Brand Architekts Group plc is an AIM listed
Beauty Brands business, specialising in the
delivery of innovative and exciting new
products to consumers and retailers.
FORWARD-LOOKING STATEMENTS
Certain statements in this Brand Architekts Group plc Annual Report and Accounts 2019 constitute “forward-looking statements”. Forward-looking statements may
sometimes, but not always, be identified by words such as “will”, “may”, “should”, “continue”, “believes”, “expects”, “intends” or similar expressions. These forward-looking
statements are subject to risks, uncertainties and other factors which, as a result, could cause Brand Architekts Group plc’s actual future financial condition, performance
and results to differ materially from the plans, goals and expectations set out in the forward-looking statements. Such statements are made only as at the date of this
Report and, except to the extent legally required, Brand Architekts Group plc undertakes no obligation to revise or update such forward-looking statements.
Contents
In this report
04
Highlights
06
Chairman’s Foreword
Strategic Report
08
Executive Chairman’s Report
10
12
15
Principal Risks and Uncertainties
Financial Review
People and Sustainability
Governance
16
18
19
Corporate Governance
Board of Directors
Directors’ Report
22
Independent Auditor’s Report
Financial Statements
26
27
29
31
32
Group Statement of Comprehensive Income
Group and Company Statements of Financial Position
Group and Company Statements of Changes in Equity
Group and Company Cash Flow Statements
Notes to the Accounts
64
Five Year Summary
66
Corporate Directory
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4
Financial Highlights
Operational Highlights
• Group Revenues for the 52 weeks increased by 8% to £77.3m (2018: £71.6m).
• Owned Brands represented 25% of revenues and 59% of underlying operational profits.
• Owned Brand revenues decreased by 6.7%, impacted by lower consumer confidence and by
challenges faced by retailers in a restricted marketplace.
• Adjusted profit before taxation* increased by 1% to £5.1m (2018: £5.0m).
• Underlying operating profit** decreased by 19% to £4.4m (2018: £5.5m).
• Adjusted EPS increased by 9% year on year to 25.3 pence (2018: 23.2 pence).
• Proposed final dividend of 4.35p per share (2018: 4.2p), in addition to the interim dividend of
2.15p already paid, to give a full year dividend of 6.5p (2018: 6.2p), an increase of 5%.
• Net Debt as at 29 June 2019 decreased to £7.2m (2018: £11.8m).
*calculated as per page 13
**as per note 2
Annual Report & Accounts 2019Brand Architekts Group plcBrand Architekts Group plc
5
Financial Highlights
Operational Highlights
• Creation of a solely Owned Brands business following the disposal of the Contract Manufacturing
Business for £35 million, a premium to the market capitalisation of the Group as at 15 July 2019.
Net proceeds receivable by the Company are £33.75 million.
• Ongoing business renamed Brand Architekts Group plc on 29 August 2019 to reflect sole focus
on Owned Brands.
• New product development (“NPD”) continues with 80 new products launched in the year.
• Net cash as at 31 August of £24m.
• Net Assets as at 31 August of £38m.
Annual Report & Accounts 2019HIGHLIGHTSBrand Architekts Group plc 6
Chairman’s Foreword
Brendan Hynes, Executive Chairman commented:
“On the 23 August 2019 the Group disposed of its Manufacturing business for £35m to KDC/One Inc. This transformational deal
is another significant milestone for our strategy of accelerating the growth of our Owned Brands business and simplifying the
Group. We will now focus all our time, resources and investment growing and developing the higher margin part of our business.
The value achieved on disposal represents a very good return for shareholders, it also strengthens our balance sheet, moving the
Group from a net debt position of £11.8m last financial year end, to a significant positive cash position on completion of £24.0m.
The new Group has been renamed the Brand Architekts Group Plc and has an outstanding, stand-alone operational team with
an excellent track record and strong relationships with our retail customers. The business is now well capitalised and we will
use some of the proceeds from the disposal to grow the business organically and through selective acquisitions that will deliver
further profitability and scale.
We are now well positioned to continue to build a more profitable and sustainable business, which will generate further
shareholder value.”
Over the last four years we have developed, both organically and through acquisition, a growing portfolio of brands that are
owned and managed by the Group and which we control from formulation development through to distribution.
Following the disposal of the Manufacturing business, we now have complete focus on the Owned Brands business as well as
the necessary financial resources to invest and grow the business further.
Annual Report & Accounts 2019Brand Architekts Group plcBrand Architekts Group plc Chairman’s Foreword
7
Revenue
Underlying Operating Profit
Adjusted PBT
Reported PBT
EPS – Adjusted
EPS – basic
Dividend per share – paid and proposed
Net Debt
Brands
MFG* Central
£m
19.7
3.6
£m
62.0
2.5
£m
(4.4)
(1.7)
2019
Total
£m
77.3
4.4
5.1
4.1
25.3
20.7
2018
Total
£m
73.9
5.5
5.0
4.5
23.2
20.9
6.5p
6.2p
£7.2m
£11.8m
*Disposal on 23 Aug 2019 for
£35m
Dividend
Given our strong cash position and confidence in the business it is the Board’s intention to propose a final dividend of 4.35
pence. Together with the interim dividend already paid of 2.15 pence, this represents a total dividend for the year of 6.5 pence,
an improvement of 5% over the prior year (2018: 6.2p).
It remains the Directors’ intention to align future dividend payments to the underlying earnings and cash flow of the stand-alone
business, taking into account the investment and operational requirements of the business.
Board succession
Following the successful completion of the deal to dispose of the Manufacturing business on 23 August, which represents a
fundamental change to the scale of business for the Group, the Board has mutually agreed with Tim Perman that he will step
down from the PLC Board and as Chief Executive and leave the company on 30 September 2019.
Brendan Hynes, Non-Executive Chairman will take on an executive Chairman role until a permanent replacement is appointed.
The successful brand management team remains in place and unchanged and will continue to be supported until the end of
the calendar year by Mathew Gazzard, formerly Group Finance Director and Jane Fletcher, formerly Group Sales and Marketing
Director, under the transitional services agreement.
In addition, we will be putting in place an interim CFO to work on the transition and to support the stand-alone Brands business,
until a full CFO is appointed.
The Board wishes to thank Tim for his contribution to the Group during his time with us and wish him all the very best for the
future.
Outlook
We expect the economic and consumer uncertainty seen in the UK and in the second half year to June 2019 to continue into
our new financial year. The slow-down in momentum in our Owned Brands business will be addressed by enabling management
to focus on this business following the disposal, innovative NPD and a stronger focus on distribution in both the UK and
internationally.
Given the strength of our balance sheet, we also remain alert to further acquisition opportunities which offer the potential to
build scale and deliver incremental shareholder value.
Following the successful disposal of the Manufacturing business, we are confident that our new strategic focus will enable us to
deliver the best outcome for all our stakeholders.
Brendan Hynes
Chairman
27 September 2019
Annual Report & Accounts 2019HIGHLIGHTSBrand Architekts Group plc
8
Strategic Report
Executive Chairman’s Report
Fundamental transformation - focus on brands
Over the last four years our stated strategy has been to develop, both organically and though acquisition,
a portfolio of brands that are owned and managed by the Group and which we control from formulation
development through distribution. As at 29th June 2019, Owned Brands represented 54% of group underlying
operation profits.
Following a strategic review process, the Board concluded that the Manufacturing business would be better
served as part of a business with bigger scale and that £35 million sale proceeds represented excellent value
for shareholders. With the disposal of the Manufacturing business in August 2019, we have accelerated our
strategic re-alignment and will now be 100% focused on the brands that we own and control. The disposal has
also strengthened the balance sheet, eliminated group debt and leaves the group in a significantly cash positive
position.
The Board believe that we are now better positioned to drive further value by focusing solely on our Owned
Brands business with its higher margins, lower capital investment requirements and superior financial returns.
Annual Report & Accounts 2019Brand Architekts Group plc 9
New name – stronger focus
The new group is now called Brand Architekts Group plc, which more appropriately reflects the future focus of the group.
Strategic priorities
The challenging market conditions, particularly in the UK require us to have a clear strategic focus. The strategic priorities for
the Group are:
•
Build Scale: Accelerate sales and profit growth organically and via accretive acquisitions
• New Product Development (NPD): continue to execute at pace
•
International expansion: Develop new customers in new geographies
• On-line expansion: accelerate E-commerce and digital presence
•
Build organisation capability: Continue to Invest in people and skills
Progress against our strategic priorities
• New Product Development (NPD)
We are pleased that the pace of NPD continues with over 80 new lines launched over the 12 month period across 11 brands.
We continue to evaluate and develop the brand portfolio to ensure that we are focusing the appropriate level of resource and
support to drive maximum performance and growth. Within the portfolio we have defined a number of ‘Drive’ brands where
we are specifically focused on extending distribution, new product development, international growth and increasing support
through both instore and digital promotion.
•
International expansion
Our focus continues on developing sales in new international markets and building relationships with appropriate distribution
and retail partners for our brand portfolio. Bi-lingual pack formats have been developed for specific brands, allowing us to
maximise opportunity whilst carefully managing inventory levels. The launch of the Dirty Works brand into France and Belgium
has been followed by new distribution in the Middle East. Our range of therapeutic bath solutions, Dr Salts, has launched
successfully in South Africa; the Real Shaving Company has launched in New Zealand.
• On-line expansion
We continue to invest in the area of developing in-house expertise to grow the reach of Owned Brands business within multi
channels to market. Strong relationships with key e-tailers have been established enhancing the breadth of distribution and
partners for our brand portfolio.
•
Build organisation capability
We will continue to build and develop the stand alone capability of our Owned Brands business by investing in further
Marketing, Digital, Technical and Supply chain skills.
Strategic Report
Annual Report & Accounts 2019STRATEGIC REPORTBrand Architekts Group plc 10
Principal Risks and Uncertainties
The Board recognises the need for a robust system of internal controls and risk management. The Group operates in an
environment that is constantly changing and as a result the risks it is facing change over time. The Group’s management have
developed processes to assess risks and to develop strategies for dealing with these risks on an ongoing basis. A formal review
of these risks is carried out by the Group twice a year. The review process involves the classification of risks, assessment to
determine the relative likelihood of them impacting the business and the potential severity of the impact, and determination of
whether changes to management processes are needed to manage them effectively. Brexit does not change the nature of the
risks that the Group is exposed to, but may well impact on the incidence and magnitude of those risks.
The Directors have identified the following as principal risks and uncertainties:
People
The performance of the Group is dependent on the efforts of our people, especially key management personnel. As the Group
undertakes major changes in structure, and to the leadership team, it is crucial that relevant skills and capabilities are retained
or, through recruitment, brought into the Group, and that new recruits mesh well with the corporate culture of the Group.
Competitive environment and customer requirements
The environment remains competitive within the personal care sector.
Following disposal of the Manufacturing business this risk is mitigated by diversification across brands, retailers, and
internationally. There is also increasing focus on digital marketing activities to increase engagement directly with retail
customers.
Close contact is maintained with customers to better understand their desires and create products that fulfil their needs.
Product quality
Product quality is a key strength of the Group and failure to maintain a high standard of quality would have a severe impact on
service levels, customer relationships, and have financial repercussions.
Annual Report & Accounts 2019Brand Architekts Group plc 11
Labour costs, prices, and supply
The Group potentially faces the risk of inflationary pressures through commodities cost increases, further driven by currency
weakness post Brexit, the National Living Wage, and other ongoing legislative changes.
The Group in the normal course of its business, transacts in and holds various currencies, and follows a policy of managing
currency exposure through natural hedging wherever possible.
The Group maintains a high level of expertise in its purchasing and supply chain team. The team seeks to cultivate strong
relationships with major suppliers to ensure continuity of supply at competitive prices. The application of long-term contracts is
assessed where applicable to reduce uncertainty in input prices. Brexit related supply risks may impact our suppliers and have
a consequential impact on the Group.
The regular renovation and innovation across our products can help to manage margin pressures in an effective manner, as far as
the competitive environment allows.
Economic environment
The market place remains challenging and there is an uncertain macro-economic outlook following the vote to leave the EU. Our
focus on executing our clear strategy, outlined earlier in this report, has improved our ability to navigate any potential macro
uncertainty.
Cyber security
The Group is exposed to the risk of increasingly sophisticated cyber-attacks aimed at causing business disruption, capture
of data for financial gain, general embarrassment and reputational damage. Investment internally and externally continues to
be applied to maintain a high level of protection software and real-time back-up. Following the introduction of GDPR Data
Protection rules, the Group has implemented Group wide data privacy protective measures.
Pension fund deficit
The revaluation of the defined benefit pension plan on a technical provision basis at each reporting date can cause large
fluctuations in valuations based on factors outside the Groups control. There is an agreed deficit recovery plan fixed until April
2027 or until a new schedule is agreed based on the next triennial valuation which will be at 5 April 2020. This deficit recovery
plan provides a degree of certainty over cash flows between triennial reviews. The Group maintains a close relationship and
regular communication with the Trustees.
Principal Risks and Uncertainties
Annual Report & Accounts 2019STRATEGIC REPORTBrand Architekts Group plc 12
Financial Review
Key Performance Indicators
To measure and monitor our progress against our growth strategy, we track our performance against a set of ambitious targets
and milestones. The goals we set are closely assessed to ensure we focus our efforts to deliver both in the short term and long
term. A summary of the financial measures used are:
Reported Results from continuing and discontinued operations
Revenue (note 2)
Adjusted revenue (constant currency) 1
Adjusted operating profit 2
Reported operating profit
Profit before taxation
Adjusted earnings per share 2
Basic earnings per share
Total Dividend per share
Net debt
2019
2018
£77.3m
£76.9m
£4.3m
£3.3m
£4.1m
25.3p
20.7p
6.5p
£7.2m
£73.9m
£74.4m
£5.2m
£4.7m
£4.5m
23.2p
20.9p
6.2p
£11.8m
1 Revenue translated at 2018 exchange rates
2 Adjusted operating profit and adjusted earnings per share are calculated before exceptional items and amortisation of acquisition-related intangibles.
Annual Report & Accounts 2019Brand Architekts Group plc
A reconciliation of underlying operating profit to profit before taxation is shown below:
13
2019
Total
£’000
Underlying profit from operations (see note 2) 4,428
Charge for share-based payments
Adjusted operating profit
Net borrowing costs
Adjusted profit before taxation
Amortisation of acquisition-related intangibles
5,070
4,313
(115)
757
(260)
Exceptional (costs)
Profit before taxation
(717)
4,093
2019
2019
Continuing Discontinued
operations
operations
2018
2018
2018
Total
Continuing Discontinued
operations
operations
£’000
2,355
(115)
2,240
(144)
2,096
(260)
(48)
1,788
£’000
5,173
£’000
2,073 5,470
(297)
-
2,073
901
2,974
-
(669)
2,305 4,524
5,000
(279)
(197)
(173)
£’000
3,319
(297)
3,022
(161)
2,861
(197)
(279)
2,385
£’000
2,151
-
2,151
(12)
2,139
-
2,139
Financial Review
The Group implements a number of non-GAAP measures which are summarised in the tables above and in more detail within
the segmental Income Statement. These measures are used to illustrate the impact of non-recurring and non-trading items on
the Group’s financial results.
In addition to the financial key performance measures, a range of operational non-financial key performance indicators are also
monitored at a management level covering, amongst others, new product development and innovation and quality. The Board
receives an overview of these on a regular basis.
Group statutory revenue at £77.3m from continuing and discontinued operations was up 5% against prior year. The Owned
Brands business endured a difficult year against strong comparatives, declining by 6.7%, adversely impacted by the decline in
consumer confidence and retailer pressures. In the Group’s Manufacturing business, revenues increased by 13% against prior year
comparators, driven by increased volumes through the launch of three new contract wins.
