Annual
Report
2021
Annual Report & Accounts 2021
Strategic Report
Highlights
Business Overview
Investment Case
Chairman’s Statement
CEO’s Statement
Business Model
Market Context
Project 50
Principal Risks and Uncertainties
Stakeholder Engagement and
Section 172
Financial Review
Governance
Board of Directors
Corporate Governance Report
Directors’ Report
01
02
12
14
16
20
22
24
26
28
31
33
34
38
40
Financial Statements
Independent Auditor’s Report
Group Statement of
Comprehensive Income
45
Group Statement of Financial Position 46
Company Statement of
Financial Position
47
Group Statement of Changes in Equity 48
Company Statement of
Changes in Equity
Cash Flow Statement
Notes to the Accounts
Corporate Directory
49
50
51
78
Brand Architekts
is a challenger
British beauty brand
business, focused on:
– insight-led brand
development
– ethical and efficient
sourcing and
manufacturing
– omnichannel routes
to market
– brand invigoration
See pages 20 to 21
for more information about our business model
Brand Architekts Group plc 01
Annual Report & Accounts 2021
Highlights
Financial highlights1
Revenue
£15.9m
-2.3% (2020: £16.3m)
Loss before
taxation
(£1.9m)
(2020: £4.3m)
Underlying gross
profit margin2
36.9%
+170 bps (2020: 35.2%)
Net cash
£19.0m
(2020: £18.0m)
Financial highlights
– Resilient performance of our business, with FY
revenue down 2.3% to £15.9m (2020: £16.3m),
supported by H2 revenue increasing 10% on the
prior year, nearly offsetting on a full year basis a
10% decline in H1 revenue.
Improved underlying gross profit margin up
170 bps to 36.9% (2020: 35.2%) driven by lower
product discount expenditure in the year and
higher margin product mix.
–
– Underlying operating loss of (£0.3m), £0.4m
lower than the prior year (2020: £0.1m),
absorbing the investment in our first ever
brand advertising campaign for key skincare
brand, Super Facialist in H2.
– Net cash up £1m to £19.0m (2020: £18.0m)
from working capital efficiencies due to
improved inventory planning as well as brand
and product line optimisation. Repayment of
outstanding term loans (£2.1m) and commercial
invoice discounting facility (£1.1m) leaving the
Group debt free.
Underlying operating
(loss)/profit3
(£0.3m)
(2020: £0.1m)
1 All prior year comparatives exclude discontinued operations.
2 Underlying gross profit margin is calculated before exceptional items included in costs of sales
(further information in note 3 of the financial statements).
3 Underlying operating (loss) / profit is calculated before exceptional items, share-based
payments and amortisation of acquisition-related intangibles.
Brand Architekts Group plc 02
Annual Report & Accounts 2021
Business Overview
Brand
Architekts:
who we are
Brand Architekts plc
offers a wide portfolio of
challenger brands, sold
throughout the UK and
in the international
beauty space.
Each brand answers the specific
needs of the consumer through
a unique combination of nature,
science and years of experience.
Our broad portfolio ranges from
skincare, haircare and bodycare to
bathing, gifting and accessories.
Our brands are available on the
high street in leading pharmacy
and drugstore chains; in national
grocery stores; on the platforms
of global e-tailers; and through
our own e-commerce websites.
Our range is a broad church,
enabling us to flex with changing
consumer behaviour and
macroeconomic factors.
Brand Architekts Group plcStrategic Report 03
Annual Report & Accounts 2021
Brand Architekts has
a dozen brands and
multiple products.
Super Facialist
Dirty Works
Be your own Super Facialist
The brand has a range of seven
science-based regimes for women.
Addresses skin brightening,
hydration, anti-blemish, anti-ageing,
firming and sensitive skin. There is
also a further regime for the needs
of male skin.
Its mild yet demonstrably effective
formulations are designed for
everyone, of every age. Super
Facialist has extensively extended
its reach during the reporting year,
including launching into Douglas and
Tesco Ireland.
Good clean fun,
in a bathroom near you
Dirty Works doesn’t take itself too
seriously, but this fragrance-fest
of bathroom escapism includes
scrubs (“Foam at Last”), fizz bars
(“Cube Tropicana”), bath bombs
(“And on That Bombshell”) and
more than 64 other fun yet indulgent
products. The brand covers all kinds
of washing and bathing, skincare
accessories and gifting.
