24 April 2024
Warpaint London
PLC
("Warpaint", the "Company" or the "Group")
Results for the year ended
31 December 2023
Record sales and profits
reflect strong Group performance; positive start to
2024
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 2023.
Financial Highlights
·
|
Strong growth in sales, margins
and profits to reach record levels for the Group. Significant
growth in all geographic regions reflecting the focus on growing
sales of the Group's branded products
|
·
|
Group sales for 2023 grew by 40%
to £89.6 million (2022: £64.1 million)
|
|
·
EU revenue increased by 60.5% to £45.1 million
(2022: 28.1 million)
·
UK revenue increased by 17.6% to £32.4 million (2022: £27.6 million)
|
|
·
US revenue increased by 36.8% to £7.3 million
(2022: £5.3 million)
|
·
|
Gross profit margin increased to
39.9% (2022: 36.4%)
|
·
|
EBITDA increased 74% to £20.4
million (2022: £11.7 million)
|
·
|
Profit before tax was up by 136%
to £18.1 million (2022: £7.7 million)
|
·
|
Earnings per share up 123% 18.1p
(2022: 8.1p)
|
·
|
Cash of £9.1 million at 31
December 2023 (31 December 2022: £5.9 million), with no
debt
|
·
|
Recommended final dividend of 6.0
pence per share (2022: 4.5 pence per share), bringing the total
dividend for the year to 9.0 pence per share (2022: 7.1 pence per
share), an increase of 27%
|
Operational Highlights
·
|
Sales of the Group's branded
products increased by 47% to £84.8 million
(2022: £57.7 million) driven by the
Group's lead brand W7 increasing by 64% to £57.4 million (2022: £35.0 million)
|
·
|
Direct online sales continue to
accelerate, with an increase of 121% in Group e-commerce sales in
2023 to £6.2 million, accounting for 6.9% of Group sales (2022:
£2.8 million, 4.3% of Group sales)
|
·
|
Successful launch of W7 product in
an initial 71 Superdrug stores
|
·
|
Following a successful trial in 20
New Look stores in 2022, W7 product was rolled out to a further 200
stores in 2023
|
·
|
Significant further expansion in
Europe, the largest sales region for the Group, for both the W7 and
Technic brands including with Normal, Etos and Wibra
|
·
|
W7 launched in 100 Watsons stores
in the Philippines in 2023
|
Post-Period End Highlights
·
Continued strong trading in Q1 2024, with
unaudited Group sales for the three months to 31 March 2023 of
£23.5 million an increase of 28% on the same period in 2023 (3
months to 31 March 2023: £18.4 million)
|
·
Margins in Q1 were robust and better than those
achieved in the full year 2023
|
·
Maintaining a strong balance sheet,
with no debt. Cash balances as at 2 April 2024 totalled £7.5
million after investment in a significant increase in stock to
satisfy expected demand later in the year (31 March 2023: £8.5
million)
|
·
Continuing brand sales momentum being seen in
2024, both internationally and the UK, including:
|
o In the US:
|
o Q1 2024 expansion into CVS in the US already implemented,
expanding the W7 range stocked and roll-out to a further 387
stores
|
o Significant Christmas order received from Walmart in the US,
for W7 and Chit Chat product and in discussions to stock the
Group's all year round product
|
o Significant expansion planned with Five Below in the US
during H1 2024, including the stocking of an increased range of W7
product in all 1544 of their stores, with a further 225+ Five Below
stores expected to open in the next 12 months stocking W7
product
|
o In the UK:
|
o In March 2024, a full range of Technic products was launched
in an initial 202 Morrisons stores in the UK
|
o Expansion to a further 100 Boots stores during April 2024
with additional W7 products stocked in existing and newly added
stores
|
o Further rollout with Superdrug planned for July 2024, into a
further 63 stores, taking the number of Superdrug stores served to
134, and an increase in the products stocked across all these
stores
|
o Further range and store expansions planned with other
existing customers including Etos, Normal, Tesco, The Range and
Wibra, together with launches with a number of significant new
customers
|
Commenting, Clive Garston, Chairman, said:
"I am very pleased with
the Group's strong performance in 2023 and that this has continued
into 2024, with record first quarter sales. This reflects the
delivery of Warpaint's consistent and focused strategy. The
key to our growth has been, and will continue to be, expanding our
presence in large retailers globally, by growing our sales with
existing customers, entering into relationships with new ones and
increasing our online presence. Notwithstanding the
continuing volatile economic environment and challenges facing our
customers, I am optimistic that the strong performance we have seen
in 2022, 2023 and now into 2024 will continue and that we have the
right offering and strategy in place to continue to deliver
profitable future growth."
This announcement contains inside information for the
purposes of Article 7 of Regulation (EU) No 596/2014 which is part
of UK law by virtue of the European Union (Withdrawal) Act
2018
Enquiries:
Warpaint
London
Sam Bazini - Chief Executive
Officer
Eoin Macleod - Managing Director
Neil Rodol - Chief Financial
Officer
|
c/o IFC
|
|
Shore Capital
(Nominated Adviser & Broker)
Patrick Castle, Daniel Bush -
Corporate Advisory
Fiona Conroy - Corporate
Broking
|
020 7408 4090
|
IFC Advisory (Financial PR & IR)
Tim Metcalfe, Graham Herring,
Florence Chandler
|
020 3934 6630
|
Warpaint London plc
Warpaint sells branded cosmetics under the
lead brand names of W7 and Technic. W7 is sold in the UK primarily
to major retailers and internationally to local distributors or
retail chains. The Technic brand is sold in the UK and continental
Europe with a significant focus on the gifting market, principally
for high street retailers and supermarkets. In addition,
Warpaint supplies own brand white label cosmetics produced for
several major high street retailers. The Group also sells
cosmetics under its other brand names of Man'stuff, Body Collection
and Chit Chat, each targeting a different demographic.
HEADLINE RESULTS FOR THE YEAR ENDED 31 DECEMBER
2023
Statutory Results
|
Year ended 31 Dec
2023
|
Year ended 31 Dec
2022
|
Revenue
|
£89.6m
|
£64.1m
|
Profit from operations
|
£18.5m
|
£8.0m
|
Profit margin from
operations
|
20.6%
|
12.4%
|
Profit before tax
("PBT")
|
£18.1m
|
£7.7m
|
Earnings per share
("EPS")
|
18.1p
|
8.1p
|
Cash and cash
equivalents
|
£9.1m
|
£5.9m
|
Adjusted Statutory Results
|
Year ended 31 Dec
2023
|
Year ended 31 Dec
2022
|
Revenue
|
£89.6m
|
£64.1m
|
Adjusted profit from
operations
|
£18.8m*
|
£10.3m*
|
Adjusted profit margin from
operations
|
21.0%*
|
16.1%*
|
Adjusted PBT
|
£18.4m*
|
£10.0m*
|
Adjusted EPS
|
18.4p*
|
10.7p*
|
Cash and cash
equivalents
|
£9.1m
|
£5.9m
|
Adjusted numbers are closer to the
underlying cash flow performance of the business which is regularly
monitored and measured by management, the adjustments made to the
statutory numbers are as follows:
|
Year ended 31 Dec
2023
|
Year ended 31 Dec
2022
|
Statutory profit from operations
|
£18.48m
|
£7.97m
|
Exceptional items
|
-
|
£0.15m
|
Amortisation
|
£0.19m
|
£2.00m
|
Share based payments
|
£0.13m
|
£0.19m
|
*Adjusted profit from operations
|
£18.80m
|
£10.31m
|
|
|
|
*Adjusted profit margin from operations
|
£18.80m
/ £89.59m = 21.0%
|
£10.31m
/ £64.06m = 16.1%
|
|
|
|
Statutory PBT
|
£18.12m
|
£7.69m
|
Exceptional items
|
-
|
£0.15m
|
Amortisation
|
£0.19m
|
£2.00m
|
Share based payments
|
£0.13m
|
£0.19m
|
*Adjusted PBT
|
£18.44m
|
£10.03m
|
|
|
|
Statutory profit attributable to equity
holders
|
£13.90m
|
£6.25m
|
Exceptional items
|
-
|
£0.15m
|
Amortisation
|
£0.19m
|
£2.00m
|
Share based payments
|
£0.13m
|
£0.19m
|
Tax attributable to adjusting
items
|
£(0.08)m
|
£(0.41)m
|
Adjusted profit attributable to equity
holders
|
£14.14m
|
£8.18m
|
Weighted number of ordinary
shares
|
76,983,311
|
76,752,355
|
*Adjusted EPS
|
18.37p
|
10.66p
|
CHAIRMAN'S STATEMENT
During 2023 Warpaint has continued
to grow in all its main markets and, notwithstanding a continuing
volatile economic environment, the continued execution of
Warpaint's business strategy and model has again enabled the
delivery of a very strong performance. I would like to thank
my colleagues on the board and all of the Warpaint team for their
dedication and exceptional efforts in achieving this
performance.
During the year, we continued our
strategy to concentrate on increasing our presence in larger
retailers globally, together with growing direct online
sales. This
focus on larger customers, doing more business with them and
expanding the number of large retailers stocking the Group's
products is reflected in the Group's results and provides a strong
platform for the future.
Trading has continued to be strong
in the first quarter of 2024, with the Group enjoying record
quarterly sales, 28% ahead of the same period in 2023. We
expect demand to remain buoyant and for sales to continue to grow,
despite continuing global uncertainties.
Results
2023 was again a year of
significant achievement, with the Group delivering record sales and
profits.
Profit before tax was £18.1
million (2022: £7.7 million) on revenue of £89.6 million (2022:
£64.1 million) with basic earnings per share of 18.1p (2022:
8.1p).
The Group continues to ensure
inventory levels are appropriate to allow on-time delivery for
customers and to service the anticipated growth in demand, with
inventory at 31 December 2023 increasing to £28.0 million (31
December 2022 £18.7 million). The balance sheet remains strong,
with cash at 31 December 2023 of £9.1 million (31 December 2022:
£5.9 million) and the Group is debt free.
Dividend
In accordance with the Group's
progressive dividend policy, the board is pleased to recommend an
increased final dividend of 6.0 pence per share which, if approved
by shareholders at the annual general meeting ("AGM"), will be paid
on 5 July 2024 to shareholders on the register at 14 June
2024. The shares will go ex-dividend on 13 June
2024.
During the year, an interim
dividend of 3.0 pence per share was paid on 24 November
2023, bringing the total dividend for the
year to 9.0 pence per share (2022: 7.1 pence per share).
Board
On 1 January 2024, we
welcomed Sharon Daly and Indira Thambiah
to the board as independent non-executive directors, following a
thorough search process. They both have considerable
experience on the boards of public companies in the consumer sector
and they are already adding considerable value. On
appointment they both joined the Company's audit and remuneration
committees and I stepped down from both committees at the same
time.
Annual General Meeting
The Company's AGM will be held at
the Company's offices at Units B&C, Orbital Forty Six, The
Ridgeway Trading Estate, Iver, Bucks, SL0 9HW on 26 June 2024 at
10.00 a.m. and we look forward to welcoming those shareholders who
are able to attend in person.
Summary and Outlook
I am very pleased with the Group's
strong performance in 2023 and that this has continued into 2024,
with the Group having record first quarter sales. This
reflects the delivery of Warpaint's consistent and focused
strategy. This strategy is fully reviewed by the board
annually and the board works closely with the executive directors
and management to ensure that it is implemented. The key to
our growth has been, and will continue to be, expanding our
presence in large retailers globally, by growing our sales with
existing customers, entering into relationships with new ones and
increasing our online presence.
Notwithstanding the continuing
volatile economic environment and challenges that face our
customers, I am optimistic that the strong performance we have seen
in 2022, 2023 and now into 2024 will continue and that we have the
right offering and strategy in place to continue to deliver
profitable future growth.
Clive Garston
Chairman
23 April 2024
CHIEF EXECUTIVE'S STATEMENT
2023 was a very good year for
Warpaint and the positive momentum has continued into Q1
2024. In 2023, Group sales increased by 40% to £89.6 million,
reaching a new record level for the Group, with significant growth
seen in all geographic regions. These sales were achieved at
an increased gross margin of 39.9% (2022: 36.4%) and resulted in a
reported profit before tax of £18.1
million (2022: £7.7 million). Gross
margin is being maintained and has grown in Q1 2024.
Our strategy of producing a wide
range of high-quality cosmetics at affordable prices remains our
key focus, with benefits seen from customers transferring to more
value-oriented brands, such as those produced by the Group, and an
increasing recognition of the Group's brands globally. The
Group is growing sales with our existing customers, both through
increasing the number of product lines stocked and the number of
outlets served, together with winning new customers with
significant sales footprints. Growing direct online sales
also remains important and these more than doubled from
£2.8 million in 2022 to £6.2 million in
2023.
In 2023, the Group continued to
concentrate on its core W7, Technic, Body Collection, Man'stuff and
Chit Chat brands and the production of a limited number of
profitable white label products for major high street
retailers. In 2023, sales of the Group's branded products
accounted for 95% of revenue (2022: 90%).
The Group's global market share
remains modest, and I believe we are very well placed with our
high-quality focused offering to see significant further
growth.
W7
The Group's lead brand is W7, with
sales in 2023 increasing by 64% to £57.4 million, accounting for
64% of total Group revenue (2022: £35.0 million/55%).
In the UK, W7 revenue was up 33%
year-on-year, representing 30% of W7 sales in the year (2022: 37%),
as stronger sales growth was generated in regions outside of the
UK. W7 revenue in the UK grew through increased sales into
many of the Group's larger customers, including Tesco and
Boots. W7 sales in the UK also received a further boost
with a successful launch in an initial 71
Superdrug stores, with a roll-out into a further 63 stores planned
for July 2024. Additionally,
following a successful trial in 20 New Look
stores in 2022, W7 product was rolled out to a further 200 stores
in 2023.
The strongest growth in 2023 was
again seen in continental Europe, with sales increasing by 95%
year-on-year, and continental Europe remaining the largest sales
region for W7 branded products in the year, accounting for 53% of
W7 sales. The Group's post-Brexit fulfilment strategy is
enabling products to enter the EU without issues, and the growth in
2023 was driven by both the range of European customers served,
including a launch into Etos and the expansion in the number of
outlets for certain larger customers, particularly with
Normal.
In the US, W7 sales grew by 43% in
2023 compared to 2022, and accounted for 11% of overall W7 sales,
with the Group benefiting from the increased number of customers
and outlets in the US.
In the rest of the world, W7 sales
increased by 65%, but remain a modest proportion of overall W7
sales at 6%.
We believe that W7 has a
compelling brand proposition and will continue to benefit from
consumers wanting a high quality, on trend, but excellent
value-for-money product.
Technic
Sales of branded Technic product
in 2023, which includes products sold under the Technic, Body
Collection and Man'stuff brands, increased by 21% to £27.5 million, representing 31% of total
Group revenue (2022: £22.7 million/36%).
In 2023, UK revenue was 44% of
Technic's total sales, increasing 13% year-on-year, driven by
increased sales of Technic and Body Collection branded products to
the retailer Bodycare and the launch in April 2023 of a range of
158 Technic products into an initial four Asda superstores on a
trial basis before a wider rollout, planned for 2024.
Sales of the Technic brand also
grew strongly in continental Europe during the year, accounting for
49% of Technic's sales, an increase of 20% on 2022, driven by both
increased product being sold in existing customers stores, and the
launch into new customers, including significant expansion with the
Dutch retailer, Wibra.
Sales for the Technic brand
outside of the UK and Europe accounted for 7% of Technic sales
(2022: 7%). In the US, sales increased by 23% and by 37% in
the rest of the world, albeit the sales were small in these regions
in the context of the Group as a whole, being approximately 2.4% of
total Group revenues.
Building on the successful sales
of W7 branded product through Amazon, a Technic brand store was
launched on Amazon.co.uk in January 2023, a number of key Technic
lines were launched on Amazon.com in Q2 2023 and on continental
European Amazon sites later in Q3 2023.
The Technic business also produces
and sells white label cosmetics for several major high street
retailers. Such opportunities are
assessed on a case-by-case, based on the return they can deliver,
and accounted for 2.5% of Group revenue in 2023 (2022:
4%).
Close-out
Close-out sales are no longer a
core focus, although the Group will take advantage of profitable
close-out opportunities as they become available. Close-out revenue
represented 2.8% of overall Group revenue in 2023 (2022:
5.9%). Whilst not core, this side of the business continues
to provide a profitable source of intelligence in the colour
cosmetics market and access to new market trends.
e-Commerce
In 2023, the Group continued to
drive direct online ("D2C") sales, a strategy that started in
2020. As a proportion of Group revenue, D2C sales increased
to 6.9% in 2023 (2022: 4.3%), having grown from £0.5 million in 2020 to £6.2 million
in 2023 (2022: £2.8 million). While growing these online
sales, the focus remains on achieving a similar net margin to the
Group's sales through traditional physical outlets.
Sales volumes continue to grow
through the W7 and Technic brand own websites, as well as through
Amazon in the UK, EU (predominantly Germany, Italy and Spain) and
the US. The Group also has official W7 brand stores on Taobao
Mall (Tmall), the most visited B2C online retail platform in China
and Xiaohongshu (Red), one of China's foremost social media,
fashion and luxury shopping platforms, which continue to perform
well and enjoyed significantly increased sales volumes in
2023.
