TIDMW7L
RNS Number : 0084M
Warpaint London PLC
25 April 2018
25 April 2018
Warpaint London plc
("Warpaint London" or the "Company")
Final Results for the Year Ended 31 December 2017
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
2017.
Financial Highlights
-- Proforma revenue increased by 15.6% to GBP31.2 million
(2016: GBP27.0 million)
-- Proforma adjusted operating margin 24.4% (2016: 25.2%)
-- Proforma adjusted earnings per share increased by 8.0%
to 9.4p (2016: 8.7p)
-- Net cash at the year end of GBP2.0 million (31 December
2016: GBP3.5 million)
-- Cash generated from operating activities GBP5.2 million
(2016: GBP3.0 million)
-- Final dividend for the year of 2.6p per share (total
dividend for the year of 4p per share including interim
dividend)
(Proforma numbers are adjusted to exclude the revenue of Retra
for Dec 2017, and for exceptional items and amortisation costs on
acquisitions in 2017 and 2016)
Operational Highlights
-- Acquisition of Retra Holdings Ltd ("Retra") for GBP18.2
million on 30 November 2017
-- W7 brand sales in the UK up 17.1%
-- W7 brand sales internationally up 16.8%
Clive Garston, Chairman of Warpaint, commented: "2017 was
Warpaint's first full year as an AIM company and I am pleased to
report that the year was one of significant growth and achievement.
The acquisition of Retra, which we made in November 2017, has been
successfully integrated into the Group and we continue to focus
heavily on building brand awareness, both in the UK and in overseas
markets.
"After a successful first year as a quoted company, we look to
the future with considerable optimism. We have had a promising
start to the current year, in line with the Board's expectations,
and with a sound financial base, including net cash, prospects are
encouraging. I believe we are well positioned to continue to
deliver increasing shareholder value in 2018 and the outlook for
the Group remains positive."
Enquiries:
Warpaint London PLC c/o IFC
Sam Bazini - Joint Chief Executive Officer
Eoin Macleod - Joint Chief Executive Officer
Neil Rodol - Chief Financial Officer
Stockdale Securities Limited (Nominated
Adviser and Broker)
Antonio Bossi, Ed Thomas - Corporate Finance
Fiona Conroy - Corporate Broking 020 7601 6100
IFC Advisory Limited (Financial PR & IR)
Tim Metcalfe
Heather Armstrong
Florence Chandler 020 3934 6630
Warpaint London plc
Warpaint London is a colour cosmetics business, based in Iver,
Buckinghamshire. It is made up of two divisions: close-out and
own-brand. The second and larger own-brand division consists
primarily of the Group's flagship brand, W7 - an extremely
creative, design-focused cosmetic brand proposition with a focus on
the 16-30 age range, delivering high-quality cosmetics at
affordable prices. The W7 brand has grown organically since its
inception in 2002 and now contains over 700 items which are sold
into high street retailers and independent beauty shops across the
UK, Europe, Australia and the US. In 2017, W7 was supplied in more
than 60 countries.
In 2017 Warpaint completed the acquisition of Retra Holdings
Limited, a UK colour cosmetics business with a significant focus on
the gifting market, principally for high street retailers and
supermarkets including Boots, Superdrug and Asda. Retra owns three
major brands: Technic, Body Collection and Man'stuff, in addition
to supplying white label cosmetics produced for several major high
street retailers including Asda and Matalan.
Headline proforma financial results for the year to 31 December
2017
Warpaint London plc ("Warpaint", the "Company" or the "Group")
is made up of three trading divisions. The largest is the own-brand
division which sells the Group's leading cosmetic brand W7; the
second, Retra Holdings Ltd ("Retra"), acquired in November 2017 is
a colour cosmetics business with a significant focus on the gifting
market, principally for high street retailers and supermarkets and
in addition supplies white label cosmetics produced for several
major high street retailers; the third and smallest division trades
in close-out and excess stock of branded cosmetics and fragrances
from around the world.
On 30 November 2017, the Group acquired Retra for a maximum
consideration of GBP18.2 million (GBP18.4 million at fair value).
This annual report has been prepared in accordance with acquisition
accounting standards, therefore in order to present to shareholders
a more consistent view of the trading of the Group we have prepared
proforma consolidated statements of comprehensive income for the
years ended 31 December 2016 and 31 December 2017, with a
reconciliation between the proforma and the statutory consolidated
statement of comprehensive income.
Headline results, shown below, represent the performance
comparisons between the proforma consolidated statements of income
for the years ended 31 December 2017 and 31 December 2016.
The proforma numbers have been adjusted to take account of
restructuring changes and other non-recurring items in 2016,
specifically the inclusion of the trade of the close-out division
in that year, and the exclusion of the acquisition of Retra in the
year ended 31 December 2017. Reconciliations between the proforma
consolidated income statements and the statutory consolidated
income statements for the 12 months to 31 December 2016, and the 12
months to 31 December 2017 are included in the Financial
Review.
The proforma consolidated statement of comprehensive income for
the years ended 31 December 2016 and 31 December 2017 includes the
trade of the larger own-brand division plus the trade of the
smaller close-out division for the whole of each year and exclude
one month of trade related to Retra in the year ended 31 December
2017. The statutory consolidated statement of comprehensive income
for the years ended 31 December 2016 and 31 December 2017, include
the trade of the larger own-brand division for the whole of each
year, plus the trade of the smaller close-out division from the
acquisition date of 11 November 2016 only, plus the trade of the
Retra division from the acquisition date of 30 November 2017
only.
In 2017, GBP0.4 million of acquisition costs have been treated
as exceptional as they were one off legal and professional fees and
commissions incurred in acquiring Retra on 30 November 2017 (2016:
GBP1.7 million of one off expenses related to the admission of the
Group's shares to trading on AIM in November 2016).
Unaudited Proforma Results Statutory Results
Year ended Year ended Growth Year ended Year ended Growth
31 Dec 2017 31 Dec 2016 % 31 Dec 2017 31 Dec 2016 %
-------------- -------------- ------- ------------- ------------- -------
Revenue GBP31.2m GBP27.0m 15.6 GBP32.5m GBP22.5m 44.4
-------------- -------------- ------- ------------- ------------- -------
Adjusted
profit from
operations GBP7.6m* GBP6.8m* 11.8 GBP7.7m* GBP6.2m* 24.2
-------------- -------------- ------- ------------- ------------- -------
Adjusted 24.4%* 25.2%* 23.7%* 27.6%*
profit from
operations
margin
-------------- -------------- ------- ------------- ------------- -------
Adjusted
PBT GBP7.5m* GBP6.8m* 10.3 GBP7.7m* GBP6.2m* 24.2
-------------- -------------- ------- ------------- ------------- -------
Adjusted
EPS 9.4p* 8.7p* 8.0 9.6p 7.9p 21.5
-------------- -------------- ------- ------------- ------------- -------
Net cash GBP2.0m GBP3.5m GBP2.0m GBP3.5m
-------------- -------------- ------- ------------- ------------- -------
*Adjusted for the GBP0.4 million of Retra Holdings Ltd
acquisition costs incurred in the year (2016: IPO costs GBP1.7
million) and GBP0.5 million of amortisation costs in relation to
acquisitions in the year (2016: GBP0.04 million)
Chairman's Statement
2017 was Warpaint's first full year as an AIM company and I am
pleased to announce that the year was one of significant growth and
achievement. Notwithstanding continuing uncertainty caused by the
prospect of Brexit and a fluctuating Sterling exchange rate, the
2017 results are highly satisfactory. The effect of the US dollar
exchange rate cannot be overemphasised. Had it been constant with
2016 the margin would have been 2.9 % higher with an accompanying
increase in earnings. In addition, in November 2017, Warpaint
acquired Retra, which is an own brand and white label colour
cosmetics and gifting company with its head office in Yorkshire.
Retra brands include Technic, Body Collection and Man'stuff. The
acquisition has been successfully integrated into the Warpaint
Group and Warpaint continues to focus heavily on building its brand
awareness, both in the UK and its successful overseas markets. I
believe that we have made excellent progress in doing this.
Following the Retra acquisition the Group's earnings are likely to
be greater in the second half of the year than the first, as a
result of a substantial proportion of Retra sales being made in
connection with Christmas gifts.
Results
The proforma numbers will be quoted throughout this annual
report in order to give shareholders clarity in understanding the
results for the year.
Profit before tax was GBP6.9 million (proforma GBP6.7 million)
on a revenue of GBP32.5 million (proforma GBP31.2 million) with
basic earnings per share of 8.34p. Net cash at 31(st) December 2017
of GBP2.0 million emphasises the Group's strong position. Margins
were strong and our priorities are to maximise earnings in all the
key markets.
Queen's Award
As was announced on 23(rd) April 2018, Warpaint has been awarded
the Queen's Award for Enterprise - International Trade. This is a
very prestigious award and we are all very excited about it. It is
further testament to the foresight and hard work of the executive
team that this award has been made to Warpaint.
Dividend
In accordance with the Group's progressive dividend policy, the
Board is pleased to recommend a final dividend of 2.6p per share
which, if approved by shareholders at the AGM, will be paid on the
20(th) July 2018 to shareholders on the register at the 6(th) July
2018. The shares will go ex-dividend on the 5(th) July 2018.
Board and People
These results would not have been possible without the
commitment, dedication and enthusiasm of my fellow Board members
and all the Group's employees. I would like to thank all of them
for their contribution to the Group's success.
A key strength of the Company is the commitment of its employees
which helps to make Warpaint the progressive, energetic and dynamic
company that it is. Nowhere is this demonstrated more than by the
dedication and ambition of the Joint Chief Executives, Sam Bazini
and Eoin Macleod and Neil Rodol, the Chief Financial Officer. They
are determined to drive Warpaint forward. The Non-Executive
Directors, Keith Sadler and Paul Hagon make a very meaningful
contribution to the Board and I regard it as a privilege and
pleasure to work alongside them. During the year, there have been a
number of significant hires, which has strengthened the team and
the Board is fully supportive of recruiting the right people to
make the Group stronger.
Awards of EMI options were made to all staff in June 2017 and it
is proposed to introduce an LTIP for senior management in the
current calendar year.
Annual General Meeting
The annual general meeting will be held on 12(th) June 2018 at
11am at the offices of DAC Beachcroft LLP, 100 Fetter Lane, London,
EC4A 1BN. I look forward to meeting all shareholders who are able
to attend.
Outlook
After a very successful first year as a quoted company, Warpaint
looks to the future with considerable optimism. We have had a
promising start to the current year and the Retra acquisition has
been well integrated. With a sound financial foundation and being
net debt free, prospects are encouraging and Warpaint is well
positioned to continue to deliver increasing shareholder value in
2018. The outlook for the Group remains positive.
Clive Garston
Chairman
24 April 2018
Joint Chief Executive's Statement
We are delighted to present the Group's first full year results
as a public company. 2017 was a very positive year for Warpaint.
Our strategy of producing an extensive range of high quality
cosmetics at an affordable price has remained our key focus and we
are very pleased with the reaction that our expanding product range
received during the year. The acquisition of Retra in November 2017
was a key development for Warpaint, which provides us with new
product ranges, new brands and new customers.
Strategy
In order to build our brands, we utilise brand ambassadors,
bloggers and vloggers to engage with our target audience. Much of
this is done through social media campaigns to educate and interact
with our loyal brand users.