Dirty Works is available at
Sainsbury’s and in over a dozen
countries, notably Ireland, Australia,
Mexico, Chile, Greece and Eastern
Europe.
Dr SALTS+
Kind Natured
The brand with the big heart
At Kind Natured we believe in
keeping it as natural as possible –
the range includes a selection of
97% natural bathing, bodycare,
haircare and footcare products. All
vegan-friendly and a pleasure to use.
Happy Naturals
A collection of haircare and washing
& bathing products packed with
efficacious, vegan, delicious
smelling, 97% natural formulations.
Created with sustainability in mind –
it’s a Daily Dose of Positivity for you
and the planet.
Kind Natured is available at Boots,
leading e-tailers and in six key
international markets.
Happy Naturals is available in
Sainsbury’s and recently launched
in Carrefour in Qatar.
Therapeutic solutions
The Dr SALTS+ range is comprised of
benefit-led bath and shower products
that harness the therapeutic benefits
of Epsom Salts.
Bathing in quality salts with the
highest concentration of natural
minerals helps the body, skin and
muscles to replenish, stay healthy and
soothe aching muscles post-exercise.
Dr SALTS+ is available at Tesco,
Waitrose, Amazon, Feel Unique and
other leading e-tailers.
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Annual Report & Accounts 2021
Business Overview continued
The Solution
Ingredient-led bodycare that
gets right to The Solution
The Solution provides hard-
working, radiance-revealing body
formulations developed by a
passionate team of skincare experts
and scientists. Using the power
of proven active ingredients at
efficacious levels to target your skin
concerns, it helps promote healthier
skin across the whole body!
Argan+
A highly effective, multi-benefit,
ingredient-led range with premium
quality formulations. Each product
contains our unique five-oil blend,
a 100% natural combination of
our precious Moroccan Argan Oil
with four other nutrient-rich oils,
Baobab, Kukui, Moringa and Sacha
Inchi. All of our oils are selected
for their nourishing and restorative
properties.
Available in the UK at Superdrug,
e-tailers and in New Zealand,
Italy and Ireland.
The range consists of haircare,
washing & bathing, bodycare and
skincare and is available at Waitrose.
SenSpa
Together with the SenSpa experts
at the multi-award-winning Spa at
Careys Manor in the New Forest,
SenSpa is a licensed hair, bath and
body therapy range, that combine
a fusion of eastern and western
extracts with natural and effective
ingredients.
All products are at least 97% natural.
Root Perfect
Fish
Perfect roots
Root Perfect is our number one value
proposition. Despite being one of
the UK’s most affordable instant root
concealers, its technically advanced,
high quality, tried-and-tested
formulations ensure a long lasting,
flawless and natural look. The five
shades use blended pigments to
cover a spectrum of hair colours.
Root Perfect is available across the
UK value channel.
Born in Soho
Born in 1987, Fish Soho is
a professional-grade, high-
performance haircare and styling
range straight out of Soho, London.
Fish Soho gives you the freedom
to discover your own distinctive/
authentic style with confidence.
Fish is available in Boots, Superdrug,
Waitrose, e-tailers and in four
international markets, including
Ireland.
Brand Architekts Group plcStrategic Report 05
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Annual Report & Accounts 2021
Business Overview continued
Be your own
Super Facialist…
Brand proposition:
Optimising our portfolio:
Super Facialist offers uncomplicated,
mix-and-match skincare at an affordable
price point. The brand blends the best of
science and nature with exquisite
fragrance, to give consumers that
facialist feeling in the comfort of their
own homes.
Operational Efficiency:
(utilising data analysis to
effectively launch New
Product Development
(NPD))
Using external data and customer
insights, Super Facialist launched five
NPD lines in FY21 – Retinol+ Firming Eye
Cream, Hexapeptide 9 Cleansing Milk,
Serum and Night Cream, and Skin
Perfecting Primer.
As part of the business’ fewer, bigger,
better strategy the Super Facialist range
line up was rationalised by five products
to make way for the five new lines.
A&P investment across trade marketing,
ongoing PR support, digital asset
creation, paid digital advertising and the
brand’s first ever media campaign.