D2C sales continue to perform
strongly, up 41% in Q1 2024 compared to the same period in
2022.
New Product Development
New product development ("NPD")
continues to be core to the Group's proposition to provide new
products that are exciting, on trend, fast to market and that meet
the consumers' evolving tastes.
During 2023, the NPD team
continued to develop a strong pipeline of customer-focused new
products, working with around 25 manufacturing partners, in China,
elsewhere in the Far East and in Europe, that can provide high
quality products quickly, at very competitive prices, and meet our
legal and ethical compliance requirements, together with ensuring
continuity of delivery. This process is supported by the
Group's Hong Kong-based sourcing office and its mainland
China-based subsidiary, with local employees able to source new
factories and oversee quality control and ethical
practices.
The Group's cosmetic products are
'cruelty free' and are not tested on animals irrespective of where
the products are being supplied. The Group supports cruelty
free alternatives to animal testing to become compulsory and animal
testing overall to cease globally. Warpaint proudly displays
the PETA company logo on its products and its commitment to the
PETA 'Beauty without Bunnies program' covers all brands within the
Group.
Environmental impact
Warpaint is very focused on the
environmental impact of its products and is committed to becoming an industry leader for sustainable
products and packaging. The Group is proud to be associated with Planet Mark, which provides a
clear framework for businesses to measure their carbon reporting
through certification. As a member of Planet Mark, the
Company is committed to implementing carbon reduction strategies,
staying ahead of legislation and risk mitigation, and eliminating
greenwashing through effective and transparent communication.
Alongside the ways our team members operate in the workplace and
wider communities, and the efforts of product teams in ensuring the
most recyclable materials and least plastic consuming designs are
put into production, Planet Mark forms a key part of the Group's
sustainability agenda.
The Group has removed all
unrecyclable plastics from the outer packaging of its gifting
products and is progressing well on the journey of removing
unrecyclable plastics from all year-round products.
The Group's product packaging
therefore uses paper and cardboard wherever practicable, enabling
the Group, the wholesaler and end user to recycle the waste
effectively.
All branded products across the
Group are being manufactured vegan friendly and without
parabens. No heavy metals such as
TBTO (preservative) and other ingredients of concern are added to
products and all raw materials comply with the strict regulations
applicable in the UK, EU, US, Canada and other markets in which the
Group operates.
Marketing and PR
During 2023, the Group's
marketing, PR and social media resources were further expanded to
ensure our marketing programmes remain fresh, innovative, focused
on customer loyalty and showcasing our products to new potential
consumers. The Group has a particular emphasis on social
media using brand ambassadors, influencers and make-up
artists. As part of an expansion of resources during 2023, we
now have individuals dedicated to each of the main social media
platforms to ensure maximum benefit is gained in these
areas.
Strategy
On an annual basis the board
reviews and appropriately adapts its three-year strategic plan for
the business based on consumer insight, market data, experience and
the Group's aims. This is targeted by year, measured,
monitored and reviewed as part of the board's on-going business
throughout the year. The strategic plan has been updated in
January 2024, forming the basis of the Group's focused activity
through to 2026. The plan is developed to drive shareholder
value and has defined targets for sales by the six key pillars
below, EBITDA, earnings per share and cash generation with a
particular emphasis on driving incremental EBITDA
growth.
The strategic plan comprises six
key pillars:
·
|
Develop and build the Group's brands and provide new product
development that meets changing trend and consumer
needs
|
|
The Group ensures that everybody
within the business has crystal clarity of the positioning of the
Group's portfolio of brands; that there is a clear hierarchy of
core brands; that close-out continues to reduce as a proportion of
sales and the Group delivers quality new product development, which
remains a crucial part of the Group's activity. It is essential to
provide great new product that is on trend, fast to market and
meets the consumers' evolving tastes. A healthy pipeline of
new products is the continual focus of our NPD team who are also
developing category extensions where appropriate to the brand and
gifting sets.
|
·
|
Develop and nurture the current core
business
|
|
While a major objective of the
Group is to continue to develop and grow the presence of the
Warpaint brands beyond their existing customer base, there is still
significant potential to be realised and further distribution gains
to be made in the current customer base, and the Group is committed
to ensuring this potential is maximised. The Group is focused
on ensuring there is a clarity of product offering to each customer
segment and to supporting its customers with relevant new products;
by using appropriate marketing and innovative merchandising
solution to draw consumers into customer stores and by enhancing
the customer offer by cross selling the Group's brands and category
extensions for example accessories, body mists, gifting and skin
care where appropriate.
|
·
|
Grow market share in the UK
|
|
The Group continues to focus on
increasing the presence of its brands across channels in which our
consumers shop, to increase accessibility and drive profitable
market share growth. As a result of this strategy, the W7
brand successfully launched into Superdrug in 2023 with more stores
being activated in 2024, continues to grow in Tesco, where
distribution gains across all store formats is successfully being
driven, and is gaining greater space and distribution in
Boots. At the same time the Technic brand is launching a
range of product into Morrisons. The Group continues to have
active discussions with other major retailers who are currently in
channels that the Group is yet to materially supply. The
expansion of the UK customer base is a key aim of management, as
the business continues to capitalise on consumers and retailers
across all sectors who are increasingly looking to provide quality
products to their customers at affordable prices. For
example, following a successful a trial, W7 rolled out into a
further 200 New Look stores in mid-2023.
|
·
|
Grow market share in the US and China
|
|
The US and China continue to
provide a major growth opportunity for the Group. In the US,
the Group has significantly increased its management and selling
capability in 2023. A compelling core product range for the
US has been established with minimum margin requirements. The
business is focused on targeted customer initiatives that have
gained both gifting and all-year-round listings with major
retailers across key channels. For example, following a
successful Christmas gift launch in 2022, W7 gained access for a
selection of all-year-round products with CVS into 186 stores in
2023, with distribution gained into a further 387 stores in
February 2024. In China, the Group conducts business locally
through its Chinese subsidiary. We are also continuing to
register products for sale in China in order to grow our total
offering and increase sales. This has led to the sales of W7
products via W7 branded storefronts on on-line
marketplaces.
|
·
|
Develop the online/e-commerce strategy for brand development
and profitable sales
|
|
The Group aims to grow and
maximise profitable sales across the Group's D2C channels. As
well as continuing to sell on the businesses' own websites and
developing its own consumer community, plans continue to be
executed to develop sales across Amazon platforms. W7 stores
have been launched in the UK, US, Italy, Germany and during
2023 and are fulfilled by Amazon.
Further on-line sales platforms and geographies continue to be
evaluated and, where profitable opportunities are identified,
launched over the course of the three-year plan. The first of
these is planned to be France in H1 2024. The Group continues
to develop and build its brands by utilising brand ambassadors,
influencers and make-up artists to engage actively with its target
audience. The Group aims to ensure that consumers are
adequately inspired and educated on how the Group's products can be
used to experiment and achieve different looks. Developing
the social media strategy also directly impacts the Group's online
sales strategy.
|
·
|
Develop and implement appropriate strategies that ensure
Warpaint reduces its impact on the environment
|
|
The Group recognises consumers',
customers' and our own requirement to reduce our environmental
impact. The business has already identified and implemented a
number of initiatives to reduce our environmental footprint via
reduced shipping and road mileage; removing plastics where possible
from packaging and improving recyclability; removing parabens from
ingredients and ensuring all products are manufactured cruelty
free. Further initiatives have been identified and targeted
with the aim of being implemented across the course of the
three-year plan. Further information is contained within the
ESG section of this report.
|
|
| |
Customers & Geographies
The largest markets for sales of
our Group brands are in continental Europe and the UK. In 2023, our
top ten customers represented 69% of revenues (2022:
60%).
UK
In 2023, revenue from the UK was
£32.4 million (2022: £27.6 million), an increase of 18%. The UK
accounted for 36% of Group revenue in 2023 (2022: 43%).
Growth in the UK was seen by both our lead W7 brand, which
increased by 33%, and the Technic brand, which increased by
13%.
The top ten UK Group customers
accounted for 66% of UK sales (2022: 75%). In recent years,
there has been a move away from selling the Group's products
through discount retailers to more traditional 'full price'
retailers. Particular highlights in 2023 were the
successful launch of W7 product in an initial 71
Superdrug stores, together with an expansion with New Look -
after an initial trial of W7 product in 20 New
Look stores in 2022, the Group rolled out W7 products to a further
200 New Look stores during 2023.
We are further expanding in the UK
during 2024, including the launch of a range of 96 Technic products
into an initial 202 Morrisons stores in March; expanding into a
further 100 Boots stores in April, with 82 W7 products stocked in
each store; and a rollout into an additional 63 Superdrug stores
planned for July, together with additional product being
stocked.
Europe
In 2023, Group revenue from Europe increased by 61% to £45.1 million
(2022: £28.1 million), accounting for 52%
of Group branded sales, and 50% of overall Group sales in 2023
(2022: 44%). The largest markets for the
Group in Europe are Denmark, France, the
Netherlands, Spain and Sweden, with strong
growth being driven by increased sales to certain existing
customers that are expanding strongly, supported by the
Group.
US
Revenue from the US, in sterling
terms, increased by 38% in 2023 to £7.3 million (2022: £5.3
million) and grew by 44% in US dollar terms. This equated to
8% of overall 2023 Group sales (2022: 8%). 99% of US revenue
was from the sale of Group brands in 2023 (2022: 97%, 2021 89%) as minimal close-out activity was
undertaken, in line with the Group's strategy to focus on its own
brands.
A good performance continued from
the Group's major customers in the USA, including CVS, Five Below,
H-E-B, Macys Backstage, Nordstrom Rack, Sallys and TJ
Maxx.
With the US market being more than
10 times the size of the UK market, the US remains a key strategic
focus for the Group. In 2023, we invested in the expansion of
our US team, which we believe will provide the Group with a good
platform to leverage the opportunity presented in this
market. The benefits of this
investment are already being seen. In Q1 2024 the Group
expanded the range of W7 products stocked with CVS and rolled out
to a further 387 stores.
A significant Christmas order has been received
from Walmart for W7 and Chit Chat product and the Group are in
discussions to stock the Group's all year round product in
Walmart. Significant expansion is also planned with Five
Below in H1 2024, including the stocking of an increased range of
W7 products in all of their stores.
Rest of the World
Revenue from the rest of the world
increased by 57% to £4.8 million (2022: £3.1 million), accounting
for 5% of overall Group sales (2022: 5%). Australia and China remain the focus, and other
countries where profitable sales in appropriate volumes can be
made. In 2023 this included W7 being
launched into 100 Watsons stores in the Philippines.
The Group has no suppliers in
Russia or Ukraine and has had no significant historic sales to
either country.
Summary and Outlook
I am again delighted with the
Group's performance in 2023. We have continued to
significantly grow sales and these sales
have been achieved at a record gross margin.
We continue to generate good growth both
in the UK and internationally. Our robust supply chain and
distribution network, coupled with maintaining appropriate levels
of stock, ensures that we are able to supply our retail customers
on time with product that their customers are demanding.
Trading in 2024 has started
strongly with a record first quarter, achieving revenue for the
first three months of 2024, 28% ahead of the same period in 2023,
with sales increases seen across all of the Group's brands, both in
stores and online, and at an improved gross margin to that achieved
for 2023 as a whole.
We will update further on our
progress later in the year and with significant opportunities for
further growth, including those already secured with both existing
retailers and new ones, together with ongoing discussions
with major retailers globally, I am confident that the Group will continue to perform well
for the remainder of the year and beyond.
Sam
Bazini
Chief Executive
Officer
23 April
2024
CHIEF FINANCIAL OFFICER'S REVIEW
2023 was another record year for the
Group and significantly ahead of 2022,
with strong growth in revenue, margins and profit before
tax. Group revenue increased in the year by 40%
and adjusted profit before tax increased by 84%. Gross margin
improved in the year by 3.5% to 39.9%. This is the third year
running that gross margin has improved. The Group continues
its strategy of building the W7 and Technic brands in the UK and
internationally, and we remain focused on margin,
generating cash and remaining debt free.
The Group monitors its performance using a
number of key performance indicators which are agreed and monitored
by the board.
*Adjusted numbers are closer to the underlying cash flow
performance of the business which is regularly monitored and
measured by management, the adjustments made to the statutory
profit before tax are as follows:
£m
|
2023
|
2022
|
Statutory
PBT
|
18.12
|
7.69
|
Exceptional Items
|
nil
|
0.15
|
Amortisation of acquired
intangibles
|
0.19
|
2.00
|
Share based payment
|
0.13
|
0.19
|
*Adjusted
PBT
|
18.44
|
10.03
|
Exceptional items include £nil (2022: £0.15
million) for content use and associated legal fees.
Headline results, shown below, represent the
performance comparisons between the consolidated statements of
income for the years ended 31 December 2022 and 31 December
2023.
Revenue
Group revenue for 2023 increased by 39.9% to
£89.6 million (2022: £64.1 million).
Company branded sales were £84.8
million (2022: £57.7 million). Our W7 brand had sales in the
year of £57.4 million (2022: £35.0 million), while our Technic
brand contributed sales of £27.5 million (2022: £22.7
million).
In 2023, sales of white label cosmetics were
£2.3 million (2022: £2.6 million). The white label business
is traditionally cost competitive and is only undertaken based on
commercial viability, in particular margin.
Revenue for close-out business was £2.5
million (2022: £3.8 million) with the reduction of 33.1% being in
line with our strategy to reduce the Group's focus on close-out
opportunities.
In the UK, revenue increased by 17.6% to £32.4
million (2022: £27.6 million). International revenue
increased by 56.7% to £57.2 million (2022: £36.5 million). In
Europe, sales increased by 60.5% to £45.1 million (2022: £28.1
million), while in the US sales increased by 36.8% to £7.3 million
(2022: £5.3 million). In the rest of the world Group sales
increased by 56.6% to £4.8 million (2022: £3.1 million).
E-commerce sales were up by 121% to £6.2
million, now representing 6.9% of Group revenue (2022: £2.8
million/4.3%).
Product Gross Margin
Gross margin was 39.9% for the year compared
to 36.4% in 2022. This is the third year in a row that
gross margin has improved incrementally. New product
development, sourcing product from new factories and
falling freight rates in the year have all helped
achieve a gross margin improvement in 2023, without the need for an
inflationary price increase to customers at the start of the
year.
During the year, 95% of sales (2022: 90%) were
of Group brands, which overall achieve a higher margin than
close-out sales and retailer own brand white label
sales. Group brand sales include gifting and
all-year-round colour cosmetics. Gifting is sold at a more
competitive margin than all-year-round colour cosmetics.
Gifting sales in 2023 were similar to 2022 whereas
all-year-round colour cosmetics grew significantly in the year,
both in physical retail and through online channels. This
change in product mix in the year also helped to improve gross
margin.
We remain focused on improving gross margin
where possible in all our businesses and are working with our Asian
business units to execute this. Margin is also benefiting from the
increased scale of our orders placed with existing suppliers as the
business grows. To counter any currency pressure, we continue
to move production to new factories of equal quality to retain or
improve margin and have a natural hedge from our US dollar revenue
which continues to grow.
At 31 December 2022, forward foreign exchange
contracts allowed for the purchase of US$39 million at an average
exchange rate of US$1.1997, this helped to protect our margin in
2023. During 2023, we purchased forward foreign exchange
contracts to help protect the Group's gross margin in 2024.
At 31 December 2023, forward foreign exchange contracts were
in place for the purchase of US$42 million at an average exchange
rate of US$1.2537. Since the start of 2024, we
have purchased more forward foreign exchange
contracts to further help protect our gross
margin.
The currency options we have for the current
year, new product development, sourcing, increased selling of the
Group brands, and growing sales in the US, will all help to protect
our margin in 2024.
Operating
Expenses
Total operating expenses before exceptional
items, amortisation costs, depreciation, foreign exchange movements
and share based payments, increased at a lower rate
than the growth in sales, increasing by 28.8% to £14.7
million in the year or 16.4% of revenue (2022: £11.4
million/17.8%).
The absolute increase of £3.3 million in the
year was necessary to support the growth of the business and was
made up of increases in wages and salaries, the spend on PR and
marketing as e-commerce sales continue to grow, travel costs, legal
and professional fees, the charge for bad debts, bank
charges, the cost of a larger sales team based in the
US and a small increase in office costs in relation to
utility charges.
Warpaint remains a business with most
operating expenses relatively fixed and evenly spread across the
whole year. We continue to monitor and examine significant
costs to ensure they are controlled and strive to reduce
them. In addition, the increased scale of the business has
given the Group increased buying power.
Adjusted
EBITDA
The board considers Adjusted EBITDA (adjusted
for foreign exchange movements, share-based payments and
exceptional items) a key measure of the performance of
the Group and one that is more closely aligned to the underlying
performance of the business. Adjusted EBITDA for the year was £21.0
million (2022: £11.9 million).