While the majority of our brand ranges include core colour
cosmetic items, we add on trend items and colourways developed by
our growing new product development team, especially within our
lead brand W7. This on trend and quick to market model is something
our customers demand and expect from us, which we repeatedly
deliver on.
Growing market share, both in our home market and overseas, is a
focus. We are delighted to have been awarded the Queen's Award for
Enterprise - International Trade, this is testament to our growth
strategy in recent years and the strength of the W7 brand and the
overall business. We have not exhausted the potential for increased
exports and we continue to grow in the UK.
Our key focus is to supply our customers with a wide range of
affordable, high quality cosmetics. We will achieve this by
continuing to build our internationally recognised brand W7, as
well as our newly acquired Retra brands, Technic, Body Collection
and Man'stuff and others we have developed such as Very Vegan. We
see this as key to supporting our future growth.
China and the US remain of particular focus for us in our
international expansion, which we are targeting with focused
e-commerce sites, along with social media activities and marketing.
During the year we launched our Chinese and US e-commerce sites
with the functionality to transact in local currencies.
Our e-commerce platform has now been in operation for over a
year to support our customers, both retailers and distributors in
the UK and overseas. We saw incremental e-commerce revenue for the
first time in 2017, the majority of which came from online sales in
the UK. We engage with, and educate our customer base through the
website with the use of beauty blogs, celebrity influencers and
endorsements, and social media campaigns. During the year we hosted
a number of very successful events which generated high profile
press coverage, as well as a number of media campaigns to
strengthen our brand awareness.
With the acquisition of Retra in the later part of the year, one
of our main priorities was to ensure the smooth integration of the
business with the wider Group. We have recruited a new managing
director and finance director for Retra. They have replaced the
original owners who remain available to the Group on a consultancy
basis. We are in an ever stronger position to support our future
growth with new and existing customers, demographics, geographies
and our ability to stay at the forefront of on trend product
development.
Acquisition of Retra
In November 2017 the Group acquired Retra which owns three major
brands: Technic, Body Collection and Man'stuff, allowing the Group
access to an older age range and a growing male health and beauty
market. Retra also produces white label cosmetics for several major
high street retailers. Retra is complementary in terms of products,
customer relationships and geographic spread. There are natural
synergy opportunities within the enlarged Group in sourcing and
cross selling.
The integration of Retra into the Group has been very successful
and the business is performing well, producing new opportunities
for the combined Group.
Brands
During 2017 Warpaint continued to focus on the development of
Warpaint's brands which represented 79% of overall revenue
generated in comparison to 17% contributed from the close-out side
of the business. The contribution from the Retra brands in the
period was minimal due to the acquisition completing at the end of
November 2017 and totalled 4% of overall revenue in the year.
As previously reported, we launched our Very Vegan range during
the second half of the year and we have been very encouraged by the
sales we have seen in the period. For 2017, the range included 15
Stock Keeping Units ("SKUs") and for 2018 we are adding 6 SKUs to
provide a full range of Very Vegan colour cosmetics.
We have seen development in some of our other brands in the year
as well as W7, increasing SKUs in a number of product lines.
Outdoor Girl now has 11 SKUs in its range, our W7 Christmas range
has now grown to 75 SKUs and the everyday range of W7 now includes
687 live SKUs.
Warpaint brands are:
-- W7
-- Very Vegan
-- Outdoor Girl
-- Smooch
-- Copy Cat
-- Taxi
Additional brands acquired through Retra are:
-- Technic
-- Body Collection
-- Man'stuff
Products
W7's largest selling product categories are eye products, face
make-up and lip products, which together represented approximately
80% of the own-brand division's revenue in 2017.
Customers & Geographies
Amongst our largest clients are export customers and
distributers from Australia, the US and Europe. At the end of 2017
our top ten W7 customers represented 59.2% of revenues, compared to
56.3% in 2016. In the UK, the W7 brand had growth of 17.1% and
internationally the brand grew by 16.8%.
In 2017 W7's global expansion increased and the brand is now
sold to more than 60 countries (2016: 50 countries).
Summary
Our first full year as a public company has been one of strong
growth for Warpaint. We have seen geographic expansion, a
significant increase in our product offering, both organically and
through the acquisition of Retra, as well as growth in our product
awareness.
We remain a leader in the sale of on trend colour cosmetics for
our growing customer base and are very encouraged by the continued
appetite we see from both UK and international customers, further
aiding us in growing our sales in the global colour cosmetics
market. We intend to continue to drive UK and export sales to new
and existing markets, develop our portfolio of brands, as well as
maximising the opportunities presented by the Retra
acquisition.
We are exceedingly grateful to our employees for their loyalty,
commitment and hard work during 2017, a year that has seen yet
another big change for Warpaint as we welcomed the Retra team into
our Group.
Sam Bazini & Eoin Macleod
Joint Chief Executive Officers
24 April 2018
Financial Review
2017 was the first full year for the Group as an AIM company
following 24 years as a private business. We delivered continued
organic growth in the UK and internationally as well as making the
significant acquisition on the 30(th) November 2017 of Retra. Our
KPIs of revenue (on a proforma basis) and profit before tax (on an
adjusted proforma basis) improved in the year by 16% and 10%
respectively. We remain focused on margin, being debt free
(notwithstanding GBP1.4million of debt outstanding at the year end
from the acquisition of Retra which we intend to repay during
2018), generating cash and delivering a progressive dividend
policy.
In order to aid shareholders' understanding of the underlying
performance of the business we have focused our comments on the
proforma consolidated statement of income for the 12 months to 31
December 2017 compared with the proforma consolidated statement of
income for the 12 months to 31 December 2016.
Headline results represent the performance comparisons between
the proforma consolidated statements of income for the years ended
31 December 2016 and 31 December 2017. The proforma numbers have
been adjusted to take account of restructuring changes and other
non-recurring items in 2016, specifically the inclusion of the
trade of the close-out division in that year, and the exclusion of
the acquisition of Retra in the year ended 31 December 2017.
Reconciliations between the proforma consolidated income statements
and the statutory consolidated income statements for the 12 months
to 31 December 2017, and the 12 months to 31 December 2016 are
shown below.
Proforma Headline Consolidated Income Statement
2017 Unaudited 2016 Unaudited
Proforma Proforma
Statement Statement
GBP'000 GBP'000
Revenue 31,226 26,968
Cost of sales (19,115) (16,745)
Gross profit 12,111 10,223
Administrative expenses (5,376) (5,205)
Analysed as:
Profit from operations before
exceptional items 7,121 6,757
Exceptional items (386) (1,739)
------------------------------- --------------- ---------------
Profit from operations 6,735 5,018
Finance expense (17) (16)
Profit before tax 6,718 5,002
Tax expense (1,363) (1,384)
Profit for the year 5,355 3,618
Reconciliation between the statutory consolidated income
statement and the proforma consolidated income statement for the 12
months to 31 December 2017
2017 Retra business 2017
Statutory post-acquisition Unaudited
Accounts 30(th) Nov Proforma
2017 (see Statement
Note 8)
GBP'000 GBP'000 GBP'000
Revenue 32,549 1,323 31,226
Cost of sales (19,911) (796) (19,115)
Gross profit 12,638 527 12,111
Administrative expenses (5,744) (368) (5376)
Analysed as:
Profit from operations before
exceptional items 7,280 159 7,121
Exceptional items (386) - (386)
------------------------------------ ----------- ------------------ -----------
Profit from operations 6,894 159 6,735
Finance expense (37) (20) (17)
Profit before tax 6,857 139 6,718
Tax expense (1,384) (21) (1,363)
Profit for the year 5,473 118 5,355
Weighted number of ordinary shares 65,575,658 65,575,658
Earnings per share 8.34p 8.17p
Profit for the year 5,473 5,355
Add back exceptional items 386 386
Add back amortisation costs in
relation to acquisitions 445 445
Adjusted profit for the year 6,304 6,186
Weighted number of ordinary shares 65,575,658 65,575,658
Adjusted earnings per share 9.61p 9.43p
Reconciliation between the statutory consolidated income
statement and the proforma consolidated income statement for the 12
months to 31 December 2016
2016 Close-out 2016 Unaudited
Statutory business Proforma
Accounts pre-acquisition Statement
11th Nov
2016
GBP'000 GBP'000 GBP'000
Revenue 22,483 4,485 26,968
Cost of sales (13,692) (3,053) (16,745)
Gross profit 8,791 1,432 10,223
Administrative expenses (4,374) (831) (5,205)
Analysed as:
Profit from operations before
exceptional items 6,156 601 6,757
Exceptional items (1,739) - (1,739)
------------------------------------ ----------- ----------------- ---------------
Profit from operations 4,417 601 5,018
Finance expense (16) - (16)
Profit before tax 4,401 601 5,002
Tax expense (1,260) (124) (1,384)
Profit for the year 3,141 477 3,618
Weighted number of ordinary shares 61,981,720 61,981,720
Earnings per share 5.07p 5.84p
Profit for the year 3,141 3,618
Add back exceptional items 1,739 1,739
Add back amortisation costs in
relation to acquisitions 44 44
Adjusted profit for the year 4,924 5,401
Weighted number of ordinary shares 61,981,720 61,981,720
Adjusted earnings per share 7.94p 8.71p
Acquisition and Related Equity Issue
The Group acquired Retra on 30 November 2017. Retra is a colour
cosmetics business focusing on the gifting market principally for
high street retailers and supermarkets. Retra's revenue is
predominantly in the second half of the year when Christmas gifting
is delivered, with early visibility of the order book in the first
half of the year.
The purchase price was GBP18.2 million (GBP16.2 million in cash
and GBP2 million of consideration shares, GBP18.4 million at fair
value). This is subject to adjustment in the event that the 2017
EBITDA is less than GBP2.85 million. On delivery of a final EBITDA
statement to the previous owners of Retra, which will be after the
date of these accounts, the actual consideration will be determined
and this is likely to lead to a repayment to the Group (see note
8).
The Group raised GBP21.2 million in cash by issuing 11,157,894
new shares at GBP1.90 to fund the acquisition of Retra, the
associated costs of the placing and to reduce Retra's reliance on
its funding arrangements. In addition, a further 1,052,631 new
consideration shares were issued as part of the amount paid for
Retra.
Revenue
Group proforma revenue for the year grew by 15.6% from GBP27.0
million in 2016 to GBP31.2 million in 2017. The sales of W7 branded
product grew by 16.4% from GBP21.9million in 2016 to GBP25.5million
in 2017. The close-out business revenue grew by 11.8% from
GBP5.1million in 2016 to GBP5.7million in 2017. Christmas W7
gifting was more significant in 2017 with sales delivered in the
second half of the year totalling GBP2.7million (2016:
GBP1.6million). Following the addition of Retra, sales will be more
weighted to the second half of the year and are expected to
represent two thirds of the total for 2018.
Our growth strategy remains on track and our recently received
honour of the Queens Award for Enterprise - International Trade is
testament to this. Revenue continues to be driven by increased
sales in the UK as we continue to grow our market share and
internationally by our growing export business. A detailed
commentary on our sales growth strategy and trading performance is
included in the CEO's report.