Advertising campaign
objectives
–
–
–
Increase brand awareness
Increase distribution
Incremental net sales
Strategic Report 07
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Annual Report & Accounts 2021
The creative:
The campaign creative was the antithesis
to the traditional sterile, heavily scientific,
and often unobtainable beauty of typical
skincare ads. Instead, with a dose of
humour, the creative captures the frantic
and often chaotic routines of women as
they juggle work, family commitments,
social time, studies and more, all whilst
trying to care for themselves. The
advertising shows relatable scenarios
that positions Super Facialist as the
everyday skincare brand that fits neatly
into women’s lives.
The media campaign:
TV activity ran throughout May and June
across all Channel 4 channels, plus UKTV
and video on demand with All4. The
Channel 4 Greenhouse Fund matched
our TV investment on a like-for-like basis,
effectively doubling our investment. The
TV activity was supported by skippable
YouTube advertising; Digital Display
advertising through Teads; advertising
on key social networks, such as Facebook
and Instagram; and finally a specific
Influencer campaign entitled
#KeepItSuperReal.
Channel development
(omnichannel approach):
Distribution gains pre media
Prior to the media campaign going live
Super Facialist secured listings in
Waitrose, BooHoo and Just My Look.
Media results:
– Brand awareness as measured by
Kantar increased by 50% between
November 2020 and June 2021.
– New listings confirmed in Tesco
and Morrisons in July 2021.
Overall:
– Super Facialist net sales have
increased to £3.2m up 30% versus
the prior year.
08
Annual Report & Accounts 2021
Business Overview continued
theunexpektedstore will be the newest beauty
retailer on the block.
Our story
What makes us different? Every product onsite has been
created and developed by our in-house team of British
beauty experts, who are passionate about combining
indulgent formulations with affordable price-tags
to give customers an incredible beauty experience,
without compromise.
Each brand answers the specific needs of our customers
through a unique combination of nature, science and
years of experience. Our broad portfolio ranges from
skincare, haircare and bodycare to bathing, gifting,
accessories and men’s; brought to you by brands such
as Super Facialist, Dirty Works, Dr SALTS+, Argan+,
SenSpa, Kind Natured, Fish Soho, plus many other
household names.
Exceeding the expectations
of everyday beauty
Looking and feeling great every day comes from the
quality and performance of our products, regardless
of the price-point.
But we want to do more than deliver great, affordable
products to your beauty cabinet. Our aim is to provide
an all-round valuable experience, going beyond the
expectations of what everyday beauty looks and feels
like.
Whether you’ve got all the time in the world to pamper
yourself from head to toe, or just need to freshen up to
get out the door, to us, everyday beauty should still be
an experience.
Beyond the shelf
Our mission and vision
We want to go beyond the shelf to create a destination
for a community of like-minded considerate and positive
beauty lovers.
Our mission is to enrich customers lives, making today
and beyond easier, by providing a level of experience
that goes beyond expectations.
We believe that getting closer to our customers and
understanding the community on a deeper level will
help us to serve them better and provide an experience
on their terms; reflecting customer feedback in the
content we produce, products we develop, and
knowledge we share.
While we’re working hard behind the scenes to produce
interesting, useful content and deliver unexpected
moments, we’re also striving to evolve into an
empowered, community-driven store, allowing
beauty enthusiasts all over the world to influence
what comes next.
Our social mission is to celebrate the positivity of
beauty in all its forms. We’re dedicated to building
a community that shares this belief too.
Our vision is to break the norm and harness customers’
voices, regardless of the entry point; continuously
exceeding their expectations of everyday beauty.
We want to close the gap between our brands and
customers by developing a community-driven website
that fuels positivity, inclusivity, and the conversations
around it.
.com
Brand Architekts Group plcStrategic Report
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Brand Architekts Group plc
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Annual Report & Accounts 2021
Business Overview continued
Accelerating
our Sustainable
Journey
All our plastics, or packaging
made of plastic, are now 100%
recyclable.
100%
87New products made of a
minimum of 30% PCR.
Brand Architekts Group plcStrategic Report 11
Annual Report & Accounts 2021
12 months on from the
announcement of our
Sustainable Blueprint Code
of Conduct, we are proud to
report that great progress
has been made to make our
portfolio more sustainable,
whilst reducing our
environmental impact.
