888 93 16 1,149
* Transferred from right of use assets category represents the
return of ROU assets at expiry of the lease and where title is
transferred to the Group.
12. Right-of-use assets
Leasehold Plant and Computer Total
property machinery equipment
GBP'000 GBP'000 GBP'000 GBP'000
Costs
At 1 January 2020 4,960 760 77 5,797
Additions 139 - - 139
Disposals (303) - - (303)
At 31 December 2020 4,796 760 77 5,633
Additions 253 - - 253
Transfer to Plant and Machinery - (760) - (760)
At 31 December 2021 5,049 - 77 5,126
Accumulated amortisation
At 1 January 2020 729 321 62 1,112
Charge for the year 702 150 15 867
Disposals (145) - - (145)
At 31 December 2020 1,286 471 77 1,834
Charge for the year 690 - - 690
Transfer to Plant and Machinery - (471) - (471)
At 31 December 2021 1,976 - 77 2,053
Net Book Value
At 31 December 2021 3,073 - - 3,073
At 31 December 2020 3,510 289 - 3,799
Transferred from right of use assets category represents the
return of ROU assets at expiry of the lease and where title is
transferred to the Group.
The weighted average incremental borrowing rate applied to
measure lease liabilities is 3.73% (2020: 3.61%) for leasehold
property, nil% (2020: 0.88%) for plant and machinery and nil%
(2020: 0.88%) for computer equipment.
13. Inventories
As at 31 December
2021 2020
GBP'000 GBP'000
Finished goods 18,655 14,934
Provision for impairment (516) (521)
18,139 14,413
The cost of inventories recognised as an expense and included in
'cost of sales' amounted to GBP28.56 million in the year ended 31
December 2021 (2020: GBP24.30 million).
14. Trade and other receivables
As at 31 December
2021 2019
GBP'000 GBP'000
Trade receivables - gross 8,755 7,750
Provision for impairment of trade receivables (66) (44)
Trade receivables - net 8,689 7,706
Other receivables 92 600
Prepayments and accrued income 1,541 881
Total 10,322 9,187
The directors consider that the carrying values of trade and
other receivables measured at book value and amortised cost
approximates to their fair value.
The individually impaired receivables relate to the supply of
goods to customers. A provision is recognised for amounts not
expected to be recovered. Movements in the accumulated impairment
losses on trade receivables were as follows:
As at 31 December
2021 2020
GBP'000 GBP'000
Accumulated impairment losses at 1 January 44 44
Additional impairment losses recognised during
the year, net 66 256
Amounts written off during the year as uncollectible (44) (256)
Accumulated impairment losses at 31 December 66 44
The impairment losses recognised during the year of GBP66,000
(2020: losses of GBP256,000 relating to the recovery of amounts
previously written off as uncollectable).
Contract Liabilities
As at 31 December
2021 2020
GBP'000 GBP'000
At 1 January 292 321
Amounts included in contract liabilities that
was recognised as revenue during the period 530 611
Amounts settled during the period (603) (640)
At 31 December 219 292
Contract liabilities are included within "trade and other
receivables" in the face of the statement of financial position
being settled net of the trade debtor balances. They arise from the
Group's brand segment, which enter into contracts with customers
for early settlement discounts, marketing contributions and volume
rebates, because the invoiced amounts to customers at each balance
sheet date do not consider the amount or rebate and discounts the
customers are entitled to until settlement of the debtor balance at
a certain time.
15. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes
of the cash flow statement:
As at 31 December
2021 2020
GBP'000 GBP'000
Cash at bank and in hand 4,072 4,875
4,072 4,875
16. Trade and other payables
As at 31 December
2021 2020
GBP'000 GBP'000
Current
Trade payables 1,847 1,439
Social security and other taxes 293 523
Other payables 66 32
Accruals and deferred income 4,087 1,127
Total 6,293 3,121
The directors consider that the carrying values of trade and
other payables measured at book value and amortised cost
approximates to their fair value.
17. Provision
The Group is currently in dispute with a third party relating to
the historic use of content on the Group's social media platforms
in the period 2018 through to early 2021. As a result of legal
advice received as to the likely quantum of liability a provision
of GBP370,000 at 31 December 2021 has been made as the directors'
best estimate of the expected liability and associated legal costs.
The payment and the restriction of content use will not affect the
ongoing running of the Group's business.