£m
|
2023
|
2022
|
Statutory profit from operations
|
18.48
|
7.97
|
Depreciation
|
0.66
|
0.76
|
Amortisation of right-of-use
assets
|
1.11
|
0.97
|
Amortisation of intangible
assets
|
0.19
|
2.00
|
EBITDA
|
20.44
|
11.70
|
Foreign exchange loss /
gain
|
0.43
|
(0.13)
|
Exceptional items
|
-
|
0.15
|
Share based payments
|
0.13
|
0.19
|
Adjusted
EBITDA
|
21.00
|
11.91
|
Profit Before Tax
Group profit before tax for the year was £18.1
million (2022: £7.7 million). The changes in profitability between
2023 and 2022 were due to:
£m
|
Effect on Profit
|
Sales volume growth
|
9.3
|
Margin growth
|
3.1
|
Increase in operating expenses
|
(3.0)
|
FX loss in 2023 £0.43 million (2022: Gain
£0.13 million)
|
(0.6)
|
Decrease in the charge for amortisation costs
on acquisition*
|
1.8
|
Other items
|
(0.2)
|
|
10.4
|
*Acquisition costs are amortised over five
years. The decrease in 2023 reflects the end of the write off
periods since the purchases of Retra Holdings Limited in November
2017 and Marvin Leeds Marketing Services Inc in August 2018.
Exceptional
Items
Exceptional
items include £nil (2022: £0.15 million for content use and
associated legal fees).
In 2022, the Group agreed a settlement
regarding a dispute with a third party relating to the historic use
of content on the Group's social media platforms in the period from
2018 through to early 2021. The total settlement including
associated legal costs was £0.52 million, of which £0.37 million
was provided for in the year to 31 December 2021. The payment
and the restriction of content use will not affect the ongoing
operations of the Group's businesses.
Tax
The tax rate for the Group for 2023 was 23.3%
compared to the average UK corporation tax standard rate of 23.5%
for 2023. Since the acquisition of LMS, the Group is exposed to tax
in the USA at an effective rate of approximately 25% and in other
jurisdictions the Group operates cost centres, but these are not
materially exposed to changes in tax rates.
Earnings Per
Share
The statutory basic and diluted earnings per
share were 18.05p and 17.98p respectively in 2023 (2022: 8.14p and
8.11p).
The adjusted basic and diluted earnings per
share before exceptional items, amortisation costs and share based
payments were 18.37p and 18.30p respectively in 2023 (2022: 10.66p
and 10.62p).
Dividends
The board is recommending a final dividend for
2023 of 6.0 pence per share, making a total dividend for the year
of 9.0 pence per share of which 3.0 pence per share was paid on 24
November 2023 (2022: total dividend of 7.1 pence per share, of
which the interim dividend was 2.6 pence per share and the final
dividend was 4.5 pence per share). The dividend for the year is
covered 2.0 times by adjusted earnings per share.
Cash Flow and
Cash Position
Net cash flow generated from operating
activities was £10.4 million (2022: £8.5 million). The
Group's year end cash balance increased by £3.2 million to £9.1
million (2022: £5.9 million). The cash generated was
principally used to fund working capital and make dividend payments
in the year.
We expect the capital expenditure requirements
of the Group to remain low, however, as part of our strategy to
grow market share in the UK and US there will be occasions where
investment in store furniture is required to secure that
business.
In 2023, £0.13 million was invested on store
furniture for Superdrug, New Look and other stores (2022: £0.29
million), £0.22 million was spent on warehouse improvements, new
pallet trucks and racking (2022: £0.42 million), £0.15 million was
spent on new computer software and equipment (2022: £0.09 million),
and £0.02 million was spent on other general office fixtures and fittings and plant upgrades
(2022: £0.03 million).
As the Group continues to grow, it is both
necessary and prudent to have bank facilities available to help
fund day-to-day working capital requirements. Accordingly,
the Group maintains a £9.5 million invoice and stock finance
facility that is used to help fund imports in our gifting business
during its peak season. At the year end, no invoice
and stock finance remained outstanding (2022: £nil). In
addition, in February 2023 the Group added a new "general purpose"
facility of £3.0 million, which on renewal in March 2024 was
increased to a £5.0 million facility. These facilities, together
with the Group's positive cash generation and the growing cash
balance held, ensure that future growth can be funded.
LTIP, EMI
& CSOP Share Options
Date
|
Shares
|
Transaction
|
Scheme
|
Exercise price
|
6 June 2023
|
375,633
|
Exercise
|
CSOP
|
49.5p
|
9 October 2023
|
23,578
|
Exercise
|
EMI
|
237.5p
|
21 November 2023
|
105,262
|
Exercise
|
EMI
|
237.5p
|
4 December 2023
|
3,837,462
|
Lapsed
|
LTIP
|
254.5p
|
24 November 2023
|
641,191
|
Granted
|
CSOP
|
325p
|
24 November 2023
|
167,309
|
Granted
|
EMI
|
325p
|
On 6 June 2023, 375,633 of the
Company's ordinary shares of 25p each that were
granted under the Warpaint London plc Company Share Option Plan
were exercised at an exercise price of 49.5p per share.
On 9 October 2023, 23,578 of the
Company's ordinary shares of 25p each that were
granted under the Warpaint London plc Enterprise Management
Incentive Scheme were exercised at an exercise price of 237.5p per
share.
On 21 November 2023, 105,262 of the
Company's ordinary shares of 25p each that were
granted under the Warpaint London plc Enterprise Management
Incentive Scheme were exercised at an exercise price of 237.5p per
share.
On the 4 December 2023, 3,837,462
ordinary shares of 25p each in the Company under the Warpaint
London plc Long Term Incentive Plan lapsed. The shares were granted
in September 2018, with an exercise price of 254.5p per
share.
On 24 November 2023 CSOP share
options were granted over a total of 641,191 ordinary shares of 25p
each in the Company under the Warpaint London plc Company Share
Option Plan. The options provide the right to acquire 641,191
ordinary shares at an exercise price of 325p per ordinary
share.
On 24 November 2023 EMI
(non-qualifying) share options were granted over a total of 167,309
ordinary shares of 25p each in the Company under the Warpaint
London plc Enterprise Management Incentive Scheme. The options
provide the right to acquire 167,309 ordinary shares at an exercise
price of 325p per ordinary share.
The exercise of EMI & CSOP
share options during the year had an immaterial
dilutive impact on earnings per share in the
period. The share-based payment charge of the EMI and CSOP
share options for the year was £0.13 million (2022: £0.19 million)
and has been taken to the share option reserve.
Balance
Sheet
Inventory was £9.3
million higher at the year end at £28.0 million (2022: £18.7
million). The rise in inventory is a function of the growth
of the business and to ensure delivery disruption is avoided for
our customers. One of the Group's unique selling propositions
is that it can deliver a full range of colour cosmetics to our
customers, in good time all year round. Having appropriate
inventory levels is vital to providing that service. The
provision for old and slow inventory was £0.38 million, 1.3% at
year-end (2022: £0.37 million, 1.9%). Across the Group we
have worked hard in the year to sell through older stock lines,
allowing for our provision for old and slow inventory to fall 0.6%
in percentage terms. Our Group policy is to provide for 50%
of the cost of perishable items that are over two years old.
However, we remain comforted by the fact that many such items
in the normal course of business are eventually sold through our
close-out division without a loss to the Group.
Trade receivables are monitored by management
to ensure collection is made to terms, to reduce the risk of bad
debt and to control debtor days, which have improved on the prior
year. At the year end, trade receivables, excluding other receivables, were £11.0 million
(2022: £9.9 million), the increase on 2022 being due to the rise in
sales year-on-year. The provision
for bad and doubtful debts carried forward at the year-end
was £0.13 million, 1.2% of gross trade receivables (2022: £0.07
million, 0.7%).
At year end, the Group had no
borrowings or lease liabilities outstanding (2022: £nil), apart
from those associated with right-of-use assets as directed by IFRS
16 (see below). The Group was therefore debt
free at the year end.
Working capital increased by £10.7 million in
the year, to £41.0 million. The main components were an
increase in inventory of £9.3 million, an increase in trade and
other receivables of £1.8 million, an increase in cash at the
year-end of £3.2 million, and an increase in trade and other
payables of £3.6 million.
Free cash flow (cash from operating activities
less capital expenditure) remained strong at £9.9 million (2022:
£7.7 million).
The Group's balance sheet remains in a very
healthy position. Net assets
totalled £46.8 million at 31 December
2023, an increase of £9.0
million from 2022. Most of
the balance sheet is made up of
liquid assets, inventory, trade receivables and cash. Included on
the balance sheet is £7.3 million of goodwill (2022:
£7.3 million) and £0.1 million of
intangible fixed assets (2022: £0.3 million)
arising from acquisition accounting.
As at the year-end, cash totalled £9.1 million (31
December 2022: £5.9 million).
Goodwill represents the excess of
consideration over the fair value of the Group's share of the net
identifiable assets of acquired businesses / cash generating units
at the date of acquisition. The carrying value at 31 December
2023 of £7.3 million included Treasured Scents Limited £0.5
million, Retra Holdings Limited £6.2 million and Marvin Leeds
Marketing Services, Inc. £0.6 million. Management has
performed the required annual impairment review at 31 December 2023
and concluded that no impairment is indicated for Treasured Scents
Limited, Retra Holdings Limited or Marvin Leeds Marketing Services,
Inc. as the recoverable amount exceeds the carrying
value.
The balance sheet also includes £5.3 million
of right-of-use assets, which is the inclusion of Group leasehold
properties, recognised as right-of-use assets as directed by IFRS
16. An equivalent lease liability is included of £5.4 million
at the balance sheet date.
Foreign
Exchange
The Group imports most of its
finished goods from China, paid for in US dollars, which are
purchased throughout the year at spot as needed, or by
taking forward foreign exchange contracts
when rates are deemed favourable, and with
consideration for the budget rate set by the board for the year.
Similarly, forward foreign exchange
contracts are taken to sell forward our
expected Euro income in the year to ensure our sales margin is
protected.
We started 2023 with forward
foreign exchange contracts in place for the purchase of US$39
million at US$1.1997/£, and the sale of €3.8 million at €1.1340/£.
During 2023 when currency rates were favourable, we purchased
additional US dollar forward foreign exchange contracts and spot
rate amounts to cover our total US dollar requirement for the
year.
In addition, during 2023 we
purchased forward foreign exchange contracts to help
protect the Group's gross margin in 2024. At 31 December 2023,
forward foreign exchange contracts were in place for the purchase
of US$42 million at an average exchange rate of US$1.2537/£, and
the sale of €3.8 million at €1.1447/£.
The Group has a natural hedge from sales to
the US which are entirely in US dollars, in 2023 these sales were
US$9.1 million (2022: US$6.3 million).
Together with sourcing product from new
factories where it makes commercial sense to do so, new product
development, and by buying US dollars when rates are favourable, we
are able to mitigate the effect of a strong US dollar against
sterling.
Section
172(1) Statement
The directors are well aware of their duty
under section 172 of the Companies Act 2006 to act in the way which
they consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole,
and in doing so have regard (amongst other matters) to:
·
|
the likely consequences of any decision in the
long term;
|
·
|
the interests of the Company's
employees;
|
·
|
the need to foster the Company's business
relationships with suppliers, customers and others;
|
·
|
the impact of the Company's operations on the
community and the environment;
|
·
|
the desirability of the Company maintaining a
reputation for high standards of business conduct, and
|
·
|
the need to act fairly as between members of
the Company
|
(the "Section 172 (1) Matters").
Induction materials provided on appointment
include an explanation of directors' duties, and the board is
regularly reminded of the Section 172(1) Matters, as a board
meeting agenda item.
Further information on how the directors have
had regard to the Section 172(1) Matters can be found in the
Stakeholder Engagement and Section 172 Report. This information
forms part of the strategic report and has been approved for issue
by the board on 24 April 2024.
Neil Rodol
Chief Financial Officer
23 April 2024
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR THE YEAR
ENDED 31 DECEMBER 2023
|
|
Year ended 31
December
|
|
|
2023
|
2022
|
|
Note
|
£'000
|
£'000
|
Operating activities
|
|
|
|
Profit before tax
|
|
18,118
|
7,690
|
Finance expense
|
5
|
369
|
281
|
Finance income
|
5
|
(6)
|
(4)
|
Amortisation of intangible
assets
|
9
|
187
|
1,995
|
Depreciation of property, plant,
and equipment
|
10
|
662
|
761
|
Depreciation on right of use
assets
|
11
|
1,111
|
965
|
Loss on disposal of property,
plant, and equipment
|
|
40
|
1
|
Share based payments
|
21
|
134
|
193
|
Increase in trade and other
receivables
|
|
(1,836)
|
(1,370)
|
Increase in inventories
|
12
|
(9,248)
|
(576)
|
Increase/(decrease) in trade and
other payables
|
|
3,588
|
(675)
|
Movement in deferred tax
assets
|
|
(51)
|
(306)
|
Fair value (gain)/loss on
derivative financial instruments
|
|
(74)
|
1,139
|
Foreign exchange translation
differences
|
|
(7)
|
(26)
|
|
|
|
|
Cash generated from operations
|
|
12,987
|
10,068
|
Tax paid
|
|
(2,569)
|
(1,546)
|
|
|
|
|
Net cash flows from operating activities
|
|
10,418
|
8,522
|
|
|
|
|
Investing activities
|
|
|
|
Purchase of intangible
assets
|
9
|
(3)
|
(12)
|
Purchase of property, plant, and
equipment
|
10
|
(515)
|
(831)
|
|
|
|
|
Net cash used in investing activities
|
|
(518)
|
(843)
|
|
|
|
|
Financing activities
|
|
|
|
Lease payments
|
16
|
(1,144)
|
(836)
|
Proceeds from issued share
capital
|
|
492
|
-
|
Lease liability
interest
|
5
|
(230)
|
(185)
|
Interest paid
|
5
|
(139)
|
(96)
|
Interest received
|
5
|
6
|
4
|
Dividends
|
18
|
(5,785)
|
(4,682)
|
|
|
|
|
Net cash used in financing activities
|
|
(6,800)
|
(5,795)
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
3,100
|
1,884
|
Cash and cash equivalents at
beginning of period
|
|
5,865
|
4,072
|
Exchange gain/(loss) on cash and
cash equivalents
|
|
88
|
(91)
|
|
|
|
|
Cash and cash equivalents at end of period
|
14
|
9,053
|
5,865
|
|
|
|
|
Cash and cash equivalents consist of:
|
|
|
|
Cash and cash
equivalents
|
14
|
9,053
|
5,865
|
|
|
|
|
|
|
9,053
|
5,865
|
|
|
|
|
The notes form part of these
financial statements.
|
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
AS AT ENDED
31 DECEMBER 2023
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 2023 were authorised
for issue by the board of directors on 23 April 2024
Warpaint London PLC is a public limited
Company incorporated and registered in England and Wales. Its
registered office is Units B&C, Orbital Forty-Six, The Ridgeway
Trading Estate, Iver, Buckinghamshire, SL0 9HW.
The Group's financial statements have been
prepared in accordance in accordance UK adopted international
accounting standards and in conformity with the requirements of the
Companies Act. The functional currency of the parent and its
subsidiaries is pounds sterling because that is the currency of the
primary economic environment in which the Group operates. The
financial statements are also presented in pounds sterling. All
values are rounded to the nearest thousand (£'000) except where
otherwise indicated.
The annual financial statements have been
prepared on the historical cost basis, except for certain financial
assets and liabilities which are carried at fair value or amortised
cost as appropriate.
The preparation of financial statements in
accordance with UK adopted international accounting standards
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reported period. Although these estimates are based on
management's best knowledge of current events and actions, actual
results ultimately may differ from those estimates. The principal
accounting policies adopted are set out below.
Basis of
consolidation
Where the company has control over an
investee, it is classified as a subsidiary. The company controls an
investee if all three of the following elements are present: power
over the investee, exposure to variable returns from the investee,
and the ability of the investor to use its power to affect those
variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these
elements of control.
The consolidated financial statements present
the results of the company and its subsidiaries as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full. All subsidiaries have a
reporting date of December.
The consolidated financial statements
incorporate the results of business combinations using the
acquisition method. In the statement of financial position, the
acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included
in the consolidated statement of comprehensive income from the date
on which control is obtained. They are deconsolidated from the date
on which control ceases.
On consolidation, the results of overseas
operations are translated into pounds sterling at rates
approximating to those ruling when the transactions took place. All
assets and liabilities of overseas operations, including goodwill
arising on the acquisition of those operations, are translated at
the rate ruling at the reporting date. Exchange differences arising
on translating the opening net assets at opening rate and the
results of overseas operations at actual rate are recognised in
other comprehensive income and accumulated in the foreign exchange
reserve.
Exchange differences recognised profit or loss
in Group entities' separate financial statements on the translation
of long-term monetary items forming part of the Group's net
investment in the overseas operation concerned are reclassified to
other comprehensive income and accumulated in the foreign exchange
reserve on consolidation.
On disposal of a foreign operation, the
cumulative exchange differences recognised in the foreign exchange
reserve relating to that operation up to the date of disposal are
transferred to the consolidated statement of comprehensive income
as part of the profit or loss on disposal.