Total statutory revenue grew by 44.4% from GBP22.5 million in
2016 to GBP32.5 million in 2017. Statutory revenue includes
GBP1.3million from the newly acquired Retra business being the
sales made in December 2017.
Product Gross Margin
Proforma gross margin improved this year by 2.4% over 2016 to
38.8%. The cost impact of Brexit has been mitigated with a
ratcheted discount mechanism from our key supplier in China, by
moving production to new factories of equal quality to improve
margin, from US dollar revenue which continues to provide a natural
hedge and from enjoying margin growth as the W7 brand continues to
grow in global awareness. Further contributing to Group margin is
the close-out business which has delivered gross margin of 31.1%
compared to 25.4% in 2016. We remain focused on improving gross
margin in both our own-brand and close-out businesses and now in
the enlarged Group including Retra.
Statutory gross margin decreased by 0.8% over 2016 to 38.8%.
Operating Expenses
Underlying proforma operating expenses(1) grew 32.8% year on
year, however expressed as a percentage of proforma turnover
underlying proforma operating expenses(1) increased to 14.6% in
2017 from 12.7% in 2016. Underlying proforma operating expenses(1)
have increased in absolute terms, reflecting the investment of key
hires in the business in 2017, increased spend on marketing and PR,
foreign exchange loss, amortisation of intangibles and the cost of
the PLC board and other AIM costs in the year. However, other
operating expenses remain at a similar level to those in 2016.
Statutory operating expenses(1) grew 89.6% year on year, however
expressed as a percentage of statutory turnover, operating
expenses(1) increased to 15.1% in 2017 from 11.5% in 2016.
Statutory operating costs grew because of the factors discussed
above, the inclusion of the operating costs of the close-out
division for a full year in 2017 and the operating costs of Retra
for the month of December only.
Most operating expenses are relatively fixed, however we
continue to monitor and examine significant costs to ensure they
are controlled and see if they can be reduced, in addition the
increased scale of the business now incorporating Retra has given
the Group increased buying.
(1) Before exceptional items and amortisation costs in relation
to acquisitions.
Profit from Operations Margin
Proforma profit from operations before exceptional items was
GBP7.1 million for the year being 22.8% of revenue (2016: GBP6.8
million, 25.1%). During 2017, there were certain costs that were
not on a like for like basis with 2016 and were not a function of
the natural growth of the business, these were:
-- Cost of the PLC board and other AIM costs for a full year:
GBP0.35 million (2016: GBP0.05 million)
-- Amortisation of intangibles from acquisitions for a full
year: GBP0.45 million (2016: GBP0.04 million)
-- Foreign exchange loss: GBP0.07 million (2016: GBP0.03 million gain)
Taking these costs into account on an underlying basis profit
from operations before exceptional items was GBP7.9 million for the
year being 25.4% of revenue, an improvement of 1.2% on 2016. Profit
from operations is a focus of the Group to grow year on year.
Profit Before Tax and Exceptional Items
Proforma Profit Before Tax ("PBT") was GBP6.7 million (2016:
GBP5.0 million), an increase of 34.0% on the prior year. Underlying
PBT (profit before tax and exceptional items) was GBP7.1 million
(2016: GBP6.7 million), an increase of 6.0% on the prior year.
Adding back the additional costs in the year detailed above, like
for like underlying PBT was GBP7.9million, an increase of 17.9% on
2016.
In the year to 31 December 2017, GBP0.4 million of Retra
acquisition costs have been treated as exceptional (total
acquisition costs were GBP1.2 million of which GBP0.8 million
relates to the issue of new shares to fund the purchase of Retra
and these have been charged against the share premium account). In
2016, GBP1.7 million of expenses were treated as exceptional as
they related to the admission of the Group's shares to trading on
AIM.
Statutory Profit Before Tax ("PBT") was GBP6.9 million (2016:
GBP4.4 million), an increase of 56.8% on the prior year. Underlying
PBT (profit before tax and exceptional items) was GBP7.2 million
(2016: GBP6.1 million), an increase of 18.0% on the prior year.
Exceptional Items
In 2017, GBP0.4 million of acquisition costs (see Note 3) have
been treated as exceptional as they related to one off legal and
professional fees and commissions incurred in acquiring Retra on 30
November 2017 (2016: GBP1.7 million of one off legal and
professional fees and commissions incurred in relation to the
admission of the Group's shares to trading on AIM in November
2016).
Tax
The proforma tax rate for the Group for 2017 was 20.3% compared
to the UK corporation tax standard rate of 19.25% for the year.
Some of the costs of the acquisition of Retra have been disallowed
for tax purposes, which has increased the effective tax rate. We
would expect the tax rate on adjusted profits to be approximately
19% in 2018 and falling in line with the UK Government measures to
reduce corporation tax to 17% by 2020.
The statutory tax rate for the Group for 2017 was 20.2% compared
to the UK corporation tax standard rate of 19.25% for the year.
Earnings Per Share
The underlying proforma basic earnings per share before
exceptional items and amortisation costs in relation to
acquisitions was 9.4p in 2017, an increase of 8.1% on the 8.7p
achieved in 2016, as a result of improved sales and gross
margin.
The statutory basic earnings per share before exceptional items
and amortisation costs in relation to acquisitions was 9.6p in
2017, an increase of 21.5% on the 7.9p achieved in 2016.
Dividends
The board is recommending a final dividend for 2017 of 2.6 pence
per share, making a total dividend of 4.0 pence per share of which
1.4 pence per share was paid on 17 November 2017 (2016: 5.8 pence
per share of which 4.3 pence per share was paid prior to the IPO).
The dividend for the year is covered 2.4 times by proforma adjusted
earnings per share and with the additional full year earnings of
Retra coming through in 2018 there is scope to increase the
dividend in the future, in line with the progressive dividend
policy outlined at the time of the IPO.
EMI Share Options
On 29 June 2017 options were granted over 277,788 ordinary
shares of 25p each in the Company under the Warpaint London PLC
Enterprise Management Incentive Scheme. The options provide the
right to acquire 277,788 ordinary shares at an exercise price of
237.5p per ordinary share. The options had a dilutive impact on
earnings per share in the period (see Note 26). The share-based
payment charge of the options for the year GBP0.05 million has been
taken to the share option reserve.
Cash Flow and Cash Position
Net cash flow generated from operating activities was GBP5.2
million (2016: GBP3.0 million), after payment of the GBP0.4 million
(2016: GBP1.7 million) exceptional items previously referred to.
The Group's cash balance decreased by GBP0.1 million to GBP3.4
million in 2017 (2016: GBP3.5 million). The cash generated was
principally used to make dividend payments in the year and reduce
debt in Retra.
Capital expenditure requirements of the Group remain modest and
we expect it to continue to be so. In 2017 GBP0.20 million (2016:
GBP0.16 million) was spent on new office space for additional
staff, the purchase of a promotional taxi for the W7 brand and
general fixtures and plant upgrades. (Also included in the
financial statements is capital expenditure of GBP0.35 million for
sales display units that have been reclassified in the balance
sheet for 2017).
Balance Sheet
Management are continually monitoring trade receivables and
stock levels to avoid working capital lock up as the business
continues to grow.
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. At the year end trade receivables were GBP12.1
million (2016: GBP2.7 million), the increase on 2016 is due to
higher sales and the acquisition of Retra. In 2017 there was a bad
and doubtful debt credit of GBP0.05 million because of the
collection of debts previously provided for in 2016. The provision
at the year end for bad and doubtful debts carried forward is
GBP0.17 million, 1.4% of gross trade receivables (2016: GBP0.11
million, 0.41%).
Stock was higher at the year end at GBP11.6 million (2016:
GBP7.9 million), this increase was due to the growth of the
business, the increase in range offering and the acquisition of
Retra. The provision for old and slow stock was GBP0.11 million,
1.0% at the year end (2016: GBP0.19 million, 2.5%). The reduction
in provision reflects the close attention of management in dealing
with slower stock items as they occur and on stock purchase order
levels that are reasoned. Whilst provisioning for older and slow
stock is prudent, the reality is that any such items are generally
sold through our close-out division without a loss to the
business.
On acquiring Retra the Group took on their debt of GBP8.7
million being GBP7.6 million of invoice and trade finance
facilities, term loans of GBP0.3 million and HP contracts of GBP0.8
million. GBP6.0 million of debt was repaid immediately upon
acquisition using surplus cash and some of the funds raised to
acquire Retra. A further GBP1.3 million of Retra debt was repaid
during December from their own positive cash flow, leaving GBP1.4
million of debt outstanding at the year end. We intend to repay the
remaining debt in 2018 from Group generated normal cash flow.
The Group's balance sheet remains in a very healthy position
being net debt free. Net assets totaled GBP40.4 million at 31
December 2017, an increase of GBP26.1 million from 2016, reflecting
the retained profits generated in the year and the issue of new
share capital to fund the purchase of Retra. The majority of the
balance sheet is made up of liquid assets of stock, trade
receivables and cash. Included in the balance sheet is GBP8.0
million of goodwill (2016: GBP0.5 million) and GBP10.7 million of
intangible fixed assets (2016: GBP1.3 million) arising from the
acquisition accounting adopted to reflect the purchase of Retra in
the year and the purchase of the close-out business by the much
larger own-brand colour cosmetics business in November 2016, in
preparation of the Group joining AIM.
Foreign Exchange
The Group imports the majority of its finished goods from China
paid for in US dollars, which strengthened on average against
Sterling by 5% in 2017 compared to 2016 ($1.289 v $1.355). The
Group has a natural hedge from sales to the US which are entirely
in US dollars, in 2017 these sales were $3.2 million (2016: $3.4
million) and together with the ratcheted discount mechanism from
our main supplier in China, sourcing product from new factories
where it makes commercial sense to do so, by growing our margin
through increased brand awareness and by hedging when rates are
favourable, we have been able to mitigate the 5% fall in value of
Sterling and at the same time deliver an improved gross margin.
As we start 2018 it is pleasing to see that Sterling has
strengthened against the US dollar, nevertheless management
continue with the same strategy as 2017 to ensure delivery of
satisfactory results.
Conclusion
The Group has delivered a good year for shareholders culminating
in an acquisition that is expected to be earnings enhancing. Our
first full year on AIM has seen the Group grow in size and profits
and the Board have put in place personnel and strategies to
continue the progress of the Group for the foreseeable future.
Neil Rodol
Chief Financial Officer
24 April 2018
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF WARPAINT LONDON
PLC
Opinion
We have audited the financial statements of Warpaint London PLC
(the 'parent company') and its subsidiaries (the 'group') for the
year ended 31 December 2017 which comprise the consolidated
statement of comprehensive income, the consolidated and company
statement of changes in equity, the consolidated and 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
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial reporting framework that has been
applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 The Financial
Reporting Standard in the United Kingdom and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 31
December 2017 and of the group's profit for the year then
ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
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. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group's or the parent company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
The following matters were identified by us as the most
significant assessed risks of material misstatement:
Accounting for business combination
As disclosed in note 8, the group acquired Retra Group Holdings
Limited and its subsidiaries ("the acquired group") on 30 November
2017. The acquisition of this business has been accounted for as a
business combination under IFRS 3.
The issue - Accounting for business combinations consists of
significant judgment in determining the fair value of both the
consideration paid for the acquired group and the underlying assets
and liabilities of that group, including intangible assets such as
customer relationships and brands. Judgment is also exercised in
determining the appropriate period over which to amortise the
intangible asset in relation to customer relationships and brands.