We are committed to using packaging
that is recyclable, recycled or reusable
and this was incorporated into all the
brand relaunches.
We ensured that all new lines were made
of 100% recyclable packaging and use
recycled packaging or reusable packaging.
We have also taken this opportunity
to educate consumers on how to
responsibly dispose of products by
clearly sign-posting what types of
materials are used and how to dispose
of the packaging. We are committed to
providing clarity and transparency to
our consumers.
Our actions:
Plastic reduction
All our plastics, or packaging made
of plastic, are now 100% recyclable.
Most of our new products (from nil
in the prior year, increasing to 87
during the year) are now made of a
minimum of 30% PCR (post-recycled
material) and this percentage
increases to 50% on some of our
natural brands. The 2021 Christmas
gifts collection is free from plastic
trays.
Eco-conscious board
Forestry Stewardship Council (FSC)
approved board is now used across
all our single products and we plan
to extend this certification to all
gifts and outer packaging in 2022.
Raw materials transparency
Our natural brands Kind Natured,
Happy Naturals and SenSpa now all
feature sustainable lead ingredients
with official accreditation. We have
had to re-engineer some of our
formulations to reflect the
sustainability of key raw ingredients.
Packaging reduction
We continue to reduce, wherever
possible, our packaging footprint.
A good example are the Super
Facialist Retinol cartons which now
use 24% less carton.
Raise awareness
Improved transparency on our
packaging and social media on our
credentials and ethos.
Engaging suppliers, constantly
Strengthening our relationship with
manufacturers to make sure the
production process is as sustainable
as the material.
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Annual Report & Accounts 2021
Investment
Case
Profitable branded business
Experienced leadership team in place
Brand Architekts has initiated and implemented four
key transformational strategies, which in conjunction
with a robust M&A strategy allows it to focus on
building a portfolio of brands with low capital
investment requirements and the potential for
superior financial returns.
After over a year in their respective roles, Quentin
Higham (CEO) and Thomas Carter (CFO) have
put in place a structure and growth strategy that
will enable the business to build scale and deliver
further profitable growth.
Distinctive and appealing
brand portfolio
One of the key strengths of the business is its broad
portfolio of brands. Brand Architekts covers all the
main bases: from female beauty to male grooming,
and from masstige to everyday value.
Established relationships with retailers
both domestically and internationally
Understanding the needs of retailers, and answering
them with distinctive and compelling products, has
been the foundation of Brand Architekts’ success
to date. It also reflects the strength of relationships
that the business has long enjoyed with its key
customers. We will now look to build on that trust
and credibility by better understanding our end
consumers and their individual needs. By applying
more science and analysis of data we can improve
and create more powerful, sustainable brands of
real substance.
Brand Architekts Group plcStrategic Report 13
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Substantial net cash position
The Group had a net cash position on 30 June 2021
of £19.0m, an improvement of £1.0m on the prior year
(2020: £18.0m).
Opportunities for further growth
online and internationally
The increasing shift online has highlighted the
importance of having a strong direct-to-consumer
(DTC) reach. Working in collaboration with THG
Ingenuity has resulted in the creation of a new
integrated marketplace called theunexpektedstore.
com. We will be making significant investments to
strengthen our consumer reach and engagement.
In parallel, we will focus on maximising our brands’
potential in new international markets and building
relationships with appropriate distribution and
retail partners.
Potential for M&A
Given the strength of its cash balance, the Group
remains alert to acquisition opportunities that will
further strengthen its areas of core competence
– category, channel and consumer – as well
as more nascent areas for the Group such as
DTC and international reach. The business will
factor in current and future consumer behaviour;
consumption and proprietary technology; and
product point-of-difference.
Brand Architekts Group plc 14
Annual Report & Accounts 2021
Chairman’s Statement
“ Notwithstanding
the challenges posed
by the pandemic, our
business has made
excellent progress…”
… towards our strategic
goals and achieved solid
operating results including
positive cash generation. The
management team and all
our colleagues have worked
hard and adapted well.
The Group delivered a resilient financial
performance, with turnover of £15.9m,
down 2.3% on the prior year, whilst
improving its cash balance by
£1m to £19.0m.
As previously indicated, during the year
under review we always intended to
strengthen our business disciplines and
build on our strategic pillars.