Going
concern
The Directors have concluded that it is
reasonable to adopt a going concern basis in preparing the
financial statements. This is based on a reasonable expectation
that the Group has adequate resources to continue in operational
existence for at least twelve months from the date of signing of
these accounts. The Group made a statutory profit of £13.9 million
in the year to 31 December 2023 (2022: £6.3 million) and had net
current assets of £36.7 million at 31 December 2023 (2022: £27.7
million).
The Group occasionally makes use in its Retra
Holdings Limited ("Retra") subsidiary of a £6.0 million bank
facility that can be used for confidential invoice discounting, and
a £3.5 million bank facility that can be used for stock finance,
which is used if needed during the peak gift buying season. These
facilities are ongoing without a fixed term. In addition, the Group
has a £5.0 million (2022: £3.0 million) general purpose bank
facility in its Warpaint Cosmetics (2014) Limited ("Warpaint
Cosmetics") subsidiary which was agreed in March 2024. This
facility will renew annually and was put in place to support the
continued growth of the business. As at the year end £nil of the
bank facilities were utilised and the Directors expect that in 2024
the facilities will only be used to modest levels well within the
facility limits, to support the day to day working capital of the
business. At the 2 April 2024 the company had cash of £7.5 million
(31 March 2023: £8.5 million), no debt and had used £nil of its
bank facilities.(31 March 2022: No debt and £nil bank facilities
were used).
The Directors have prepared forecasts covering
the period to December 2025, built from the detailed Board-approved
budget for 2024. The forecasts include a number of assumptions in
relation to varying levels of sales revenue. Whilst the Group's
trading and cash flow forecasts have been prepared using current
trading assumptions, the operating environment presents a number of
challenges which could negatively impact the actual performance
achieved. These challenges include, but are not limited to,
achieving forecast levels of sales and order intake, the impact on
customer confidence as a result of general economic conditions,
achieving forecast margin improvements, supply side price
inflation, increases in freight costs, and the director's ability
to implement cost saving initiatives in areas of discretionary
spend where required.
The Group's cash flow forecasts and
projections, taking account of reasonable and possible changes in
trading performance, offset by mitigating actions within the
control of management including reductions in areas of
discretionary spend, show that the Group will be able to operate
comfortably through to the end of December 2025, and in Retra and
Warpaint Cosmetics within the level of their own bank
facility.
In preparing this analysis, a number of
scenarios were modelled.. The scenarios modelled were all based on
varying levels of sales revenue, including one that assumes no
growth for 2024 and 2025 as a reasonable downside scenario, and
more extreme falls in revenue of up to 30% in both years as a
worst-case scenario. In each scenario, mitigating actions within
the control of management have been modelled. Under each of the
scenarios modelled, the Group has sufficient cash to meet its
liabilities as they fall due and consequently, the directors
believe that the Group has sufficient financial strength to
withstand the possible disruption to its activities.
Based on the above indications the directors
believe that it remains appropriate to prepare the financial
statements on a going concern basis.
Revenue
Recognition
Performance
obligations and timing of revenue recognition
The Group's revenue is derived from selling
goods with revenue recognised at a point in time when control of
the goods has transferred to the customer. This is generally when
the goods are delivered to the customer. However, for export sales,
control might also be transferred when delivered either to the port
of departure or port of arrival, depending on the specific terms of
the contract with a customer. There is limited judgement needed in
identifying the point control passes: once physical delivery of the
products to the agreed location has occurred, the group no longer
has physical possession, usually will have a present right to
payment (as a single payment on delivery) and retains none of the
significant risks and rewards of the goods in question.
UK sales are recognised and invoiced to the
customer once the goods have been delivered to the customer.
Overseas sales are recognised and invoiced to the customer once the
goods have been delivered to the customer or collected by the
customer from the Group's warehouse according to the terms of sale.
Online sales are recognised and invoiced to the customer once the
goods have been delivered to the customer.
Customer loyalty
The Group operates a loyalty reward scheme for
'digital' customers where points are earned for products purchased
online, with 10 points equivalent to £1. The Group accounts for
loyalty points when redeemed as a sales discount on the sales
transaction. A sales discount provision is recognised in the
accounts in relation to points issued but not yet redeemed. When
estimating this provision, the Group considers the likelihood that
the customer will redeem the points. At the year-end there were 9.3
million points yet to be redeemed, leading to a provision of
£18,568 (2022: 6.5 million points leading to a provision of
£32,471).
Under IFRS 15, volume rebates and early
settlement discounts represent variable consideration and is
estimated and recognised as a reduction to revenue as performance
obligations are satisfied. Management recognises revenue based on
the amount of estimated rebate to the extent that revenue is highly
probably of not reversing. Management monitors this estimate at
each reporting date and adjusts it as necessary.
Determining
the transaction price
Most of the group's revenue is derived from
fixed price contracts and therefore the amount of revenue to be
earned from each contract is determined by reference to those fixed
prices. Exceptions are as follows:
·
Some contracts provide customers with a limited right of
return. These relate predominantly, but not exclusively, to online
sales direct to consumers and sales made to certain large
retailers. Historical experience enables the group to estimate
reliably the value of goods that will be returned and restrict the
amount of revenue that is recognised such that it is highly
probable that there will not be a reversal of previously recognised
revenue when goods are returned.
·
Variable consideration relating to volume rebates has been
considered in estimating revenue in order that it is highly
probable that there will not be a future reversal in the amount of
revenue recognised when the amount of volume rebates has been
determined.
Allocating
amounts to performance obligations
For most contracts, there is a fixed unit
price for each product sold, with reductions given for bulk orders
placed at a specific time. Therefore, there is no judgement
involved in allocating the contract price to each unit ordered in
such contracts (it is the total contract price divided by the
number of units ordered). Where a customer orders more than one
product line, the Group is able to determine the split of the total
contract price between each product line by reference to each
product's standalone selling prices (all product lines are capable
of being, and are, sold separately).
Practical
Exemptions
The group has taken advantage of the practical
exemptions:
·
not to account for significant financing components where the
time difference between receiving consideration and transferring
control of goods (or services) to its customer is one year or less;
and
·
expense the incremental costs of obtaining a contract when
the amortisation period of the asset otherwise recognised would
have been one year or less.
Expenditure
and provisions
Expenditure is recognised in respect of goods
and services received when supplied in accordance with contractual
terms. Provision is made when an obligation exists relating to a
past event and where the amount of the obligation can be reliably
estimated.
Retirement
Benefits: Defined contribution schemes
Contributions to defined contribution schemes
are charged to the consolidated statement of comprehensive income
in the year to which they relate.
Exceptional
items and Alternative Performance Measures
Exceptional items which have been disclosed
separately on the face of the Consolidated Statement of
Comprehensive Income in order to summarise the underlying results.
Exceptional items in 2022 relate to a royalty claim and associated
legal fees. Neither 'underlying profit or loss' nor 'exceptional
items' are defined by IFRS however the directors believe that the
disclosures presented in this manner provide a clearer presentation
of the underlying financial performance of the Group.
Alternative performance measures (APM's) are
used by the Board to assess the Group's performance and are applied
consistently from one period to the next. They therefore provide
additional useful information for shareholders on the underlying
performance and position of the Group. Additionally, adjusted
profit from operations is used to determine adjusted EPS which is
used as a key performance indicator for the Long-Term Incentive
Plan (LTIP) and the Company Share Option Scheme (CSOP). These
measures are not defined by IFRS and are not intended to be a
substitute for IFRS measures. The Group presents underlying profit
from operations, profit before tax and EPS which are calculated as
the statutory measures stated before non-underlying items,
including exceptional items, amortisation of intangible assets and
share-based payments where applicable.
Underlying results are used in the day-to-day
management of the Group. They represent statutory measures adjusted
for items which could distort the understanding of performance and
comparability year on year. Non-underlying items include the
amortisation of intangible assets, exceptional items and
share-based payments. Exceptional items are those items which the
group consider to be significant in nature and not in the normal
course of business or are consistent with items that were treated
as exceptional in prior periods.
Intangible
assets
Patents
Patents are used by the Group in order to
generate future economic value through normal business operations.
Patents are acquired separately and carried at cost less
amortisation and impairment. The underlying assets are amortised
over the period from which the Group expects to benefit, which is
typically between five to ten years.
Intangible assets acquired
separately
Intangible assets with finite useful lives
that are acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is
recognised on a straight-line basis over their estimated useful
lives. The estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the effect of
any changes in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired
separately are carried at cost less accumulated
impairment losses. Amortisation is provided on
Licences and Website costs so as to write off the carrying value
over the expected useful economic life of five years.
Intangible assets acquired in a business
combination
Intangible assets acquired in a business
combination and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is
regarded as their cost). Subsequent to initial recognition,
intangible assets acquired in a business combination are reported
at cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets that are acquired
separately. Amortisation is provided on customer lists and brands
so as to write off the carrying value over the expected useful
economic life of five years. Other details of the acquisition are
detailed in note 9.
Goodwill
Goodwill represents the excess of the cost of
a business combination over the Group's interest in the fair value
of identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given,
liabilities assumed, and equity instruments issued, plus the amount
of any non-controlling interests in the acquiree. Contingent
consideration is included in cost at its acquisition date fair
value and, in the case of contingent consideration classified as a
financial liability, remeasured subsequently through profit or
loss.
Goodwill is considered to have an indefinite
useful economic life and is capitalised as an intangible asset with
any impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
Impairment of
non-financial assets (excluding inventories and deferred tax
assets)
Impairment tests on goodwill and other
intangible assets with indefinite useful economic lives are
undertaken annually at the financial year end. Other non-financial
assets are subject to impairment tests whenever events or changes
in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its
recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down
accordingly.
Where it is not possible to estimate the
recoverable amount of an individual asset, the impairment test is
carried out on the smallest group of assets to which it belongs for
which there are separately identifiable cash flows; its cash
generating units ('CGUs'). Goodwill is allocated on initial
recognition to each of the Group's CGUs that are expected to
benefit from a business combination that gives rise to the
goodwill.
Impairment charges are included in profit or
loss, except to the extent they reverse gains previously recognised
in other comprehensive income. An impairment loss recognised for
goodwill is not reversed.
Derecognition of intangible
assets
An intangible asset is derecognised on
disposal, or when no future economic benefits are expected from use
or disposal. Gains or losses arising from derecognition of an
intangible asset, measured as the difference between the net
disposal proceeds and the carrying amount of the asset, are
recognised in profit or loss when the asset is
derecognised.
Property,
plant and equipment
Items of property, plant and equipment are
initially recognised at cost. As well as the purchase price, cost
includes directly attributable costs.
Depreciation is provided on all items of
property, plant and equipment so as to write off their carrying
value over the expected useful economic lives. It is provided at
the following rates:
Plant and machinery
|
-
|
25% reducing balance or 20% straight
line
|
Fixtures and fittings
|
-
|
25% reducing balance or 20% straight
line
|
Computer equipment
|
-
|
25% reducing balance or 33.33% straight
line
|
Motor vehicles
|
-
|
20% straight line
|
Right-of-Use
Assets
Right-of-use assets are measured at cost,
which is made up of the initial measurement of the lease liability
adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the asset at the end of the lease,
less any lease incentives received.
The Group depreciates the right-of-use assets
on a straight-line basis from the lease commencement date to the
earlier of the end of the useful life of the right-of-use asset or
the end of the lease term.
The Group also assesses the right-of-use asset
for impairment when such indicators exist.
The right-of-use assets are included in a
separate line within non-current assets on the Consolidated Balance
Sheet.
Financial
assets
The Group classifies its financial assets into
one of the categories discussed below, depending on the purpose for
which the asset was acquired. Other than financial assets in a
qualifying hedging relationship, the Group's accounting policy for
each category is as follows:
Fair value
through profit or loss
This category comprises in-the-money
derivatives and out-of-money derivatives where the time value
offsets the negative intrinsic value (see "Financial liabilities"
section for out-of-money derivatives classified as liabilities).
They are carried in the statement of financial position at fair
value with changes in fair value recognised in the consolidated
statement of comprehensive income in the finance income or expense
line. Other than derivative financial instruments which are not
designated as hedging instruments, the Group does not have any
assets held for trading nor does it voluntarily classify any
financial assets as being at fair value through profit or
loss.
Amortised
cost
These assets arise principally from the
provision of goods and services to customers (e.g. trade
receivables), but also incorporate other types of financial assets
where the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely
payments of principal and interest. They are initially recognised
at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
Impairment requirements use an 'expected
credit loss' ('ECL') model to recognise an allowance. Impairment is
measured using a 12- month ECL method unless the credit risk on a
financial instrument has increased significantly since initial
recognition in which case the lifetime ECL method is adopted. For
receivables, a simplified approach to measuring expected credit
losses using a lifetime expected loss allowance is available and
has been adopted by the Group. During this process the probability
of the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss
arising from default to determine the lifetime expected credit loss
for the trade receivables. For trade receivables, which are
reported net, such provisions are recorded in a separate provision
account with the loss being recognised within administrative
expenses in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the
associated provision.
The Group's financial assets measured at
amortised cost comprise trade and other receivables, and cash and
cash equivalents in the consolidated statement of financial
position.
Cash and cash equivalents include cash in
hand, deposits held at call with banks, other short term highly
liquid investments with original maturities of three months or
less, and - for the purpose of the statement of cash flows - bank
overdrafts. Bank overdrafts are shown within loans and borrowings
in current liabilities on the consolidated statement of financial
position.
Financial
liabilities
The Group classifies its financial liabilities
into one of two categories, depending on the purpose for which the
liability was acquired. The Group's accounting policy for each
category is as follows:
Fair value
through profit or loss
This category comprises out-of-the-money
derivatives where the time value does not offset the negative
intrinsic value (see "Financial assets" for in-the-money
derivatives and out-of-money derivatives where the time value
offsets the negative intrinsic value). They are carried in the
consolidated statement of financial position at fair value with
changes in fair value recognised in the consolidated statement of
comprehensive income. The Group does not hold or issue derivative
instruments for speculative purposes, but for hedging purposes.
Other than these derivative financial instruments, the Group does
not have any liabilities held for trading nor has it designated any
financial liabilities as being at fair value through profit or
loss.
Other
financial liabilities
Other financial liabilities include the
following items:
·
Bank loans which are initially recognised at fair value net
of any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost ensuring the interest element of the
borrowing is expensed over the repayment period at a constant
rate.
·
Trade payables, other borrowings and other short-term
monetary liabilities, which are initially recognised at fair value
and subsequently carried at amortised cost using the effective
interest method.
Derivative
financial instruments
The Group enters into a variety of derivative
financial instruments to manage its exposure to foreign exchange
rate risk, through the use of foreign exchange rate forward
contracts.
Derivatives are initially recognised at fair
value at the date the derivative contracts are entered into and are
subsequently re-measured to their fair value at the end of each
reporting period. The resulting gain or loss is recognised in
profit or loss immediately unless the derivative is designated and
effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge
relationship.
Foreign
currencies
Transactions entered into by Group entities in
a currency other than the currency of the primary economic
environment in which they operate (their "functional currency") are
recorded at the rates ruling when the transactions occur. Foreign
currency monetary assets and liabilities are translated at the
rates ruling at the reporting date. Exchange differences arising on
the retranslation of unsettled monetary assets and liabilities are
recognised immediately in profit or loss, except for foreign
currency borrowings qualifying as a hedge of a net investment in a
foreign operation, in which case exchange differences are
recognised in other comprehensive income and accumulated in the
foreign exchange reserve along with the exchange differences
arising on the retranslation of the foreign operation.
Leases
All leases are accounted for by recognising a
right-of-use asset and a lease liability except for:
·
leases of low value assets; and
·
leases with a duration of 12 months or less.
Lease liabilities are measured at the present
value of the contractual payments due to the lessor over the lease
term, with the discount rate determined by reference to the rate
inherent in the lease unless (as is typically the case) this is not
readily determinable, in which case the group's incremental
borrowing rate on commencement of the lease is used. Variable lease
payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the
initial measurement of the lease liability assumes the variable
element will remain unchanged throughout the lease term. Other
variable lease payments are expensed in the period to which they
relate.
On initial recognition, the carrying value of
the lease liability also includes:
·
amounts expected to be payable under any residual value
guarantee;
·
the exercise price of any purchase option granted in favour
of the group if it is reasonably certain to assess that option;
and
·
any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Right of use assets are initially measured at
the amount of the lease liability, reduced for any lease
incentives received, and increased
for:
·
lease payments made at or before commencement of the
lease;
·
initial direct costs incurred; and
·
the amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased
asset.
Subsequent to initial measurement lease
liabilities increase as a result of interest charged at a constant
rate on the balance outstanding and are reduced for lease payments
made. Right-of-use assets are amortised on a straight-line basis
over the remaining term of the lease or over the remaining economic
life of the asset if, rarely, this is judged to be shorter than the
lease term.
When the group revises its estimate of the
term of any lease (because, for example, it re-assesses the
probability of a lessee extension or termination option being
exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are
discounted at a revised discount rate. The carrying value of lease
liabilities is similarly revised when the variable element of
future lease payments dependent on a rate or index is revised. In
both cases an equivalent adjustment is made to the carrying value
of the right-of-use asset, with the revised carrying amount being
amortised over the remaining (revised) lease term.