18. Loans and borrowings
As at 31 December
2021 2020
GBP'000 GBP'000
Bank loans
Repayable within 1 year - 48
- 48
Lease liabilities
Repayable within 1 year 610 866
Repayable within 2 - 5 years 2,261 2,375
Repayable in more than 5 years 276 670
3,147 3,911
Total
Repayable within 1 year 610 914
Repayable within 2 - 5 years 2,261 2,375
Repayable in more than 5 years 276 670
3,147 3,959
Undiscounted lease payments
As at 31 December
2021 2020
GBP'000 GBP'000
Lease liabilities
Repayable within 1 year 684 995
Repayable within 2 - 5 years 2.390 2,599
Repayable in more than 5 years 281 506
Total 3,355 4,100
Lease liabilities
As at 31 December
Leasehold Plant and Computer Total
property machinery equipment
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 4,326 398 16 4,740
Lease additions 139 - - 139
Lease disposals (158) - - (158)
Interest expense 97 44 2 143
Lease payments (745) (190) (18) (953)
As at 31 December 2020 3,659 252 - 3,911
Lease additions 253 - - 253
Interest expense 84 - - 84
Lease payments (765) (252) - (1,017)
Adjustments (84) (84)
As at 31 December 2021 3,147 - - 3,147
Nature of lease liabilities
The Group leases a number of properties in the United Kingdom
and United States of America as well as certain items of plant and
equipment.
An additional GBP1,061 (2020: GBP2,617) has been expensed to the
statement of comprehensive income in respect of low value operating
leases. Interest payments of GBPNil (2020: GBP4,051) have also been
expensed in respect of leases that expired during the period.
The interest rates expected are as follows:
As at 31 December
2021 2020
% %
Finance loans 7.0 7.0
Bank loans 8.75 8.75
Invoice financing 3.25 3.25
Secured loans
The borrowings of the subsidiary companies, Retra Holdings
Limited and Badgequo Limited, are secured by a debenture including
a fixed charge over the present leasehold property, a first fixed
charge over book and other debts and a first floating charge over
all assets of those companies.
Bank borrowings include stock and invoice financing facilities
amounting to GBPNil (2020: GBPNil). The carrying value of assets
pledged as collateral approximates to GBP8,205,000 (2020:
GBP8,763,000).
19. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using tax rate of 19% - 25%.
The movement on the deferred tax account is as shown below:
Deferred tax liability Deferred tax asset
Year ended 31 December Year ended 31 December
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Opening balance (1,000) (1,324) 581 374
Foreign exchange adjustment - 3 - (16)
Recognised in profit
and loss:
Tax expense 443 321 (81) 223
Closing balance (557) (1,000) 500 581
The deferred tax liability has arisen due to the timing
difference on accelerated capital allowances amounting to GBP46,000
(2020: GBP42,000) and on the intangible assets acquired in a
business combination amounting to GBP1,057,000 (2020:
GBP1,057,000).
Deferred tax asset has arisen from taxable losses carry forward
for LMS amounting to GBP1,995,000 (2020: GBP2,323,000) and
recognised at a rate of 25%.
20. Dividends
Year to December 2021 Paid Amount per Total
share GBP'000
05 July
Final dividend - 2020 21 3.0p 2,303
Interim dividend - 2021 11 Nov 21 2.5p 1,919
4,222
Year to December 2020 Paid Amount per Total
share GBP'000
Final dividend - 2019 - - -
Interim dividend - 2020 20 Nov 20 2.8p 2,149
2,149
The Group has proposed a final dividend for the year ended 31
December 2021 of 3.5p per share.
21. Called up share capital
No. of
shares
'000 GBP'000
Allotted and issued
Ordinary shares of GBP0.25 each:
At 1 January 2019 and 2020 76,749 19,187
Issued at 12 May 2021 3 1
At 31 December 2021 76,752 19,188
During the year, Company issued 3,230 equity shares with par
value of GBP0.25 per share for GBP0.495 per share. Entire amount
was paid in cash. No shares were allotted other than for cash.
All ordinary shares carry equal rights.
22. 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.
Retained earnings
Retained earnings represent cumulative profits or losses, net of
dividends and other adjustments.
Merger reserve
The merger reserve arose due to the Group reconstruction in
2016. 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 31 December 2015 and as at 1 January
2015. The corresponding entry being the merger reserve so the
overall net assets as at the comparative dates are not
affected.
Share option reserves
'Share option reserves' have arisen from the share-based payment
charge. The shares over which the options were issued are that of
the parent Company. 'Other reserves' have also arisen on
translation of foreign subsidiaries.