Considerable progress has been made
here. The senior team have tackled the
workload with vigour and have created
the platform on which to build towards
our Project 50 ambition, a programme
to deliver annual net sales of £50m
within five years. The activity has centred
around four strategic pillars, namely:
optimising the portfolio; channel
development; operational efficiency;
and being a responsible business. I am
pleased with the solid progress that has
been made.
Roger McDowell
Non-Executive Chairman
Brand Architekts Group plcStrategic Report 15
Annual Report & Accounts 2021
We have worked to optimise the
portfolio by reducing the number of
brands and products. In doing so, we will
focus on brands with greater growth
potential and those product ranges that
best meet consumer needs,
concentrating our new product
development in these areas. Within the
rationalised portfolio, we revitalised
seven brands, all of which will be
relaunched in store by the end of
calendar year 2021. In May and June, we
launched our first advertising campaign
across both television and digital
channels to support key skincare brand
Super Facialist, the Group’s standout
performer, and will look to invest in
further campaigns in the future.
A significant amount of work has also
been done on channel development
through expanding our routes to market.
Previously, the Group had limited reach
direct to consumers. This reflected the
genesis of Brand Architekts, which relied
on the strengths of its relationships with
a number of key retailers. As the
pandemic accelerated a change in
consumer shopping behaviour and
offline retailers reduced space for
non-essential categories, it became
extremely important to invest in our own
direct to consumer site. Our agreement
with THG Ingenuity, will see the launch,
later this calendar year of our new
marketplace, theunexpektedstore.com.
This development will accelerate our
sales growth in 2022 and beyond. Our
International sales grew during the year
despite the pandemic and we expect
further progress as the sales team
focus on building key international
relationships.
From an operational efficiency
perspective, the Group implemented
customer and consumer shopping data
dashboards, providing insight into
brand performance, informing both
portfolio optimisation and its new
product development programme.
Next year will bring the integration
of its demand planning and business
intelligence platforms, underpinning
customer service levels and robust
financial management.
On behalf of the Board I would like to
extend my sincere thanks to our staff.
They have had to contend with a vast
amount of change, including to the
leadership team and the trading
environment as a result of the pandemic.
They have done so with great endeavour
and application and it is of great credit to
them all.
Finally, I look forward to a year of
significant progress towards our long-
term goals.
Both consumers and investors alike are
demanding greater responsibility from
the companies they endorse and at
Brand Architekts it is a task that we take
seriously and readily accept. From the
raw materials we use to the packaging of
our end products, we have made a
commitment to improve. We have made
a great start this year with a large
number of our products now using a
minimum of 30% post-consumer recycled
material but there is much more that we
can and will do.
Further information on the development
of our strategic pillars into next year can
be found in the CEO’s Statement.
We are conscious of the Board structure
and will be actively reviewing the
diversity and relevance of its
composition.
Brand Architekts Group plc 16
Annual Report & Accounts 2021
CEO’s Statement
“ We have initiated
and implemented four
key transformational
strategies.”
In September 2020 we launched
“Project 50”, which is our vision to grow
the business to £50m net sales within the
next five years.
Project 50 deployed four strategic pillars,
namely: optimising the portfolio; channel
development; operational efficiency; and
being a responsible business.
As we lived and breathed this within our
team, discussing and developing both
at a Board and senior management level,
alongside input from key service
providers, two things became apparent.
Firstly, the increasing importance of our
marketplace, theunexpektedstore.com,
not only as a channel development
initiative but also as a strategic initiative
that will inform our culture and way of
thinking, our products and our
engagement with our consumers.
Secondly, operational efficiency changed
from being an individual strategic pillar
focused on specific operational
improvements into the ongoing
foundation of how we approach and
develop all our strategic initiatives, now
and in the future.
Consequently, the transformative
strategies have now evolved into the
following four pillars and associated
initiatives:
Quentin Higham
Chief Executive Officer
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Annual Report & Accounts 2021
1. Brand Development
– Productivity
Over the last year we have rationalised
our brand count from 22 to 13, whilst
also halving our number of products.
The business remains focused on
rationalising underperforming
products to improve productivity.
This will result in stronger selling
products on shelf or online, affording
opportunities both in shelf position,
ranking online, as well as purchasing
efficiencies.