We also consider that there is a risk that the disclosures in the
financial statements may not be presented in accordance with the
requirements of the accounting standards.
How we addressed the risk - Our audit procedures included
challenging the Directors' assessment of the fair value of the
consideration paid, the assets acquired and liabilities assumed
with reference to evidence provided by third party experts engaged
by management. We critically evaluated the capabilities, competence
and objectivity of the external valuers engaged by the Directors
involved in assessing the fair value of intangible assets and the
fair value of the consideration paid by checking their
qualifications and background, as well as evaluating and concluding
on the appropriateness of their conclusions by comparing them to
our knowledge of the industry and market information.
We used our own valuation specialists to challenge the
acquisition accounting including the identification of amounts
related to customer relationships and brand while we have tested
the valuation of the consideration paid by agreement to supporting
documents and quoted market price. We also challenged the third
party experts and management regarding the amortisation period of
the intangible assets in relation to customer relationships and
brands. We have considered the period over which the intangibles
are to be amortised and benchmarked these against similar assets in
competitor businesses.
In addition, we considered the adequacy of the Group's
disclosures in respect of the business combinations by checking its
appropriateness based on our workings and its compliance with the
requirements of the standards.
Carrying value of inventory
See accounting policy in note 1.
The issue - The group holds significant levels of inventory and
a number of estimates are involved in valuing slow moving and
obsolete inventories, some of which have a limited shelf life.
There are inherent uncertainties in consumer preferences and
spending patterns, which are primarily driven by wider trends in
the fashion and cosmetics industry. There is a recoverability risk
associated with new product launches as well as with close out
stock purchased at the end of ranges or seasons with judgement
required in forecasting demand.
How we addressed the risk - Our procedures included assessing
the principles and appropriateness of the Group's inventory
provisioning policies based on our understanding of the business
and the accuracy of previous provisioning estimates. In assessing
inventory provisions our procedures included testing the
methodology applied by management in preparing their provision
including the identification of slow moving and obsolete items. We
considered the inventory write off figure during the year and
compared this to the Group's expected recoveries brought forward
and to the position at the year end date. Further, we tested the
unprovided inventory balance by reviewing sales volumes and values
after the balance sheet date.
Our application of materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality
which, together with qualitative considerations, help us to
determine the nature, timing and extent of our audit procedures on
the individual financial statement areas and disclosures and in
evaluating the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
We determined materiality for the financial statements as a
whole to be GBP388,000 which represents 5% of profit before tax and
exceptional items. In the prior year materiality was based on 8.5%
of profit before tax and exceptional items at GBP515,000.
Whilst materiality for the financial statements of a whole was
GBP388,000, each component of the Group was audited to a lower
level of materiality. Component materiality ranged from GBP45,000
to GBP349,200.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole. Performance materiality was
set at GBP271,600 (2016: GBP381,550) which represents 70% (2016
65%) of the above materiality levels.
We agreed with the audit committee that we would report to them
misstatements identified during our audit above GBP19,400 (2016:
GBP25,000). We also agreed to report differences below these
thresholds that, in our view, warranted reporting on qualitative
grounds.
We used profit before tax before exceptional items as a
benchmark given the importance of profit as a measure for
shareholders in assessing the performance of the Group.
An overview of the scope of our audit
The group consists of three trading subgroups, all of which are
run from the UK. As mentioned above, the group acquired Retra Group
Holdings Limited and its subsidiaries during the year that brings
the total of trading subgroups to three. Retra Group Holdings
Limited and its subsidiaries only contributed one month of its
post-acquisition trading in these group financial statements. In
establishing the overall approach to the group audit, we completed
full scope audits on the underlying subgroups and the parent
company.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept, 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 set out in the Directors' report, the directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group's and the parent company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Mark RA Edwards (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
24 April 2018
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
Year ended 31 December
2017 2016
Note GBP'000 GBP'000
Revenue 1,2 32,549 22,483
Cost of sales (19,911) (13,692)
Gross profit 12,638 8,791
Administrative expenses 3,4 (5,744) (4,374)
Analysed as:
Profit from operations before exceptional
items 7,280 6,156
Exceptional items 3 (386) (1,739)
-------------------------------------------- ----- ------------ -----------
Profit from operations 3 6,894 4,417
Finance expense 5 (37) (16)
Profit before tax 6,857 4,401
Tax expense 6 (1,384) (1,260)
Profit for the year attributable to equity
holders of the parent company 5,473 3,141
Other comprehensive income - -
Total comprehensive income attributable
to equity holders of the parent company 5,473 3,141
Basic earnings per share (pence) 26 8.34 5.07
Diluted earnings per share (pence) 26 8.34 5.07
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
Registered Number: 10261717
Year ended 31 December
2017 2016
Note GBP'000 GBP'000
Non-current assets
Goodwill 9 7,982 513
Intangibles 10 10,653 1,403
Property, plant and equipment 11 1,497 237
Total non-current assets 20,132 2,153
Current assets
Inventories 12 11,531 7,669
Trade and other receivables 13 13,226 5,364
Derivative financial instruments 22 - 37
Cash and cash equivalents 3,369 3,503
Total current assets 28,126 16,573
Total assets 48,258 18,726
Current liabilities
Trade and other payables 14 (3,537) (2,841)
Loans and borrowings 15 (582) -
Corporation tax liability (939) (1,329)
Derivative financial instruments 22 (3) -
Total current liabilities (5,061) (4,170)
Non-current liabilities
Bank loan 15 (814) -
Deferred tax liability 16 (1,959) (278)
Total non-current liabilities (2,773) (278)
Total liabilities (7,834) (4,448)
NET ASSETS 40,424 14,278
2017 2016
GBP'000 GBP'000
Equities
Share capital 18 19,187 16,135
Share premium 19,359 1,806
Merger reserve (16,100) (17,995)
Other reserves 20 45 -
Retained earnings 17,933 14,332
TOTAL EQUITY 40,424 14,278
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
Share Share Merger Share Retained Total
Capital Premium Reserve option Earnings Equity
reserve
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2016 15,000 - (20,000) - 13,991 8,991
Shares issued for cash 18 644 1,806 - - - 2,450
Shares issued for Treasured
Scents 18 1,340 - 2,005 - - 3,345
Share capital reduction 18 (849) - - - - (849)
Profit for the year - - - - 3,141 3,141
Dividends paid 17 - - - - (2,800) (2,800)
As at 31 December 2016 16,135 1,806 (17,995) 14,332 14,278
Shares issued during
the year 18 2,789 18,410 - - - 21,199
Shares issued for Retra
Holdings 18 263 - 1,895 - - 2,158
Share issue costs - (857) - - - (857)
Movement in other reserves 20 - - - 45 - 45
Profit for the year - - - - 5,473 5,473
Dividends paid 17 - - - - (1,872) (1,872)
As at 31 December 2017 19,187 19,359 (16,100) 45 17,933 40,424
WARPAINT LONDON PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
Year ended 31 December
2017 2016
Note GBP'000 GBP'000
Operating activities
Profit before tax 6,857 4,401
Interest paid 5 37 16
Amortisation of intangible assets 10 469 57
Depreciation of property, plant and equipment 11 184 58
Loss on disposal of property, plant and equipment 6 8
Share based payment 45 -
Decrease/(Increase) in trade and other receivables 869 (289)
Decrease/(Increase) in inventories 224 (1,413)
(Decrease)/Increase in trade and other payables (1,356) 1,601
Cash generated from operations 7,335 4,439
Tax paid (2,077) (1,465)
Interest paid (37) (16)
Net cash flows from operating activities 5,221 2,958
Investing activities
Purchase of intangible assets 10 (52) (77)
Purchase of property, plant and equipment 11 (555) (163)
Acquisition of business 8 (16,200) -
Bank balances acquired 8 242 98
Sale of investments - (6)
Proceeds from sale of property, plant and 33 -
equipment
Net cash used in by investing activities (16,532) (148)
Financing activities
Proceeds from new share capital subscribed 21,199 2,500
Share issue costs (857) (53)
Reduction in borrowings (7,293) (712)
Dividends 17 (1,872) (2,800)
Net cash generated by/ (used in) financing
activities 11,177 (1,065)
Net increase in cash and cash equivalents (134) 1,745
Cash and cash equivalents at beginning of
period 3,503 1,758
Cash and cash equivalents at end of period 3,369 3,503
Cash and cash equivalents consists:
Cash and cash equivalents 3,369 3,503
3,369 3,503
WARPAINT LONDON PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
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 2017 were authorised for issue by the board
of directors on 24 April 2018 and the statement of financial
position was signed on the board's behalf by Neil Rodol.
Warpaint London PLC is a public limited Company incorporated and
domiciled in England and Wales. Its registered office is Units
B&C, Orbital Forty Six, The Ridgeway Trading Estate, Iver,
Bucks., SL0 9HW.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements are presented in pounds sterling because
that is the currency of the primary economic environment in which
the Group operates. 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 conformity with
International Financial Reporting Standards adopted by the European
Union requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reported period. Although these estimates are based on
management's best knowledge of current events and actions, actual
results ultimately may differ from those estimates. The principal
accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporates the financial
statements of the Group and all of its subsidiary undertakings. The
financial statements of all Group companies are adjusted, where
necessary, to ensure the use of consistent accounting policies.
Acquisitions are accounted for under the acquisition method from
the date control passed to the Group. On acquisition, the assets
and liabilities of a subsidiary are measured at their fair values.
Any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill.
The group was formed after the company, prior to its IPO and
listing on AIM, completed share for share transactions for two
separate groups owned by the same shareholders. In the financial
year ended 31 December 2016, the Board took the view that the most
appropriate way to account for these in line with IFRS was to deem
the share for share exchange with the Warpaint Group (the own brand
business) as a group reconstruction. This has been accounted for
under the basis of merger accounting given that the ultimate
ownership before and after the transaction remained the same.
Merged subsidiaries undertakings are treated as if they have always
been a member of the Group. Any difference between the nominal
value of the shares acquired by the Company and those issued by the
Company to acquire them is taken to the merger reserve.
There is currently no specific guidance on accounting for group
reconstructions such as this transaction under IFRSs. In the
absence of specific guidance, entities should select an appropriate
accounting policy and IFRS permits the consideration of
pronouncements of other standard-setting bodies. This group
reconstruction as scoped out of IFRS 3 has therefore been accounted
for in the year ended 31 December 2016 using predecessor accounting
principles resulting in the following practical effects;
a. The net assets of the two companies are combined using
existing book values, with adjustments made as necessary to ensure
that the same accounting policies are applied to the calculation of
the net assets of both companies;
b. No amount is recognised as consideration for goodwill or negative goodwill;
c. The consolidated profit and loss account includes the profits
or losses of each company for the entire period, regardless of the
date of the reconstruction, and the comparative amounts in the
consolidated financial statements are restated to the figures
presented by the predecessor company Warpaint Cosmetics Group
Limited;
d. The retained earnings reserve includes the cumulative results
of each company, regardless of the date of the reconstruction, and
the comparative amounts in the statement of financial position were
restated in 2016 to that presented by the predecessor company
Warpaint Cosmetics Group Limited
The share for share exchange of the other group of companies,
namely Treasured Scents (the close-out business) was acquired on 11
November 2016 and has been treated as an acquisition under IFRS
3.