23. Share based payments
Movements in the number of options and their weighted average
exercise prices are as follows:
Weighted Number Weighted Number of
average exercise of options average exercise options
price (pence) price (pence)
2021 2021 2020 2020
Outstanding at the beginning
of the year 233.50 4,528,962 253.45 4,088,302
Granted during the year 122.0 400,000 49.50 454,686
Expired during the year 115.0 (68,132) 83.36 (14,026)
Outstanding at the end
of the year 226.0 4,860,830 233.50 4,528,962
The weighted average remaining contractual life of the options
is 2.6 years (2020: 3.0 years).
The following options over ordinary shares have been granted by
the Company:
Exercise Exercise Number of options
price period
Pence (years)
29 June 2017 237.50 3 255,051
24 September 2018 254.50 5 3,837,462
20 May 2020 49.50 3 454,686
25 May 2021 122.0 3 400,000
At the date of grant, the options were valued using the
Black-Scholes option pricing model. The fair value per options
granted and the assumptions used in the calculations were as
follows:
25 May 2021 20 May 2020 24 Sept 29 June
18 17
Expected volatility 78% 76% 78% 64%
Expected life (years) 3 3 2-4 3
Risk-free interest rate 0.15% 0.01% 1.61% 0.38%
Expected dividend yield 1.76% 2.08% 1.53% 2%
Fair value per option
(GBP) 0.552 0.213 0.422 0.963
On 25 May 2021, the Company granted, in aggregate, 400,000 share
options with an exercise price of 122.0 pence per Ordinary share
under a Company Share Option Plan (CSOP). Key persons discharging
managerial responsibilities (PDMR's) were awarded a cumulative
400,000 share options as part of their annual remuneration and
incentivisation packages. The options are exercisable for a period
of seven years from 24 May 2024 and are not subject to the
satisfaction of any performance criteria.
On 20 May 2020, the Company granted, in aggregate, 454,686 share
options with an exercise price of 49.50 pence per Ordinary share
under a Company Share Option Plan (CSOP). Key persons discharging
managerial responsibilities (PDMR's) were awarded a cumulative
112,106 share options as part of their annual remuneration and
incentivisation packages. The remaining 342,580 options granted
have been awarded to other members of the Company's workforce. No
directors of the Company were awarded options in relation to this
CSOP. The options are exercisable for a period of seven years from
20 May 2023, subject to the same performance conditions dictated by
the Enterprise Management Incentive Scheme detailed below.
On 24 September 2018, share options with an exercise price of
254.50p, equal to the closing mid-market value immediately prior to
the date of grant, and subject to the achievement of demanding
Earnings Per Share ("EPS") and Total Shareholder Return ("TSR")
performance conditions measured over a period of up to 5 years were
granted to certain directors.
The share options are exercisable up to 10 years from the date
of grant. Vesting is subject to the performance conditions set out
below:
-- 50% of the award is subject to an adjusted EPS growth
performance condition. One third of this portion of the award will
be tested and vest after three, four and five years. Vesting is
based on adjusted EPS in the years ending Dec 2020, 2021 and 2022.
Threshold vesting of 20% of the award is achieved at 12.5% compound
annual EPS growth and full vesting at 22.5% compound annual EPS
growth, measured from 31 December 2017.
-- 50% of the award is subject to an absolute TSR performance
condition tested following the announcement of results for the
years ending 31 December 2020, 2021 and 2022. Threshold vesting of
20% of the award is achieved at 8% compound annual TSR and straight
line vesting up to 100% vesting at 18% compound annual TSR,
measured from 31 December 2017.
An additional grant of 460,494 share options with the same terms
was made on the same date to three senior management individuals of
the Company.
On 29 June 2017, the Company granted in aggregate over 277,788
ordinary shares of 25 pence each in the Company under the
Enterprise Management Incentive Scheme to all staff members,
including the Company's Chief Financial Officer, Neil Rodol, but
excluding all other directors. The Options are exercisable for a
period of seven years from 29 June 2020, subject to certain
performance conditions being met, including that the compound
annual growth rate in the Company's earnings per share must exceed
8 per cent over the three financial years commencing 1 January
2017, subject to the discretion of the Company's remuneration
committee.
The charge in the statement of comprehensive income for the
share-based payments during the year was GBP177,000 (2020:
GBP656,000).
24. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
Key management personnel are considered to be the directors.