When the group renegotiates the contractual
terms of a lease with the lessor, the accounting depends
on the nature of the modification:
·
if the renegotiation results in one or more additional assets
being leased for an amount commensurate with the standalone price
for the additional rights-of-use obtained, the modification is
accounted for as a separate lease in accordance with the above
policy ;
·
in all other cases where the renegotiated increases the scope
of the lease (whether that is an extension to the lease term, or
one or more additional assets being leased), the lease liability is
remeasured using the discount rate applicable on the modification
date, with the right-of-use asset being adjusted by the same amount
; and
·
if the renegotiation results in a decrease in the scope of
the lease, both the carrying amount of the lease liability and
right-of-use asset are reduced by the same proportion to reflect
the partial of full termination of the lease with any difference
recognised in profit or loss. The lease liability is then further
adjusted to ensure its carrying amount reflects the amount of the
renegotiated payments over the renegotiated term, with the modified
lease payments discounted at the rate applicable on the
modification date. The right-of-use asset is adjusted by the same
amount.
For contracts that both convey a right to the
group to use an identified asset and require services to be
provided to the group by the lessor, the group has elected to
account for the entire contract as a lease, i.e. it does allocate
any amount of the contractual payments to, and account separately
for, any services provided by the supplier as part of the
contract.
Nature of leasing activities (in the
capacity as lessee)
The group leases a number of properties in the
jurisdictions from which it operates with a fixed periodic rent
over the lease term. The group has a total of 7 property
leases.
Taxation
Income tax expense represents the sum of the
tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable
profit for the year. Taxable profit differs from 'profit before
tax' as reported in the consolidated statement of comprehensive
income and other comprehensive income because of items of income or
expense that are taxable or deductible in other years and items
that are never taxable or deductible.
The Group's current tax is calculated using
tax rates that have been enacted or substantively enacted by the
end of the reporting period.
Deferred taxation
Deferred tax assets and liabilities are
recognised where the carrying amount of an asset or liability in
the combined statement of financial position differs from its tax
base, except for differences arising on:
·
the initial recognition of goodwill;
·
the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
·
investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets is
restricted to those instances where it is probable that taxable
profit will be available against which the difference can be
utilised.
The amount of the asset or liability is
determined using tax rates that have been enacted or substantively
enacted by the end of the reporting period and are expected to
apply when the deferred tax liabilities or assets are settled or
recovered. Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset
when the Group has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and
liabilities relate to taxes levied by the same tax authority on
either:
·
the same taxable group company; or
·
different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Inventories
Inventories are initially recognised at cost,
and subsequently at the lower of the cost and net realisable value.
Cost comprises all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present
location and condition.
Operating
segments
Operating segments are reported in a manner
consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision maker has
been identified as the management team including the Chief
Executive Officers, Managing Director and the Chief Financial
Officer.
The Board considers that the Group's project
activity constitutes the two operating and two reporting segments
presented in Note 2, as defined under IFRS 8. Management reviews
the performance of the Group by reference to total results against
budget.
The total profit measures are operating profit
and profit for the year, both disclosed on the face of the combined
income statement. No differences exist between the basis of
preparation of the performance measures used by management and the
figures in the Group financial information.
Earnings per
share
Basic earnings per share is calculated by
dividing the earnings attributable to ordinary shareholders of the
parent by the weighted average number of ordinary shares
outstanding during the year, excluding treasury shares and shares
in employee benefit trusts, determined in accordance with the
provisions of IAS 33 earnings per Share. Diluted earnings per share
is calculated by dividing earnings attributable to ordinary
shareholders of the parent by the weighted average number of
ordinary shares outstanding during the year adjusted for the
potentially dilutive ordinary shares.
Share
Capital
The Group's ordinary shares are classified as
equity instruments.
Share-based
payments
Where equity settled share options are awarded
to employees, the fair value of the options at the date of grant is
charged to the consolidated statement of comprehensive income over
the vesting period. Non-market vesting conditions are considered by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied.
Where the terms and conditions of options are
modified before they vest, the increase in the fair value of the
options, measured immediately before and after the modification, is
also charged to the consolidated statement of comprehensive income
over the remaining vesting period.
Where equity instruments are granted to
persons other than employees, the consolidated statement of
comprehensive income is charged with the fair value of goods and
services received.
Dividends
Dividends are recognised when they become
legally payable. In the case of interim dividends to equity
shareholders, this is when paid to the shareholders. In the
case of final dividends, this is when approved by the shareholders
at the annual general meeting.
Changes in
accounting policies
New standards, interpretations and amendments that are
effective for the first time for the financial year beginning 31
December 2023
IFRS 4
|
Amendments regarding the expiry
date of the deferral approach
|
IFRS 17
|
Insurance contracts
|
IFRS 17
|
Amendments regarding comparative
information for initial application of IFRS 17 and IFRS
9
|
IAS 1
|
Amendments regarding disclosure of
accounting policies
|
IAS 8
|
Amendments regarding the
definition of accounting estimates
|
IAS 12
|
Amendments resulting from deferred
tax assets and liabilities arising from a simple
transaction
|
New
standards, interpretations and amendments effective from 1 January
2024
At the date of authorisation of these
financial statements, certain new standards, amendments and
interpretations to existing standards have been published by the
IASB and adopted by the EU but are not yet effective and have not
been adopted early by the Group. Management anticipates that all of
the relevant pronouncements will be adopted in the Group's
accounting policies for the first period beginning after the
effective date of the pronouncement. Information on new standards,
amendments and interpretations that are expected to be relevant to
the Group's financial statements is provided below. Certain other
new standards and interpretations have been issued but are not
expected to have a material impact on the Group's financial
statements.
|
|
Effect annual periods
beginning before or after
|
IFRS 16
|
Amendments to clarify seller-lessee
subsequently measured sale and leaseback transactions
|
1st January 2024
|
IFRS S1
|
General Requirements for
Disclosure of Sustainability-related Financial
Information
|
1st January 2024
|
IFRS S2
|
Climate-related
Disclosures
|
1st January 2024
|
IFRS 7
|
Amendments regarding supplier
finance arrangements
|
1st January 2024
|
IAS 1
|
Amendments regarding to the
classification of liabilities with covenants as either current or
non-current
|
1st January 2024
|
IAS 7
|
Amendments regarding supplier
finance arrangements
|
1st January 2024
|
Critical
accounting judgements and key sources of estimation uncertainty
The Group makes certain estimates and
assumptions regarding the future. Estimates and judgements are
continually evaluated based on historical experience and other
factors, including the expectations of future events that are
believed to be reasonable under the circumstances. In the future,
actual experience may differ from these estimates and assumptions.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed
below.
Key sources of estimation
uncertainty
a)
Inventories
Inventories are initially recognised at cost,
and subsequently at the lower of the cost and net realisable value.
There is judgement involved in assessing the level of inventory
provision required in respect of slow-moving inventory. Inventory
is carried at a value of £27.9 million at the year end.
The Group makes a 50% provision for perishable
items of stock that are greater than two years old. Should the
Group increase the provision to 100% of perishable items that are
greater than two years old, this would decrease profit by £0.27
million. The Group does not provide any provision on its
non-perishable goods that are greater than two years old on the
basis that the products have long shelf life. Should the Group
increase the provision to 100% of non-perishable items that are
greater than two years old, this would decrease profit by £0.04
million.
b) Valuation of
goodwill
The assessment of the recoverable amount of
goodwill allocated to Retra Holdings Limited, Marvin Leeds
Marketing Services, Inc. and Treasured Scents Limited, as detailed
in note 9, was based on fair value less costs to sell and value in
use calculations which involved judgements over the assumptions
applied. For Retra Holdings Limited, a 5% increase in the discount
rate from 7.6% to 12.6% would reduce the value in use by
approximately £66 million leaving headroom of £64 million above the
carrying value. For Marvin Leeds Marketing Services, Inc., a 5%
increase in the discount rate from 7.5% to 12.5% would reduce the
value in use by approximately £12.6 million leaving headroom of
£11.7 million above the carrying value. For Treasured Scents
Limited, a 5% increase in the discount rate from 7.6% to 12.6%
would reduce the value in use by approximately £5.6 million leaving
headroom of £5.9 million above the carrying value. None of these
scenarios would therefore result in any impairment of the
goodwill.
Critical accounting
judgements
c) Deferred tax
assets
Deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. The
carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or
part of the assets to be recovered.
2.
Segmental information
For management purposes, the Group is
organised into two operating segments; Branded and Close-out. The
segment 'Branded' relates to the sale of 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. The executive
directors Sam Bazini, Eoin Macleod and Neil Rodol together with
members from the Groups senior management teams are the chief
operating decision makers of the whole business.
Year ended 31 December
|
2023
|
2023
|
2023
|
2022
|
2022
|
2022
|
|
Own Brand
|
Close-out
|
Total
|
Own Brand
|
Close-out
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
Revenue
|
87,068
|
2,522
|
89,590
|
60,288
|
3,770
|
64,058
|
Cost of sales
|
(52,341)
|
(1,516)
|
(53,857)
|
(38,327)
|
(2,397)
|
(40,724)
|
|
|
|
|
|
|
|
Gross profit
|
34,727
|
1,006
|
35,733
|
21,961
|
1,373
|
23,334
|
Administrative expenses
|
(16,765)
|
(487)
|
(17,252)
|
(14,319)
|
(896)
|
(15,215)
|
Exceptional items
|
-
|
-
|
-
|
(143)
|
(9)
|
(152)
|
|
|
|
|
|
|
|
Segment result
|
17,962
|
519
|
18,481
|
7,499
|
468
|
7,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment result to profit before
tax:
|
|
|
|
|
|
|
Segment result
|
17,962
|
519
|
18,481
|
7,499
|
468
|
7,967
|
|
|
|
|
|
|
|
Finance Income
|
6
|
-
|
6
|
4
|
-
|
4
|
Finance expense
|
(369)
|
-
|
(369)
|
(281)
|
-
|
(281)
|
|
|
|
|
|
|
|
Profit before tax
|
17,599
|
519
|
18,118
|
7, 222
|
468
|
7,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of total revenue by geographical
market:
|
|
|
|
|
|
|
UK
|
30,097
|
2,308
|
32,405
|
24,277
|
3,287
|
27,564
|
Europe - Other
|
8,213
|
11
|
8,224
|
6,942
|
13
|
6,955
|
Europe - Spain
|
11,223
|
82
|
11,305
|
8,005
|
194
|
8,199
|
Europe - Denmark
|
25,499
|
28
|
25,527
|
12,822
|
98
|
12,920
|
Rest of World - USA
|
7,213
|
93
|
7,306
|
5,163
|
178
|
5,341
|
Rest of World - Australia and New
Zealand
|
3,067
|
-
|
3,067
|
1,565
|
-
|
1,565
|
Rest of World - Other
|
1,756
|
-
|
1,756
|
1,514
|
-
|
1,514
|
|
|
|
|
|
|
|
Total
|
87,068
|
2,522
|
89,590
|
60,288
|
3,770
|
64,058
|
|
|
|
|
|
|
|
During the year ended 31 December 2023,
revenues of approximately £23.2 million (2022: £11.2 million) were
derived from a single external customer based in Denmark (25.9%;
2022: 17.5%).
The Directors are not able to
attribute the Group's assets and liabilities by reportable business
segment.
Analysis of non-current assets by geographical
market.
|
|
|
|
|
|
|
Year ended 31 December
|
2023
|
2023
|
2023
|
2022
|
2022
|
2022
|
|
UK
|
USA
|
Total
|
UK
|
USA
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Goodwill
|
6,720
|
554
|
7,274
|
6,720
|
554
|
7,274
|
Customer lists
|
-
|
-
|
-
|
-
|
160
|
160
|
Brand
|
-
|
3
|
3
|
-
|
3
|
3
|
Patents
|
83
|
-
|
83
|
105
|
-
|
105
|
Website
|
7
|
-
|
7
|
9
|
-
|
9
|
Property, plant and
equipment
|
1,239
|
6
|
1,245
|
1,427
|
5
|
1,432
|
Right of use assets
|
5,214
|
66
|
5,280
|
5,624
|
35
|
5,659
|
|
|
|
|
|
|
|
|
13,263
|
629
|
13,892
|
13,885
|
757
|
14,642
|
|
|
|
|
|
|
|
3. Operating
profit
Operating profit for the period is stated
after charging/(crediting):
|
Year ended 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Foreign exchange
loss/(gain)
|
433
|
(133)
|
Depreciation
|
662
|
761
|
Amortisation of right-of-use
assets
|
1,111
|
965
|
Amortisation of intangible
assets
|
187
|
1,995
|
Exceptional costs
|
-
|
152
|
Staff costs (note 4)
|
8,115
|
6,942
|
Write off/(back) of
inventories
|
13
|
(151)
|
Inventories recognised as an
expense (note 12)
|
45,900
|
35,087
|
|
|
|
The expenditure incurred within the table
above falls wholly within Administrative expenses.
Exceptional
costs
|
Year ended 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Royalty claim and associated legal
fees
|
-
|
152
|
|
|
|
|
-
|
152
|
|
|
|
During the year ended 31 December 2022 the
Group agreed a settlement regarding a dispute with a third party
relating to the historic use of content on the Group's social media
platforms in the period from 2018 through to early 2021. The
total settlement including associated legal costs was £0.52
million, of which £0.37 million was provided for in the year to 31
December 2021. The payment and the restriction of content use
will not affect the ongoing operations of the Group's
businesses.
Auditor's
Remuneration
Analysis of auditor's remuneration is as
follows:
|
Year ended 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Fees payable to the Company's
auditor for the audit of the Group's annual accounts
|
99
|
91
|
Fees payable to the Company's
auditor for the audit of subsidiary companies
|
142
|
106
|
|
|
|
Total audit fees
|
241
|
197
|
|
|
|
|
|
|
|
|
|
Tax advice
|
16
|
15
|
Other assurance
|
-
|
3
|
|
|
|
Total non-audit fees
|
16
|
18
|
|
|
|
4.
Staff costs
|
Year ended 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Wages and salaries
|
7,130
|
6,103
|
Social security costs
|
863
|
738
|
Pension costs (note 24)
|
122
|
101
|
|
|
|
|
8,115
|
6,942
|
|
|
|
The average monthly number of
employees during the period was as follows:
|
Year ended 31
December
|
|
2023
|
2022
|
|
No.
|
No.
|
Directors
|
7
|
7
|
Administrative
|
24
|
24
|
Finance
|
12
|
9
|
Warehouse
|
65
|
58
|
Sales
|
14
|
13
|
New Product Development and
PR
|
19
|
14
|
|
|
|
|
141
|
125
|
|
|
|
|
|
|
|
|
|
|
2023
|
2022
|
Directors' remuneration, included in staff
costs
|
£'000
|
£'000
|
Salaries
|
1,273
|
985
|
Share based payments (note
21)
|
75
|
125
|
Benefits
|
27
|
23
|
Pension contributions
|
2
|
2
|
|
|
|
|
1,377
|
1,135
|
|
|
|
Remuneration in respect of Directors was as
follows:
|
|
Salary/ fees and
bonus
|
Share based
payment
|
Benefits
|
Pension
contribution
|
2023
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Executive
Directors
|
|
|
|
|
|
|
|
S Bazini
|
|
375
|
-
|
15
|
-
|
390
|
|
E Macleod
|
|
375
|
-
|
12
|
-
|
387
|
|
N Rodol
|
|
298
|
50
|
-
|
1
|
349
|
|
S Craig
|
|
68
|
1
|
-
|
1
|
70
|
|
P Hagon*
|
|
42
|
24
|
-
|
-
|
66
|
|
Non-executive
Directors
|
|
|
|
|
|
|
|
C Garston
|
|
69
|
-
|
-
|
-
|
69
|
|
K Sadler
|
|
46
|
-
|
-
|
-
|
46
|
|
J Collier**
|
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
1,273
|
75
|
27
|
2
|
1,377
|
|
|
|
|
|
|
|
|
|
* Shares
granted to consultancy company Ward & Hagon Management
Consulting LLP, of which director Paul Hagon is a
member.
** Appointed 1 September 2021 and
resigned 31 December 2022.
|
|
Salary/ fees and
bonus
|
Share based
payment
|
Benefits
|
Pension
contribution
|
2022
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Executive
Directors
|
|
|
|
|
|
|
S Bazini
|
|
260
|
27
|
13
|
-
|
300
|
E Macleod
|
|
260
|
27
|
10
|
-
|
297
|
N Rodol
|
|
212
|
50
|
-
|
1
|
263
|
S Craig
|
|
63
|
1
|
-
|
1
|
65
|
P Hagon*
|
|
40
|
20
|
-
|
-
|
60
|
Non-executive
Directors
|
|
|
|
|
|
|
C Garston
|
|
66
|
-
|
-
|
-
|
66
|
K Sadler
|
|
44
|
-
|
-
|
-
|
44
|
J Collier**
|
|
40
|
-
|
-
|
-
|
40
|
|
|
|
|
|
|
|
|
|
985
|
125
|
23
|
2
|
1,135
|
|
|
|
|
|
|
|
* Shares granted to consultancy
company Ward & Hagon Management Consulting LLP, of which
director Paul Hagon is a member.
** Appointed 1 September 2021 and
resigned 31 December 2022.