On 21 November 2016, the Company also undertook a capital
reduction pursuant to which 16,340,000 B ordinary shares of
GBP0.052 each held by Sam Bazini and Eoin Macleod where cancelled
in consideration for the transfer of the entire issued share
capital of Warpaint Cosmetics Limited to a company owned and
controlled by Sam Bazini and Eoin Macleod.
On 30 November 2017, the company acquired 100% of the share
capital of Retra Holdings Limited by way of a share for share
exchange which has been treated as an acquisition under IFRS 3. All
subsidiaries have a reporting date of December. All transactions
and balances between Groups companies are eliminated on
consolidation. The amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure the
consistency with the accounting policies of the Group.
Going concern
The Directors have prepared a detailed forecast with a
supporting business plan for the foreseeable future. The forecast
indicates that the Group will remain in a positive cash position
throughout the forecast period. As such, the Directors have a
reasonable expectation the Company and Group will have adequate
resources to continue in operational existence for the foreseeable
future. As such, they continue to prepare the financial statements
on the basis of going concern.
Revenue Recognition
Revenue for the Group is measured at the fair value of the
consideration received or receivable. The Group recognises revenue
for goods sold net of discounts and provisions when the amount of
revenue can be reliably measured and it is probable that future
economic benefits will flow to the entity.
Sale of goods
Revenue from the sale of goods is recognised when all of the
following conditions are satisfied:
-- the Group has transferred the significant risks and rewards of ownership to the buyer;
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold;
-- the amount of revenue can be measured reliably;
-- it is probable that the Group will receive the consideration due under the transaction; and
-- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
UK sales are recognised and invoiced to the customer once the
goods have been delivered to the customer. Overseas sales are
recognised and invoiced to the customer once the goods have been
delivered to the customer, or collected by the customer from the
company's warehouse according to the terms of sale.
Where the company has entered in to distributor arrangements the
risk and rewards are considered to be with the distributor from the
date of dispatch from either the company's overseas supplier or
from the company's UK warehouse. Revenue will therefore be
recognised from the date of dispatch.
Expenditure and provisions
Expenditure is recognised in respect of goods and services
received when supplied in accordance with contractual terms.
Provision is made when an obligation exists for a future liability
relating to a past event and where the amount of the obligation can
be reliably estimated.
Retirement Benefits: Defined contribution schemes
Contributions to defined contribution schemes are charged to the
consolidated statement of comprehensive income in the year to which
they relate.
Exceptional items
Exceptional items which have been disclosed separately on the
face of the income statement in order to summarise the underlying
results. Exceptional items, relate to legal and professional fees
incurred on the acquisition of Retra Holdings Limited (2016: costs
in relation to listing the company on AIM). Neither 'underlying
profit or loss' nor 'exceptional items' are defined by IFRS however
the directors believe that the disclosures presented in this manner
provide clear presentation of the financial performance of the
Group.
Intangible assets
Patents
Patents are used by the Group in order to generate future
economic value through normal business operations. 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.
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 8.
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:
Land and buildings - 50 years
Plant and machinery - 25% reducing balance
Fixtures and fittings - 25% reducing balance
Computer equipment - 25% reducing balance
Motor vehicles - 20% straight line
Financial assets
The Group classifies its financial assets into the categories,
discussed below, due to the purpose for which the asset was
acquired. The Group has not classified any of its financial assets
as held to maturity.
Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the supply of goods to customers (e.g.
trade receivables), but also incorporate other types of contractual
monetary asset. They are initially recognised at fair value plus
transactions costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised
cost using the effective interest rate method, less provision for
impairment.
The Group's loans and receivables comprise of trade and other
receivables included within the combined statement of financial
position.
Cash and cash equivalents include cash held at bank and bank
overdrafts. Bank overdrafts are shown within loans and borrowings
in current liabilities in the combined statement of financial
position.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the income
statement. On confirmation that the trade receivables will not be
collectable, the gross carrying value of the asset is written off
against the associated provision.
Financial liabilities
The Group classifies its financial liabilities as other
financial liabilities which include the following:
-- Bank loans which are initially recognised at fair value net
of any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost ensuring the interest element of the
borrowing is expensed over the repayment period at a constant
rate.
-- Trade payables, other borrowings and other short-term
monetary liabilities, which are initially recognised at fair value
and subsequently carried at amortised cost using the effective
interest method.
Leased assets
Assets obtained under hire purchase contract and finance leases
are capitalised as tangible fixed assets. Assets acquired by
finance lease are depreciated over the shorter of the lease term
and their useful lives. Assets acquired by hire purchase are
depreciated over their useful lives. Finance leases are those where
substantially all of the benefits and risks of ownership are
assumed by the company. Obligations under such agreements are
included in creditors net of the finance charge allocated to future
periods. The finance element of the rental payment is charged to
the profit and loss account so as to produce a constant periodic
rate of charge on the net obligation outstanding in each
period.
Operating Leases
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an 'operating lease'),
the total rentals payable under the lease are charged to the
combined statement of comprehensive income on a straight-line basis
over the lease term. The aggregate benefit of lease incentives is
recognised as a reduction of the rental expense over the lease term
on a straight-line basis.
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from 'profit before tax' as reported
in the consolidated statement of profit or loss and other
comprehensive income because of items of income or expense that are
taxable or deductible in other years and items that are never
taxable or deductible.
The Group's current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting
period.
Deferred taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the combined statement
of financial position differs from its tax base, except for
differences arising on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
balance sheet date and are expected to apply when the deferred tax
liabilities or assets are settled or recovered. Deferred tax
balances are not discounted.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company; or
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of the cost and net realisable value. Cost comprises
all costs of purchase, costs of conversion and other costs incurred
in bringing the inventories to their present location and
condition.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
Sterling at the rates of exchange ruling of the Statement of
Financial Position date. Transactions in foreign currencies are
translated into Sterling at the rate of exchange ruling at the date
of the transaction. Exchange differences are taken into account in
arriving at operating profit.
Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
management team including the Chief Executive Officers and the
Chief Financial Officer.
The Board considers that the Group's project activity
constitutes two operating and two reporting segments, as defined
under IFRS 8. Management reviews the performance of the Group by
reference to total results against budget.
The total profit measures are operating profit and profit for
the year, both disclosed on the face of the combined income
statement. No differences exist between the basis of preparation of
the performance measures used by management and the figures in the
Group financial information.
Derivative financial instruments
The Group enters into a variety of derivative financial
instruments to manage its exposure to foreign exchange rate risk,
through the use of foreign exchange rate forward contracts.
Derivatives are initially recognised at fair value at the date
the derivative contracts are entered into and are subsequently
re-measured to their fair value at the end of each reporting
period. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a
hedging instrument, in which event the timing of the recognition in
profit or loss depends on the nature of the hedge relationship.
Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders of the parent by the weighted
average number of ordinary shares outstanding during the year,
excluding treasury shares and shares in employee benefit trusts,
determined in accordance with the provisions of IAS 33 earnings per
Share. Diluted earnings per share is calculated by dividing
earnings attributable to ordinary shareholders of the parent by the
weighted average number of ordinary shares outstanding during the
year adjusted for the potentially dilutive ordinary shares.
Changes in accounting policies
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published by the IASB 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.
IFRS 9 'FINANCIAL INSTRUMENTS'
The IASB have released IFRS 9 'Financial Instruments',
representing the completion of its project to replace IAS 39
'Financial Instruments: Recognition and Measurement'. The new
standard introduces extensive changes to IAS 39's guidance on the
classification and measurement of financial assets and introduces a
new 'expected credit loss' model for the impairment of financial
assets. IFRS 9 also provides new guidance on the application of
hedge accounting. The Group's management have yet to assess the
impact of IFRS 9 on these consolidated financial statements. The
new standard is required to be applied for annual reporting periods
beginning on or after 1 January 2018.
IFRS 15 'REVENUE FROM CONTRACTS WITH CUSTOMERS'
IFRS 15 presents new requirements for the recognition of
revenue, replacing IAS 18 'Revenue', IAS 11 'Construction
Contracts', and several revenue-related interpretations. The new
standard establishes a control-based revenue recognition model and
provides additional guidance in many areas not covered in detail
under existing IFRSs, including how to account for arrangements
with multiple performance obligations, variable pricing, customer
refund rights, supplier repurchase options, and other common
complexities. IFRS 15 is effective for reporting periods beginning
on or after 1 January 2018. The Group's management have not yet
assessed the impact of IFRS 15 on these consolidated financial
statements.
IFRS 16 'LEASES'
IFRS 16 represents new requirements for the recognition of
operating leases, replacing IAS 17 'Leases'. The new standard
requires that certain operating leases are disclosed within the
Statement of Financial Position. The Group's management have yet to
assess the impact of IFRS 16 on these consolidated financial
statements. The new standard is required to be applied for annual
reporting periods beginning on or after 1 January 2019.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectations
of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Judgements and accounting estimates and assumptions
a) Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of the cost and net realisable value. There is
judgement involved in assessing the level of inventory provision
required in respect of slow moving inventory.
The Group make a 50% provision for perishable items of stock
that are greater than 18 months old. Should the Group increase the
provision to 100% of perishable items that are greater than 18
months old, this would decrease profit by GBP114,000.
b) Intangible assets acquired
On acquisition of Treasured Scents (2014) Limited the group has
recognised the customer list also obtained in the business
combination. The valuation of the customer list is based on
judgement involved in assessing the projected future cashflows
arising from those customers. Further judgement is involved in
assessing the life of the intangible asset and a suitable discount
rate to be used to measure the future revenues to present
value.
On acquisition of Retra Holdings Limited the group has
recognised the customer list and brands obtained in the business
combination.
The valuation of the customer list is based on judgement
involved in assessing the projected future cashflows arising from
those customers. Further judgement is involved in assessing the
life of the intangible asset and a suitable discount rate to be
used to measure the future revenues to present value. A one per
cent increase in the discount rate from 15% to 16% would reduce the
fair value of customer lists by approximately GBP220,000. A
reduction in the growth rate of cash flows beyond the five-year
period from 4.5% to 3.5% would reduce the fair value of customer
list by approximately GBP130,000.
The valuation of the brands is based on judgement involved in
assessing the future royalties arising from the 'Technic' and
'Man'Stuff' brands. Further judgement is involved in assessing the
life of the intangible asset and a suitable discount rate to be
used to measure the future revenues to present value. A one per
cent increase in the discount rate from 15% to 16% would reduce the
fair value of brands by approximately GBP150,000.
2. Segmental information
For management purposes, the Group is organised into two
operating segments; Branded and Close-out. The segment 'W7 Branded'
relates to the sale of own branded products whereas 'close-out'
relates to the purchase of third party stock which is then
repackaged for sale. These segments are the basis on which the
Group reports internally to the Board.