Compensation of the directors is disclosed in note 5 with the
exception of dividends and drawings which are disclosed in note
19.
During 2021, Warpaint Cosmetics (2014) Limited paid rent in the
sum of GBP120,000 (2020: GBP120,000) to Direct Supplies (2014)
Group Limited, of which S Bazini is a director. At the year end the
amount due to Direct Supplies (2014) Group Limited was GBP30,000
(2020: GBPNil). During 2021, Warpaint Cosmetics (2014) Limited paid
rent in the sum of GBP120,000 (2020: GBP120,000) to Trading Scents
Group Limited, of which E Macleod is a director. At the year end
the amount due to Trading Scents Group Limited was GBP30,000 (2020:
GBP1,000).
During 2021, Retra Holdings Limited paid rent in the sum of
GBP340,000 (2020: GBP340,000) to Warpaint Cosmetics Limited, of
which E Macleod and S Bazini are directors.
As announced on 6 February 2020, the Group appointed Ward &
Hagon, a provider of practical business solutions, to assist it in
implementing its strategic growth plan. As a result of a successful
initial period, whereby they assisted the Group in accessing new
retail channels (including Tesco) the Group is pleased to announce
that the Contract with Ward & Hagon, has been renewed for a
further 12 months.
The Contract has a total annual value of GBP210,000 (which will
be satisfied from the Group's operating cash flows), and includes
the services of Paul Hagon, an executive director of the Company
and Martyn Ward, amongst other members of the Ward & Hagon
team. In addition, Ward & Hagon will be paid a commission of 3%
on all sales generated from their introductions in the 12-month
period from the point of first sale, and 4% on all sales generated
from their introductions in the 12-month period thereafter.
The board is of the view that the services provided under the
Contract represent value to shareholders through assisting the
Group achieving is near term objectives. Accordingly, Ward &
Hagon will continue to focus on assisting the Group access new
retail channels both in the UK and overseas.
Paul Hagon, an executive director of Warpaint, is a member of
Ward & Hagon. Accordingly, the renewal of the contract is
classified as a related party transaction pursuant to the AIM Rules
for Companies. The independent directors of the Company (being all
executive and non-executive directors except Mr Hagon), having
consulted with N+1 Singer, the Company's Nominated Adviser,
consider that the terms of the Contract renewal are fair and
reasonable insofar as the Company's shareholders are concerned.
Also note Ward & Hagon were paid GBP200,000 fees (2020:
GBP200,0000, GBP20,010 commission (2020: GBPNil) and expenses of
GBP7,941 in 2021 (2020: GBP7,299).
25. 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, share
premium and retained earnings totalling GBP50,358,000 as at 31
December 2021 (2020: GBP51,748,000) as shown in the statement of
changes in equity.
The Group maintains or adjusts its capital structure through the
payment of dividends to shareholders and issue of new shares.
Year ended 31 December
2021 2020
GBP'000 GBP'000
Financial assets
Financial assets at amortised cost:
Trade and other receivables 8,781 8,306
Financial assets measured at fair value
through the profit and loss:
Cash and cash equivalents 4,072 4,875
Derivative financial instruments 545 40
13,398 13,221
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables (1,913) (2,598)
Loan and borrowings (3,147) (3,959)
Financial liabilities measured at fair value
through the profit and loss:
Derivative financial instruments - (400)
(5,060) (6,957)
Net 8,338 6,264
Financial assets measured at fair value through the profit and
loss comprise cash and cash equivalents and derivative financial
instruments.
Financial assets measured at amortised cost comprise trade
receivables and other receivables.
Financial liabilities measured at amortised cost comprise trade
payables and other payables, and bank loans.
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 a
floating rate 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 GBP18,000 (2020:
GBP7,000) 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 Group makes a provision in the financial
statements for expected credit losses based on an evaluation of
historical data and applies percentages based on the ageing of
trade receivables.
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 2021, the Group has trade receivables of
GBP8,689,000 (2020: GBP7,706,000).
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
2021 2020
GBP'000 GBP'000
Current 4,811 4,682
1 - 30 days 2,006 1,801
31 - 60 days 1,516 944
61 - 90 days 183 220
91 + days 239 103
Provision for impairment of trade receivables (66) (44)
Total trade receivables - net 8,689 7,706
The Directors are unaware of any factors affecting the
recoverability of outstanding balances at 31 December 2021 and,
consequently, no further provisions have been made for bad and
doubtful debts.