– NPD – consumer insights
and trends
As a business we have invested in
consumer data dashboards to help
analyse trends and performance.
Coupled with industry insights and
our inherent understanding of the
beauty and personal care market,
NPD (new product development) lies
at the heart of our organisation. In the
last financial year we needed to
reinvigorate our portfolio, which
resulted in the planned relaunch of
seven brands and the launch of one
new brand. Our new brand, The
Solution, launched into Superdrug in
August 2020 and Tesco Ireland in
June 2021. The seven relaunches were
originally planned for the end of the
last financial year, but due to Covid-
related reasons, offline retailers
delayed their instore range builds until
September and October 2021. We are
excited to be rolling out to our UK and
international customers, new designs
for Dr SALTS+, SenSpa, Argan+,
Happy Naturals, Kind Natured,
Beautopia and Root Perfect. Going
forward, we will continue to launch
new and exciting products and we
have a three-year NPD programme in
place, which takes into consideration
trends, consumer insights and change
in consumer behaviour. This will allow
us to add in-demand products to
either existing brand portfolios, or as
part of the creation of new brands.
– Digital first
In line with our direct-to-consumer
(DTC) strategy of launching a new DTC
marketplace (as further detailed in our
DTC strategy below), our strategic
focus is to become a “digital first”
business. This will allow us to launch
new products or brands online first,
thereby enabling us to launch outside
the constraints of offline category
range builds. It will also allow us to
use our own DTC channel as a ”test
campaign, we secured new
distribution in Tesco and Morrisons.
As our brands achieve a certain level
of scale, we will start to invest in
advertising and promotion (A&P) to
accelerate sales and return on
investment (ROI).
– Portfolio management M&A
The Project 50 vision requires an
acquisition plan that will complement
our strategic pillars. We are
constantly evaluating opportunities
and although it is difficult to predict
an exact timeline, over the next few
years we are confident that we will be
investing in additions that will be
accretive to our portfolio. Key
considerations will be the fit to our
existing portfolio, NPD programme
and culture.
and play” environment, whereby we
can get feedback from consumers, as
well as being able to provide offline
retailers with empirical success.
Becoming digital first means that we
will always ensure that a brand has
extensive digital assets, always
communicating to consumers through
digital/social channels and investing
advertising monies in the digital
medium. We are changing the way we
invest all our resources (financial, as
well as human), so that digital first is at
the heart of our business.
– Advertising and promotion
The business has historically focused
on product development and offline
retailer exclusivity and promotion. To
support our omnichannel approach,
we have started to invest in consumer
advertising and marketing activities.
Last year’s Super Facialist advertising
campaign was the first example of our
investment into a brand. The
campaign objectives were to improve
consumer engagement, drive brand
awareness, stimulate trial and secure
distribution gains. On the back of the
Brand Architekts Group plc 18
Annual Report & Accounts 2021
CEO’s Statement continued
2. Brand Reach
– UK omnichannel
As part of our omnichannel strategy,
we successfully negotiated with
retailers to secure non-exclusivity
for Dirty Works, Happy Naturals,
Beautopia, Kind Natured, Argan+
and SenSpa. As a result, we can now
implement an online and offline
distribution drive for these brands
alongside the rest of our portfolio to
secure new and incremental listings.
The success of an omnichannel
approach can be seen in the growth
of Super Facialist, which has come
from securing new distribution in
Amazon, Waitrose, Morrisons and
more recently Tesco.
– DTC
Reflecting the change in consumer
behaviour, the creation of a new
integrated marketplace has been our
number one priority. Since January
2021 we have been working with THG
Ingenuity to create a new marketplace
called theunexpektedstore.com. We are
taking advantage of THG Ingenuity’s
world leading ecommerce platform –
including trading and marketing
services – and its sophisticated logistics
and warehouse facilities to do this.
The marketplace is expected to
launch by the end of this calendar
year. theunexpektedstore will not only
sell all our brands and products, but
we are very excited about creating a
community, whereby our mission is to
break the mould of everyday beauty.
theunexpektedstore will be a
community-driven platform that fuels
positivity, inclusivity and exceeds the
expectations of everyday beauty. We
will be investing in a robust marketing
programme to drive traffic to the site,
initially around our better-known
brands, to secure customer
acquisition, before we start to invest
in theunexpektedstore brand.