On a comparable 52-week basis, revenue increased by 8% to £77.3m (2018: £71.6m). The weakness of Sterling against the US
dollar has increased sales revenue by £0.5m. Revenue increase on a constant currency basis would have been 4.0%.
The adverse currency impact on revenue has been offset by an equivalent favourable currency impact on cost of goods,
reflecting the Group’s broadly natural hedge profile.
The pressure experienced on the margin accretive Owned Brands revenues, whilst slightly offset by higher volume sales in the
Manufacturing business, has resulted in a reduction in the underlying operating profit at £4.4m (2018: £5.5m).
Underlying operating profit is shown before charges for share-based payments, with a charge made of £0.1m (2018: £0.3m).
Share options are put in place in order to incentivise the Group’s wider management team (including the Executive Directors)
and to ensure that their interests are aligned with shareholders.
The net effect is that the Group made an adjusted operating profit of £4.3m (2018: £5.2m). Adjusted profit before tax increased
to £5.1m (2018: £5.0m).
The exceptional item of £0.7m for the Group in the current period is in part due to the GMP equalisation charge on the Group’s
DB Pension Scheme of £0.3m and £0.4m of “one off” costs relating to the Group’s disposal of the Manufacturing business and
wider restructure. In 2018 there was an exceptional charge of £0.28m mainly relating to the writing down of the investment in
Sterling Shave Club.
The overall effective rate of the new Group taxation for the period was 11.1% (2018: 19%) of pre-tax profits. The current year tax
charge reflects standard UK and the Czech Republic rates of taxation.
This results in adjusted earnings per share of 24.1p (2018: 23.2p).
Annual Report & Accounts 2019STRATEGIC REPORTBrand Architekts Group plc
14
The Group’s strategic investment shareholding in Shanghai Colour Cosmetics Technology Company Limited (SCCTC) has
reduced from 19% to 13.3% within the period. However, the carrying value remains unchanged during the period, based on a
fair value of SCCTC’s commercially, externally assessed valuation of the business. The initial cost of this investment was £0.14m
and this is now valued at £1.39m. This improved valuation reflects a strong trading performance, supplying customers in Europe
and the USA. Income totalling £1.15m was received in the year (2018: £0.19m). This investment was part of the Manufacturing
business on disposal and is classified as held for sale at the period end.
Net debt and cash flow
Net debt decreased significantly to £7.2m (2018: £11.8m). A re-balancing of the company’s working capital from the prior year
has helped ‘normalise’ the net debt closing balance. The Group maintains a broadly natural hedge position on the Euro and US
Dollar, and manages timing differences through a multi-currency invoice finance facility. At the reporting date, the Group was
maintaining a hedged position by holding Euro and US Dollar cash balances, whilst drawing on its GBP facility. Note 11 provides
an analysis of net debt.
The components of working capital highlight the unwinding of the impact of the introduction of the three new major account
wins in the Manufacturing business which were being implemented at the end of the prior year. This aspect combined with a
more linear shape to trade debtors have positively impacted the total working capital invested at year end.
Financing costs of £0.4m (2018: £0.36m) comprised interest expense of £0.26m (2018: £0.21m) plus a pension plan notional
finance charge of £0.13m (2018: charge £0.15m). Finance income is the receipt of £1.15m (2018: £0.19m) income from our
investment holding in SCCTC.
Capital expenditure was £1.1m which was behind the level of depreciation. We have continued to make a number of investments
to improve line efficiencies and support incremental new customer contracts.
Defined benefit pension plan
The defined benefit pension plan underwent its last triennial valuation on 5 April 2017. The deficit on a statutory funding basis
was £2.6m and the Group entered into a revised deficit recovery plan and schedule of contributions in July 2018. Under this
there is a commitment to make deficit reduction payments of £318k per annum (previously £108k per annum) for seven years
and £210k for a further three years, and to pay certain administration costs and the PPF levy for the life of the plan. This
commitment will be re-assessed once the results of the next triennial valuation at 5 April 2020 are available.
Accounting Standards require the discount rate used for valuations under IAS19 ‘employee benefits’ to be based on yields on
high quality (usually AA-rated) corporate bonds of appropriate currency, taking into account the term of the relevant pension
plan’s liabilities. Corporate bond indices are used as a proxy to determine the discount rate. At the reporting date, the yields
on bonds of all types were lower than they were at 30 June 2018. This has resulted in lower discount rates being adopted for
accounting purposes compared to last year. In addition, inflation rates are higher than last year. The combination of these
two factors have materially increased the fair value of the plan liabilities as measured under IAS 19, which combined with
the anticipated investment return performance, has translated into an increased liability under the IAS19 methodology. For
accounting purposes at 29 June 2019, the Group recognised under IAS19 ‘employee benefits’, a net liability of £9.4m (2018:
£4.5m).
Dividends
The Board is pleased to announce that it will be proposing a final dividend of 4.35 pence. Together with the interim dividend
already paid of 2.15 pence this represents a total dividend for the year of 6.5 pence, an improvement of 5% over the prior year
(2018: 6.2p). If approved, the final dividend will be paid on 6 December 2019 to shareholders on the register on 15 November
2019. The shares will be marked as ex-dividend on 14 November 2019.
Going Concern
As part of its normal business practice, the Group prepares annual and longer-term plans and, in reviewing this information
the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, we continue to adopt the going concern basis in preparing the annual report
and accounts.
Annual Report & Accounts 2019Brand Architekts Group plc 15
People and Sustainability
Employment practices
The success of our business is dependent upon the quality, commitment and behaviour of our employees. Therefore, the Group
provides clear policies and direction to our employees and strives for the highest standards of behaviour.
Employee communication
The policy of informing and consulting with employees is given prominence and has continued by means of regular briefing
Groups and consultative committees. Employees are encouraged to present their views and suggestions in respect of the
Group’s performance. During the year a number of employee workshops and briefings have taken place to engage employees.
This has been supported through an employee reward and recognition scheme and an on-line facility to capture employee
suggestions and questions.
Equality and diversity
The Group continues to carefully consider applications for employment by individuals from any background, including disabled
persons. The Group’s training, development and promotion policies aim to ensure all employment decisions are based on
fairness and merit.
The Group published its Gender Pay Gap report in February 2019. We are pleased to report that the Group’s pay gap of 3.1% is
significantly less than the national average of 17.9% and we believe that our approach to recruitment, development and pay will
continue to support our position. However, we will not become complacent as there are opportunities still to be realised. We
have a culture based on continual improvement and so we will continue to focus on improving our gender pay profile. Consistent
evaluation of roles using proven tools and processes will be an important aspect.
Corporate Social Responsibility
The Group recognises the importance of social responsibility in its business and remains strongly committed to reducing the
environmental impact of its production and design processes, and advancing its systems and policies to comply with and,
wherever possible, anticipate changing legislative and customer demands. This important area is covered as part of regular team
briefs to all members of staff.
By order of the Board
Brendan Hynes
Executive Chairman
27 September 2019
Annual Report & Accounts 2019STRATEGIC REPORTBrand Architekts Group plc
16
Corporate Governance
The Board, recognising the importance of sound corporate governance, has decided to adopt the QCA’s new Corporate
Governance Code (published in April 2018) (the “QCA Code”) as the basis for the Company’s corporate governance. In applying
the QCA Code, the company applies the ten principles of the QCA Code (the “Principles”) to its governance.
Relations with Shareholders
Communications with shareholders are given high priority. The Chairman’s foreword and Strategic report on pages 2 to 4
include a detailed review of the business and future developments. There is regular dialogue with institutional and other major
shareholders including presentations after the Company’s announcement of final and interim results. The Board also uses the
Annual General Meeting to communicate with private and institutional investors and welcomes their participation. All Directors
will be available to answer questions at the Annual General Meeting on 20 November 2019 and the resolutions to be proposed
can be found on the separate circular sent to shareholders with a copy of this Report and Accounts. The Chairman and Non-
Executive Directors meet and communicate with shareholders as requested. They also use the Company’s broker and informal
discussions after the Annual General Meeting, to maintain open routes of communication with shareholders. All presentations to
shareholders are shown in the investors section of the Group’s website.
The Workings of the Board and its Committees
The Board
The Company’s corporate governance is founded on the Board having good quality people in place with relevant skills and
experience, working as a team, to achieve the Company’s strategy and deliver value for shareholders.
The Board currently comprises an Executive Chairman, and two Non-Executive Directors. The Board is in the process of
recruiting a new Chief Executive and a new Finance Director who have skills and experience that are relevant to the new shape
of the business. The biographies appearing on page 12 demonstrate a range of experience and sufficient calibre to bring
independent judgement on issues of strategy, performance, resources and standards of conduct that are vital to the success of
the Group. The Board is responsible to shareholders for the proper management of the Group. A statement of the Directors’
responsibilities in respect of the accounts and a statement of going concern is set out on page 14.
Annual Report & Accounts 2019Brand Architekts Group plc Corporate Governance
17
The Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decision by
the Board. Each Executive Director is given responsibility for specific aspects of the Group’s affairs and independent advice is
available to all Directors. Appropriate training is given when Directors are appointed to the Board.
The Board meets a minimum of six times per year to review trading performance, set and monitor strategy, approve matters
reserved for decision by the Board and to ensure that adequate funding exists. All Directors are supplied with information in a
manner to enable the Board to discharge its duties.
Indemnity Insurance
The Group carries liability and indemnity insurance for Directors, Officers and Senior Managers.
Nomination Committee
The current members of the Nomination Committee are Brendan Hynes (Committee Chairman), and Roger McDowell. The
Committee is responsible for proposing candidates for appointment to the Board, having regard to the balance and structure
of the Board. In appropriate cases recruitment consultants are used to assist the process. The terms of reference of the
Nomination Committee are published on the Group’s website. All Directors are subject to re–election at least every three years.
Audit Committee
The current members of the Audit Committee are Edward Beale (Committee Chairman), Brendan Hynes, and Roger McDowell.
It meets at least twice a year to review the Group’s accounting policies and reporting procedures, external audit reports and
other relevant matters. The external auditors, Group Finance Director and Chief Executive Officer are also invited to attend
but are not entitled to vote. The terms of reference of the Audit Committee are published on the Group’s website. The Group
sometimes receives non-audit services such as taxation and other consultancy advice from the Group’s auditors. The Audit
Committee assesses the independence of the external auditors by means of an internal review of relationships with the auditors
together with a review of an annual independence report issued by the auditors. The Group does not have an internal audit
function.
Remuneration Committee
The current members of the Remuneration Committee are Roger McDowell (Committee Chairman), Brendan Hynes, and Edward
Beale. The Chief Executive Officer and Group Finance Director attend the Remuneration Committee meetings by invitation but
are not entitled to vote. The Committee reviews the terms and conditions of service of Executive Directors, and ensures that
salaries, bonuses and share option awards satisfy any relevant performance criteria and align interests with shareholders. Terms
of reference of the Remuneration Committee are published on the Group’s website.
Internal Control
The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system can only
provide reasonable and not absolute assurance against material misstatement or loss. The key procedures established are as
follows:
•
Responsibility levels, the ethos of the Group, the delegation of authority and other control procedures, together with
appropriate accounting policies, are communicated throughout the Group;
•
The Group appoints experienced and professional staff of the necessary calibre, both through promotion and recruitment,
to fulfil their responsibilities;
•
The Group maintains an annual budget process. The Board sets budgets once per year and monitors actual performance
against those budgets at every Board meeting. The Board also reviews forecasts and expectations in the light of up-to-date
circumstances and takes action as appropriate;
•
The Audit Committee considers significant control matters. Management letter points raised by the external auditors are
discussed by the Audit Committee and are dealt with as appropriate;
•
The Group maintains an expenditure approval process that ensures that the Board approves major expenditure and
investments; and
•
The Board undertakes a review of internal controls annually.
The Group has established a Group Risk Management Register and the Board has procedures in place for regular reviews.
Annual Report & Accounts 2019GOVERNANCEBrand Architekts Group plc 18
Board of Directors
BRENDAN M HYNES
MBA, FCMA
Executive Chairman
Brendan joined the Company as Non-Executive Chairman on 1st July 2013 and is currently acting
as Executive Chairman on a temporary basis. He is also currently the Senior Independent Non-
Executive Director and Chairman of the Audit Committee of Churchill China plc, Non-Executive
Director of private, online education business “Webexaminer”; and a member of the Criticaleye
Advisory Board. He was CEO of Nichols plc from 2007 to 2013 having previously been Group
Finance Director. He has plc main board experience across a range of other sectors including
TMT, retail, consumer goods, buildings and automotive. Previous roles have included Executive
Director at Knowledge Management Software plc and Group Finance Director at William
Baird plc a branded clothing business and Director of the Consumer, Retail and Distribution
(CRD) practice of PricewaterhouseCoopers advising Times 100 companies. Brendan chairs the
Nomination Committee and is a member of the Audit and Remuneration Committees.
ROGER MCDOWELL
Roger was reappointed to the Board in March 2012 having previously served as a Non-Executive
Independent Non-Executive
Director from July 2011 to January 2012. Roger is an experienced director of over 30 years’
Director
standing: he led the Oliver Ashworth Group through dramatic growth, main market listing
and sale to St. Gobain, following which he was appointed to a number of non-executive roles,
including chairmanships in both public and private equity backed businesses. He is currently
Chairman of Avingtrans plc, and is Senior Non-Executive Director of Servelec Group plc and
Tribal Group plc. He is also a Non-Executive Director of D4T4 Solutions plc and Proteome
Sciences plc. Roger chairs the Remuneration Committee and is a member of the Audit and
Nomination Committees.
EDWARD BEALE
Edward joined the Company as a Non-Executive Director on 1 July 2014. Mr Beale is a Chartered
Independent Non-Executive
Accountant and is the Finance Director of Marshall Monteagle plc. He is a member, previously
Director
chairman, of the Corporate Governance Expert Group of the Quoted Companies Alliance. He
was a member of the Accounting Standards Board of the Financial Reporting Council for six
years to 31st August 2013. He is a non-executive director of London Finance & Investment
Group P.L.C., Western Selection P.L.C., Heartstone Inns Limited, and some of their subsidiary
and associated companies. Edward chairs the Audit Committee and is a member of the
Remuneration Committee.
Annual Report & Accounts 2019Brand Architekts Group plc 19
Directors’ Report
The Directors’ present their annual report on the affairs of the Group, together with the financial statements and auditor’s report,
for the period ended 29 June 2019. The Corporate Governance Statement set out on pages 16 to 17 forms part of this report.
Change of name
The Company changed its name on 9 August 2019 from Swallowfield plc to Brand Architekts Group plc.
Directors
The Company’s current Directors are listed on page 18, together with their biographical details. The Directors who served at any
time during the year and since the year end were as follows:
B M Hynes
F P Berrebi (resigned 29 June 2019)
T J Perman (resigned 30 September 2019)
J M Fletcher (resigned 23 August 2019)
M Gazzard (resigned 23 August 2019)
R S McDowell
E J Beale
Strategic Report
The Strategic Report set out on page 4 provides a fair review of the Group’s business for the year ended June 2019. It also
explains the objectives and strategy of the Group, its competition and the markets in which it operates, the principal risks
and uncertainties it faces, employee information, the Group’s financial position, key performance indicators and likely future
developments of the business.
Substantial Shareholdings
As at 28 June 2019, the following shareholders had notified the Company that they held an interest in 3% or more of its issued
ordinary share capital:
Shareholdings
Significant Shareholders
Soros Fund Mgt
Western Selection Plc
Canaccord Genuity Wealth Mgt
FIL Investment International
R & A Persey
Charles Stanley
BGF Investments
Hargreaves Lansdown Asset Mgt
River & Mercantile Asset Mgt
Gresham House
M&G Investment Mgt
City Asset Mgt
Shareholding
2,116,426
Percentage of Issued Shares
12.4
1,300,000
1,060,000
1,059,900
1,036,924
956,433
954,500
886,450
790,000
662,773
566,750
566,061
7.6
6.2
6.2
6.1
5.6
5.6
5.2
4.6
3.9
3.3
3.3
Save for these interests, the Directors have not been notified that any person is directly or indirectly interested in 3% or more of
the issued ordinary share capital of the Company.