Year ended 31 December 2017 2017 2017 2016 2016 2016
Own Brand Close-out Total Own Brand Close-out Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 26,890 5,659 32,549 21,862 621 22,483
Cost of sales (16,012) (3,899) (19,911) (13,078) (614) (13,692)
Gross profit 10,878 1,760 12,638 8,784 7 8,791
Administrative expenses (4,423) (935) (5,358) (2,483) (152) (2,635)
Exceptional items (386) - (386) (1,739) - (1,739)
Segment result 6,069 825 6,894 4,562 (145) 4,417
Reconciliation of segment
result to profit before
tax:
Segment result 6,069 825 6,894 4,562 (145) 4,417
Finance expense (37) - (37) (16) - (16)
Profit before tax 6,032 825 6,857 4,546 (145) 4,401
Analysis of total revenue
by geographical market:
UK 12,070 4,507 16,577 9,617 615 10,232
USA 2,483 160 2,643 2,612 - 2,612
Australia 3,740 156 3,896 2,315 - 2,315
Rest of World 8,597 836 9,433 7,324 - 7,324
Total 26,890 5,659 32,549 21,868 615 22,483
During the year ended 31 December 2017, the Group had 1 customer
that exceeded 10% of total revenue being 11%. During the year ended
31 December 2016, the Group had 1 customer that exceeded 10% of
total revenue being 12%.
Information regarding segment assets and liabilities as at 31
December 2017 and capital expenditure for the period then
ended:
Own Brand Close-out Eliminations* Total
GBP'000 GBP'000 GBP'000 GBP'000
Total assets 76,389 3,108 (31,239) 48,258
Total liabilities (5,112) (817) (1,905) (7,834)
Tangible asset additions 1,483 - - 1,483
Intangible asset additions 12,539 - - 12,539
Total capital expenditure 14,022 - - 14,022
*The eliminations are as a result of adjustments arising on
consolidation of the financial statements.
3. Operating profit
Operating profit for the period is stated after charging/
(crediting):
Year ended 31 December
2017 2016
GBP'000 GBP'000
Foreign exchange loss/(gain) 71 (28)
Depreciation and amortisation 653 115
Loss on disposal of fixed asset 6 8
Operating lease costs 373 263
Exceptional costs 386 1,739
Exceptional costs in the year ended 31 December 2017 of
GBP386,000 relate to legal and professional fees incurred on the
acquisition of Retra Holdings Limited (2016: costs in relation to
listing the company on AIM GBP1,739,000).
Analysis of auditor's remuneration is as follows:
Year ended 31 December
2017 2016
GBP'000 GBP'000
Fees payable to the Company's auditor for the
audit of the Group's annual accounts 20 13
Fees payable to the Company's auditor for the
audit of subsidiary companies 66 49
86 62
2017 2016
GBP'000 GBP'000
Other services pursuant to legislation:
Tax advice 1 30
Transaction related services 114 308
Total non-audit fees 115 338
4. Staff costs
Year ended 31 December
2017 2016
GBP'000 GBP'000
Wages and salaries 3,099 1,413
Social security costs 205 159
Pension costs 14 6
3,318 1,578
The average monthly number of employees during the period was as
follows:
Year ended 31 December
2017 2016
No. No.
Directors 6 3
Administrative 6 5
Finance 3 2
Warehouse 25 22
Sales 4 4
Other 8 4
52 40
2017 2016
Directors' remuneration, included in staff costs GBP'000 GBP'000
Salaries 653 330
Bonus - 150
Pension contributions - -
653 480
Remuneration in respect of Directors was as follows:
Salary Bonus Benefits Pension 2017 2016
/fees contribution
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Executive Directors
C Garston 60 - - - 60 10
S Bazini 200 - 6 - 206 146
E Macleod 200 - 5 - 205 146
N Rodol 112 - - - 112 166
Non-executive Directors
K Sadler 40 - - - 40 7
P Hagon 30 - - - 30 5
642 - 11 - 653 480
Number Number Number Number Exercise Earliest Exercise
of Shares of Shares of shares of Shares Price Exercise Expiry
at January Awarded Lapsed at December Date Date
2017 in the in the 2017
year year
N Rodol - 105,262 - 105,262 237.5p 29/06/2020 29/06/2027
Total share
options - 105,262 - 105,262
The directors of the Group are the only key management
personnel.
5. Finance expense
Year ended 31 December
2017 2016
GBP'000 GBP'000
Loan interest 15 16
HP interest 5 -
Other interest 17 -
37 16
6. Income tax
Year ended 31 December
2017 2016
GBP'000 GBP'000
Current tax expense
Current tax on profits for the period 1,473 1,225
Adjustment in respect of previous periods (30) 19
1,443 1,244
Deferred tax expense
Origination and reversal of temporary differences (59) 16
Total tax expense 1,384 1,260
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
2017 2016
GBP'000 GBP'000
Profit for the period before tax 6,857 4,401
Expected tax charge based on corporation tax
rate of 19.25% (2016: 20%) 1,319 880
Expenses not deductible for tax purposes 178 361
Other adjustments 4 3
Prior year adjustments (30) 19
Adjustment to deferred tax to average rate (87) (3)
Total tax expense 1,384 1,260
The UK corporation tax at the standard rate for the year is
19.0% (2016: 20.0%).
In July 2015 the UK government announced its intention to reduce
the standard corporation tax rate to 18% by 2020. The measure to
reduce the rate to 19% for the financial year beginning 1 April
2017 and to 18% for the financial year beginning 1 April 2020 were
substantively enacted on 26 October 2015 and have been reflected in
the calculation of deferred tax in the December 2017 numbers.
7. Subsidiaries
At the period end, the Group has the following subsidiaries:
Subsidiary name Nature of business Place of incorporation Percentage
owned
Warpaint Cosmetic Group
Limited Holding company England and Wales 100%
Warpaint Cosmetics (2014)
Limited* Wholesaler England and Wales 100%
Treasured Scents (2014)
Limited Wholesaler England and Wales 100%
Treasured Scents Limited* Holding company England and Wales 100%
Warpaint Cosmetics Inc. Dormant 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%
Supply chain
Badgequo Deutschland GmbH* management Germany 100%
Supply chain
Badgequo Hong Kong Limited* management Hong Kong 100%
* indicates indirect interest
On 30 November 2017, the Company acquired 100% of the issued
share capital of Retra Holdings Limited and its subsidiary
undertaking Badgequo Limited, Retra Own Label Limited, Badgequo
Deutschland GmbH and Badgequo Hong Kong Limited.
All the other 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 the USA incorporated subsidiary is 160
Greentree Drive, Suite 101, Dover, DE 19904, Kent County, USA.
The registered office for the German incorporated subsidiary is
Robert-Bosch-Straße 10, Haus 1, 56410 Montabaur, Germany.
The registered office for the Hong Kong incorporated subsidiary
is 12F, 3 Lockhart Road, Wanchai, Hong Kong.
8. Acquisitions
Retra Holdings Limited
On 30 November 2017, the Group acquired the entire share capital
of Retra Holdings Limited ("Retra Holdings)"), a cosmetics
wholesaler based in the UK. The principal reason for acquiring
Retra Holdings was due to the company operating in the same
industry, it also holds additional customer base, product ranges
and brands.
Retra has contributed GBP1,323,000 to revenue for the period
between the date of acquisition and the balance sheet date. Had
Retra Holdings been consolidated from 1 January 2017, the
consolidated income statement for the year ended 31 December 2017
would show additional revenue of GBP18,944,000 and profit before
tax of GBP1,849,000.
The provisional fair value of the net assets Book Fair value Total
at the acquisition date is as follows: value adjustment
GBP'000 GBP'000 GBP'000
Brands - 3,802 3,802
Customer lists - 5,865 5,865
Property, plant and equipment 929 - 929
Stock 4,088 - 4,088
Trade and other receivables 8,698 - 8,698
Cash and cash equivalents 242 - 242
Trade and other payables (2,234) - (2,234)
Corporation tax (74) - (74)
Loans (8,687) - (8,687)
Deferred tax liability - (1,740) (1,740)
Net assets acquired 2,962 7,927 10,889
Goodwill arising on acquisition 7,469
Consideration 18,358
The gross contractual amount of trade receivables is equal to
the fair value.
Goodwill comprises the value of expected synergies and other
opportunities arising from the acquisition, management know how,
the skilled work force employed by Retra Holdings Limited and other
intangible assets that do not qualify for separate recognition.
None of the goodwill recognised is expected to be deductible for
tax purposes.
The fair value of consideration paid is as GBP'000
follows:
Cash consideration 16,200
Share consideration 2,158
18,358
Share consideration is based on the issue of 1,052,631 shares at
a market value on 30 November 2017 at GBP2.05 per share.
The final consideration amount is dependent on an EBITDA
statement to be agreed according to the Sale and Purchase agreement
terms and delivery of the statutory accounts of Retra Holdings
Limited. The purchase price was GBP18.36 million (GBP16.2 million
in cash and GBP2 million of consideration shares) this being the
maximum amount payable. On delivery of a final EBITDA statement to
the previous owners of Retra, which will be after the date of these
accounts the actual consideration will be determined and this is
likely to lead to a repayment to the Group, although the amount at
the date of these accounts is not certain.
The profit and loss for Retra Holdings Limited from the date of
acquisition to 31 December 2017 is as follows:
GBP'000
Revenue 1,323
Cost of sales (796)
Gross profit 527
Administrative expenses (368)
Finance expense (20)
Profit before tax 139
Tax expense (21)
Total comprehensive income for the period 118
Treasured Scents (2014) Limited
On 11 November 2016, the Group acquired the entire share capital
of Treasured Scents (2014) Limited ("Treasured Scents (2014)"), a
close-out cosmetics wholesaler based in the UK. The principal
reason for acquiring Treasured Scents was due to the company
operating in the same industry and the client relationships
maintained by the directors, Mr E. Macleod and Mr S. Bazini.
Treasured Scents (2014) has contributed GBP621,260 to revenue
for the period between the date of acquisition and the balance
sheet date. Had Treasured Scents been consolidated from 1 January
2016, the consolidated income statement for the year ended 31
December 2016 would show revenue of GBP26,968,000 and profit before
tax of GBP4,927,000.
The fair value of the net assets at the acquisition date is as
follows:
Book Fair value Total
value adjustment
GBP'000 GBP'000 GBP'000
Client relationships - 1,318 1,318
Property, plant and equipment 14 - 14
Stock 960 - 960
Trade and other receivables 1,142 - 1,142
Cash and cash equivalents 98 - 98
Trade and other payables (334) - (334)
Current tax liabilities (116) - (116)
Deferred tax liabilities - (250) (250)
Net assets acquired 1,764 1,068 2,832
Goodwill arising on acquisition 513
Consideration 3,345
The gross contractual amount of trade receivables is equal to
the fair value.
Goodwill comprises the value of expected synergies and other
opportunities arising from the acquisition, management know how,
the skilled work force employed by Treasured Scents (2014) Limited
and other intangible assets that do not qualify for separate
recognition. None of the goodwill recognised is expected to be
deductible for tax purposes. The fair value of consideration has
been calculated by means of an EBITDA multiple supported by a
discounted cashflow model.
The fair value of consideration paid is as follows:
GBP'000
Share consideration 3,345
3,345
The profit and loss for Treasured Scents (2014) Limited from the
date of acquisition to 31 December 2016 is as follows:
GBP'000
Revenue 615
Cost of sales (614)
Gross profit 1
Administrative expenses (152)
Loss before tax (151)
Tax expense 19
Total comprehensive loss for the period (132)
9. Goodwill
Cost GBP'000
At 1 January 2017 513
Arising on acquisition of Retra Holdings Limited 7,469
At 31 December 2017 7,982
Impairment
At 31 December 2016 and 31 December 2017 -
Net book value
At 31 December 2017 7,982
At 31 December 2016 513
Goodwill represents the excess of consideration over the fair
value of the Group's share of the net identifiable assets of the
acquired subsidiary at the date of acquisition.