Directors' interests in share options for year ended 31
December 2023
As at 31 December 2023, the
following Directors held the following performance related share
awards (Enterprise Management Incentive Scheme Options, or CSOPs)
over ordinary shares of 25p each under the Warpaint London plc
Enterprise Management Incentive Scheme and the Warpaint London plc
Company Share Option Plan. For details of the share option
schemes see Note 21 in the Financial Statements.
|
Type of Share
Award
|
Date of
Grant
|
Number of Shares at 31
December 2023
|
Exercise
Price
|
End of Performance
Period/First Exercise Date
|
Number of Shares at 31
December 2022 (or date of appointment if later)
|
S Bazini
|
LTIP
|
21.09.2018
|
-
|
254.5p
|
31.12.2022
|
1,534,986
|
E Macleod
|
LTIP
|
21.09.2018
|
-
|
254.5p
|
31.12.2022
|
1,534,986
|
N Rodol
|
EMI
|
29.06.2017
|
-
|
237.5p
|
29.06.2020
|
105,262
|
|
LTIP
|
21.09.2018
|
-
|
254.5p
|
31.12.2022
|
306,996
|
|
EMI (Non-Qualifying)
|
24.05.2021
|
225,410
|
122.0p
|
24.05.2024
|
225,410
|
|
CSOP
|
24.05.2021
|
24,590
|
122.0p
|
24.05.2024
|
24,590
|
|
CSOP
|
24.11.2023
|
9,230
|
325.0p
|
24.11.2026
|
-
|
|
EMI (Non- Qualifying)
|
24.11.2023
|
110,770
|
325.0p
|
24.11.2026
|
-
|
S Craig
|
EMI
|
29.06.2017
|
10,000
|
237.5p
|
29.06.2020
|
10,000
|
|
CSOP
|
24.11.2023
|
10,000
|
325.0p
|
24.11.2026
|
-
|
|
CSOP
|
20.05.2020
|
10,000
|
49.5P
|
20.05.2023
|
10,000
|
P Hagon
|
EMI (Non-Qualifying)
|
01.03.2022
|
200,000
|
127.5p
|
01.03.2025
|
200,000*
|
C Garston
|
-
|
-
|
-
|
-
|
-
|
-
|
K Sadler
|
-
|
-
|
-
|
-
|
-
|
-
|
J Collier**
|
-
|
-
|
-
|
-
|
-
|
-
|
* Shares granted to consultancy
company Ward & Hagon Management Consulting LLP, of which
director Paul Hagon is a member.
** Appointed 1 September 2021 and
resigned 31 December 2022.
The Directors of the Group are the
only key management personnel.
5.
Finance income and finance expenses
|
Year ended 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Finance income
|
|
|
Interest received
|
6
|
4
|
|
|
|
|
6
|
4
|
|
|
|
Finance expenses
|
|
|
Lease liability interest (note
16)
|
(230)
|
(185)
|
Other interest relating to trade
finance facilities
|
(139)
|
(96)
|
|
|
|
|
(369)
|
(281)
|
|
|
|
|
|
|
6.
Income tax
|
Year ended 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Current tax expense
|
|
|
Current tax on profits for the
period
|
4,245
|
1,817
|
|
|
|
|
4,245
|
1,817
|
Deferred tax expense
|
|
|
Origination and reversal of
temporary differences
|
(26)
|
(377)
|
|
|
|
Total tax expense
|
4,219
|
1,440
|
|
|
|
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 before tax
as follows:
|
Year ended 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Profit for the period before
taxation
|
18,118
|
7,690
|
|
|
|
Expected tax charge based on UK
effective corporation tax rate of 23.5% (2022: 19% UK standard
rate)
|
4,258
|
1,461
|
Expenses/(Income)/ not
deductible/(allowable)
|
20
|
(11)
|
Other adjustments
|
(74)
|
(41)
|
Different tax rates applied in
overseas jurisdiction
|
18
|
31
|
Differences due to an increase in
tax rate
|
23
|
-
|
Movement in deferred
tax
|
(26)
|
-
|
|
|
|
Total tax expense
|
4,219
|
1,440
|
|
|
|
The standard rate of UK corporation tax
changed from 19% to 25% on 1 April 2023. (2022: 19.0%).
The Group's effective tax rate for the year is
23.29% (2022: 18.73%).
7.
Subsidiaries
At the period end, the Group has the following
subsidiaries:
Subsidiary
name
|
Nature of
business
|
Place of
incorporation
|
Percentage
owned
|
Warpaint Cosmetics Group
Limited
|
Holding company
|
England and Wales
|
100%
|
Warpaint Cosmetics (2014)
Limited*
|
Wholesaler
|
England and Wales
|
100%
|
Treasured Scents (2014)
Limited
|
Holding company
|
England and Wales
|
100%
|
Treasured Scents
Limited*
|
Dormant
|
England and Wales
|
100%
|
Warpaint Cosmetics Inc.
|
Holding company
|
U.S.A.
|
100%
|
Retra Holdings Limited
|
Holding company
|
England and Wales
|
100%
|
Badgequo Limited*
|
Wholesaler
|
England and Wales
|
100%
|
Retra Own Label
Limited*
|
Dormant
|
England and Wales
|
100%
|
Badgequo Hong Kong
Limited*
|
Supply chain management
|
Hong Kong
|
100%
|
Jinhua Badgequo Cosmetics Trading
Co., Ltd*
|
Wholesaler
|
People's Republic of
China
|
100%
|
Marvin Leeds Marketing Services,
Inc.*
|
Wholesaler
|
U.S.A.
|
100%
|
Warpaint Cosmetics (ROI)
Limited
|
Wholesaler
|
Republic of Ireland
|
100%
|
Beaute Sales EU Limited
|
Dormant
|
England & Wales
|
100%
|
* indicates indirect interest
All entities detailed above have been in
existence for the whole of the reporting period, except for Beaute
Sales EU Limited which was incorporated on the 27th of
January 2023.
The registered office for all UK incorporated
subsidiaries is Units B&C, Orbital Forty-Six, The Ridgeway
Trading Estate, Iver, Bucks. SL0 9HW.
The registered office for Warpaint Cosmetics
Inc. is 445 Northern Boulevard - Great Neck, New York
11021.
The registered office for Badgequo Hong Kong
Limited is 12F, 3 Lockhart Road, Wanchai, Hong Kong.
The registered office for Jinhua Badgequo
Cosmetics Trading Co. Ltd is Room 1401, Gongyuan Building No. 307
South Shuanglong Street, Wucheng District, Jinhua, Zhejiang, China
321000.
The registered office for Marvin Leeds
Marketing Services, Inc. is 34W. 33rd St. - Suite 301,
New York NY 10001.
The registered office for Warpaint Cosmetics
(ROI) Limited is 6th Floor, South Bank House, Barrow
Street, Dublin 4, D04 TR29.
The registered office for Beaute Sales EU
Limited is Units 3 & 4 Zodiac Business Park, High Road, Cowley,
Uxbridge, UB8 2GU.
8.
Goodwill
Cost
|
£'000
|
At
1 January 2022,31 December 2022 and 31 December
2023
|
8,086
|
At
31 December 2023
|
8,086
|
|
|
Impairment
|
|
At
1 January 2022,31 December 2022 and 31 December
2023
|
812
|
|
|
|
|
Net book value
|
|
At 31 December 2023
|
7,274
|
|
|
At 31 December 2022
|
7,274
|
|
|
|
|
|
|
Goodwill represents the excess of
consideration over the fair value of the Group's share of the net
identifiable assets of the acquired business/CGU at the date of
acquisition. The carrying value at 31 December 2023 includes
Treasured Scents (2014) Limited ("TS2014") (the
Close-out business) of £513,000, Retra Holdings Limited £6,207,000
and Marvin Leeds Marketing Services, Inc. £554,000.
Impairment is calculated by comparing the
carrying amounts to the recoverable amount being the higher of
value in use derived from discounted cash flow projections or the
fair value less costs to sell. A CGU is deemed to be an individual
division, and these have been grouped together into similar classes
for the purpose of formulating operating segments as reported in
Note 2. The discount rate for the CGU has been calculated using
various assumptions to arrive at the Weighted Average Cost of
Capital ("WACC"). The WACC has been calculated by weighting
the required returns of interest bearing debt and common equity in
line with an estimate split of the capital structure. 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 7.6% (2022:
13.3%) for Retra Holdings Limited and 7.5% (2022: 10.4%) for Marvin
Leeds Marketing Services, Inc. and 7.6% for
TS2014 (2022: 13.3%). Cash flows beyond the
five-year period are extrapolated using a long-term average growth
rate of 2.0% (2022: 2.0%). The average growth rate
beyond the five-year period is lower than current growth rates and
is in line with Management's expectations for the
business.
The fair value less costs to sell was based on
a multiple of earnings less estimated costs to sell. Management
have performed the annual impairment review as required by IAS 36
and have concluded that no impairment is indicated for
TS2014, Retra Holdings Limited ("Retra") or
Marvin Leeds Marketing Services, Inc. ("LMS") as the
recoverable amounts exceeds the respective carrying
values.
Key assumptions and sensitivity to
changes in assumptions
The key assumptions are based upon
management's historical experience. The calculation of VIU is most
sensitive to the following assumptions:
·
Sales and gross margin - for LMS this is based on forecasts
incorporating a compound annual growth rate of 15% revenue over the
next five years. For Retra, the compound annual growth rate over
the next five years is anticipated to be 9% to 13%. For Treasured
Scents the compound annual growth rate over the next five years is
anticipated to be 2.5%. The gross margins for LMS, Retra and
Treasured Scents are based on historical rates achieved.
·
Administrative expenses are expected to increase by 10% in
LMS, 4% in Retra and decrease by 5% in Treasured Scents.
·
Growth Rate - used to extrapolate beyond the budget period
and for terminal values based on a long-term average growth rate of
2.0%.
Sensitivity to changes in
assumptions
The impairment review of the Group is
sensitive to changes in the key assumptions, most notably the
pre-tax discount rate, the terminal growth rate, the projected
operating cash flows. Reasonable changes to these assumptions are
considered to be:
·
5.0% increase in the pre-tax discount rate;
·
reduction in the terminal growth rate to 1%; and
·
10.0% reduction in projected operating cash flows.
Reasonable changes to the assumptions used,
considered in isolation, would not result in an impairment of
goodwill for LMS, Retra or TS2014.
9. Intangible
assets
|
Brands
|
Customer
lists
|
Patents
|
Website
|
Licences
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Cost
|
|
|
|
|
|
|
At 1 January 2022
|
3,802
|
8,240
|
267
|
45
|
6
|
12,360
|
|
|
|
|
|
|
|
Additions
|
-
|
1
|
3
|
8
|
-
|
12
|
|
|
|
|
|
|
|
At 31 December 2022
|
3,802
|
8,241
|
270
|
53
|
6
|
12,372
|
|
|
|
|
|
|
|
Additions
|
-
|
-
|
3
|
-
|
-
|
3
|
Disposals
|
-
|
-
|
(29)
|
(4)
|
-
|
(33)
|
|
|
|
|
|
|
|
At
31 December 2023
|
3,802
|
8,241
|
244
|
49
|
6
|
12,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation
|
|
|
|
|
|
|
At 1 January 2022
|
3,115
|
6,798
|
140
|
41
|
6
|
10,100
|
|
|
|
|
|
|
|
Charge for the year
|
684
|
1,283
|
25
|
3
|
-
|
1,995
|
|
|
|
|
|
|
|
At 31 December 2022
|
3,799
|
8,081
|
165
|
44
|
6
|
12,095
|
|
|
|
|
|
|
|
Charge for the year
|
-
|
160
|
25
|
2
|
-
|
187
|
Amortisation on
disposals
|
-
|
-
|
(29)
|
(4)
|
-
|
(33)
|
|
|
|
|
|
|
|
At
31 December 2023
|
3,799
|
8,241
|
161
|
42
|
6
|
12,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
At 31 December 2023
|
3
|
-
|
83
|
7
|
-
|
93
|
|
|
|
|
|
|
|
At 31 December 2022
|
3
|
160
|
105
|
9
|
-
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
Property, plant
and equipment
|
Plant and
machinery
|
Fixtures and
fittings
|
Computer
equipment
|
Motor
vehicles
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Costs
|
|
|
|
|
|
At 1 January 2022
|
1,027
|
2,231
|
367
|
120
|
3,745
|
|
|
|
|
|
|
Additions
|
301
|
409
|
91
|
30
|
831
|
Disposals
|
-
|
(349)
|
(3)
|
(72)
|
(424)
|
Foreign exchange
gain/(loss)
|
(37)
|
-
|
16
|
-
|
(21)
|
|
|
|
|
|
|
At 31 December 2022
|
1,291
|
2,291
|
471
|
78
|
4,131
|
|
|
|
|
|
|
Additions
|
146
|
221
|
148
|
-
|
515
|
Disposals
|
-
|
(749)
|
-
|
-
|
(749)
|
Foreign exchange loss
|
-
|
(2)
|
(1)
|
-
|
(3)
|
|
|
|
|
|
|
At 31 December 2023
|
1,437
|
1,761
|
618
|
78
|
3,894
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
|
|
|
At 1 January 2022
|
760
|
1,195
|
290
|
115
|
2,360
|
|
|
|
|
|
|
Charge for year
|
181
|
538
|
37
|
5
|
761
|
Disposals
|
-
|
(349)
|
(1)
|
(72)
|
(422)
|
|
|
|
|
|
|
At 31 December 2022
|
941
|
1,384
|
326
|
48
|
2,699
|
|
|
|
|
|
|
Charge for year
|
108
|
492
|
56
|
6
|
662
|
Disposals
|
-
|
(709)
|
-
|
-
|
(709)
|
Foreign exchange loss
|
-
|
(2)
|
(1)
|
-
|
(3)
|
|
|
|
|
|
|
At 31 December 2023
|
1,049
|
1,165
|
381
|
54
|
2,649
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
At 31 December 2023
|
388
|
596
|
237
|
24
|
1,245
|
|
|
|
|
|
|
At 31 December 2022
|
350
|
907
|
145
|
30
|
1,432
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
Right-of-use assets
|
|
Leasehold
property
|
Computer
equipment
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
Costs
|
|
|
|
|
At 1 January 2022
|
|
5,049
|
77
|
5,126
|
|
|
|
|
|
Additions
|
|
3,551
|
-
|
3,551
|
|
|
|
|
|
At 31 December 2022
|
|
8,600
|
77
|
8,677
|
|
|
|
|
|
Additions
|
|
732
|
-
|
732
|
Disposals
|
|
(334)
|
-
|
(334)
|
|
|
|
|
|
At 31 December 2023
|
|
8,998
|
77
|
9,075
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortisation
|
|
|
|
|
At 1 January 2022
|
|
1,976
|
77
|
2,053
|
|
|
|
|
|
Charge for the year
|
|
965
|
-
|
965
|
|
|
|
|
|
At 31 December 2022
|
|
2,941
|
77
|
3,018
|
|
|
|
|
|
Charge for the year
|
|
1,111
|
-
|
1,111
|
Disposals
|
|
(334)
|
-
|
(334)
|
|
|
|
|
|
At 31 December 2023
|
|
3,718
|
77
|
3,795
|
|
|
|
|
|
Net Book Value
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
5,280
|
-
|
5,280
|
|
|
|
|
|
At 31 December 2022
|
|
5,659
|
-
|
5,659
|
|
|
|
|
|
The weighted average incremental borrowing
rate applied to measure lease liabilities is 4.10% (2022: 3.99%)
for leasehold property.
12.
Inventories
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Finished goods
|
28,341
|
19,080
|
Provision for
impairment
|
(378)
|
(365)
|
|
|
|
|
27,963
|
18,715
|
|
|
|
The cost of inventories recognised as an
expense and included in 'cost of sales' amounted to £45.9 million
in the year ended 31 December 2023 (2022: £35.1
million).
The cost of inventories recognised as an
expense includes a write down of inventory to net realisable value
of £13,000 (2022: £151,000 write back).
13.
Trade and other receivables
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Trade receivables -
gross
|
10,997
|
9,935
|
Provision for impairment of trade
receivables
|
(129)
|
(70)
|
|
|
|
Trade receivables - net
|
10,868
|
9,865
|
Other receivables
|
397
|
213
|
Prepayments and accrued
income
|
2,264
|
1,615
|
|
|
|
Total
|
13,529
|
11,693
|
|
|
|
|
|
|
The directors consider that the
carrying values of trade and other receivables measured at book
value and amortised cost approximates to their fair
value.
The individually impaired
receivables relate to the supply of goods to customers. A provision
is recognised for amounts not expected to be recovered. Movements
in the accumulated impairment losses on trade receivables were as
follows:
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Accumulated impairment losses at 1
January
|
70
|
66
|
Additional impairment losses
recognised during the year, net
|
101
|
4
|
Amounts written off during the
year as uncollectible
|
(42)
|
-
|
|
|
|
Accumulated impairment losses at 31
December
|
129
|
70
|
|
|
|
The impairment losses recognised
during the year are net of a credit of £Nil (2022: £9,000) relating
to the recovery of amounts previously written off as
uncollectable.