The allowance for bad debts has been calculated using a 12-month
lifetime expected credit loss model, as set out below, in
accordance with IFRS 9.
As at 31 December As at 31 December
2021 2020
GBP'000 % GBP'000 GBP'000 % GBP'000
Current 4,811 0.135 6 4,682 0.135 6
1 - 30 days 2,006 0.405 8 1,801 0.405 7
31 - 60 days 1,516 1.215 18 944 1.215 11
61 - 90 days 183 3.645 8 220 3.645 8
91 + days 239 10.935 26 103 10.935 12
66 44
Credit quality of financial assets
As at 31 December
2021 2020
Trade receivables, gross (note 14): GBP'000 GBP'000
Receivable from large companies 2,600 4,270
Receivable from small or medium-sized companies 2,211 412
Total neither past due nor impaired 4,811 4,682
As at 31 December
2021 2020
Past due but not impaired: GBP'000 GBP'000
Less than 30 days overdue 2,006 1,801
30 - 90 days overdue 1,872 1,223
Total past due but not impaired 3,878 3,024
Lifetime expected loss provision:
Less than 30 days overdue - -
30 - 90 days overdue 66 44
Total lifetime expected loss provision (gross) 66 44
Less: Impairment provision (66) (44)
Total trade receivables, net of provision
for impairment 8,689 7,706
Cash and cash equivalents, neither past due nor impaired
(Moody's ratings of respective counterparties):
As at 31 December
2021 2020
GBP'000 GBP'000
AAA rated 6 10
AA rated 1,723 303
A rated - 1,115
BAA rated 2,343 3,447
Total cash and cash equivalents 4,072 4,875
For the purpose of the Group's monitoring of credit quality,
large companies or Groups are those that, based on information
available to management at the point of initially contracting with
the entity, have annual turnover in excess of GBP100,000 (2020:
GBP100,000).
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 monthly cash balance updates and weekly sales
and margin reports marked against budget. At the start of each year
the Board approve and adopt a budget and cash flow for the next 24
months, the CFO monitors these and reports any material divergences
to the Board, so that management can ensure that sufficient funding
is in place as it is required. The budget and cash flow are updated
at the end of each year, for the following 24 months.
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 2021
Less than Between Between Over 5 years Total
6 months 6 months 1 and 5
and 1 year years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 1,847 - - - 1,847
Other payables 66 - - - 66
Accruals 4,087 - - - 4,087
Loans and borrowings 342 342 2,390 281 3,355
6,342 342 2,390 281 9,355
Year ended 31 December 2020
Less than Between 6 Between Over 5 Total
6 months months and 1 and 5 years
1 year years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 1,439 - - - 1,439
Other payables 32 - - - 32
Accruals 1,127 - - - 1,127
Loans and borrowings 497 498 2,599 506 4,100
3,095 498 2,599 506 6,698
The borrowings of the Group are secured by a debenture including
a fixed charge over all present leasehold property, a first fixed
charge over book and other debts and a first floating charge over
all assets.
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. At December 2021,
there were total sums of GBP939,000 (2020: GBP375,000) held in
foreign currency.
The Group is also exposed to currency risk as the assets one of
its subsidiary are denominated in US Dollars. At 31 December 2021,
the net foreign liability was GBP0.7m (2020: GBP0.4m). Differences
that arise from the translation of these assets from US dollar to
sterling are recognised in other comprehensive income in the year
and the cumulative effect as a separate component in equity. The
Group does not hedge this translation exposure to its equity.
A 5% weakening of sterling would result in a GBP9,083 increase
in reported profits and equity, while a 5% strengthening of
sterling would result in GBP8,218 decrease in profits and
equity.
Marvin Leeds Marketing Services, Inc.
As at 31 December
2021 2021
USD GBP
Profit After Tax 233,587 172,570
5% weakening of US dollar 233,587 181,653
Increase profits 9,083
5% strengthening of US dollar 233,587 164,352
Decrease profits (8,218)
Foreign exchange risk
2021 2020
GBP'000 GBP'000
Derivatives carried at fair value:
Exchange gain/(loss) on forward foreign currency
contracts 545 (360)
The Group, along with other businesses, will face the risk of
inflationary pressures through commodities cost increases, further
driven by currency weakness post Brexit.
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.