Goodwill arising on acquisition in the year ended 31 December
2016 relates to the Group's acquisition of Treasured Scents (2014)
Limited. Goodwill arising on acquisition in the year ended 31
December 2017 relates to the Group's acquisition of Retra Holdings
Limited.
Impairment is calculated by comparing the carrying amounts to
the value in use derived from discounted cash flow projections for
Treasured Scents and Retra Holdings. 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
pre-tax discount rate of 15% (2016: 15%). Cash flows beyond the
five-year period are extrapolated using the average growth rate of
4.5% (2016: 0.5%). 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. Management have
performed the annual impairment review as recognised by IAS 36 and
have concluded that no impairment is indicated with the fair value
of goodwill exceeding book value.
Key Assumptions and sensitivity to changes in assumptions
The key assumptions are based upon management's historical
experience. The calculation of VIU is most sensitive to the
following assumptions:
-- Sales and EBITDA - this is based on reasonable forecasts for
the first year. These have been forecasted for years two to five
based on expected sales trends
-- Discount Rate - pre-tax discount rate of 15% reflects the
Directors' estimate of an appropriate rate of return, taking into
account the relevant risk factors
-- Growth Rate - used to extrapolate beyond the budget period
and for terminal values based on a long term average growth rate of
4.5% (2016: 0.5%).
Management believe that no reasonably possible change in key
assumptions would lead to an impairment of goodwill.
10. Intangible assets
Brands Customer Patents Website Licences Total
list
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2016 - - 91 - - 91
On acquisition of subsidiaries - 1,318 - - - 1,318
Additions - - 41 30 6 77
At 31 December 2016 - 1,318 132 30 6 1,486
On acquisition of subsidiaries 3,802 5,865 - - - 9,667
Additions - - 42 10 - 52
At 31 December 2017 3,802 7,183 174 40 6 11,205
Accumulated amortisation
At 1 January 2016 - - 26 - - 26
Charge for the year - 44 8 4 1 57
At 31 December 2016 - 44 34 4 1 83
Charge for the year 63 382 16 7 1 469
At 31 December 2017 63 426 50 11 2 552
Net book value
At 31 December 2017 3,739 6,757 124 29 4 10,653
At 31 December 2016 - 1,274 98 26 5 1,403
At 1 January 2016 - - 65 - - 65
11. Property, plant and equipment
Land Plant Fixtures Computer Motor Total
and buildings and machinery and fittings equipment vehicles
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Costs
At 1 January 2016 1,400 83 26 35 - 1,544
Additions - 6 43 42 72 163
On acquisition of
subsidiary - 2 4 - 8 14
Disposals (1,400) - - (9) - (1,409)
At 31 December 2016 - 91 73 68 80 312
Additions - 5 440 22 88 555
On acquisition of
subsidiary - 731 60 137 - 928
Disposals - - - - (40) (40)
At 31 December 2017 - 827 573 227 128 1,755
Accumulated depreciation
At 1 January 2016 37 26 3 3 - 69
Charge for year 14 14 9 10 11 58
On disposals (51) - - (1) - (52)
At 31 December 2016 - 40 12 12 11 75
Charge for year - 25 122 16 21 184
On disposals - - - - (1) (1)
At 31 December 2017 - 65 134 28 31 258
Net book value
At 31 December 2017 - 762 439 199 97 1,497
At 31 December 2016 - 51 61 56 69 237
At 1 January 2016 1,363 57 23 32 - 1,475
The net book value of assets held under finance leases or hire
purchase contracts, included above are as follows:
As at 31 December
2017 2016
GBP'000 GBP'000
Plant and machinery 21 -
Computer equipment 67 -
88 -
12. Inventories
As at 31 December
2017 2016
GBP'000 GBP'000
Finished goods 11,645 7,858
Provision (114) (189)
11,531 7,669
The cost of inventories recognised as an expense and included in
'cost of sales' amounted to GBP19,215,000 in the year ended 31
December 2017 (2016: GBP11,690,172).
13. Trade and other receivables
As at 31 December
2017 2016
GBP'000 GBP'000
Trade receivables - gross 12,076 2,674
Allowance for doubtful debts (173) (110)
Trade receivables - net 11,903 2,564
Other receivables 572 16
Prepayments and accrued income 751 2,784
Total 13,226 5,364
The directors consider that the carrying value of trade and
other receivables measured at book value and amortised cost
approximates to fair value.
The individually impaired receivables are over three months past
due and 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
2017 2016
GBP'000 GBP'000
Accumulated impairment losses at 1 January 110 100
Additional impairment losses recognised during
the year, net 93 12
Amounts written off during the year as uncollectible (30) (2)
Effect of translation to presentation currency - -
Accumulated impairment losses at 31 December 173 110
The impairment losses recognised during the year are net of a
credit of GBP52,000 (2016: GBP2,000) relating to the recovery of
amounts previously written off as uncollectable.
14. Trade and other payables
As at 31 December
2017 2016
GBP'000 GBP'000
Current
Trade payables 1,671 2,537
Social security and other taxes 568 -
Other payables 41 23
Accruals and deferred income 1,257 281
Total 3,537 2,841
The directors consider that the carrying value of trade and
other payables measured at book value and amortised cost
approximates to fair value. Included in other payables are amounts
owed to directors of GBPnil as at 31 December 2017 (2016:
GBP16,918). The amounts owed to the directors are interest free and
are repayable on demand.
15. Loans and borrowings
As at 31 December
2017 2016
GBP'000 GBP'000
Bank loans -
Repayable within 1 year 401 -
Repayable within 2 - 5 years 221 -
622 -
Hire purchase finance -
Repayable within 1 year 181 -
Repayable within 2 - 5 years 593 -
774 -
Total
Repayable within 1 year 582 -
Repayable within 2 - 5 years 814 -
1,396 -
The interest rates expected are as follows:
As at 31 December
2017 2016
% %
Finance loans 7 -
Bank loans 10 -
16. Deferred Tax
Deferred tax is calculated in full on temporary differences
under the liability method using tax rate of 19%-20%.
The movement on the deferred tax account is as shown below:
Year ended 31 December
2017 2016
GBP'000 GBP'000
Opening balance 278 11
On acquisition of subsidiary 1,740 251
Recognised in profit and loss:
Tax expense (59) 16
Closing balance 1,959 278
The deferred tax has arisen due to the timing difference on
accelerated capital allowances amounting to GBP57,000 (2016:
GBP36,000) and on the intangible assets acquired in a business
combination amounting to GBP1,902,000 (2016: GBP242,000).
In July 2015 the UK government announced its intention to reduce
the standard corporation tax rate to 17% by 2020. The measure to
reduce the rate to 19% for the financial year beginning 1 April
2017 and to 18% for the financial year beginning 1 April 2020 were
substantively enacted on 26 October 2015 and have been reflected in
the calculation of deferred tax in the December 2017 numbers.
17. Dividends
Year to December 2017 Paid Amount per Total GBP'000
share
Final dividend - 2016 13 Jul 17 1.5p 968
Interim dividend - 2017 13 Nov 17 1.4p 904
1,872
Year to December 2016 Paid Amount per Total GBP'000
share
4 April
Interim dividend 16 GBP12,000 1,200
Interim dividend 25 Nov 16 9.79p 1,600
2,800
The payment of dividends prior to the group restructuring on 11
November 2016 were based on 100 ordinary shares in issue.
18. Called up share capital
As at 31 December
Date No of 2017
shares
'000 GBP'000
Allotted and issued
Ordinary shares of GBP1 each
11 Nov
Share issue on incorporation 16 16,340 16,340
Sub-division to A and B shares 15 Nov 16,340 -
16
21 Nov
Cancellation of B shares 16 (16,340) (849)
Consolidation and subdivision 24 Nov 45,621 -
of shares into ordinary shares 16
25p
Ordinary shares of GBP0.25
each 61,961 15,491
30 Nov
New share issue 16 2,577 644
At 1 January 2017 64,538 16,135
30 Nov
New share issue 17 12,211 3,052
76,749 19,187
On 30 November 2017, the company issued 12,210,525 ordinary
GBP0.25 shares resulting in an increased share capital of
GBP3,052,631.
All ordinary shares carry equal rights.
19. Other Reserves
Share premium
The share premium reserve contains the premium arising on the
issue of equity shares, net of issue expenses incurred by the
company. On 30 November 2017, the company issued 11,157,894
ordinary GBP0.25 shares at a price of GBP1.90 for cash and
1,052,631 shares at a price of GBP2.05 per share as consideration
for an acquisition, resulting in share premium of GBP20,216,000
less directly attributable share issue costs of GBP857,000.
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 the 1
January 2015. The corresponding entry being the merger reserve so
the overall net assets as at the comparative dates are not
affected.
The 2016 movement on the merger reserve arose due to the
acquisition of Treasured Scent (2014) Limited on 11 November 2016.
The shareholders of Treasured Scent (2014) Limited transferred
their shares to Warpaint London PLC in exchange for shares in
Warpaint London PLC, the difference in fair value of the
consideration was GBP2,005,233. This is adjusted through the merger
reserve as it is considered part of the consideration paid by
Warpaint London PLC to acquire Treasured Scents (2014) Limited.
The 2017 movement in merger reserve represents the difference
between the issue price and the nominal value of shares issued as
consideration for the acquisition of subsidiary undertaking.
Other reserves
'Other reserves' have arisen from the share-based payment
charge. The shares over which the options were issued are that of
the parent company.
20. Share based payments
Movements in the number of options and their weighted average
exercise prices are as follows:
Weighted average Number
exercise price of options
(pence)
2017 2017
Outstanding at the beginning - -
of the year
Granted during the year 237.5 277,788
Expired during the year - (21,896)
Outstanding at the end of the
year 237.5 255,892
The weighted average remaining contractual life of the options
is 2.5 years.
The following options over ordinary shares have been granted by
the Company:
Exercise Exercise Number
price period of options
Pence (years)
29 June 2017 237.50 3 277,788
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:
29 June
17
Expected volatility 64%
Expected life (years) 3
Risk-free interest rate 0.38%
Expected dividend yield 2%
Fair value per option (GBP) 0.963
On 29 June 2017, Warpaint London PLC 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 GBP45,091.
21. Related party transactions
Transactions between the company and its subsidiaries, which are
related parties, have been eliminated on consolidation. Related
party transactions are considered to be conducted at arm's
length.
Key management personnel are considered to be the Directors.
Compensation of key management personnel (including Directors) is
disclosed in note 4 with the exception of dividends and drawings
which are disclosed in note 17.
During 2017, Treasured Scents (2014) Ltd paid rent in the sum of
GBPNil (2016: GBP123,750) to Trading Scents Group Limited, of which
Mr Macleod is a director. At the year end the amount due to Trading
Scents Group Limited was GBPNil (2016: GBPNil).
During 2017, Warpaint Cosmetics (2014) Ltd paid rent in the sum
of GBP120,000 (2016: GBP30,000) to Trading Scents Group Limited, of
which Mr Macleod is a director. At the year end the amount due to
Trading Scents Group Limited was GBP80,000 (2016: GBPNil).