General Meeting
This year’s Annual General Meeting will be held on Wednesday 20 November 2019, at 11am. The venue for the AGM will be
Farmers and Fletchers, 3 Cloth Street, London EC1A 7LD.
A separate circular will be sent to shareholders and includes the following:
• Notice of meeting;
•
Form of proxy;
• Details and information on the resolutions to be proposed.
Annual Report & Accounts 2019GOVERNANCEBrand Architekts Group plc
20
PKF Francis Clark have expressed their willingness to continue in office as auditors and a resolution proposing their
reappointment will be presented at the forthcoming Annual General Meeting.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
elected to prepare financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the
European Union. The financial statements are required by law to give a true and fair view of the state of affairs of the Company
and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are
required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
•
state whether applicable IFRS’s have been followed, subject to any material departures disclosed and explained in the
financial statements; and
•
prepare financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy, at any time,
the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other
information included in annual reports may differ from legislation in other jurisdictions.
Disclosure of Information to Auditors
At the date of making this report each of the Company’s Directors, as set out on page 18, confirm the following:
•
so far as each Director is aware, there is no relevant information needed by the Company’s auditors in connection with
preparing their report of which the Company’s auditor is unaware; and
•
each Director has taken all the steps that they ought to have taken as a director in order to make themselves aware of any
relevant information needed by the Company’s auditors in connection with preparing their report and to establish that the
Company’s auditor is aware of that information.
By Order of the Board
Brendan Hynes
Executive Chairman
27 September 2019
Company Number: 01975376
Annual Report & Accounts 2019Brand Architekts Group plc
21
Annual Report & Accounts 2019GOVERNANCEBrand Architekts Group plc 22
Independent
Auditor’s Report
to the members of Brand Architekts Group plc
Opinion
We have audited the financial statements of Brand Architekts plc (the ‘company’) and its subsidiaries (the ‘group’) for the 52
weeks ended 29 June 2019, which comprise the group statement of comprehensive income, the group and company statements
of financial position, the group and company statements of changes in equity, the group and company cash flow statements and
the notes to the financial statements including a summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s and of the company’s affairs as at 29 June 2019
and of the group’s profit for the period then ended;
•
•
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group and company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in accordance with those requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you
where:
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate;
or
•
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group’s or the company’s ability to continue to adopt the going concern basis of accounting for at least
twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Annual Report & Accounts 2019Brand Architekts Group plc
23
Revenue recognition
Work done
The group’s two key sources of revenue are:
• Assessing and challenging the revenue recognition
• Own brand sales
• Contract manufacturing
policies adopted by the group to confirm they are
appropriate in the context of the business and in
accordance with IFRS 15.
•
Reviewing a sample of relevant contracts to assess
We identified that the revenue recognition risk relates
whether there is an alternate use and if there is a
particularly to the adoption of IFRS 15 in respect of contract
contractual right to be paid for work as it progresses.
manufacturing arrangements. Where there are contracts for
• Assessing the disclosures made and adjustments required
products with no alternate use and there is a contractual right to
in respect of adopting IFRS15.
be paid for work as it progresses, IFRS 15 requires revenue to be
recognised over a period of time rather than at a point in time.
As a result of the procedures performed, we are satisfied that revenue has been correctly recorded and the adoption of IFRS15
does not have a material impact on the financial statements.
Goodwill, brands and investment impairment
Work done
As identified in the accounting policies, the impairment review
Our audit work included:
of the group’s carrying value of goodwill and brands is one of
• Assessing and challenging the key assumptions and
the main areas of estimation. At 29 June 2019, the carrying value
calculations applied by management in their impairment
of these balances in the group balance sheet was £11.3m (2018:
reviews.
£11.3m). We identified that the audit risk relates to ensuring
•
Benchmarking the revised long term growth rate to
that management’s impairment review is robust and reliable
independent market data to confirm it is appropriate.
in identifying potential impairment, and that the assumptions
• Assessing and challenging management’s sensitivity
made are reasonable.
analysis on key assumptions and calculations.
•
Performing our own sensitivity analysis on short term
growth forecasts.
As a result of the procedures performed, we are satisfied that the key assumptions used in the impairment model and the
resulting conclusions drawn by management are appropriate and that no impairment is required.
Capitalisation of new product development (NPD) time
Work done
The group incurs NPD expenditure in relation to product
Our audit work included:
development prior to the point of commercial production. The
•
Reviewing and challenging the basis of management’s
key cost is in relation to employee time spent on research and
assessment as to when the development phase of NPD
development activities.
begins.
Significant judgement is required in determining when
amount of internal time capitalised and agreeing the
capitalisation can take place as set out in IAS38. Significant
inputs, on a sample basis, back to underlying records such
estimation is required in determining the percentage of
as timesheets and payroll costs.
employees’ time that can be capitalised.
•
Reviewing the historical market life of products and
The group amortises NPD costs over a 12 month period on the
whether the periods over which management amortise
basis that products are typically launched within 12 months of
such costs are aligned with those lives.
•
Reviewing and challenging calculations that support the
development.
We identified that the audit risk relates to ensuring that
capitalised NPD costs are accurate and recoverable.
As a result of the procedures performed, we are satisfied that the capitalisation of development time is appropriate.
Annual Report & Accounts 2019GOVERNANCEBrand Architekts Group plc
24
Our application of materiality
Misstatements, including omissions, are considered to be material if individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial statements. We use quantitative
thresholds of materiality, together with qualitative assessments in planning the scope of our audit, determining the nature,
timing and extent of our audit procedures and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall group materiality:
Overall company materiality:
Performance materiality:
Basis for determination:
£253,000
£170,000
75% of financial statement materiality
5% of profit before exceptional items (and central costs
at a company level)
Range of materiality at 4 components subject to full scope audits:
£23,000 - £199,000
Misstatements reported to the audit committee:
£6,000
Rationale for the benchmark applied: We consider adjusted profit to be the most appropriate measure for materiality as it best
reflects the underlying trading profitability and is a key metric used by both management and other stakeholders in assessing
performance.
An overview of the scope of our audit
We planned and performed our audit by obtaining an understanding of the group and its environment, including the accounting
processes and controls, and the industry in which it operates. The group comprises the following active companies:
•
•
•
•
•
•
1 UK trading parent company
2 UK trading subsidiary companies (1 wholly owned and 1 51% owned)
1 wholly owned Czech Republic based trading subsidiary;
1 wholly owned French based trading subsidiary;
1 wholly owned US based trading subsidiary; and
1 intermediate UK holding company.
Of the group’s 6 trading components, the 3 UK based trading companies were subject to full scope audits performed by the
group audit team. The UK intermediate holding company was also subject to a full scope audit by the group audit team.
Component auditors were used to perform specific audit procedures on the Czech Republic subsidiary in conjunction with
analytical procedures carried out by the group audit team. The remaining 2 overseas components were subject to analytical
review procedures, carried out by the group audit team. Those components subject to audit and specific audit procedures cover
94% of the group’s revenue and 98% of the group’s consolidated profit before exceptional and central costs. Our audit work at
the component level is executed at levels of materiality appropriate for such components.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial
statements are prepared is consistent with the financial statements; and
•
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Annual Report & Accounts 2019Brand Architekts Group plc
25
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the company and its environment obtained in the course of
the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
•
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
•
the company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the group’s and the company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s shareholders those matters we are
required to state to them in an audit report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s shareholders as a body for our audit work, for this
report, or for the opinions we have formed.
Glenn Nicol
(Senior Statutory Auditor)
PKF Francis Clark
Statutory Auditor
Centenary House
Peninsula Park
Rydon Lane
Exeter
EX2 7XE
30 September 2019
Annual Report & Accounts 2019GOVERNANCEBrand Architekts Group plc Group Statement of Comprehensive Income
For the 52 weeks ended 29 June 2019 and 53 weeks ended 30 June 2018
Revenue
Cost of sales
Gross profit
Commercial and administrative costs
Operating profit before exceptional items
Exceptional items
Operating profit
Finance income
Finance expense
Profit before taxation
Taxation
Profit for the year
Profit on Discontinued Operations after taxation
Profit for the year
Other comprehensive income/(loss):
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of defined benefit liability
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations
(Loss)/gain on financial assets held at fair value
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
Profit attributable to:
Equity shareholders
Non-controlling interests
Total comprehensive income attributable to:
Equity shareholders
Non-controlling interests
Earnings per share
- basic
- diluted
Dividends
Paid in year (£’000)
Paid in year (pence per share)
Proposed (£’000)
Proposed (pence per share)
Notes
2
3
7
8
4
9
28
11
11
10
10
2019
£’000
19,676
(12,680)
6,996
(5,016)
1,980
(48)
1,932
-
(144)
1,788
(198)
1,590
2,050
3,640
(4,011)
(35)
(6)
(4,052)
(412)
3,539
101
(513)
101
20.7p
20.0p
1,088
6.35p
745
4.35p
The accompanying accounting policies and notes form part of the financial statements.
*2018 comparatives have been restated for discontinued operations – see note 2 for further information.
26
2018*
£’000
21,085
(12,705)
8,380
(5,556)
2,824
(279)
2,545
-
(160)
2,385
(453)
1,932
1,701
3,633
1,403
30
156
1,589
5,222
3,542
91
5,131
91
20.9p
20.3p
933
5.5p
720
4.2p
Annual Report & Accounts 2019Brand Architekts Group plc
27
Group Statement of Financial Position
For the 52 weeks ended 29 June 2019, and 53 weeks ended 30 June 2018
Notes
2019
£’000
2018
Restated – Note 29
£’000
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Assets held for resale
Cash and cash equivalents
Current tax receivable
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Current tax payable
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Post-retirement benefit obligations
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Revaluation of investment reserve
Exchange reserve
Pension re-measurement reserve
Retained earnings
Equity attributable to holders of the parent
Non-controlling interest
Total equity
12
13
22
14
15
16
28
17
18
19
26
22
23
23
23
23
23
23
21
12,817
1,714
-
14,552
5,211
3,475
22,700
381
285
32,052
46,604
6,628
1,139
527
8,294
2,091
9,417
1,061
12,569
20,863
25,741
857
11,987
1,241
(147)
(6,502)
18,160
25,596
145
25,741
11,438
13,852
803
1,391
27,484
13,825
19,283
-
934
109
34,151
61,635
23,709
1,127
503
25,339
3,230
4,489
1,555
9,274
34,613
27,022
857
11,987
1,247
(112)
(2,491)
15,455
26,943
79
27,022
The accompanying accounting policies and notes form part of the financial statements.
Approved by the Board on 27 September 2019 and signed on its behalf by
Brendan Hynes
Executive Chairman and Company Secretary
Company Number: 01975376
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
28
2018
£’000
10,493
4,828
806
16,131
32,258
9,866
12,956
-
737
-
23,559
55,817
24,699
1,127
3
25,829
3,230
4,489
410
8,129
33,958
21,859
857
11,987
1,247
467
(2,491)
9,792
21,859
Company Statement of Financial Position
For the 52 weeks ended 29 June 2019, and 53 weeks ended 30 June 2018
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Assets held for resale
Cash and cash equivalents
Current tax receivable
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Current tax payable
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Post-retirement benefit obligations
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Revaluation of investment reserve
Capital reserve
Pension re-measurement reserve
Retained earnings
Total equity
Notes
12
13
22
14
15
16
28
17
18
19
26
22
23
23
23
23
23
23
2019
£’000
-
3,969
1,645
12,084
17,698
-
4
22,151
147
341
22,643
40,341
10,199
1,139
-
11,338
2,091
9,417
-
11,508
22,846
17,495
857
11,987
1,241
467
(6,502)
9,445
17,495
The accompanying accounting policies and notes form part of the financial statements.
Approved by the Board on 27 September 2019 and signed on its behalf by
Brendan Hynes
Executive Chairman and Company Secretary
Company Number: 01975376
Annual Report & Accounts 2019Brand Architekts Group plc
29
Group Statement of Changes in Equity
For the 52 weeks ending 29 June 2019 and 53 weeks ending 30 June 2018
Share
Capital
£’000
857
-
Share Revaluation
Premium of investment
reserve
£’000
£’000
11,987
-
1,247
-
Exchange
Pension re-
Reserve measurement
reserve
£’000
£’000
(112)
-
(2,491)
-
Retained
Earnings
£’000
15,455
(1,088)
-
254
(834)
3,539
-
-
-
Non-
controlling
interest
£’000
79
(35)
101
-
66
-
-
-
-
Total
Equity
£’000
27,022
(1,123)
101
254
(768)
3,539
(4,011)
(35)
(6)
-
-
-
-
-
-
-
-
-
-
-
(35)
(6)
-
-
-
-
-
(4,011)
-
-
Group
Balance as at June 2018
Dividends
Non-controlling interest
Share based payments
Transactions with owners
Profit for the year
-
-
-
-
Other comprehensive income:
Re-measurement of defined benefit liability
Exchange difference on
translating foreign operations
Gain on available for sale
financial assets
Total comprehensive
income for the year
-
-
-
-
-
-
-
-
-
-
-
Balance as at June 2019
857
11,987
(6)
1,241
(35)
(147)
(4,011)
(6,502)
3,539
- (513)
18,160
145
25,741
Group
Balance as at June 2017
Dividends
Issue of new shares
Non-controlling interest
Share based payments
Transactions with owners
Profit for the year
Other comprehensive income:
Re-measurement of
defined benefit liability
Exchange difference on
translating foreign operations
Gain on available for
sale financial assets
Total comprehensive
income for the year
Share
Capital
£’000
844
-
13
-
-
13
-
-
-
-
-
Share Revaluation
Premium of investment
reserve
£’000
£’000
Exchange
Pension re-
Reserve measurement
reserve
£’000
£’000
Retained
Earnings
£’000
12,749
(933)
Non-
controlling
interest
£’000
18
(30)
11,744
-
243
-
-
243
-
-
-
-
-
1,091
-
(142)
-
(3,894)
-
-
-
-
-
-
-
-
156
156
1,247
-
-
-
-
-
-
30
-
-
-
-
-
-
-
-
97
(836)
3,542
1,403
-
-
-
-
-
30
(112)
1,403
(2,491)
3,542
15,455
Total
Equity
£’000
22,410
(963)
256
91
97
(519)
3,542
1,403
30
156
5,131
-
91
-
61
-
-
-
-
-
Balance as at June 2018
857
11,987
79
27,022
The accompanying accounting policies and notes form part of the financial statements.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
30
Company Statement of Changes in Equity
For the 52 weeks ending 29 June 2019 and 53 weeks ending 30 June 2018
Company
Balance as at June 2018
Dividends
Share based payments
Transactions with owners
Profit for the year
Other comprehensive income:
Re-measurement of
defined benefit liability
Gain on available for
sale financial assets
Total comprehensive
income for the year
Share
Capital
£’000
857
-
Share Revaluation
Premium of investment
reserve
£’000
£’000
11,987
-
1,247
-
Exchange
Pension re-
Reserve measurement
reserve
£’000
£’000
467
-
(2,491)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6)
(6)
1,241
Retained
Earnings
Total
Equity
£’000
£’000
9,792
(1,088)
254
(834)
487
21,859
(1,088)
254
(834)
487
-
-
-
(4,011)
-
-
-
(4,011)
(6)
(4,011)
487
(3,530)
-
-
-
-
-
-
Balance as at June 2019
857
11,987
467
(6,502)
9,445
17,495
Company
Balance as at June 2017
Dividends
Issue of new shares
Share based payments
Transactions with owners
Profit for the year
Other comprehensive income:
Re-measurement of
defined benefit liability
Gain on available for
sale financial assets
Total comprehensive
income for the year
Share
Capital
£’000
844
-
13
-
13
-
-
-
-
Share Revaluation
Premium of investment
reserve
£’000
£’000
Exchange
Pension re-
Reserve measurement
reserve
£’000
£’000
11,744
-
243
-
243
-
-
-
-
1,091
-
467
-
(3,894)
-
-
-
-
-
-
156
156
1,247
-
-
-
-
-
-
-
-
-
-
-
1,403
-
1,403
467
(2,491)
Retained
Earnings
Total
Equity
£’000
9,942
(933)
-
97
(836)
686
£’000
20,194
(933)
256
97
(580)
686
-
-
1,403
156
686
9,792
2,404
21,859
Balance as at June 2018
857
11,987
The accompanying accounting policies and notes form part of the financial statements.