– International
Our brands and products are sold in
34 countries, which has helped raise
awareness and contribute to our
annual volumes and sales results.
Despite the pandemic, last year we
were able to grow our international
business and achieve listings in some
key retailers around the world, notably
in Ireland (Tesco, Dunnes, Macauley,
Lloyds Pharmacy), Mexico (Walmart),
Qatar (Carrefour) and across Europe
on douglas.com. A key strategic focus
going forward will be to prioritise time
and effort in establishing some direct
key international retailer relationships,
whereby the retailer has a dominant
share of a market; driving several
strong distributor markets, whereby
the distributor has the proven track
record and desire to market at least
three of our brands into multiple
retailers; whilst maintaining support
for all the smaller markets. The
international focus will centre on a
“fewer, bigger, better” approach,
from both a customer and brand
perspective.
3. Environmental &
Societal Responsibility
– Sustainability pledge –
packaging and ingredients
environmental footprint
In line with our sustainability pledge,
we are working towards ensuring that
all our plastic and packaging is 100%
recyclable, reusable or bio-sourced by
2025. We will work with suppliers that
are committed to building long-term
partnerships to meet or exceed
government and EU targets for plastic
reduction. Last year, the number of
products using a minimum of 30%
PCR (post-consumer recycled
material) increased from 0 to 87.
Brand Architekts Group plcStrategic Report 19
Annual Report & Accounts 2021
Outlook
The required transformation of the
business has taken longer than originally
anticipated, undoubtedly exacerbated by
COVID and the changing patterns and
behaviours of offline retailers. We have,
however, taken advantage of the market
disruption, conducting a root and branch
change programme, taking significant
action which will result in a stronger
business in the medium term. Certain
actions, particularly around brand
relaunch, were deliberately brought
forward although we were conscious that
this would have a negative short-term
effect. The result is an excellent platform
on which to build future success. We are
conscious of the challenges faced by
traditional retail and whilst our own
e-commerce platform is close to
readiness it will take time and investment
before this channel is material. Given the
above we are taking a cautious view for
the year in prospect but remain confident
in our strategy and future growth
prospects.
– Employee development
One benefit of the pandemic was that it
showed us how employees can benefit
from working from home, whilst also
highlighting the need for an office. As a
result of listening to our employees we
have changed all employee contracts
to reflect a new hybrid way of working,
whilst also upgrading our London
office to become a hot desk hub that
encourages creativity, collaboration
and training. We have also ensured
that everyone now benefits from a
bi-annual PDR (performance &
development review) and PDPs
(personal development plans), onsite
and offsite training, fortnightly town
halls, employee recognition awards
and quarterly Company newsletters.
The Project 50 vision requires our
employee culture to evolve so that
employees are empowered and
excited to take ownership.
4. theunexpekted
– Over the next few years, we expect
theunexpekted to become our culture
and way of life, a mantra that we live by as
a company. Our goal is to challenge the
expectations of ourselves and the market
we exist in, unconstrained by conventional
thinking or ways of working. Our focus to
deliver this will be on the quality and
performance of the product, our editorial
content and how-to videos, and how we
respond and react to user-generated
content and recommendations. If the
business lives by theunexpekted mantra,
we should be in a position for our brands
to flourish and challenge.
Given the pandemic’s adverse impact on
the last financial year, in particular with
regard to the retailer-led delays of a
number of key brand launches, we have
extended Project 50’s end date by a
further year, but we remain confident that
this ambitious goal is achievable.
Although the last year was challenging,
good improvements have been
implemented. Distribution gains and
market penetration both domestically and
internationally are the priority for our
brands, whereas driving traffic, customer
acquisition, increasing conversion and
average order value will be the focus of
our new DTC business. We believe that
we have in place the right strategies to
deliver Project 50 and therefore increase
earnings and shareholder value.
Brand Architekts Group plc 20
Annual Report & Accounts 2021
Business Model
Driven by
ambitious
growth
Resources that define us
How we create value – the brand life cycle
01
We will combine our wealth
of experience in the beauty
sector with a significant
investment in business
intelligence insights and
market data.
02
Opportunities come in many
forms, including market gaps
addressable by new product
development, and M&A to
open new avenues. We are
alert to both and have the
resources to act.