During 2017, Warpaint Cosmetics (2014) Ltd paid rent in the sum
of GBP120,000 (2016: GBP153,750) to Direct Supplies (2014) Group
Limited, of which Mr Bazini is a director. At the year end the
amount due to Direct Supplies (2014) Group Limited was GBPNil
(2016: GBPNil).
During 2017, Warpaint Cosmetics (2014) Ltd paid consultancy fees
in the sum of GBPnil (2016: GBP150,000) to Outdoor Girl Limited, of
which Mr Rodol is a director.
During the year, the company advanced GBP12,500 (2016:
GBP15,000) to Mr S Bazini, a director of the company. During the
year, the director repaid GBP26,276 (2016: GBP93,803). Mr S Bazini
incurred expenses on behalf of the company totalling GBP1,804
(2016: GBP2,002). At the year end the company owed the sums of
GBPNil (2016: GBP15,779) to Mr S Bazini.
During the year, the company advanced GBP12,500 (2016:
GBP15,000) to Mr E Macleod, a director of the company. During the
year, the director repaid GBP17,711 (2016: GBP84,803). Mr E Macleod
was reimbursed expenses on behalf of the company totalling GBP4,071
(2016: GBP2,663). At the year end the company owed the sums of
GBPNil (2016: GBP1,140) to Mr E MacLeod.
Dividends paid to Mr S Bazini prior to the company listing on
AIM totalled GBPNil (2016: GBP600,000). Dividends paid to Mr E
Macleod prior to the company listing on AIM totalled GBPNil (2016:
GBP600,000).
22. Financial instruments
Capital risk management
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies. The overall
objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's
competitiveness and flexibility. The Group reports in Sterling. All
funding requirements and financial risks are managed based on
policies and procedures adopted by the Board of Directors.
The Group manages its capital to ensure its ability to continue
as a going concern and to maintain an optimal capital structure to
reduce cost of capital. The capital structure of the Group
comprises equity attributable to equity holders of the Company
consisting of invested capital as disclosed in the Statement of
Changes in Equity and cash and cash equivalents.
The Group's invested capital is made up of share capital and
retained earnings totalling GBP37,120,000 as at 31 December 2017
(2016: GBP30,467,000) 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
2017 2016
GBP'000 GBP'000
Financial assets
Loans and receivables at amortised cost including
cash and cash equivalents:
Cash and cash equivalents 3,369 3,503
Trade and other receivables 12,475 2,617
15,844 6,120
Financial liabilities
Trade and other payables (2,969) (2,841)
Bank loan (1,396) -
(4,365) (2,841)
Net 11,479 3,279
Cash and cash equivalents
This comprises cash and short-term deposits held by the Group.
The carrying amount of these assets approximates their fair
value.
General risk management principles
The Group's activities expose it to a variety of risks including
market risk (interest rate risk), credit risk and liquidity risk.
The Group manages these risks through an effective risk management
programme and through this programme, the Board seeks to minimise
potential adverse effects on the Group's financial performance. The
Directors have an overall responsibility for the establishment of
the Group's risk management framework. A formal risk assessment and
management framework for assessing, monitoring and managing the
strategic, operational and financial risks of the Group is in place
to ensure appropriate risk management of its operations.
The following represent the key financial risks that the Group
faces:
Market risk
The Group's activities expose it to the financial risk of
interest rates.
Interest rate risk
The Group's interest rate exposure arises mainly from its
interest-bearing borrowings. Contractual agreements entered into at
floating rates expose the entity to cash flow risk. Interest rate
risk also arises on the Group's cash and cash equivalents. The
Group does not enter into derivative transactions in order to hedge
against its exposure to interest rate fluctuations. An increase in
the rate of interest by 100 basis points would decrease profits by
GBP13,000 (2016: GBPNil) with an increase in profits by the same
amount for a decrease in the rate of interest by 100 basis
points.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or a counterparty to a financial instrument fails to meet
its contractual obligations.
The Group's principal financial assets are trade and other
receivables and bank balances and cash. The credit risk on liquid
funds is limited because the counterparties are banks with high
credit-ratings assigned by international credit-rating
agencies.
The Group's credit risk is primarily attributable to trade
receivables. The Group has a policy of assessing credit worthiness
of potential and existing customers before entering into
transactions. There is ongoing credit evaluation on the financial
condition of accounts receivable using independent ratings where
available or by assessment of the customer's credit quality based
on its financial position, past experience and other factors. The
Group manages the collection of its receivables through its ongoing
contact with customers so as to ensure that any potential issues
that could result in non-payment of the amounts due are addressed
as soon as identified.
The maximum exposure to credit risk in respect of the above is
the carrying value of financial assets recorded in the financial
statements. At 31 December 2017, the Group has trade receivables of
GBP11,903,000 (2016: GBP2,564,000).
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
2017 2016
GBP'000 GBP'000
Current 4,241 1,296
1 - 30 days 3,550 1,084
31 - 60 days 2,623 112
61 - 90 days 868 89
91 + days 794 93
Allowance for doubtful debts (173) (110)
Total trade receivables - gross 11,903 2,564
The Directors are unaware of any factors affecting the
recoverability of outstanding balances at 31 December 2017 and,
consequently, no further provisions have been made for bad and
doubtful debts.
Credit quality of financial assets
As at 31 December
2017 2016
Trade receivables, gross (Note 13): GBP'000 GBP'000
Receivable from large companies 3,929 984
Receivable from small or medium-sized companies 312 312
Total neither past due nor impaired 4,241 1,296
Past due but not impaired:
Less than 30 days overdue 3,550 1,084
30 - 90 days overdue 4,112 184
Total past due but not impaired 7,662 1,268
Individually determined to be impaired (gross):
Less than 30 days overdue - -
30 - 90 days overdue 173 110
Total individually determined to be impaired
(gross) 173 110
Less: Impairment provision (173) (110)
Total trade receivables, net of provision
for impairment 11,903 2,564
Cash and cash equivalents, neither past due nor impaired
(Moody's ratings of respective counterparties):
As at 31 December
2017 2016
GBP'000 GBP'000
A rated 800 -
BAA rated 2,569 3,502
Total cash and cash equivalents 3,369 3,502
For the purpose of the groups 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 (2016:
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 regular forecasts which estimate cash flows
over the next eighteen months, so that management can ensure that
sufficient funding is in place as it is required.
The tables below summarise the maturity profile of the combined
group's non-derivative financial liabilities at each financial year
end based on contractual undiscounted payments, including estimated
interest payments where applicable:
Year ended 31 December 2017
Less than Between Between Total
6 months 6 months 1 and 5
and 1 year years
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 1,671 - - 1,671
Other payables 41 - - 41
Accruals 1,257 - - 1,257
Bank loans - 582 814 1,396
Estimated interest 102 63 201 366
3,071 645 1,015 4,731
Year ended 31 December 2016
Less than Between Between Total
6 months 6 months 1 and 5
and 1 year years
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 2,537 - - 2,537
Other payables 23 - - 23
Accruals 281 - - 281
Bank loans - - - -
2,841 - - 2,841
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 2017, there were total sums of GBP304,527 (2016:
GBP495,146) held in foreign currency.
A 5% weakening of sterling would result in a GBP16,000 increase
in reported profits and equity, while a 5% strengthening of
sterling would result in GBP14,000 decrease in profits and
equity.
2017 2016
GBP'000 GBP'000
Derivatives carried at fair value:
Exchange (loss)/gain on forward foreign currency
contracts (3) 37
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.
As at 31 December 2017, the group has 1 (2016: 2) forward
foreign exchange contracts outstanding. Derivative financial
instruments are carried at fair value.
The following table details the USD foreign currency contracts
outstanding as at the balance sheet date.
a) Contracted exchange rate GBP/$ rate 2017 2016
3 months or less 1.3393 1.2411 -
1.266
3 to 6 months - -
2017 2016
b) Contract value GBP'000 GBP'000
3 months or less 359 1,398
3 to 6 months - -
359 1,398
2017 2016
c) Foreign currency $'000 $'000
3 months or less 481 1,750
3 to 6 months - -
481 1,750
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 are
considered to be Level 3 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.
23. Pension costs
The Group operates a defined contribution pension scheme.
Contributions payable to the company's pension scheme are charged
to the statement of comprehensive income in the period to which
they relate. The amount charged to profit in each period was
GBP13,800 (2016: GBP6,228).
24. Operating lease commitments - Group company as lessee
The group leases offices and warehouses under non-cancellable
operating lease agreements. The lease terms are between 5-10 years,
and are renewable at the end of the lease period at market
rate.
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
Land and buildings 2017 2016
GBP'000 GBP'000
Not later than 1 year 466 360
Later than 1 year and not later than 5 years 1,542 1,440
Later than 5 years 1,290 1,650
Total 3,298 3,450
25. Controlling party
In the opinion of the Directors there is no ultimate controlling
party.
26. Earnings per share
Basic earnings per share are calculated by dividing profit or
loss attributable to ordinary equity holders by the weighted
average number of ordinary shares in issue during the period.
The acquisition of Warpaint Cosmetics Group Limited by Warpaint
London PLC on 11 November 2016 has been accounted for using merger
accounting principles. The effect of using merger accounting
principles on share capital is that the capital that existed as at
the point Warpaint London PLC legally acquired Warpaint Cosmetics
Group Limited is accounted for as if it had been in existence as at
the comparative period end (31 December 2015) and as at the opening
balance sheet date (1 January 2015).
The weighted average number of shares in issue for the prior
year has therefore been stated to reflect the post IPO share
capital structure, this adjustment assumes the total shares issued
during the IPO were in issue throughout the whole of the current
and previous period presented. The weighted average number of
shares includes the shares issued as consideration for the
acquisition of Treasured Scents (2014) Limited on 11 November
2016.
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.
2017 2016
Basic earnings per share (pence) 8.34 5.07
Diluted earnings per share (pence) 8.34 5.07
The calculation of basic and diluted earnings
per share is based on the following data:
2017 2016
Earnings GBP'000 GBP'000
Earnings for the purpose of basic earnings per
share, being the net profit 5,473 3,141
Number of shares 2017 2016
Weighted number of ordinary shares for the purpose
of basic earnings per share 65,575,658 61,981,720
Potentially dilutive shares awarded - -
Weighted number of ordinary shares for the purpose
of diluted earnings per share 65,575,658 61,981,720
The 255,862 share options issued during the year has 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.
27. Notes supporting statement of cash flows
Significant non-cash transactions from investing activities is
the equity consideration for the business combination of
GBP2,158,000. The non-cash transactions arising on the acquisition
of Retra are as follows:
Total
GBP'000
Property, plant and equipment 929
Stock 4,088
Trade and other receivables 8,698
Cash and cash equivalents 292
Trade and other payables (2,234)
Corporation tax (74)
Loans (8,687)
2,962
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 2017 - - -
Non-cash flows:
* Amounts recognised on business combinations 834 7,855 8,689
Cash flows (20) (7,273) (7,293)
At 31 December 2017 814 582 1,396
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAALLALNPEAF
(END) Dow Jones Newswires
April 25, 2018 02:01 ET (06:01 GMT)
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Warpaint London (LSE:W7L)
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부터 7월(7) 2023 으로 7월(7) 2024