Annual Report & Accounts 2019Brand Architekts Group plc
Cash Flow Statement
For the 52 weeks ended 29 June 2019 and 53 weeks ended 30 June 2018
Cash flow from operating activities
Profit before taxation
Depreciation
Amortisation
Finance income
Finance cost
(Increase) in inventories
Decrease /(increase) in trade and other receivables
Increase in trade and other payables
(Decrease) in share-based payments provision
Contributions to defined benefit plans
Cash generated from operations
Finance expense paid
Taxation paid
Net cash flow from operating activities
Cash flow from investing activities
Investment income received
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of subsidiary
Net cash flow from investing activities
Cash flow from financing activities
Movements in invoice discounting facility
Proceeds from new loan
Issue of new share capital
Repayment of loans
Dividends paid
Net cash flow from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Group
2019
£’000
4,093
1,262
944
(1,146)
389
(2,129)
1,252
3,059
(221)
(282)
7,221
(263)
(593)
6,365
1,146
(1,088)
(699)
-
(641)
(4,027)
-
-
(1,127)
(1,123)
(6,277)
(553)
934
381
2018
£’000
4,524
1,283
583
(191)
364
(2,395)
(2,648)
944
(1,666)
(108)
690
(209)
(762)
(281)
191
(1,631)
(3,850)
(1,850)
(7,140)
2,741
3,000
256
(736)
(963)
4,298
(3,123)
4,057
934
Company
2019
£’000
461
1,064
768
(1,182)
382
(877)
(1,693)
7,7712
(221)
(282)
6,132
(256)
(197)
5,679
1,182
(900)
(699)
-
(417)
(3,637)
-
-
(1,127)
(1,088)
(5,852)
(590)
737
147
The accompanying accounting policies and notes form part of the financial statements.
31
2018
£’000
699
1,058
418
(822)
363
(1,279)
71
2,563
(1,666)
(108)
1,297
(208)
(247)
842
822
(1,486)
(3,850)
(1,850)
(6,364)
1,701
3,000
256
(736)
(933)
3,288
(2,234)
2,971
737
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
32
Note 1 Significant accounting policies
Notes to the Accounts
General information
Brand Architekts Group plc is a Company incorporated in the United Kingdom under the Companies Act 2006. The address
of the registered office is given on page 58. The nature of the Group’s operations and its principal activities are set out in the
Strategic Report. The Group draw their accounts up on a 52 week year basis.
Basis of preparation
The Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union and also in accordance with IFRS issued by the International Accounting Standards
Board. These financial statements have been prepared under the historical cost convention, modified to include the revaluation
of certain non-current assets and financial instruments.
The Directors have considered trading and cash flow forecasts prepared for the Group, and based on these, and the confirmed
banking facilities, are satisfied that the Group will continue to be able to meet its liabilities as they fall due for at least one year
from the date of signing of these accounts. On this basis, they consider it appropriate to adopt the going concern basis in the
preparation of these accounts.
The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand (£’000)
except where otherwise indicated.
Discontinued Activities
As a result of the agreed disposal of the manufacturing business (completed post year-end), these operations have been
disclosed as discontinued and the related assets classified as held for sale at the period end.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings. The
results and net assets of undertakings acquired or disposed of during a financial year are included in the Group Statement of
Comprehensive Income and Group Statement of Financial Position from the effective date of acquisition or to the effective
date of disposal. Subsidiary undertakings have been consolidated using the purchase method of accounting. In accordance
with the exemptions given by section 408 of the Companies Act 2006, the Company has not presented its own Statement of
Comprehensive Income. The Company’s profit after tax for the year to June 2019 was £0.487m (2018: profit after tax £0.686m).
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of June 2019. The parent
controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability
to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of June.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted
where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date of disposal, as applicable.
Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments
or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
• fair values of the assets transferred
•
liabilities incurred to the former owners of the acquired business
• equity interests issued by the Group
• fair value of any asset or liability resulting from a contingent consideration arrangement, and
• fair value of any pre-existing equity interest in the subsidiary.
Annual Report & Accounts 2019Brand Architekts Group plc
33
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the
acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share
of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the
•
•
•
consideration transferred,
amount of any non-controlling interest in the acquired entity, and
acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of
the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
Intangible assets
(i) Computer software
Computer software is stated at cost less accumulated amortisation. Computer software is amortised on a straight-line basis
over the expected useful life of 3 years.
(ii) Research and development
Expenditure on the research phase of projects to develop new products is recognised as an expense as incurred.
Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet
the following recognition requirements:
•
•
•
•
•
the development costs can be measured reliably
the project is technically and commercially feasible
the Group intends to and has sufficient resources to complete the project
the Group has the ability to use or sell the development
the development will generate probable future economic benefits.
Development costs not meeting these criteria for capitalisation are expensed as incurred.
Any capitalised development costs that are not yet complete are not amortised but are subject to impairment testing. Complete
development projects are amortised on a straight-line basis over the expected life of the project up to a maximum of 5 years.
(iii) Brand names and customer relationships
Brand names and customer relationships acquired are recognised as intangible assets at their fair values (see note 13).
Customers relationships are amortised on a straight-line basis over 5 or 10 years, based on evaluation at point of acquisition.
Brand names are considered to have an indefinite life and are tested for impairment annually. This is on the basis that the brand
is well established and there is no foreseeable limit on the period of time over which it is expected to contribute to cash flow.
(iv) Goodwill
An impairment test is undertaken where there are indicators of impairment or on an annual basis where intangible assets are
determined to have an infinite useful life such as Brands and goodwill. Brands and goodwill are combined together as part of the
same CGU and tested together using a discounted cash flow approach.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
34
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Where there is evidence of impairment,
property, plant and equipment is written down to its recoverable amount. Any such write down is charged to the profit or loss
for the year. Property, plant and equipment are depreciated on a straight-line basis over their expected useful lives as follows:
Freehold buildings
Plant and machinery
2% per annum
5% to 33% per annum
Freehold land is not depreciated.
Impairment of assets
An impairment test is performed annually where required and whenever events and circumstances indicate that the carrying
value of an asset may exceed its recoverable amount. The carrying value is compared against the expected recoverable amount
of the asset, generally by reference to the present value of the future net cash flows expected to be derived from that asset.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are those incurred in bringing each product to its
present location and condition. Cost comprises purchase costs including transport costs together with any direct labour and
attributable overheads. Net realisable value is based on estimated selling price, less further costs expected to be incurred to
completion and disposal.
Taxation
Current tax is the tax payable based on taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. Deferred tax on temporary differences
associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group
and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as
well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is
probable that the underlying deductible temporary differences will be able to be offset against future taxable income.
Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the Statement of Financial Position date.
Changes in deferred tax assets or liabilities are recognised in profit or loss as a component of tax expense in the Statement
of Comprehensive Income, except where they relate to items that are charged or credited directly to equity (such as the
revaluation of land) in which case the related deferred tax is also charged or credited directly to equity.
Foreign currencies
Trading transactions denominated in foreign currencies are recorded in sterling at actual rates as at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the middle market rates ruling at the Statement
of Financial Position date. Such exchange differences are recognised in the profit or loss for the year.
The assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling at the
Statement of Financial Position date. Income and expenses are translated at the average rate. The exchange differences arising
from the retranslation of foreign operations are charged / credited to other comprehensive income and recognised in the
‘Exchange reserve’ in equity. On disposal of a foreign operation, the cumulative translation differences are reclassified from equity
to profit or loss.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for
goods provided in the normal course of business, net of discounts and rebates, VAT and other sales-related taxes. Revenue
is recognised when the Group has transferred the significant risks and rewards of ownership to the customer, which is
generally when the production of goods is complete, the customer has accepted title of the goods under contractual shipping
arrangements and collectability of the related receivables is reasonably assured.
Leased assets
Operating lease rental payments are charged to profit or loss on a straight line basis over the term of the lease.
Annual Report & Accounts 2019Brand Architekts Group plc
35
Employee benefits
Pension obligations
The Group operates both defined benefit and defined contribution pension plans.
i) Defined benefit schemes
Plan assets are measured at fair values. Defined benefit pension plan liabilities are measured by an independent actuary using
the projected unit method and discounted at the current rate of return on high quality corporate bonds of equivalent term and
currency to the liability. The increase in the present value of the liabilities of the Group’s defined benefit pension plans expected
to arise from employee service in the year is charged to operating profit. The plan was closed to future accrual on 31 December
2015. The expected return on the plan’s assets and the increase during the year in the present value of the plan’s liabilities,
arising from the passage of time, are included in other finance income or cost.
ii) Defined contribution schemes
Costs of defined contribution pension plans are charged to the profit or loss in the year they fall due.
iii) Share-based Payment Transactions
The value, as at the grant date, of options granted to employees is recognised as an employee expense, with a corresponding
increase in equity, over the period in which the employees become unconditionally entitled to the options. The fair value of the
options granted is measured using an option valuation model, taking into account the terms and conditions upon which the
options were granted.
For cash-settled share-based payment transactions, the liability needs to be re-measured at the end of each reporting period up
to the date of settlement, with any changes in fair value recognised in the profit or loss.
Financial assets
The Group’s financial assets consist of loans and receivables and financial assets at fair value through profit or loss. Financial
assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they
were acquired.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Trade and other receivables are classified as loans and receivables. Loans and receivables are measured subsequent to
initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value
through impairment or reversal of impairment is recognised in the profit or loss.
The Group’s 13.3% interest in SCCTC (see note 14) is held at fair value as required under IFRS9. Gains and losses in respect of this
investment are held in a separate reserve. Fair value has been determined by the latest share acquisitions by a third party on an
arm’s length basis.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on demand deposits, together with other short-term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes
in value. The Group considers overdrafts (repayable on demand) to be an integral part of its cash management activities and
these are included in cash and cash equivalents for the purposes of the Cash Flow Statement.
Financial liabilities
The Group’s financial liabilities consist of bank borrowings, trade and other payables.
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to
the contractual provisions of the instrument. Financial liabilities categorised as at fair value through profit or loss are recorded
initially at fair value, all transaction costs are recognised immediately in the profit or loss. All other financial liabilities are
recorded initially at fair value, net of direct issue costs.
Financial liabilities categorised as at fair value through profit or loss are re-measured at each reporting date at fair value, with
changes in fair value being recognised in the profit or loss. All other financial liabilities are carried subsequently at amortised
cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the profit or
loss. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the profit
or loss on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the
extent that they are not settled in the period in which they arise.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc 36
Financial liabilities are categorised as at fair value through profit or loss where they are classified as held-for-trading or
designated as at fair value through profit or loss on initial recognition. A financial liability is derecognised only when the
obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.
Distributions to shareholders
Dividends and other distributions to shareholders are reflected in financial statements when approved by shareholders
in a general meeting, except for interim dividends which are included in financial statements when paid by the Company.
Accordingly, proposed dividends are not included as a liability in the financial statements.
Exceptional items
Exceptional items are non-recurring material items which are outside the normal scope of the Group’s ordinary activities such
as liabilities and costs arising from a fundamental restructuring of the Group’s operations.
Significant management judgement in applying accounting policies
The following are significant management judgements in applying the accounting policies of the Group that have the most
significant impact on the financial statements:
Deferred Taxation
The Group has not made full provision for deferred taxation on the full carrying value of the Group’s land and buildings, on the
basis that the full value of these assets will be recovered through sale and not through use and that indexation will result in no
taxable gain arising on disposal.
Post-retirement benefits
The Group has a commitment to pay certain future administration costs and PPF levies associated with the Group’s defined
benefit pension plan as set out in Note 26 Post Retirement Benefits. These future cash outflows relate to an ongoing economic
benefit at the period end, and therefore do not give rise to a liability that needs to be included in the statement of financial
position.
Key sources of estimation uncertainty
In applying the above accounting policies, the Group has made appropriate estimates in a number of areas and the actual
outcome may differ from those calculated. The key sources of estimation uncertainty at the year-end that may have a risk
of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
Fair value on acquisition
Judgement and estimates arise in the determination and fair value of intangible and tangible assets and contingent and other
liabilities arising when acquiring a business. The valuation of externally acquired assets such as Brands and customer lists require
judgement regarding estimated future cash flows arising for those established assets, discounted to reflect the time value
of money. Judgement is also used in determining the useful economic life and amortisation periods. Further information is
included in Note 13.
Impairment reviews
An impairment test is undertaken where there are indicators of impairment or on an annual basis where intangible assets are
determined to have an infinite useful life such as Brands and goodwill using a discounted cash flow approach. Note 13 discloses
the assumptions used.
Post-retirement benefits
The Group’s defined benefit pension plan is assessed annually. The value in these accounts which has been based on the
assumptions of an independent actuary resulted in a deficit of £9.4m (2018: £4.5m) before deferred taxation. The size of the
deficit is sensitive to the market value of the underlying plan investments and the actuarial assumptions which include price
inflation, pension and salary increases, the discount rate used in assessing the liabilities, mortality rates, and other demographic
factors. Further details are included in Note 26.
Capitalisation of New Product Development (NPD) costs
The Group capitalises NPD costs within intangible fixed assets. The key sources of estimation uncertainty involved is this are:
a. Assessment of proportion of employee’s time spent on new product development.
b. Period of amortisation – the length of time between the creation of the asset and it being consumed in the sales of the
products created varies over the range of products created. Review of available data has indicated that one year is a
reasonable average figure.
Annual Report & Accounts 2019Brand Architekts Group plc 37
Impact of new standards adopted during the period
IFRS 9 ‘Financial Instruments’
The Group adopted IFRS 9 with effect from 1 July 2018. Due to the short term nature of the Group’s trade receivables,
the credit ratings of the Group’s Clients, and credit insurance on certain trade receivables, the requirement under IFRS 9 to use
an expected loss method of impairment of financial assets has not had a material effect on the Group’s financial statements.
Impairment of financial assets
A loss allowance is recognised on initial recognition of financial assets held at amortised cost, based on expected credit losses,
and is remeasured annually with changes appearing in profit or loss. Where there has been a significant increase in credit risk
of the financial instrument since initial recognition, the loss allowance is measured based on lifetime expected losses. In all
other cases, the loss allowance is measured based on 12-month expected losses. For assets with a maturity of 12 months or less,
including trade receivables, the 12-month expected loss allowance is equal to the lifetime expected loss allowance.
IFRS 15 ‘Revenue from Contracts with Customers’
The Group adopted IFRS 15 with effect from 1 July 2018. The main impact of this standard has been assessed in respect of the
manufacturing business where IFRS15 requires revenue to be recognised over a period of time where products are produced
that have no alternative use and where there is a right to payment through the manufacturing process. From review of
contractual terms and based on customary practice, it has been concluded that no contract assets or liabilities arise in such
instances or else are immaterial to the financial statements. As such there has been no material impact in the adoptions of
IFRS15.
Revenue continues to be recognised when the significant risks and rewards of ownership to the customer have been transferred.
This is when performance obligations are deemed to have been satisfied in contracts. All revenue has therefore been recognised
at a point in time rather than over a period of time. As such no contract assets or liabilities have been recognised.