Derivatives are recognised initially at their fair value at the
date the derivative contract is entered intro and are subsequently
remeasured to their fair value at each reporting date. The
resulting gain or loss is recognised immediately in the profit or
loss unless the derivative is designed and effective as a hedging
instrument, in which event the timing and recognition in the profit
or loss depends on the nature of the hedging relationship.
As at 31 December 2021, the Group has 40 (2020: 42) forward
foreign exchange contracts outstanding. Derivative financial
instruments are carried at fair value.
The following table details the foreign currency contracts
outstanding as at the balance sheet date.
a) Contracted exchange rate 2021 2020 2021 2020
GBP/$ GBP/EUR
3 months or less 1.3730 1.3353 - 1.1082
3 to 6 months 1.3866 1.3222 1.1645 1.1099
6 to 12 months 1.3813 1.3265 1.1491 1.1024
b) Contract value 2021 2020 2021 2020
GBP/$ GBP/EUR
GBP'000 GBP'000 GBP'000 GBP'000
3 months or less 728 2,620 - 947
3 to 6 months 13,159 7,008 1,072 2,479
6 to 12 months 5,447 3,766 2,259 1,133
19,335 13,394 3,331 4,559
c) Foreign currency 2021 2020 2021 2020
$'000 $'000 EUR'000 EUR'000
3 months or less 1,000 3,500 - 1,050
3 to 6 months 18,250 9,254 1,250 2,750
6 to 12 months 7,535 5,000 2,600 1,250
26,785 17,754 3,850 5,050
Fair value of financial assets and liabilities
Financial instruments are measured in accordance with the
accounting policy set out in Note 1. All financial instruments
carrying value approximates its fair value with the exception of
foreign currency forward contracts and options which are considered
Level 2. The Directors consider that there is no significant
difference between the book value and fair value of the Group's
financial assets and liabilities and is considered to be
immaterial.
26. Pension costs
The Group operates a defined contribution pension scheme.
Contributions payable to the Group'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 GBP88,339
(2020: GBP91,019).
27. Controlling party
In the opinion of the directors there is no ultimate controlling
party.
28. Earnings/(loss) 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 weighted average number of shares for the current year
includes the shares issued as consideration for the acquisition of
Retra Holdings Limited on 30 November 2017.
2021 2020
Basic earnings/(loss) per share (pence) 3.69 (1.31)
Diluted earnings per/(loss) share (pence) 3.68 (1.31)
The calculation of basic and diluted earnings/(loss)
per share is based on the following data:
2021 2020
Earnings GBP'000 GBP'000
Earnings for the purpose of basic earnings per
share, being the net profit/(loss) 2,830 (1,003)
Number of shares 2021 2020
Weighted number of ordinary shares for the purpose
of basic earnings per share 76,751,187 76,749,125
Potentially dilutive shares awarded 62,699 67,040
Weighted number of ordinary shares for the purpose
of diluted earnings per share 76,813,886 76,816,165
The 4,542,988 share options (2020: 4,088,302) in issue
throughout the year have not been included in the computation of
diluted earnings per share, as per IAS 33, the share options are
not dilutive as they are not likely to be exercised given that the
exercise price is higher than the average market price.
The additional 400,000 share options granted 25 May 2021 have
been included in the computation of diluted earnings per share as
the exercise price of the options is below the average annual
market price of Ordinary shares.
29. Notes supporting statement of cash flows
Non-cash transactions from financing activities are shown in the
table below.
Non-current Current
loans and loans and
borrowings borrowings Total
GBP'000 GBP'000 GBP'000
At 1 January 2020 3,864 2,205 6,069
Non-cash flows: - (19) (19)
Cash flows - (2,091) (2,091)
Reclassification from Non-current loans
and borrowings to current loans and
borrowings (819) 819 -
At 31 December 2020 3,045 914 3,959
Non-cash flows: - 169 169
Cash flows - (981) (981)
Reclassification from Non-current loans
and borrowings to current loans and
borrowings (508) 508 -
At 31 December 2021 2,537 610 3,147
30. Post balance sheet events
On 2 March 2022, Ward & Hagon Management Consulting LLP (an
LLP of which Paul Hagon is a member) were granted options to
subscribe for 200,000 ordinary shares of 25p in the Company at an
exercise price of 127.5 pence per share (the "Option"), being the
closing mid-market price on 1 March 2022 (the last practicable date
prior to this announcement). The Option is exercisable between
three and ten years from the date of grant. Save as mentioned
above, there were no changes in the shareholdings of the directors
between 31 December 2021 and the date of this report.
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