Contract Liabilities
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
At 1 January
|
243
|
219
|
Amounts included in contract
liabilities that was recognised as revenue during the
period
|
503
|
525
|
Amounts settled during the
period
|
(469)
|
(501)
|
|
|
|
At 31 December
|
277
|
243
|
|
|
|
Contract liabilities are included within
"trade and other receivables" in the face of the statement of
financial position being settled net of the trade debtor balances.
They arise from the group's own brand segment, which enter into
contracts with customers for early settlement discounts, marketing
contributions and volume rebates, because the invoiced amounts to
customers at each balance sheet date do not consider the amount or
rebate and discounts the customers are entitled to until settlement
of the debtor balance at a certain time.
14. Cash and cash equivalents
Cash and cash equivalents include
the following for the purposes of the cash flow
statement:
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Cash at bank and in
hand
|
9,053
|
5,865
|
|
|
|
|
9,053
|
5,865
|
|
|
|
15.
Trade and other payables
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Current
|
|
|
Trade payables
|
1,892
|
1,368
|
Social security and other
taxes
|
1,355
|
1,294
|
Other payables
|
86
|
101
|
Accruals
|
6,243
|
3,225
|
|
|
|
Total
|
9,576
|
5,988
|
|
|
|
The directors consider that the
carrying values of trade and other payables measured at book value
and amortised cost approximates to their fair value.
16.
Lease liabilities
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Lease liabilities
|
|
|
Repayable within 1 year
|
1,259
|
1,015
|
Repayable within 2 - 5
years
|
3,227
|
3,498
|
Repayable in more than 5
years
|
963
|
1,349
|
|
|
|
|
5,449
|
5,862
|
|
|
|
|
|
|
Undiscounted
lease payments
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Lease liabilities
|
|
|
Repayable within 1 year
|
1,459
|
1,200
|
Repayable within 2 - 5
years
|
3,673
|
4,027
|
Repayable in more than 5
years
|
1,031
|
1,465
|
|
|
|
Total
|
6,163
|
6,692
|
|
|
|
Lease liabilities
|
|
|
As at 31
December
|
|
|
|
Leasehold
property
|
Total
|
|
|
|
£'000
|
£'000
|
|
|
|
|
|
At 1 January 2022
|
|
|
3,147
|
3,147
|
Lease additions
|
|
|
3,551
|
3,551
|
Interest expense
|
|
|
185
|
185
|
Lease payments
|
|
|
(1,021)
|
(1,021)
|
Prior period adjustment
|
|
|
-
|
-
|
|
|
|
|
|
As at 31 December 2022
|
|
|
5,862
|
5,862
|
|
|
|
|
|
Lease additions
|
|
|
731
|
731
|
Interest expense
|
|
|
230
|
230
|
Lease payments
|
|
|
(1,374)
|
(1,374)
|
|
|
|
|
|
As at 31 December 2023
|
|
|
5,449
|
5,449
|
|
|
|
|
|
Nature of
lease liabilities
The group leases a number of properties in the
United Kingdom and United States of America.
The interest rates expected are as
follows:
|
As at 31
December
|
|
2023
|
2022
|
|
%
|
%
|
Invoice financing
|
7.24¹
|
5.49¹
|
|
|
|
Note 1: Base rate +
1.99%
|
|
|
17.
Deferred tax
Deferred tax is calculated in full
on temporary differences under the liability method using tax rate
of 25%.
The movement on the deferred tax
account is as shown below:
|
Deferred tax
liability
|
Deferred tax
asset
|
|
Year ended 31
December
|
Year ended 31
December
|
|
2023
|
2022
|
2023
|
2022
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
Opening balance
|
(180)
|
(557)
|
429
|
500
|
Foreign exchange
adjustment
|
-
|
-
|
-
|
(71)
|
Recognised in profit and loss:
|
|
|
|
|
Release of deferred tax on
intangible assets
|
(115)
|
-
|
-
|
-
|
Deferred tax on share based
payment recognised in the income statement
|
-
|
-
|
100
|
-
|
Deferred tax on share-based
payments recognised in the share option reserve
|
-
|
-
|
214
|
-
|
Tax expense
|
115
|
377
|
(74)
|
-
|
Adjustment in respect of previous
periods
|
-
|
-
|
(77)
|
-
|
|
|
|
|
|
Closing balance
|
(180)
|
(180)
|
592
|
429
|
|
|
|
|
|
The deferred tax liability has arisen due to
the timing difference on accelerated capital allowances amounting
to £115,000 (2022: £65,000) and on the intangible
assets acquired in a business combination amounting to £Nil (2022:
£115,000).
The deferred tax asset has arisen from loss
carry forward for LMS amounting to £1,451,944 (2022:
£1,716,000) and recognised at a rate of 21% and from share options
amounting to £314,000, of which £214,000 has been recognised in the
share option reserve, in the Statement of Changes in
Equity.
18.
Dividends
Year to December 2023
|
Paid
|
Amount per
share
|
Total
£'000
|
|
|
|
|
Final dividend - 2022
|
04 July
23
|
4.5p
|
3,471
|
Interim dividend - 2023
|
24 Nov
23
|
3p
|
2,314
|
|
|
|
|
|
|
|
5,785
|
|
|
|
|
Year to December 2022
|
Paid
|
Amount per
share
|
Total
£'000
|
|
|
|
|
Final dividend - 2021
|
05 July
22
|
3.5p
|
2,686
|
Interim dividend - 2022
|
25 Nov
22
|
2.6p
|
1,996
|
|
|
|
|
|
|
|
4,682
|
|
|
|
|
The Group has proposed a final dividend for
the year ended 31 December 2023 of 3p per share.
19.
Called up share
capital
|
No. of
shares
|
|
|
'000
|
£'000
|
Allotted and issued
|
|
|
|
|
|
Ordinary shares of
£0.25 each:
|
|
|
At 1 January 2022 and 31 December
2022
|
76,752
|
19,188
|
Issued at 6 June 2023
|
376
|
94
|
Issued at 9 October
2023
|
24
|
6
|
Issued at 21 November
2023
|
105
|
26
|
|
|
|
At 31 December 2023
|
77,257
|
19,314
|
|
|
|
On 6th June 2023, the Company
issued 375,633 equity shares with par value of £0.25 per share for
£0.495 per share. The entire amount was paid in cash. No shares
were allotted other than for cash.
On 9th October 2023, the Company
issued 23,578 equity shares with par value of £0.25 per share for
£2.375 per share. The entire amount was paid in cash. No shares
were allotted other than for cash.
On 21st November 2023, the Company
issued 105,262 equity shares with par value of £0.25 per share for
£2.375 per share. The entire amount was paid in cash. No shares
were allotted other than for cash.
All ordinary shares carry equal
rights.
20.
Reserves
Share
premium
The share premium reserve contains the premium
arising on the issue of equity shares, net of issue expenses
incurred by the Company.
Retained
earnings
Retained earnings represent cumulative profits
or losses, net of dividends and other adjustments.
Merger
reserve
The merger reserve arose due to the group
reconstruction in 2016. The effect of the application of merger
accounting principles on the merger reserve is that the share
capital and other distributable reserves that existed in Warpaint
Cosmetics Group Limited (the Company) as at the point Warpaint
London PLC legally acquired Warpaint Cosmetics Group Limited is
accounted for as if it had been in existence as at 31 December 2015
and as at 1 January 2015. The corresponding entry being the merger
reserve so the overall net assets as at the comparative dates are
not affected.
Share option
reserves
'Share option reserves' have arisen from the
share-based payment charge. The shares over which the options were
issued are that of the parent company. 'Other reserves' have also
arisen on translation of foreign subsidiaries.
21. Share
based payments
Movements in the number of options
and their weighted average exercise prices are as
follows:
|
Weighted average exercise
price (pence)
|
Number of
options
|
Weighted average exercise
price (pence)
|
Number of
options
|
|
2023
|
2023
|
2022
|
2022
|
|
|
|
|
|
Outstanding at the beginning of
the year
|
222.20
|
5,069,514
|
226.00
|
4,860,830
|
Granted during the year
|
325.00
|
808,500
|
127.95
|
220,000
|
Exercised
|
97.80
|
(501,473)
|
-
|
-
|
Expired and lapsed during the
year
|
253.31
|
(3,861,304)
|
55.40
|
(26,842)
|
Other adjustments
|
-
|
-
|
80.09
|
15,526
|
|
|
|
|
|
Outstanding at the end of the
year
|
237.94
|
1,515,237
|
222.20
|
5,069,514
|
|
|
|
|
|
The weighted average remaining
contractual life of the options is 7.39 years (2022: 1.34
years).
The following options over
ordinary shares have been granted by the Company:
|
Exercise
price
|
Exercise
period
|
Number of
options
|
|
Pence
|
(years)
|
|
29 June 2017
|
237.50
|
3
|
96,737
|
20 May 2020
|
49.50
|
3
|
10,000
|
25 May 2021
|
122.00
|
3
|
400,000
|
01 March 2022
|
127.50
|
3
|
200,000
|
24 November 2023
|
325.00
|
3
|
808,500
|
At the date of grant, the options
were valued using the Black-Scholes option pricing model. The fair
value of options granted and the assumptions used in the
calculations were as follows:
|
|
|
|
24 Nov 23
|
01 Mar 22
|
25 May 21
|
20 May 20
|
29 June 17
|
Expected volatility
|
|
|
|
40%
|
54%
|
78%
|
76%
|
64%
|
Expected life (years)
|
|
|
|
3
|
3
|
3
|
3
|
3
|
Risk-free interest rate
|
|
|
|
4.35%
|
0.99%
|
0.15%
|
0.01%
|
0.38%
|
Expected dividend yield
|
|
|
|
1.79%
|
4.94%
|
1.76%
|
2.08%
|
2%
|
Fair value per option
(£)
|
|
|
|
0.918
|
0.354
|
0.552
|
0.213
|
0.963
|
On 29 June 2017, the Company
granted in aggregate over 277,788 ordinary shares of 25 pence each
in the Company under the Enterprise Management Incentive Scheme to
all staff members, including the Company's Chief Financial Officer,
Neil Rodol, but excluding all other directors. The Options are
exercisable for a period of seven years from 29 June 2020 (three
years after the grant date), 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.
On 20 May 2020, the Company
granted, in aggregate, 454,686 share options with an exercise price
of 49.50 pence per Ordinary share under a Company Share Option Plan
(CSOP). Key persons discharging managerial responsibilities
(PDMR's) were awarded a cumulative 112,106 share options as part of
their annual remuneration and incentivisation packages. The
remaining 342,580 options granted have been awarded to other
members of the company's workforce. No directors of the company
were awarded options in relation to this CSOP. The options are
exercisable for a period of seven years from 20 May 2023, subject
to the same performance conditions dictated by the Enterprise
Management Incentive Scheme detailed above.
On 25 May 2021, the Company
granted, in aggregate, 400,000 share options with an exercise price
of 122.0 pence per Ordinary share under a Company Share Option Plan
(CSOP). Key persons discharging managerial responsibilities
(PDMR's) were awarded a cumulative 400,000 share options as part of
their annual remuneration and incentivisation packages. The options
are exercisable for a period of seven years from 24 May 2024
and are not subject to the satisfaction of
any performance criteria.
On 1 March 2022, the Company
granted in aggregate 200,000 ordinary shares of 25 pence each at an
exercise price of 127.5 pence each under an unapproved scheme.
These were granted to a consultancy company Ward & Hagon
Management Consulting LLP ("Ward & Hagon") appointed to assist
with the implementation of the Company's strategic growth plan in
recognition of the success of the arrangements at the time and to
incentivise the consultancy company to align with the long-term
interest of shareholders. The options are exercisable between three
and ten years from the date of grant.
On 24 November 2023, the Company
granted in aggregate 641,191 ordinary shares of 25 pence each at an
exercise price of 325 pence each under a Company Share Option Plan
(CSOP) scheme. Key persons discharging managerial responsibilities
(PDMR's) were awarded a cumulative 58,691 share options as part of
their annual remuneration and incentivisation packages. The
remaining 582,500 options granted have been awarded to other
members of the company's workforce. The options are exercisable
between three and ten years from the date of grant, with the usual
first exercise date being the 3rd anniversary of the date of the
grant.
On 24 November 2023, the Company
granted in aggregate 167,309 ordinary shares of 25 pence each at an
exercise price of 325 pence each under an unapproved Enterprise
Management Incentive (EMI) scheme. Key persons discharging
managerial responsibilities (PDMR's) were awarded a cumulative
167,309 share options as part of their annual remuneration and
incentivisation packages. The options are exercisable between three
and ten years from the date of grant, with the usual first exercise
date being the 3rd anniversary of the date of the grant.
The charge in the statement of
comprehensive income for the share-based payments during the year
was £134,284 (2022: £192,986).
22.
Related party transactions
Transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation.
Key management personnel are considered to be
the directors. Compensation of the directors is disclosed in note 4
with the exception of dividends which are disclosed in note
18.
The lease between Warpaint Cosmetics (2014)
Limited and Direct Supplies (2014) Group Limited is a 10 year lease
which commenced on the 3 August 2016, with annual rental payments
of £138,800.
During 2023, Warpaint Cosmetics (2014) Limited
paid rent in the sum of £138,800 (2022: £138,000) to Direct
Supplies (2014) Group Limited, of which S Bazini is a director. At
the year end the amount due to Direct Supplies (2014) Group Limited
was £34,500 (2022: £34,500).
The lease between Warpaint Cosmetics (2014)
Limited and Trading Scents Group Limited is a 10 year lease which
commenced on the 3 August 2016, with annual rental payments of
£138,800.
During 2023, Warpaint Cosmetics (2014) Limited
paid rent in the sum of £138,800 (2022: £138,000) to Trading Scents
Group Limited, of which E Macleod is a director. At the year end
the amount due to Trading Scents Group Limited was £34,500 (2022:
£34,500).
During the year ended 31 December 2023,
Warpaint Cosmetics (2014) Limited entered into two lease
agreements, for two additional units with Warpaint Cosmetics
Limited. The agreements relate to two leases to the 2 August 2026,
with annual rental payments of £138,000 and £110,250
respectively.
During 2023, Warpaint Cosmetics (2014) Limited
paid rent in the sum of £303,966 (2022: £138,000) to Warpaint
Cosmetics limited, of which S Bazini and E Macleod are directors.
At the year end the amount due to Warpaint Cosmetics Limited was
£62,063 (2022: £34,500).
Warpaint Cosmetics (2014) Limited also entered
into a 10 year lease agreement with Warpaint Cosmetics Limited on
the 3 August 2016, with annual rental payments of
£138,800.
During 2023, Retra Holdings Limited paid rent
in the sum of £410,107 (2022: £404,265) to Warpaint Cosmetics
Limited, of which E Macleod and S Bazini are directors.
The leases between Retra Holdings Limited and
Warpaint Cosmetics Limited are two 10 year leases which commenced
on 11th March 2018 with annual rental payments of
£225,000, and £185,107 respectively.
Paul Hagon, an executive director of Warpaint
London plc ("Warpaint"), is a member of Ward & Hagon.
Ward & Hagon were paid £190,000 fees (2022: £177,437), £116,763
commission (2022: £169,172) and expenses of £9,346 in 2023 (2022:
£7,404) and were issued with 200,000 share options in 2022, details
of which are disclosed in note 21.
23. Financial instruments
Capital risk management
The Board has overall responsibility for the
determination of the Group's risk management objectives and
policies. The overall objective of the Board is to set policies
that seek to reduce risk as far as possible without unduly
affecting the Group's competitiveness and flexibility. The Group
reports in Sterling. All funding requirements and financial risks
are managed based on policies and procedures adopted by the Board
of Directors.
The Group manages its capital to ensure its
ability to continue as a going concern and to maintain an optimal
capital structure to reduce cost of capital. The capital structure
of the Group comprises equity attributable to equity holders of the
Company consisting of invested capital as disclosed in the
Statement of Changes in Equity and cash and cash
equivalents.
The Group's invested capital is made up of
share capital, share premium and retained earnings totalling
£62,095,000 as at 31 December 2023 (2022: £51,926,000) 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
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Financial assets
|
|
|
Financial assets at amortised
cost:
|
|
|
Trade and other
receivables
|
11,265
|
10,078
|
Financial assets measured at fair
value through the profit and loss:
|
|
|
Cash and cash
equivalents
|
9,053
|
5,865
|
Derivative financial
instruments
|
-
|
8
|
|
|
|
|
20,318
|
15,951
|
Financial liabilities
|
|
|
Financial liabilities at amortised
cost:
|
|
|
Trade and other
payables
|
(8,221)
|
(4,694)
|
Loan and borrowings
|
(5,449)
|
(5,862)
|
Financial liabilities measured at
fair value through the profit and loss:
|
|
|
Derivative financial
instruments
|
(518)
|
(600)
|
|
|
|
|
(14,188)
|
(11,156)
|
|
|
|
Net
|
6,130
|
4,795
|
|
|
|
|
|
|
| |
Financial assets measured at fair
value through the profit and loss comprise cash and cash
equivalents and derivative financial instruments.
Financial assets measured at
amortised cost comprise trade receivables and other
receivables.
Financial liabilities measured at
amortised cost comprise trade payables and other payables, and bank
loans.
Cash and cash equivalents
This comprises cash and short-term
deposits held by the Group. The carrying amount of these assets
approximates their fair value.