The Group has applied the practical expedient permitted by IFRS 15 to not disclose the transaction price allocated to
performance obligations unsatisfied or partially unsatisfied as of the end of the reporting period as contracts typically have
an original expected duration of a year or less.
Costs incurred in obtaining a new customers or contracts are written off as incurred and are not taken into consideration
in when assessing the cost of fulfilling a contacts as contracts tend to be satisfied in a period of less than 12 months.
Standards in issue but not yet effective
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing
standards have been published by the IASB but are not yet effective, and have not been adopted early by the Group.
Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first
period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations
that are expected to be relevant to the Group’s financial statements is provided below. Certain other new standards and
interpretations have been issued but are not expected to have a material impact on the Group’s financial statements.
IFRS 16 ‘Leases’
IFRS 16 represents new requirements for the recognition of operating leases, replacing IAS 17 ‘Leases’. The new standard
requires that certain operating leases are disclosed within the Statement of Financial Position.
The Group’s management have yet to assess the impact of IFRS 16 on these consolidated financial statements. The new standard
is required to be applied for our annual reporting period ending on 30 June 2020.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc 38
Note 2 Segmental analysis
The Group is a market leader in the development, formulation, and supply of personal care and beauty products.
The reportable segments of the Group are aggregated as follows:
•
Brands – we leverage our skilled resources to develop and market a growing portfolio of Brand Architekts Group owned
and managed Brands. These include organically developed Bagsy, MR. and Tru, plus the acquisitions of The Real Shaving
Company (in 2015), the portfolio of Brands included in The Brand Architekts acquisition (in 2016) and the Fish brand
acquired during this financial year.
• Manufacturing – the contracted development, formulation and production of quality products for many of the world’s
leading personal care and beauty Brands.
•
Eliminations and Central Costs. Other Group-wide activities and expenses, including defined benefit pension costs, share-
based payment expenses, amortisation of acquisition-related intangibles, interest, taxation and eliminations of intersegment
items, are presented within ‘Eliminations and central costs’.
This is the basis on which the Group presents its operating results to the Directors, which is considered to be the Chief
Operating Decision Maker (CODM) for the purposes of IFRS 8. Comparative full year numbers have been presented on the same
basis.
IFRS15 requires the disaggregation of revenue into categories that depict how the nature, timing, amount and uncertainty of
revenue and cash flows are affected by economic factors. The Directors have considered how the Group’s revenue might be
disaggregated in order to meet the requirements of IFRS15 and has concluded that the activity and geographical segmentation
disclosures set out below represent the most appropriate categories of disaggregation.
a) Principal measures of profit and loss – Income Statement segmental information for 52 weeks ending 29 June 2019 and 53
weeks ending 30 June 2018:
52 weeks ended 30 June 2019
UK revenue
International revenue
Revenue – External
Revenue – Internal
Total revenue
Discontinued Operation
Total Revenue
Brands Manufacturing
£’000
£’000
Eliminations and
Central Costs
£’000
Total
£’000
2018
Total
£’000
16,381
35,763
3,220 21,974
19,601
57,737
75 4,235
19,676
-
61,972
(61,972)
19,676
-
-
52,144
51,253
25,194 22,692
- 77,338 73,945
- -
77,338 73,945
(52,860)
(4,310)
4,310
(4,310)
(1,706)
(115)
(260)
-
(57,662)
19,676
4,428
(115)
(260)
(48)
(717)
(144) 757
(255)
(2,050)
442
-
21,085
5,470
(297)
(197)
(279)
(173)
(438)
(1,701)
1,788 2,385
(198) (453)
1,932
1,590
-
2,515
-
-
(669)
901
(255)
(2,492)
Underlying profit from operations*
Charge for share-based payments
3,619
-
Amortisation of acquisition-related intangibles
Exceptional costs
Net borrowing costs
Tax charge on discontinued operations
Segment Profit included in Discontinued Operations
-
-
-
-
-
Profit before taxation
Tax charge
3,619
-
(1,831)
(198)
Profit for the period from continuing activities
3,619
-
(2,029)
*The underlying profit net of eliminations and central costs are as follows:
Underlying profit from operations – operating segments
Eliminations and central costs
Underlying profit from operations
Continuing operations -
Discontinued operations -
Total
Brands
£’000
3,619
(1,264)
2,355
Manufacturing
£’000
2,515
(442)
2,073
£’000
6,134
(1,706)
4,428
Annual Report & Accounts 2019Brand Architekts Group plc
39
2017
Total
£’000
44,732
29,582
Brands Manufacturing
£’000
£’000
Eliminations and
Central Costs
£’000
Total
£’000
53 weeks ended 30 June 2018
UK revenue
International revenue
Revenue – External
Revenue – Internal
Total revenue
Discontinued Operation
Total Revenue
Underlying profit from operations
Charge for share-based payments
17,086
34,167
3,968
21,054
18,724
52,891
31 1,940
21,085
-
(54,831)
54,831
21,085
4,806
-
Amortisation of acquisition-related intangibles
Exceptional costs
Net borrowing costs
Tax charge on discontinued operations
-
-
-
-
Segment Profit included in Discontinued Operations
-
Profit before taxation
4,806
Tax charge
-
Profit for the period from continuing activities 4,806
-
(1,971)
-
-
51,253
22,692
73,945
(1,971)
1,971
(1,875)
(297)
(197)
(279)
(161)
-
-
74,314
5,617
74,314
- -
73,945
74,314
(52,860)
21,085
5,470
(297)
(197)
(279)
(173)
(438)
388 (1,701)
2,385
3,115
(453) (543)
2,572
1,932
-
(1,755)
(343)
(187)
(217)
-
-
(2,421)
(453)
(2,874)
-
2,539
-
-
-
(12)
(438)
(2,089)
-
-
-
*The underlying profit net of eliminations and central costs are as follows:
Underlying profit from operations – operating segments
Eliminations and central costs
Underlying profit from operations
Continuing operations -
Discontinued operations -
Total
Brands
£’000
4,806
(1,487)
3,319
Manufacturing
£’000
2,539
(388)
2,151
£’000
6,134
(1,875)
5,470
The segmental Income Statement disclosures are measured in accordance with the Group’s accounting policies as set out in
note 1.
Inter segment revenue earned by Manufacturing from sales to Brands is determined on commercial trading terms as if Brands
were a third-party customer.
All defined benefit pension costs and share-based payment expenses are recognised for internal reporting to the CODM as part
of Group-wide activities and are included within ‘Eliminations and central costs’ above. Other costs, such as Group insurance and
auditors’ remuneration which are incurred on a Group-wide basis are recharged by the head office to segments on a reasonable
and consistent basis for all periods presented, and are included within segment results above.
b) Other Income Statement segmental information
The following additional items are included in the measures of underlying profit and loss reported to the CODM and are included
within (a) above:
52 weeks ended 29 June 2019
Depreciation
Amortisation
53 weeks ended 30 June 2018
Depreciation
Amortisation
Brands Manufacturing
£’000
£’000
Eliminations
and Central
Costs
£’000
13
-
1,249
700
-
260
Total
£’000
1,262
960
13 1,270
-
1,283
- 386
197
583
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
40
c) Principal measures of assets and liabilities
The Groups assets and liabilities are managed centrally by the CODM and consequently there is no reconciliation between the
Group’s assets per the statement of financial position and the segment assets.
d) Additional entity-wide disclosures
The distribution of the Group’s external revenue by destination is shown below:
Geographical segments
UK
Other European Union countries
Rest of the World
Geographical segments – Ongoing Business
UK
Other European Union countries
Rest of the World
52 weeks ended
29 June 2019
53 weeks ended
30 June 2018
£’000
52,144
17,482
7,712
77,338
52 weeks ended
29 June 2019
£’000
16,456
609
2,611
19,676
£’000
51,284
16,891
5,770
73,945
53 weeks ended
30 June 2018
£’000
17,021
520
3,544
21,085
In the 52 weeks ended 29 June 2019, the Group had two customers that exceeded 10% of total revenues, being 12% and 11%
respectively. In the 53 weeks ended 30 June 2018, the Group had two customers that exceeded 10% of total revenues, this
being 13% and 12% respectively.
In 2019 the Group had non-current assets held overseas of £2,247,000 (2018: £2,304,000).
Note 3 Exceptional items
The exceptional item of £0.048m in the current period is due to the GMP equalisation charge on the Group’s DB Pension Plan of
£0.288m offset by the release (credit) of unrequired contingent earn-out consideration that arose in a prior-year of £0.240m.
Note 4 Profit before taxation
(a) This is stated after charging/ (crediting)
Depreciation of property, plant and equipment of purchased assets
Amortisation of intangible assets
Research and development
Foreign exchange (gains) / losses
Operating leases:
Hire of plant and machinery
Rent of buildings
(b) Auditors’ remuneration
Audit services:
Audit of the Company financial statements – PKF Francis Clark
Audit of the Company financial statements – Grant Thornton UK LLP
Audit of subsidiary undertakings – PKF Francis Clark
Audit of subsidiary undertakings – Grant Thornton UK LLP
Audit related services:
Interim review – Grant Thornton UK LLP
Taxation compliance services:
Corporation tax compliance – Grant Thornton UK LLP
Other non-audit services:
Acquisition advice – Grant Thornton UK LLP
2019
£’000
1,262
944
1,039
(37)
125
782
35
-
12
-
-
-
-
2018
£’000
1,283
583
972
(9)
80
679
-
42
-
20
9
21
19
Annual Report & Accounts 2019Brand Architekts Group plc
(c) Earnings before interest, taxation, depreciation and amortisation
(‘EBITDA’) from continuing and discontinued operations
Operating profit before exceptional items
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of acquisition-related intangibles
EBITDA before exceptional operating items
Exceptional operating items
EBITDA after exceptional operating items
41
2019
£’000
2018
£’000
4,053
1,262
701
260
6,276
(717)
5,559
4,976
1,283
386
197
6,842
(279)
6,563
*Operating profit before exceptional items were derived from continuing activities of £1,980,000 (2018: £2,824,000) and from
discontinued activities of £2,073,000 (2018: £2,150,000)
Note 5 Staff costs
Wages and salaries
Social security costs
Other pension costs
The average monthly number of employees, including executive Directors, during the year was:
Production
Distribution
Administration
Remuneration in respect of Directors was as follows:
2019
£’000
13,846
1,602
928
16,376
2019
Number
437
104
45
586
2018
£’000
13,476
1,555
997
16,028
2018
Number
441
103
49
593
Executive Directors
T J Perman
C G How
J M Fletcher
M Gazzard
M W Warren
Non-Executive Directors
B M Hynes
E J Beale
F P Berrebi (resigned 29 June 2019)
R S McDowell
Total
Salary/Fees
Benefits
Contributions
£’000
£’000
£’000
Pension
Total
2019
£’000
Total
2018
£’000
260
-
125
133
-
60
29
29
29
665
77
-
18
11
-
-
-
-
-
106
-
-
31
13
-
-
-
-
-
44
337
-
174
157
-
60
29
29
29
815
-
258
175
74
88
61
29
29
29
743
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
42
Director’s and former Directors’ interest in share based options:
Number
of Shares
at June
2018
Number
of Shares
lapsed
in year
46,376
(15,304)
22,717
11,358
77,160
77,160
57,870
-
-
-
-
-
292,641
(15,304)
46,376
(15,304)
22,717
11,358
-
-
C G How
J M Fletcher
M W Warren
T J Perman
J M Fletcher
M Gazzard
Total share options
Phantom share options:
C G How
J M Fletcher
M W Warren
Total phantom
80,451
(15,304)
Number
of Shares
Awarded
in year
Number
of Shares
Exercised
in the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Number
of Shares
at June
2019
31,072
22,717
11,358
77,160
77,160
57,870
277,337
31,072
22,717
11,358
65,147
Exercise
Price
Nil
Nil
Nil
5p
5p
5p
Nil
Nil
Nil
Earliest
Exercise
Date
Exercise
Expiry
Date
16/7/19
15/7/26
16/7/19
15/7/26
16/7/19
15/7/26
19/6/21
18/6/28
19/6/21
18/6/28
19/6/21
18/6/28
16/7/19
15/7/26
16/7/19
15/7/26
16/7/19
15/7/26
The mid-market price of the ordinary shares on 29 June 2019 was 192.5p (2018: 322.5p) and the range during the 52-week period
to 29 June 2019 was 172.5p to 322.5p (53 weeks to 30 June 2018: 280.0p to 412.5p).
The total number of ordinary shares subject to options and which could, in the future, be issued is 523,641. This represents 3.06%
of the issued share capital of the Company which comprised 17,135,542 Ordinary Shares at the reporting date.
Note 6 Share Based Employee Remuneration
Executive and Managers Share Option Scheme
The Group operates both approved and unapproved share option schemes.
There have been a number of options granted during the course of the financial year to 30 June 2018 with further details given
below:
Date of grant
Number
of share
options
granted
Number of
phantom
options
granted
5 December 2015 – managers phantom share options
-
20,000
15 July 2016 – exec share options
15 July 2016 – exec cash-settled share options
80,451
-
-
80,451
Exercise
price
155.0p
Nil
Nil
16 June 2017 – managers share options
18 June 2018 – execs share options
Total Options Granted
Charge relating to options granted in the prior year
Charge relating to phantoms granted in the prior year
Charge relating to options granted in the current year
Charge included in Administration expenses
231,000
212,190
523,641
-
367.5p
-
100,451
5p
291p
200
260
(145)
-
115
Amount
expensed
in year-ended
June 2019
£’000
-
24
(145)
36
Fair
value
pence
154p
165p
307p
47p
Period of
expense
(restated)
3 years
3 years
3 years
3 years
3 years
The Company has used the QCA-IRS option valuer TM (based on the Black-Scholes-Merton based option pricing model) to
calculate the fair value of the outstanding share options. This model was developed by The QCA partnered with Independent
Remuneration Solutions (IRS) and City Group Plc. The development was led by Mr Edward Beale, a Director of the Group,
and at that time Chief Executive of City Group Plc.
Year-ended June 2017 awards
All of the 183,620 new Options granted under the LTIP on 15 July 2016 have two performance conditions attached to them. The
first 50% of the award is linked to certain share price targets and the remaining 50% is linked to earning per share targets. To the
extent that both of the performance conditions are met at the end of the three-year performance cycle, then the Options can be
exercised at nil cost. Upon vesting, half of each award will be made in shares with the balance being made in cash.
Annual Report & Accounts 2019Brand Architekts Group plc
43
The managers share options were issued on 16 June 2017 under a Company Share Option Scheme (CSOP), and have an
exercise price of 367.5p and no performance conditions attached, with vesting after a minimum of three-years and a maximum
of ten-years.
15,304 of both the share based options and the phantom share options have lapsed following Chris How’s departure from the
Group.
Period-ended June 2018 awards
All of the 212,190 Options granted under the LTIP on 18 June 2018 have performance conditions attached to them which is linked
to earning per share targets. To the extent that the performance conditions are met at the end of the three-year performance
cycle, then the Options can be exercised at a cost of 5p per share. Upon vesting, the award will be made in shares.
Detailed in Note 5 is a summary of awards outstanding at the end of the year.
Note 7 Finance income
Total
Ongoing Operations
Note 8 Finance costs
Total
Ongoing Operations
Note 9 Taxation
Income from investments
Income from investments
Bank loans and overdrafts
Net pension plan costs
Bank loans and overdrafts
Net pension plan costs
(a) Analysis of tax charge in the year
UK corporation tax:
- on profit for the year
- adjustment in respect of previous years
-foreign tax
Total current tax charge
Deferred tax:
-current year (credit)
-prior year charge/(credit)
Total deferred tax
Tax charge
2019
£’000
1,146
1,146
2019
£’000
-
-
2019
£’000
263
126
389
2019
£’000
18
126
144
2019
£’000
528
(171)
77
434
(28)
47
19
453
2018
£’000
191
191
2018
£’000
-
-
2018
£’000
212
152
364
2018
£’000
8
152
160
2018
£’000
901
-
(11)
890
(60)
61
1
891
Total tax charge of £453,000 (2018: £891,000) comprised tax on ongoing operations of £198,000 (2018: £453,000) plus tax on
discontinued operations of £255,000 (2018: £438,000).
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
44
(b) Factors affecting total tax charge for the year
The tax assessed on the profit before taxation for the year is lower (2018: higher) than the standard rate of UK corporation tax of
19.00% (2018: 19.00%). The differences are reconciled below:
Tax at the applicable rate of 19.00% (2018: 19.00%)
Profit before taxation
Effect of:
Adjustment in respect of previous years
Adjustment to deferred tax
Differences between UK and foreign tax rates
Permanent differences and other
R&D tax credit
Actual tax charge
2019
£’000
4,093
778
(124)
(7)
10
(168)
(36)
453
2018
£’000
4,524
860
(60)
-
-
91
-
891
(c) Factors that may affect future tax charges
Provision has not been made for deferred taxation on the Group’s land and buildings on the basis that the principal location
will be sold in the short term, and that the majority of its value will therefore be recovered through sale. Because of this no tax
liability is expected to arise and therefore no provision has been made in relation to deferred taxation.
Note 10 Payments to shareholders
Final dividend paid -
Interim dividend paid -
4.2p (2018: 3.5p) per share
2.15p (2018: 2.0p) per share
2019
£’000
720
368
1,088
In addition a dividend payment was made to the non-controlling interest of £35,000.
The Directors have recommended the payment of a final dividend of 4.35p per share (2018: 4.2p).
Note 11 Earnings per share
Basic and Diluted
Profit for the year (£’000)
Profit for the year (£’000) continuing operations
Basic weighted average number of
ordinary shares in issue during the year
Diluted number of shares
Basic earnings per share
Diluted earnings per share
Basic earnings per share continuing operations
Diluted earnings per share continuing operations
2019
3,539
1,489
17,135,542
17,659,183
20.7p
20.0p
8.7p
8.4p
2018
£’000
590
343
933
2018
3,542
1,841
16,934,762
17,454,505
20.9p
20.3p
10.8p
10.5p
Basic earnings per share has been calculated by dividing the profit for each financial year by the weighted average number of
ordinary shares in issue at 29 June 2019 and 30 June 2018 respectively. There is a difference at June 2019 between the basic net
earnings per share and the diluted net earnings per share of 0.7p due to the 523,641 share options awarded.
Annual Report & Accounts 2019Brand Architekts Group plc
Adjusted earnings per share
Adjusted Profit for the year after tax (£’000)
Basic weighted average number
of ordinary shares in issue during the year
Diluted number of shares
Basic earnings per share
Diluted earnings per share
2019
4,330
17,135,542
17,659,183
25.3p
24.5p
45
2018
3,928
16,934,762
17,454,505
23.2p
22.5p
Adjusted profit for the current year of £4.33m is shown after adding back Exceptional Items of £0.72m and Amortisation of
Acquisition Related Intangibles of £0.26m, and then deducting a notional tax charge of £0.19m. Adjusted earnings per share
has been calculated by dividing the adjusted profit of £4.33m by the weighted average number of ordinary shares in issue at
29 June 2019. The 2018 comparative figures have also been adjusted to a comparable basis.
Note 12 Property, plant and equipment
Freehold Land
and Buildings
Group Cost:
At June 2017
Exchange Movements
Additions
Disposals
At June 2018
Exchange Movements
Additions
Transfers to Assets Held for Sale
Disposals
At June 2019
Depreciation:
At June 2017
Exchange Movements
Additions
Provided during the year
Disposals
At June 2018
Exchange Movements
Additions
Provided during the year
Transfers to Assets Held for Sale
Disposals
At June 2019
Net book value:
At June 2019
At June 2018
£’000
7,610
-
-
-
7,610
-
-
(7,610)
-
-
2,938
-
-
115
-
3,053
-
-
108
(3,161)
-
-
-
4,557
Plant and
Machinery
£’000
26,131
66
1,631
(1,721)
26,107
23
1,088
(23,033)
(4,145)
40
19,727
36
-
1,168
(1,705)
19,226
76
-
1,154
(16,292)
(4,145)
19
21
6,881
Total
£’000
33,741
66
1,631
(1,721)
33,717
23
1,088
(30,643)
(4,145)
40
22,665
36
-
1,283
(1,705)
22,279
76
-
1,262
(19,453)
(4,145)
19
21
11,438
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
Freehold Land
and Buildings
£’000
7,610
-
-
-
7,610
-
(7,610)
-
-
2,939
113
-
-
3,052
108
(3,160)
-
-
-
-
Plant and
Machinery
£’000
23,317
1,486
-
(1,705)
23,098
900
(19,853)
(4,145)
-
17,925
943
-
(1,705)
17,163
956
(13,974)
-
(4,145)
-
-
46
Total
£’000
30,927
1,486
-
(1,705)
30,708
900
(27,463)
(4,145)
-
20,864
1,056
-
(1,705)
20,215
1,064
(17,134)
-
(4,145)
-
-
4,558
5,935
10,493
Research &
Software Development
£’000
£’000
Brand
Customer
Names Relationships
£’000
£’000
Goodwill
£’000
Total
£’000
782
420
6,015
1,746
1,473
1,145
2,618
-
-
2,618
-
-
420
734
(395)
759
695
(770)
(684)
6,015
2,700
-
8,715
-
-
1,746
380
-
2,126
-
-
-
8,715
2,126
2,618
27
360
(345)
42
684
(42)
(684)
-
-
-
-
-
-
-
-
202
197
-
399
243
-
642
-
-
-
-
-
-
-
10,436
1,145
11,581
3,850
(421)
15,010
699
(1,456)
(794)
13,459
583
583
(371)
1,158
944
(666)
(794)
642
-
717
8,715
8,715
1,484
1727
2,618
2,618
12,817
13,852
782
36
(26)
792
4
(686)
(110)
-
717
26
(26)
717
17
(624)
(110)
-
-
75
Company Cost:
At June 2017
Additions
Transfers to subsidiary
Disposals
At June 2018
Additions
Transfers to Assets Held for Sale
Disposals
At June 2019
Depreciation:
At June 2017
Provided during the year
Transfers to subsidiary
Disposals
At June 2018
Provided during the year
Transfers to Assets Held for Sale
Transfers to subsidiary
Disposals
At June 2019
Net book value:
At June 2019
At June 2018
Note 13 Intangible assets
Group Cost
At June 2017
Prior Year Adjustment
At June 2017 restated
Additions
Disposals
At June 2018
Additions
Transfers to Assets Held for Sale
Disposals
At June 2019
Amortisation:
At June 2017
Provided during the year
Disposals
At June 2018
Provided during the year
Transfers to Assets Held for Sale
Disposals
At June 2019
Net book value:
At June 2019
At June 2018
Annual Report & Accounts 2019Brand Architekts Group plc
Company Cost
At June 2017
Additions
Disposals
At June 2018
Additions
Transfers to Assets Held for Sale
Disposals
At June 2019
Amortisation:
At June 2017
Provided during the year
Disposals
At June 2018
Provided during the year
Transfers to Assets Held for Sale
Disposals
At June 2019
Net book value:
At June 2019
At June 2018
Software
£’000
Research &
Development
£’000
Brand
Names
£’000
Customer
Relationships
£’000
782
36
(26)
792
4
(686)
(110)
-
717
26
(26)
717
17
(624)
(110)
-
-
75
420
734
(395)
759
695
(770)
(684)
-
27
360
(345)
42
684
(42)
(684)
-
-
717
924
2,700
-
3,624
-
-
100
380
-
480
-
-
3,624
480
-
-
-
-
-
-
-
3,624
3,624
36
32
-
68
67
-
135
345
412
47
Total
£’000
2,226
3,850
(421)
5,655
699
(1,456)
(794)
4,104
780
418
(371)
827
768
(666)
(794)
135
3,969
4,828
Impairment testing
The three Brands (Brand Architekts, Real Shaving Co and Fish) have been tested for impairment and all three gave valuations
well in excess of their carrying values. Sensitivity analysis were carried out on each of the brands to ascertain whether any
reasonable change in assumptions would cause an impairment, no such impairment was found.
As previously the recoverable amount of each brand was determined based on value-in-use calculations, covering a 1-2year
forecast, followed by an extrapolation of expected cash flows for the remaining useful life using growth assumptions determined
by management.
The present value of the expected cash flows is determined by applying a suitable discount rate reflecting current market
assessments of the time value of money and risks specific to the brand. The rate applied is a pre-tax 8%.
Growth assumptions
For each brand management have assumed a growth rate of between 2-5% which reflects the specific initiatives planned and
the overall prospects of the sector in which it operates.
Discount rates
The discount rates reflect appropriate adjustments relating to market risk and specific risk factors.
Cash flow assumptions
Management’s key assumptions include stable profit margins, based on past experience in this market. The Group’s management
believes that this is the best available input for forecasting this mature sector.
Apart from the considerations in determining the value-in-use of the brand described above, management is not currently
aware of any other probable changes that would necessitate changes in its key estimates. The values of the intangibles that
are not amortised are the Brand Architekts brand name £5,091,000, the Fish brand name £2,700,000 and the RSC brand name
£924,000.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
Note 14 Investments
For the 52 weeks ending 29 June 2019 and 53 weeks ending 30 June 2018
48
2018
£’000
1,235
156
1,391
2018
Total
£’000
19,553
-
156
19,709
2019
£’000
1,391
(6)
(1,385)
-
2019
Total
£’000
19,709
-
(6)
(1,385)
18,318
Equity investment Investments in
held at fair value
Subsidiaries
£’000
£’000
18,318
-
-
18,318
1,391
-
(6)
(1,385)
-
-
-
-
(3,578)
(3,578)
(3,578)
(2,656)
(6,234)
12,084
(2,656)
(6,234)
12,084
-
(3,578)
16,131
Group:
Equity investments held at fair value
Cost:
Opening position
Revaluation
Transfer to Assets Held for Sale
Closing position
Company Cost:
Opening position
Additions
Revaluation
Transfer to Assets Held for Sale
Closing position
Provision for impairment:
at June 2018
Transfer from amounts due to
subsidiary undertakings
At June 2019
Net book value:
The company has transferred £2,656,000 of balances during the period in relation to dormant subsidiaries. There has been no
impact on the company profit as there were equal and opposite amounts owed to subsidiary companies that have been released
to profit during the period as they are deemed no longer due to the subsidiary companies.
The Company owns 100% of the voting rights and ordinary shares of the following subsidiary undertakings, except as indicated
below:
Name of Company
Aerosols International Limited
Atlas Group Limited
Bagsy Beauty Limited (formerly Cosmetics Plus Limited)
Tru Products Limited
Curzon Supplies Limited
Fish London Limited
The Brand Architekts Limited
Mr. Haircare Limited – 51%
Country of
Registration
England
England
England
England
England
England
England
England
Nature of Business
Dormant
Dormant
Dormant
Dormant
Non Trading
Dormant
Trading – Brands business
Trading – venture with Jamie
Stevens (Media) Limited
Swallowfield Consumer Products Limited
Swallowfield SARL, 41 rue Camille Desmoulins,
92130 Issy-Les-Moulineaux
France
Swallowfield s.r.o. Vozicka 606, 390 02 Tabor, Czech Republic
Czech Republic
Swallowfield Inc
USA
Trading
Trading
Trading
The non-controlling interest represents the share of earnings within Mr. Haircare Limited due to Jamie Stevens (Media) Limited.
The registered office of each subsidiary is the same as that of Brand Architekts Group plc except where shown otherwise.
Annual Report & Accounts 2019Brand Architekts Group plc
Note 15 Inventories
Group
Raw materials
Work in progress
Finished goods and goods for resale
Company
Raw materials
Work in progress
Finished goods and goods for resale
49
2018
£’000
6.562
297
6,966
13,825
2018
£’000
6,504
297
3,065
9,866
2019
£’000
496
-
4,715
5,211
2019
£’000
-
-
-
-
The Group consumed inventories totalling £53.7m during the year (2018: £48.2m). No items are being carried at fair value less
cost to sell (2018: £NIL).
As described in note 28, certain inventories have been transferred to assets held for sale.
Note 16 Trade and other receivables
Group
Company
Amounts owed by Group undertakings
Trade receivables
Other receivables
Prepayments
2019
£’000
3,325
-
5
145
3,475
2018
£’000
17,094
-
110
2,079
19,283
2019
£’000
-
4
-
-
4
The amounts owed by Group undertakings relate to intercompany receivables.
As described in note 28, a number of trade and other receivables have been transferred to assets held for sale.
Detailed below is the movement on the bad and doubtful debt provision for the Group and Company:
Ageing of trade receivables:
Group and Company
Opening balance
Impairment loss recognised
Amounts recovered
Charged to profit and loss
Closing balance
2019
£’000
12
(12)
-
-
-
2018
£’000
11,910
116
20
910
12,956
2018
£’000
12
-
-
-
12
An allowance has been made for estimated irrecoverable amounts of £nil (2018: £12,000). The estimated irrecoverable amount is
arrived at by considering the historic loss rate and adjusting for current expectations, client base and economic conditions. Both
historic losses and expected future losses being very low, the Directors consider it appropriate to apply a single average rate for
expected credit losses to the overall population of trade receivables and accrued income. The single expected loss rate applied
is 0% (2018 0.1%). The difference between the incurred loss method applied in the 2018 annual report and the new lifetime
expected loss rate method under IFRS 9 is considered immaterial and comparatives have not been restated. The Directors
consider that the carrying amount of trade and other receivables approximates their fair value.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
Ageing of trade receivables:
Group
Current
Overdue but less than 90 days
More than 90 days overdue
Company
Current
Overdue but less than 90 days
More than 90 days overdue
50
2018
£’000
14,065
2,180
849
17,094
2018
£’000
10,789
1,053
68
11,910
2019
£’000
3,091
213
21
3,325
2019
£’000
-
-
-
-
Our policy requires customers to pay us in accordance with agreed payment terms. Depending on the geographical location,
our settlement terms are generally due within 30 or 60 days from the end of the month of sale and do not bear any effective
interest rate. All trade receivables are subject to credit risk exposure. Where the Group identifies a specific concentration
of credit risk attached to any individually significant balances these are specifically reviewed for recoverability and suitable
provision made having regard to the credit risk identified.
Note 17 Trade and other payables
Trade payables
Amounts owed to subsidiaries
Other taxes and social security costs
Accruals
Share-based payments accrual
Commercial Invoice Discounting facility
Group
Company
2019
£’000
1,561
-
109
515
124
4,319
6,628
2018
£’000
12,425
-
454
2,139
345
8,346
23,709
2019
£’000
-
6,297
-
186
124
3,592
10,199
2018
£’000
10,583
4,774
404
1,364
345
7,229
24,699
The Directors consider that the carrying value of trade and other payables approximates to their fair value.
The Commercial Invoice Discounting (CID) facility allows a regular drawdown of cash funds in Sterling and foreign currencies,
and is secured on the book debts of the Group and Company. This facility carries an interest rate of 1.5% over base and is
repayable on demand.
As described in note 28, a number of trade and other payables have been transferred to assets held for sale.
Note 18 Interest-bearing loans and borrowings – amounts falling due within one year
Group and Company
Secured: Loans
2019
£’000
1,139
The Directors consider that the carrying value of bank loans and overdrafts approximates to their fair value.
Note 19 Interest-bearing loans and borrowings – amounts falling due after more than one year
Loans are repayable by instalments as follows:
Group and Company
Between one and two years
Between two and five years
2019
£’000
1,022
1,069
2,091
2018
£’000
1,127
2018
£’000
1,139
2,091
3,230
The Group’s loan facilities are secured by fixed and floating charges over certain of the Group’s freehold land and buildings.