General risk management principles
The Group's activities expose it
to a variety of risks including market risk (interest rate risk),
credit risk and liquidity risk. The Group manages these risks
through an effective risk management programme and through this
programme, the Board seeks to minimise potential adverse effects on
the Group's financial performance. The Directors have an overall
responsibility for the establishment of the Group's risk management
framework. A formal risk assessment and management framework for
assessing, monitoring and managing the strategic, operational and
financial risks of the Group is in place to ensure appropriate risk
management of its operations.
The following represent the key
financial risks that the Group faces:
Market
risk
The Group's activities expose it
to the financial risk of interest rates.
Interest rate
risk
The Group's interest rate exposure
arises mainly from its interest-bearing borrowings. Contractual
agreements entered into a floating rate expose the entity to cash
flow risk. Interest rate risk also arises on
the Group's cash and cash
equivalents. The Group does not enter into derivative transactions
in order to hedge against its exposure to interest rate
fluctuations. An increase in the rate of interest by 100 basis
points would decrease profits by £4,000
(2022: £12,000) with an increase in profits by
the same amount for a decrease in the rate of interest by 100 basis
points.
Credit
risk
Credit risk is the risk of
financial loss to the Group if a customer or a counterparty to a
financial instrument fails to meet its contractual
obligations.
The Group's principal financial
assets are trade and other receivables and bank balances and cash.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit-ratings assigned by
international credit-rating agencies.
The Group's credit risk is
primarily attributable to trade receivables. The Group has a policy
of assessing credit worthiness of potential and existing customers
before entering into transactions. There is ongoing credit
evaluation on the financial condition of accounts receivable using
independent ratings where available or by assessment of the
customer's credit quality based on its financial position, past
experience and other factors. The Group manages the collection of
its receivables through its ongoing contact with customers so as to
ensure that any potential issues that could result in non-payment
of the amounts due are addressed as soon as identified. The Group
makes a provision in the financial statements for expected credit
losses based on an evaluation of historical data and applies
percentages based on the ageing of trade receivables.
The maximum exposure to credit
risk in respect of the above is the carrying value of financial
assets recorded in the financial statements. At 31 December 2023,
the Group has trade receivables of £10,835,000 (2022:
£9,865,000).
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
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Current
|
5,680
|
5,502
|
1 - 30 days
|
3,514
|
2,680
|
31 - 60 days
|
980
|
1,164
|
61 - 90 days
|
547
|
375
|
91 + days
|
276
|
214
|
Provision for impairment of trade
receivables
|
(129)
|
(70)
|
|
|
|
Total trade receivables -
net
|
10,868
|
9,865
|
|
|
|
The Directors are unaware of any
factors affecting the recoverability of outstanding balances at 31
December 2023 and, consequently, no further provisions have been
made for bad and doubtful debts.
The allowance for bad debts has
been calculated using a 12-month lifetime expected credit loss
model, as set out below, in accordance with IFRS 9.
|
As at 31
December
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
%
|
£'000
|
£'000
|
%
|
£'000
|
Current
|
5,680
|
0.135%
|
8
|
5,432
|
0.135
|
8
|
1 - 30 days
|
3,514
|
0.405%
|
14
|
2,680
|
0.405
|
11
|
31 - 60 days
|
980
|
1.215%
|
12
|
1,164
|
1.215
|
14
|
61 - 90 days
|
547
|
3.645%
|
20
|
375
|
3.645
|
14
|
91 + days
|
276
|
27.174%
|
75
|
214
|
10.935
|
23
|
|
|
|
|
|
|
|
|
|
|
129
|
|
|
70
|
|
|
|
|
|
|
|
Credit quality of financial assets
|
As at 31
December
|
|
2023
|
2022
|
Trade receivables, gross (note 13):
|
£'000
|
£'000
|
|
|
|
Receivable from large companies
(see below for definition)
|
5,190
|
5,115
|
Receivable from small or
medium-sized companies
|
490
|
386
|
|
|
|
Total neither past due nor impaired
|
5,680
|
5,501
|
|
|
|
For the purpose of the Group's
monitoring of credit quality, large companies or groups are those
that, based on information available to management at the point of
initially contracting with the entity, have annual turnover in
excess of £100,000 (2022: £100,000).
|
As at 31
December
|
|
2023
|
2022
|
Past due but not impaired:
|
£'000
|
£'000
|
Less than 30 days
overdue
|
3,514
|
2,680
|
30 - 90 days overdue
|
1,674
|
1,684
|
|
|
|
Total past due but not impaired
|
5,188
|
4,364
|
|
|
|
Lifetime expected loss provision:
|
|
|
Less than 30 days
overdue
|
-
|
-
|
30 - 90 days overdue
|
129
|
70
|
|
|
|
Total lifetime expected loss provision
(gross)
|
129
|
70
|
|
|
|
|
|
|
Less: Impairment
provision
|
(129)
|
(70)
|
|
|
|
Total trade receivables, net of provision for
impairment
|
10,868
|
9,865
|
|
|
|
Cash and cash equivalents, neither
past due nor impaired (Moody's ratings of respective
counterparties):
|
As at 31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
AAA rated
|
3
|
-
|
AA rated
|
3,292
|
-
|
A rated
|
-
|
5,862
|
BAA rated
|
5,758
|
3
|
|
|
|
Total cash and cash equivalents
|
9,053
|
5,865
|
|
|
|
Liquidity
risk
Liquidity risk arises from the Group's
management of working capital. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they
fall due. The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it closely monitors its access to bank and other credit
facilities in comparison to its outstanding commitments on a
regular basis to ensure that it has sufficient funds to meet the
obligations as they fall due.
The Board receives monthly cash
balance updates and weekly sales and margin reports marked against
budget. At the start of each year the Board approve and adopt a
budget and cash flow for the next 24 months, the CFO monitors these
and reports any material divergences to the Board, so that
management can ensure that sufficient funding is in place as it is
required. The budget and cash flow are updated at the end of each
year, for the following 24 months.
The tables below summarise the
maturity profile of the combined group's non-derivative financial
liabilities at each financial year end based on contractual
undiscounted payments, including estimated interest payments where
applicable:
Year ended 31 December 2023
|
Less than 6
months
|
Between 6 months and 1
year
|
Between 1 and 5
years
|
Over 5
years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
Trade payables
|
1,892
|
-
|
-
|
-
|
1,892
|
Other payables
|
86
|
-
|
-
|
-
|
86
|
Accruals
|
6,243
|
-
|
-
|
-
|
6,243
|
Lease liabilities
|
729
|
730
|
3,673
|
1,031
|
6,163
|
|
|
|
|
|
|
|
8,950
|
730
|
3,673
|
1,031
|
14,384
|
|
|
|
|
|
|
Year ended 31 December 2022
|
Less than 6
months
|
Between 6 months and 1
year
|
Between 1 and 5
years
|
Over 5
years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
Trade payables
|
1,368
|
-
|
-
|
-
|
1,368
|
Other payables
|
101
|
-
|
-
|
-
|
101
|
Accruals
|
3,225
|
-
|
-
|
-
|
3,225
|
Lease liabilities
|
605
|
595
|
4,027
|
1,465
|
6,692
|
|
|
|
|
|
|
|
5,299
|
595
|
4,027
|
1,465
|
11,386
|
|
|
|
|
|
|
The borrowings of the subsidiary companies,
Retra Holdings Limited and Badgequo Limited, are secured by a
debenture including a fixed charge over the present leasehold
property, a first fixed charge over book and other debts and a
first floating charge over all assets of those
companies.
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. At December 2023, there
were total sums of £2,384,899 (2022: £1,828,145) held in foreign
currency.
The Group is also exposed to
currency risk as the assets one of its subsidiary are denominated
in US Dollars. At 31 December 2023, the net foreign
liability was £0.2m (2022: £0.5m).
Differences that arise from the translation of these assets from US
dollar to sterling are recognised in other comprehensive income in
the year and the cumulative effect as a separate component in
equity. The Group does not hedge this translation exposure to its
equity.
A 5% weakening of sterling would result in a
£11,085 increase in reported profits and equity, while a 5%
strengthening of sterling would result in £10,030 decrease in
profits and equity.
Marvin Leeds
Marketing Services, Inc.
|
|
As at 31
December
|
|
|
2023
|
2023
|
|
|
USD
|
GBP
|
|
|
$
|
£
|
|
|
|
|
Profit After Tax
|
|
268,316
|
210,626
|
|
|
|
|
5% weakening of US
dollar
|
|
268,316
|
221,711
|
|
|
|
|
|
Increase
profits
|
|
11,085
|
|
|
|
|
5% strengthening of US
dollar
|
|
268,316
|
200,596
|
|
|
|
|
|
Decrease
profits
|
|
(10,030)
|
|
|
|
|
Foreign exchange
risk
|
2023
|
2022
|
|
£'000
|
£'000
|
Derivatives carried at fair
value:
|
|
|
Exchange loss on forward foreign
currency contracts
|
(518)
|
(592)
|
|
|
|
The Group, along with other businesses, will
face the risk of inflationary pressures through commodities cost
increases.
Derivatives:
Foreign currency forward contracts
The Group enters into forward foreign exchange
contracts and options to manage the risk associated with
anticipated sale and purchase transactions which are denominated in
foreign currencies.
Derivatives are recognised initially at their
fair value at the date the derivative contract is entered into and
are subsequently remeasured to their fair value at each reporting
date. The resulting gain or loss is recognised immediately in the
profit or loss unless the derivative is designed and effective as a
hedging instrument, in which event the timing and recognition in
the profit or loss depends on the nature of the hedging
relationship.
As at 31 December 2023, the group has in total
52 (2022: 34) forward foreign exchange contracts outstanding, made
up of regular forward foreign exchange contracts.
Regular
forward foreign exchange contracts:
At 31 December 2023, there were 52 (2022: 30)
regular forward foreign exchange contracts, to buy US dollars and
sell Euros, for an agreed amount of foreign currency on a specific
future date. The purchase or sale is made at a predetermined
exchange rate. The outcome is certain and will deliver a known
fixed amount. The following table details the regular forward
foreign exchange contracts outstanding as at the balance sheet
date.
a) Contracted exchange
rate
|
2023
|
2022
|
2023
|
2022
|
|
£/$
|
£/€
|
3 months or less
|
1.2660
|
1.2707
|
n/a
|
n/a
|
3 to 6 months
|
1.2526
|
1.1447
|
1.1491
|
1.1485
|
6 to 12 months
|
1.2546
|
1.1407
|
1.1435
|
1.1414
|
12 months or more
|
n/a
|
n/a
|
n/a
|
1.1192
|
b) Contract
value
|
2023
|
2022
|
2023
|
2022
|
|
£/$
|
£/€
|
|
£'000
|
£'000
|
£'000
|
£'000
|
3 months or less
|
10,310
|
1,448
|
-
|
-
|
3 to 6 months
|
16,554
|
699
|
872
|
849
|
6 to 12 months
|
6,792
|
438
|
2,382
|
1,095
|
12 months or more
|
-
|
-
|
-
|
1,385
|
|
|
|
|
|
|
33,656
|
2,585
|
3,254
|
3,329
|
|
|
|
|
|
c) Foreign
currency
|
2023
|
2022
|
2023
|
2022
|
|
$'000
|
$'000
|
€'000
|
€'000
|
3 months or less
|
12,943
|
1,840
|
-
|
0
|
3 to 6 months
|
20,750
|
800
|
1,000
|
975
|
6 to 12 months
|
8,500
|
500
|
2,725
|
1,250
|
12 months or more
|
-
|
-
|
-
|
1,550
|
|
|
|
|
|
|
42,193
|
3,140
|
3,725
|
3,775
|
|
|
|
|
|
Window
Barrier Accrual forward foreign exchange
contracts:
At 31 December 2023, there were no Window
Barrier Accrual forward foreign exchange contracts to buy US
dollars (2022: 3)
Window Barrier Accruals have an agreed US dollar purchase Forward Rate, a start
date known as the Barrier date, an end date known as the Expiration
date, a rate below which the forward foreign exchange
contract becomes worthless known as the Knock Out Rate, and a
Notional Amount of currency to purchase at the Forward Rate
depending on the US dollar Spot Rate at the Expiration
Date.
Each Window Barrier Accrual contract has been
designed to cover the currency needs of the business throughout
2023 and includes 12 Barrier and Expiration dates, one in each
calendar month, so that the forward foreign exchange contract is
split evenly across the year.
If from month to month between the Barrier
date and the following Expiration date, the Spot Rate of the US
dollar falls below the Knock Out Rate, then there is no obligation,
and no US dollars can be purchased. Otherwise, if on the Expiration
date Spot Rate is below the Forward Rate, then the Notional Amount
of US dollars will be purchased at the Forward Rate, however if on
the Expiration date Spot Rate is above the Forward Rate, then
double the Notional Amount of US dollars will be purchased at the
Forward Rate.
Counter TARN
forward foreign exchange contracts:
At 31 December 2023, there were no Counter
TARN forward foreign exchange contract to buy US dollars (2022:
1).
Counter TARNs have an agreed US
dollar purchase Forward Rate, an end date known as the Expiration
date, a Target which is the agreed number of times the contract
allows the purchase of dollars when the Spot Rate is less than the
Forward rate at the Expiration date, a Fixing Count which
increments by 1 each time the contract allows the purchase of
dollars when the Spot Rate is less than the Forward rate,
a Notional Amount of currency to purchase at the Forward Rate
depending on the US dollar Spot Rate at the Expiration Date, and
a Knock Out Event which is when the Fixing Count total
has reached the agreed Target and thereafter the
forward foreign exchange contract becomes
worthless.
The Counter TARN contract has been designed to
cover the currency needs of the business throughout 2024 and
includes 12 Expiration dates, one in each calendar month, so that
the forward foreign exchange contract is split evenly across the
year.
If from month to month on the Expiration dates
Spot Rate is below the Forward Rate, then the Notional Amount of US
dollars will be purchased at the Forward Rate and the Fixing Count
will increment by 1, however if on the Expiration dates Spot Rate
is above the Forward Rate, then double the Notional Amount of US
dollars will be purchased at the Forward Rate and the Fixing Count
will not change. If at any time the Fixing Count reaches the Target
for the contract, then this triggers a Knock Out Event which ends
the contract and no further US dollars can be purchased.
Foreign currency forward contract
assets and liabilities are presented in the line 'Derivative
financial instruments' (either as asset or as liabilities) within
the Statement of Financial Position.
Fair value of financial assets and
liabilities
Financial instruments are measured
in accordance with the accounting policy set out in Note 1. All
financial instruments carrying value approximates its fair value
with the exception of foreign currency forward contracts and
options which are considered Level 2. The Directors consider that
there is no significant difference between the book value and fair
value of the Group's financial assets and liabilities and is
considered to be immaterial.
24. 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 £121,682 (2022: £101,003).
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.
|
2023
|
2022
|
|
|
|
Basic earnings per share
(pence)
|
18.05
|
8.14
|
|
|
|
Diluted earnings per share
(pence)
|
17.98
|
8.11
|
|
|
|
The calculation of basic and
diluted earnings per share is based on the following
data:
|
|
|
|
|
|
|
2023
|
2022
|
Earnings
|
£'000
|
£'000
|
Earnings for the purpose of basic
earnings per share, being the net profit
|
13,899
|
6,250
|
|
|
|
Number of shares
|
2023
|
2022
|
Weighted number of ordinary shares
for the purpose of basic earnings per share
|
76,983,311
|
76,752,355
|
Potentially dilutive shares
awarded
|
325,443
|
296,256
|
|
|
|
Weighted number of ordinary shares
for the purpose of diluted earnings per share
|
77,308,754
|
77,048,611
|
|
|
|
905,237 share options (2022: 4,063,881) in
issue have not been included in the computation of diluted earnings
per share, as per IAS 33, the share options are not dilutive as
they are not likely to be exercised given that the exercise price
is higher than the average market price.
The additional 10,000 share options granted on
20 May 2020, additional 400,000 share options granted 24 May 2021
and 200,000 share options granted 01 March 2022 have been included
in the computation of diluted earnings per share as the exercise
prices of the options are below the average annual market price of
Ordinary shares.
27. Notes supporting
statement of cash flows
Non-cash transactions from financing activities
are shown in the table below.
|
Non-current loans and
borrowings
|
Current loans and
borrowings
|
Total
|
|
£'000
|
£'000
|
£'000
|
|
|
|
|
At 1 January 2022
|
2,537
|
610
|
3,147
|
Non-cash flows
|
3,551
|
-
|
3,551
|
Cash flows
|
-
|
(836)
|
(836)
|
Reclassification from Non-current
loans and borrowings to current loans and borrowings
|
(1,241)
|
1,241
|
-
|
|
|
|
|
At 31 December 2022
|
4,847
|
1,015
|
5,862
|
Non-cash flows
|
731
|
-
|
731
|
Cash flows
|
-
|
(1,144)
|
(1,144)
|
Reclassification from Non-current
loans and borrowings to current loans and borrowings
|
(1,388
|
)
1,388
|
-
|
|
|
|
|
At 31 December 2023
|
4,190
|
1,259
|
5,449
|
|
|
|
|
The above relates to payments in respect of
the groups right of use assets. The Group does not have any
loans and borrowing.