The loans are over fixed terms with between one and four years remaining at a fixed annual interest rate of 2.35%.
Annual Report & Accounts 2019Brand Architekts Group plc
51
Note 20 Obligations under leases
Operating leases
At the Statement of Financial Position date, the Group and Company had outstanding commitments for future minimum lease
payments under non-cancellable operating leases, which fall due as follows:
Group
Other
Within one year
In the second to fifth years inclusive
In over five years
2019
£’000
147
299
36
482
Company
Other
Within one year
In the second to fifth years inclusive
In over five years
2019
£’000
142
292
36
470
2018
£’000
152
354
29
535
2018
£’000
145
342
29
516
Land & Buildings
2018
2019
£’000
733
1,430
-
2,163
£’000
615
1,788
-
2,403
Land & Buildings
2018
2019
£’000
464
1,009
-
1,473
£’000
346
1,126
-
1,472
Note 21 Financial instruments
The Group uses financial instruments comprising borrowings, cash and cash equivalents, and various items such as trade
receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise
finance for the Group’s operations.
The Group also has bank accounts denominated in Euros, US Dollars, Canadian Dollars, Czech Koruna, and Chinese Renminbi.
The purpose of these accounts is to manage the currency transactions arising from the Group’s operations overseas. The main
risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk and liquidity risk. The Board
reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained
unchanged from the previous year.
Interest rate risk
The Group finances its operations through a mixture of debt and equity.
The Group’s loan borrowings bear interest at rates based on the bank’s base rate. The Group Statement of Financial Position
also includes financial assets in the form of cash at bank and in hand totalling £381,000 (2018: £934,000) which are exposed
to floating interest rates based on bank base rates.
A 0.5% increase in bank base rates would reduce pre-tax profits by £63,000 in the period. A 0.5% decrease would have the
opposite effect.
Foreign currency risk
The Group is exposed to transactional foreign exchange risk. The Group seeks to hedge its exposures using bank facilities
denominated in Euros, US Dollars, Canadian Dollars, Czech Koruna, and Chinese Renminbi and also by buying and selling
products in these currencies with the objective of minimising fluctuations in exchange rates on future transactions and cash
flows.
Approximately 13% (2018: 13%) of the Group’s sales are invoiced in Euros and 18% (2018: 16%) in US Dollars. These sales are
calculated in sterling, but invoiced in Euros / US Dollars. The Group policy is to minimise currency exposures on balances for
which settlement is not anticipated until a later date through the use of the respective bank facilities. All other Group sales are
denominated in sterling.
At 29 June 2019, there were sums totalling £247,000 (2018: £318,000) held in foreign currency bank accounts.
A 5% weakening of sterling would result in a £124,000 increase in reported profits and equity, while a 5% strengthening of
sterling would result in a £118,000 decrease in profits and equity.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
52
Liquidity risk
The Group seeks to manage financial risk, to ensure sufficient liquidity is available to meet the identifiable needs of the Group
and to invest cash assets safely and profitably.
The Group’s and Company’s liabilities, including those classified as held for sale, see note 28, have contractual maturities as
summarised below:
Group
Loans and receivables
Financial liabilities at amortised cost through profit or loss
Company
Loans and receivables
Financial liabilities at amortised cost through profit or loss
Group
Loans and receivables
Financial liabilities at amortised cost through profit or loss
Financial liabilities at fair value through profit or loss
Company
Loans and receivables
Financial liabilities at amortised cost through profit or loss
Financial liabilities at fair value through profit or loss
Current
Non-current
Within 6 months
6-12 months
1-5 years Over 5 years
29 June 2019
£’000
604
20,412
21,016
£’000
591
-
591
£’000
2,143
-
2,143
£’000
-
-
-
Current
Non-current
Within 6 months
6-12 months
1-5 years Over 5 years
29 June 2019
£’000
604
17,091
17,695
£’000
591
-
591
£’000
2,143
-
2,143
£’000
-
-
-
Current
Non-current
Within 6 months
6-12 months
1-5 years Over 5 years
30 June 2018
£’000
604
21,401
300
22,305
£’000
604
-
-
£’000
3,338
-
-
604
3,338
£’000
-
-
-
-
Current
Non-current
Within 6 months
6-12 months
1-5 years Over 5 years
30 June 2018
£’000
604
17,918
300
18,822
£’000
604
-
-
£’000
3,338
-
-
604
3,338
£’000
-
-
-
-
No gains or losses have been recognised in the period in respect of financial liabilities held at amortised cost.
A gain of £0.3m has been recognised in the Statement of comprehensive income in respect of financial liabilities held at fair
value through profit and loss.
Working capital
The Group’s working capital policy is to fund short-term movements through excess cash generated from the trading business.
The Group had £10.7m (2018: £15.6m) undrawn committed borrowing facilities available at June 2019. The maturity profile of
committed bank facilities is regularly reviewed and such facilities are extended or replaced well in advance of their expiry.
Annual Report & Accounts 2019Brand Architekts Group plc
53
Capital maintenance
The Group’s objectives when managing capital are:
•
to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders
and benefits for other stakeholders;
•
•
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk; and
to maintain an optimal capital structure to reduce the cost of capital.
The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to
it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust
the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares, or sell assets to reduce debt.
Financial assets
Financial assets included in the Statement of Financial Position relate to the following IFRS9 categories (including those held for
sale at the period end – see note 28):
Loans and receivables
Fair value through profit or loss
Group
Company
2019
£’000
15,730
1,385
17,115
2018
£’000
18,138
1,391
19,529
2019
£’000
12,222
1,385
13,607
2018
£’000
12,783
1,391
14,174
No gains or losses have been recognised in the period in respect of financial assets held at amortised cost.
The financial assets are included in the Statement of Financial Position within the following headings:
Non-current assets
Investments
Current assets:
Trade receivables
Other receivables
Intercompany receivables
Cash and cash equivalents
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
1,385
1,391
1,385
1,391
15,317
32
-
381
17,115
17,094
110
-
934
19,529
11,992
79
4
147
13,607
11,910
20
116
737
14,174
Financial liabilities
Financial liabilities included in the Statement of Financial Position relate to the following categories (including those held for
sale at the period end – see note 28):
Current liabilities:
Borrowings
Trade payables
Intercompany payables
Accruals
Other payables
Non-current liabilities:
Borrowings
Group
Company
2019
£’000
1,139
14,865
-
1,986
4,319
2,091
24,400
2018
£’000
1,127
12,424
-
2,484
8,346
3,230
27,611
2019
£’000
1,139
13,209
8,953
1,350
3,592
2,091
30,334
2018
£’000
1,127
10,582
4,774
1,709
7,229
3,230
28,651
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
Note 22 Deferred tax liabilities
The movement in deferred tax provisions is analysed as follows:
Group
Deferred taxation
At June 2017
Recognised in profit or loss
Recognised in other
comprehensive income
Prior Year Adjustment
Temporary exchange differences
At June 2018
Recognised in profit or loss
Recognised in other
comprehensive income
Temporary exchange differences
At June 2019
Deferred tax is represented by:
Capital allowances in advance
of depreciation
Temporary difference on post
retirement benefit obligations
Other temporary differences
Temporary exchange differences
Recognised as:
Deferred tax assets
Deferred tax liabilities
Deferred tax (asset)/liability
held for resale
Company
Deferred taxation
At June 2017
Recognised in profit or loss
Recognised in other
comprehensive income
At June 2018
Recognised in profit or loss
Recognised in other
comprehensive income
At June 2019
Deferred tax is represented by:
Capital allowances in advance
of depreciation
Temporary difference on post
retirement benefit obligations
Other temporary differences
Total
2019
£’000
1,566
(1,601)
(55)
-
(90)
(1,714)
1,061
563
(90)
2019
£’000
506
(1,601)
(53)
(1,148)
54
£’000
(681)
1
287
1,145
-
752
19
(857)
(4)
(90)
2018
£’000
410
(763)
(40)
(393)
(803)
410
-
(393)
(683)
287
-
(396)
105
(857)
(1,148)
2018
£’000
410
(763)
(43)
(396)
Annual Report & Accounts 2019Brand Architekts Group plc
Recognised as:
Deferred tax assets
Deferred tax liabilities
Deferred tax (asset)/liability
held for resale
Total
(1,645)
-
497
(1,148)
55
(806)
410
-
(396)
Provision has not been made for deferred taxation on the full carrying value of the Group’s land and buildings, on the basis
that the full value of these assets will not be recovered through use and that indexation will result in no taxable gain arising
on disposal.
Note 23 Share capital and reserves
Equity ordinary share capital
Authorised share capital 25,800,000
shares of 5p each
Allotted, called-up and fully paid
ordinary shares at 29 June 20 and 30
June 2018
Shares in issue
2019
£’000
1,290
2018
£’000
1,290
857
857
At the both the beginning and end of the financial year there were 17,135,542 shares in issue.
Share premium
Share premium reserve includes the accumulated premium on the issue of share capital.
Revaluation of investment reserve
The Group has a total shareholding in the Chinese business, Shanghai Colour Cosmetics Technology Company Limited (SCCTC)
of 13.3%. In line with IFRS9, the equity instrument has been held at fair value. Gains and losses are held in a separate reserve.
Exchange reserve
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income and
accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment
is disposed of.
Pension re-measurement reserve
Actuarial re-measurement of plan liabilities recognised in other comprehensive income and accumulated in a separate reserve
within equity, net of the impact of deferred tax.
Retained earnings
Retained earnings account includes all current and prior period profits and losses.
Note 24 Notes to Cash Flow Statement
Group
(a) Reconciliation of cash and cash equivalents to movement in net debt:
(Decrease)/Increase in cash
and cash equivalents
Net cash outflow/(inflow) from
decrease/(increase) in borrowings
Change in net debt
Opening net debt
Closing net debt
2019
£’000
(553)
5,154
4,601
(11,769)
(7,168)
2018
£’000
(3,123)
(5,005)
(8,128)
(3,641)
(11,769)
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
Company
(a) Reconciliation of cash and cash equivalents to movement in net debt:
(b) Analysis of net debt:
Cash at bank and in hand
CID facility
Borrowings due within one year
Borrowings due after one year
(Decrease)/Increase in cash
and cash equivalents
Net cash outflow/(inflow) from
decrease/(increase) in borrowings
Change in net debt
Opening net debt
Closing net debt
(b) Analysis of net debt:
Cash at bank and in hand
Secured debt facility
Borrowings due within one year
Borrowings due after one year
Note 25 Capital Commitments
Group and Company
Contracted for but not provided
56
Non-Cash
Movement Closing 2019
£’000
£’000
8
-
-
-
8
381
(4,319)
(1,139)
(2,091)
(7,168)
2018
£’000
(2,234)
(3,965)
(6,199)
(4,650)
(10,849)
Closing 2018
Cash Flow
£’000
934
(8,346)
(1,127)
(3,230)
(11,769)
£’000
(561)
4,027
(12)
1,139
4,593
2019
£’000
(590)
4,764
4,174
(10,849)
(6,675)
Closing 2018
Cash Flow
£’000
737
(7,229)
(1,127)
(3,230)
(10,849)
£’000
(591)
3,637
(12)
1,139
4,173
2019
£’000
198
Non-Cash
Movement Closing 2019
£’000
£’000
1
-
-
-
1
147
(3,592)
(1,139)
(2,091)
(6,675)
2018
£’000
270
Note 26 Post retirement benefits
The Group and Company operate defined contribution pension plans, all of which are funded by the payment of contributions to
separately administered plans.
The Group and Company operates a funded defined benefit plan, the Aerosols International Pension Plan (the Plan) in the UK
which provides both pensions in retirement and death benefits to members.
Contributions to defined contribution plans are expensed when they become due for payment and amounted to £840,000
(2018: £780,000) of which £15,000 related to continuing and £825,000 related to discontinued businesses. Employer
contributions to these plans varied between 2% and 7% of salary depending on the plan and the level of employee contributions.
The Group has an obligation to ensure that the Plan has sufficient funding, and promises of future funding, to pay pensions to
its members, who are some of the current and former employees of the contract manufacturing business sold to KDC/One in
August 2019.
The Plan is set up as a Trust, separate from the Group, and managed by the Trustees. The Trust has committed to pay both
pensions in retirement and death benefits to members.
Annual Report & Accounts 2019Brand Architekts Group plc
57
The Group’s obligation to the Plan continues following the sale of the contract manufacturing business. An agreed Schedule of
Contributions is in place under which the Group commits to make deficit reduction payments, and to pay (i) the administration
costs of the Trust (with the exception of investment management charges), and (ii) the Pension Protection Fund levies, for
the life of the Plan . This commitment will be reviewed and may be altered once the results of the next triennial valuation of
the Fund at 5 April 2020 have been finalised. Triennial valuations are prepared using a different basis to the IAS 19 valuation
of liabilities, and the IAS 19 valuation included in these accounts does not provide any indication of what the outcome of the
triennial funding valuation might be.
Payments made by the Company to the Plan and in respect of Plan liabilities were:
Company pension contributions
Deficit recovery payments
Plan administrative expenses
Pension Protection Fund premium
Total
The amounts expensed in the Group Statement of Comprehensive Income were:
In Operating profit:
Company pension contributions
Plan administrative expenses
Pension Protection Fund premium
In Exceptional items (note 3)
Past service charge – GMP equalisation
In Finance costs:
Unwinding of notional discount factor
Total
2019
£’000
-
282
179
108
569
2019
£’000
-
179
108
287
290
126
703
2018
£’000
-
108
171
222
501
2018
£’000
-
171
222
393
-
155
548
The deficit reduction payment will be £318k per annum (previously £108k per annum) for seven years to 2025 and £210k for a
further three years to 2028. Anticipated payments by the Company in respect of plan administrative expenses and the pension
protection fund premium in the year ending 30 June 2020 are expected to be of a similar order of magnitude to payments in
2019.
IAS 19 Employee Benefits
IAS 19 requires that the assets and liabilities to members of the Plan are consolidated in these Group accounts using the
valuation method prescribed in the accounting standard. The effects of the application of IAS19 on the statement of financial
position at June 2019 are:
Increase in pension and other benefit obligations
Increase in deferred tax
Decrease in equity
2019
£’000
(4,832)
821
(4,011)
The Accounting Standards require the discount rate to be based on yields on high quality (usually AA-rated) corporate bonds
of appropriate currency, taking into account the term of the relevant pension plan’s liabilities. Corporate bond indices are often
used as a proxy to determine the discount rate. At the reporting date, the yields on bonds were lower than they were at June
2018. This has resulted in higher discount rates being adopted for accounting purposes as compared to last year which has
translated into a reduced liability.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
(a) The principal actuarial assumptions used at the Statement of Financial Position date were as follows:
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Deferred revaluation for benefits in excess of GMP
Employed deferred members
Deferred members
Rate of increase in pensions in payment:
CPI, max 3% (2017: max 3%)
RPI, max 5% (2017: max 5%)
RPI, max 2.5% (2017: max 2.5%)
Mortality assumptions:
Life expectancy of male aged 65 now
Life expectancy of female aged 65 now
Life expectancy of male aged 65 in 20 years
Life expectancy of female aged 65 in 20 years
2019
2.40%
3.10%
2.10%
2.60%
2.10%
1.91%
3.04%
2.18%
20.9
23.1
22.2
24.6
58
2018
2.80%
3.00%
2.00%
2.50%
2.00%
1.85%
2.95%
2.15%
20.8
22.7
22.1
24.2
The assumptions used in determining the overall expected return on the plan’s assets have been set with reference to yields
available on corporate bonds.
(b) The assets in the plan at the Statement of Financial Position date were as follows:
Equities
Property
Index Linked Gilts
Corporate Bonds
Diversified Growth Funds
LDI funds
Other
Fair value of plan assets
2019
Market
Value
£’000
9,188
1,652
2,449
1,954
6,686
1,903
313
24,145
2018
Market
Value
£’000
8,897
1,596
2,233
1,990
6,128
1,947
222
23,013
The actual return on plan assets was an increase of £1.5m (2018: increase £0.6m).
The plan assets do not include any of the Company’s own financial instruments, nor any property occupied by, or assets used by,
the Company.
(c) Amounts recognised in the Statement of Financial Position:
Present value of funded obligations
Fair value of scheme assets
(Deficit)
Net liability recognised in the
Statement of Financial Position
2019
£’000
(33,562)
24,145
(9,417)
2018
£’000
(27,502)
23,013
(4,489)
(9,417)
(4,489)
Annual Report & Accounts 2019Brand Architekts Group plc
(d) Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
Benefit obligation at beginning of year
Movement in the year:
Notional finance cost
Actuarial gains/(losses) - financial
Actuarial (loss) / gain – demographic
Actuarial (losses) - experience
Past Service Cost
Net benefits paid out
Benefit obligation at end of year
(e) Reconciliation of opening and closing balance of the fair value of plan assets:
Fair value of plan assets
at beginning of year
Movement in the year:
Notional interest on plan assets
Return on assets, excluding
interest income
Contributions - employer
Benefits paid out
Fair value of plan assets at end of year
2019
£’000
(27,502)
(770)
(3,320)
(260)
(2,106)
(290)
686
(33,562)
2019
£’000
23,013
644
854
320
(686)
24,145
(f) Re-measurement of the net defined benefit liability to be shown in other comprehensive income:
Net re-measurement - financial
Net re-measurement – demographic
Net re-measurement – experience
Return on assets,
excluding interest income
Deferred taxation
Total re-measurement of the net
defined benefit liability to be
shown in OCI
2019
£’000
3,320
260
2,106
(854)
(4,832)
821
(4,011)
59
2018
£’000
(29,438)
(738)
1,660
100
(113)
-
1,027
(27,502)
2018
£’000
23,306
583
43
108
(1,027)
23,013
2018
£’000
(1,660)
(100)
113
(43)
(1,690)
287
(1,403)
(g) History of plan - the history of the plan for the current year and prior years is as follows:
Statement of Financial Position
Present value of defined benefit obligation
Fair value of plan assets
At end of year
2019
£’000
(33,562)
24,145
(9,417)
2018
£’000
(27,502)
23,013
(4,489)
2017
£’000
2016
£’000
2015
£’000
(29,438)
(24,694)
(22,970)
23,306
(6,132)
20,199
(4,495)
20,308
(2,662)
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
60
Characteristics of the Plan and the risks associated with the Plan
a) Information about the characteristics the Scheme
i.
The Plan provides pensions in retirement and death benefits to members. Pension benefits are linked to a member’s
final salary at retirement and their length of service. As of 31 December 2015, the Plan closed to future accrual.
The Plan is a registered plan under UK legislation and was contracted out of the State Second Pension.
The Plan is subject to the plan funding requirements outlined in UK legislation. The last agreed plan funding valuation
ii.
iii.
of the Plan was as at 5 April 2017 and revealed a deficit of £2,599,000.
iv.
The Plan membership as at 5 April 2017 comprised 279 deferred pensioner members and 12 pensioner members.
Since 31 December 2015, the Plan has been closed to future accrual with those active members if still employed by
the Company transferring to a new category of employed deferred member. If no longer employed, they became a
deferred member.
v.
The Plan was established from 1 January 1987 under trust and is governed by the Plan’s trust deed and rules dated
19 January 2001. The Trustees are responsible for the operation and the governance of the Plan, including making
decisions regarding the Plan’s funding and investment strategy in conjunction with the Company.
b) Information about the risks of the Plan to the Company
The Plan exposes the Company to actuarial risks such as; market (investment) risk, interest rate risk, inflation risk, currency risk
and longevity risk. The small number of Plan members means that the Plan and ultimately the Company are exposed to the
experience (such as life expectancy and take-up of member options) of individual members. The Plan does not expose the
Company to any unusual Plan-specific or Company-specific risks.
c) Information about any amendments, curtailments and settlements
There has been no allowance for any amendments, curtailments, or settlements within this accounting period.
On the 26th October 2018, a High Court judge ruled that the trustees of UK defined benefit pension Plans must compensate
members for sex inequalities attributable to guaranteed minimum pensions (GMPs). The Plan has benefits which include GMPs
and as such will need to take action to address this inequality. The outcome of this will be to increase the liabilities of the Plan.
Whilst the Trustees have not yet taken any steps to amend benefits in the Plan to deal with inequalities arising from GMPs the
company has estimated the potential impact as a prior service cost.
Amount, timing and uncertainty of future cash flows
a) Sensitivity analysis
Please note that the results in the disclosures are inherently volatile, particularly the figures shown on the statement of financial
position. The results disclosures are dependent on the assumptions chosen by the Directors’.
The table below shows the approximate impact of varying the key assumptions adopted as at June 2019
Discount rate (increase of 0.25% pa)
Rate of RPI inflation (increase of 0.25% pa)
Mortality (1.5% long term rate)
Decrease by
Increase by
Increase by
b) Description of asset-liability matching strategies
June 2019
£’000
£1,800
£1,400
£450
The Trustees holds a proportion of the Plan’s assets in pooled funds invested in gilts, corporate bonds and liability driven
investment funds to provide some degree of matching with the Plan’s liabilities.
Liability driven investment funds and index-linked gilts fund are used to provide a degree of price inflation and interest rate
matching with the liabilities.
Annual Report & Accounts 2019Brand Architekts Group plc
61
c) The Plan’s investment strategy
The Plan’s investment strategy is to invest broadly 75% in return seeking and 25% in matching assets, which include leveraged
liability driven investment funds in order to hedge some of the Plan’s interest rate and inflation exposure. This strategy reflects
the Plan’s liability profile and the Trustees’ and Employer’s attitude to risk.
The Plan holds a number of annuity policies which match a portion of pensions in payment.
Note 27 Related parties
Compensation of key management personnel (including directors):
Short term employee benefits
Post-employment benefits
2019
£’000
771
44
815
2018
£’000
2,665
55
2,720
Directors and their Interests
The Directors who served during the year and their interests in the Company’s share capital are as follows:
B M Hynes
C G How
J M Fletcher
M Gazzard
F P Berrebi
T Perman
R S McDowell
E J Beale
29 June 2019
Ordinary Shares
74,914
201,698
104,216
3,000
-
12,000
389,205
-
30 June 2018
Ordinary Shares
24 June 2017
Ordinary Shares
74,914
226,434
102,216
3,000
-
-
344,189
-
74,914
89,977
37,374
-
-
-
344,189
-
Mr E J Beale’s Director’s fees have been surrendered to his primary employer, Marshall Monteagle plc. He is a director of Western
Selection PLC, who have a beneficial interest in 7.6% of the Company’s issued share capital at the reporting date. Director’s Fees of
£29,000 were paid or are payable for the year ended June 2019 (2018: £29,000).
During the year the Group sold finished goods to the value of £80,000 (2018: £69,000) to Monteagle International Ltd,
a subsidiary of Marshall Monteagle plc. Mr E J Beale is a director of Monteagle International Ltd.
In the year to June 2019, Brand Architekts Group plc purchased goods and services amounting to £2,710,000 (2018: £2,468,000)
from Swallowfield s.r.o.
At the year end the Company had payables due to Swallowfield s.r.o. amounting to £42,000 (2018: £144,000) being disclosed
within ‘Trade and other payables’ (see Note 17). ‘Trade and other payables’ also includes an amount of £2,494,000 (2018:
£2,494,000) in respect of amounts due to dormant subsidiaries (see Note 17).
In the year to June 2019, the Company purchased services amounting to £267,000 (2018: £nil) from Swallowfield SARL. At the
2019 year end the Company had a balance due from Swallowfield SARL amounting to £2,000 (2018: £114,000) being disclosed
within ‘Trade and other receivables’ (see Note 16).
In the year to June 2019, the Company purchased services amounting to £141,000 (2018: £135,000) from Swallowfield Inc. At the
2019 year end the Company had payables due to Swallowfield Inc. amounting to £63,000 (2018: £54,000) being disclosed within
‘Trade and other payables’ (see Note 17).
In the year to June 2019, the Company sold products to the value of £170,000 (2018: £102,000) to MR Haircare Limited, a joint
venture with Jamie Stevens (Media) Limited. At the 2019 year end the Company had payables due to MR Haircare Limited of
£282,000 (2018: £100,000) being disclosed within ‘Trade and other payables’ (see Note 17). In the year to June 2019 MR Haircare
Limited made a profit of £206,000 (2018: profit £187,000) and this is reported in the Group results.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
62
In the year to June 2019, the Company sold products to the value of £2,024,000 (2018: £358,000) and also operated an inter-
company current account with Brand Architekts Limited, a wholly owned subsidiary. At the 2019 year end the Company had
payables due to Brand Architekts Limited of £5,177,000 (2018: £1,431,000) being disclosed within ‘Trade and other payables’
(see Note 17). In the year to June 2019 Brand Architekts Limited made a profit after tax of £2,909,000 (2018: £3,599,000) and
this is reported in the Group results.
In the year to June 2019, the Group purchased finished products for resale amounting to £2,801,000 (2018: £3,641,000) from
SCCTC, a Chinese manufacturer of cosmetics products in which the Group holds a 13.3% shareholding. At the 2019 year end the
Group had payables due to SCCTC amounting to £502,000 (2018: £724,000) being disclosed within ‘Trade and other payables’
(see Note 17).
During the year, Brand Architekts Group plc operated an inter-company loan facility with Swallowfield Consumer Products Limited
with the balance at the year-end of £734,000 due to Swallowfield Consumer Products Limited (2018: £366,000 due to Swallowfield
Consumer Products) being disclosed within ‘Trade and other payables’ (see Note 17). Interest of £12,000 (2018: £5,000) was
payable on this loan during the year to Swallowfield Consumer Products.
Annual Report & Accounts 2019Brand Architekts Group plc 63
Note 28 Non-adjusting post period end events - discontinued operations
In July 2019, the Group sold its 100% interest in Curzon Supplies Ltd for consideration of £35m (completing the disposal of the
Manufacturing segment) which is the only operation presented as discontinued operations in 2019. Curzon Supplies Ltd was
incorporated in March 2019.
Although the transaction completed after the period end it was more likely than not to go through at the balance sheet date
and so results have been disclosed here. The financial results of this business has been treated as discontinued operations in
both the current and prior year financial statements in line with IFRS5. The remaining activities within the Group are referred
to as continuing operations.
As a result the following assets and liabilities have been classified as held for sale:
Net assets held for sale
Property, plant and equipment
Intangible fixed assets
Equity instruments held at fair value
Inventories
Trade and other receivables
Trade and other payables
Deferred tax liability
Result of discontinued operations
Expenses other than finance costs
Revenue
Investment Income
Exceptional costs
Tax (expense) / credit
Profit / (Loss) for the year
Earnings per share from discontinued operations
Basic earnings per share
Diluted earnings per share
Cashflow in respect of discontinued activities
Operating cash flows
Investing cash flows
Financing cash flows
Total cash flows
Group
2019
£’000
11,190
779
1,385
10,743
13,966
Company
2019
£’000
10,329
779
1,385
10,743
13,962
(14,800)
(14,550)
(563)
22,700
2019
£’000
57,663
(497)
22,151
2018
£’000
52,860
(55,835)
(50,709)
1,146
(669)
(255)
2,050
2019
£
12.6
11.6
2019
£000
6,717
(602)
(3,637)
2,478
(12)
-
(438)
1,701
2018
£
10.0
9.7
2018
£000
1,619
(879)
1,701
2,441
Included in Exceptional costs in discontinued operations are restructuring charges of £535k and deal fees of £88k.
Note 29 Prior Year Adjustment
A deferred tax liability was not recognised in respect of customer relationships and brands, which were assets that were
separately identified in the acquisition of Brand Architeks Limited. This has historically resulted in an understatement of Goodwill
and the deferred tax liability of £1,145k. This has been restated in the comparative information. There has been no impact to the
previously stated retained earnings, net assets and cash flows.
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc
64
Five Year Summary
The following five-year summary has been produced to allow improved comparisons to be made between the current results
and those of prior years.
Unaudited
IFRS audited
Financial Year
2019
£’000
IFRS audited
IFRS audited
IFRS audited
IFRS audited
Financial Year
20181 restated
£’000
Financial Year
Financial Year
Financial Year
2017 restated
£’000
2016
£’000
2015
£’000
Number of weeks in financial year
52
53
52
52
52
Statement of Comprehensive Income
Reported Revenue
Adjustment for 53rd week
Revenue
Operating profit before exceptional items
Exceptional items
Operating profit after exceptional items
Net interest
Profit before taxation
Taxation
Profit attributable to equity
shareholders of the parent
Profit attributable to non-controlling interest
Payments to shareholders
Statement of Financial Position
Non-current assets
Net current assets
Total assets less current liabilities
Non-current liabilities:
Loans and lease finance
Long term employee benefits
Deferred tax
Equity
Net debt
77,338
-
77,338
4,227
(891)
3,336
757
4,093
(453)
3,539
101
(1,123)
27,409
10,967
38,376
(2,091)
(9,417)
(1,127)
25,741
7,168
73,945
(2,298)
71,647
4,976
(279)
4,697
(173)
4,524
(891)
3,542
91
(963)
26,339
8,812
35,151
(3,230)
(4,489)
(69)
27,022
11,769
74,314
-
74,314
3,675
(343)
3,332
(217)
3,115
(543)
2,554
18
(675)
22,889
7,619
30,508
(1,559)
(6,132)
(407)
22,410
3,641
54,455
49,447
-
-
54,455
49,447
1,793
645
2,438
(164)
2,274
(273)
2,001
-
(317)
13,988
4,500
18,488
(442)
(4,495)
(414)
13,137
4,331
996
-
996
(182)
814
(68)
746
-
-
13,061
3,511
16,572
(583)
(2,662)
(403)
12,924
5,390
Statistics
Weighted average number of shares in issue
17,135,542
16,934,762
16,834,773
11,306,416
11,306,416
Undiluted earnings per share
Gearing
Dividends per share (paid)
20.7
28%
6.6
20.9
44%
5.5
15.2p
17%
4.0p
17.7p
34%
2.8p
6.6p
42%
-
1 Except for revenue, where the relevant adjustment has been shown above, no material changes would be required to the
income statement to adjust the 2018 financial year numbers to a 52-week basis.
Annual Report & Accounts 2019Brand Architekts Group plc
65
Annual Report & Accounts 2019FINANCIAL STATEMENTSBrand Architekts Group plc 66
Corporate Directory
Directors
B M Hynes
(Executive Chairman)
R S McDowell
(Non-Executive Director)
E J Beale
(Non-Executive Director)
Secretary
B M Hynes
Registered Office
8 Waldegrave Road
Teddington
TW11 8GT
Stockbrokers
N+1Singer Singer Advisory LLP (N+1 Singer)
One Bartholomew Lane
London
EC2N 2AX
Financial PR
Alma PR
Aldwych House
71 – 91 Aldwych
London WC2B 4HN
Registered Number
01975376
Financial Calendar
2019 Annual General Meeting
Proposed final dividend payment
Interim results announcement
Interim dividend payment
Announcement of 2020 final results
2020 Annual General Meeting
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgewater Road
Bristol
BS99 7NH
Auditors
PKF Francis Clark
Centenary House
Peninsula Park
Rydon Lane
Exeter
EX2 7XE
Solicitors
Osborne Clarke
2 Temple Back East
Temple Quay
Bristol
BS1 6EG
Bankers
HSBC Bank plc
3 Rivergate
Temple Quay
Bristol
BS1 6ER
Website Address
www.brandarchitektsplc.com
20 November 2019
6 December 2019
March 2020
May 2020
September 2020
November 2020
Annual Report & Accounts 2019Brand Architekts Group plc www.brandarchitektsplc.com