03
04
From sourcing sustainable
ingredients to reducing single-
use plastics wherever we can,
our default position is to apply
high ethical standards, working
with partners who share our
values.
We are driven by how and
where our consumers wish
to buy. Our omnichannel
strategy includes a major
focus on growing our DTC
channel, expanding our e-tailer
presence and developing
exclusives and value lines for
high street distribution.
Brand portfolio
– Strong revenue
generating portfolio
– Multiple opportunities
to enhance earnings
See pages 2 to 7
Team attributes
– Brand sentience/perceptive
– Entrepreneurial culture
and values
See pages 8 to 9
Key industry
relationships
– Manufacturers
– Retailers
– Distributors
– Media
See pages 28 to 29
05
Finances
– Low operational gearing
/capital light/focus
on margin/scalable
See pages 31 to 32
Social media is a tailor-made
medium for us and we harness
its power for awareness-
raising via our own feeds,
and through attracting social
influencers and awards. We will
also explore all other digital
and above-the-line media to
optimise the marketing mix.
06
Our “fewer, bigger, better”
philosophy means training our
resources and energies on a
tightly drawn, high-performing
portfolio. This enhances
efficiency and responds to the
needs of our retailer partners.
Brand Architekts Group plcStrategic Report 21
Annual Report & Accounts 2021
Stakeholders
Customers
and consumers
Employees
01
Consumer
and category
insight
—
‘ D A T A - L E D’
02
Address
market
opportunities
—
‘ I N S T I N C T - D R I V E N’
06
Brand
review and
invigoration
—
‘ S E L F -A W A R E’
05
03
Suppliers
Promotion,
awareness
and brand
communication
—
‘ D I G I T A L F I R S T’
Sourcing
and
manufacturing
—
‘ E N V I R O N M E N T A L
& S U S T A I N A B L E’
04
Routes
to market
—
‘ O M N I C H A N N E L’
Shareholders
Local
communities
Brand Architekts Group plc
22
Annual Report & Accounts 2021
Market Context
Trends and
Opportunities
Brand Architekts Group plcStrategic Report 23
Annual Report & Accounts 2021
– Wellness
2020 has been a year of reflection for
many, allowing consumers to reflect on
what is truly important to them. People
have been able to put things into greater
perspective, and consequently have
become more aware of their mental
wellbeing and willing to invest in it.
Mood-enhancing and aromatherapy-led
products offering a holistic approach
from skincare to washing and bodycare
will gain credibility and popularity and we
look forward to rolling out this innovation
into our Argan+ and Dr SALTS+ portfolio.
– Sensitivity and skin-stress
Pandemic-related skin issues such as
“maskne” and “Covid-face” – the
visible appearance of stress as a result
of the coronavirus outbreak – will drive
innovation, leading to a resurgence
and greater trust in science-based
holistic skincare, result-led products
but formulated with simpler, cleaner
formulations and hero ingredients.
An opportunity perfectly suited to our
Super Facialist and The Solution
brands for 2023.
2-3-year opportunities
– Shifting to self-care
We anticipate consumers will be
wanting brands that offer them an
experience that builds calming and
restorative moments into their day.
Products that help transport them
(rising awareness of skin-mind
connectivity – psycho dermatology)
and turn beauty routines into rituals to
tackle the issues of stress, lack of sleep
and burn out. We can expect a greater
emphasis and need for mood-boosting
aromas, adaptogenic ingredients and
sensorial textures in future launches
across Super Facialist (SleepSmart and
Hexapeptide) and SenSpa (Gifting).
– Circular economy –
“from farm to skin”
As consumers change their beauty
habits, whilst pushing brands to reduce
waste and demonstrate greener
credentials, we anticipate a greater
expectation for circularity and use of
sustainably sourced materials. The
desire to reduce eco footprint, and the
rise of homegrown brands, local
sourcing and production, offers us a
great opportunity to build authentic
brands that resonate with the
consumer; this will be incorporated
into our product development plans
for Kind Natured and Happy Naturals.
Self-care, wellness and
sustainability lie at the
heart of 2021’s beauty trends
and consumer needs. In the
next financial year, we are
launching many products
that will resonate and excite
consumers, with anticipated
strong sales.
– Self-care
Self-care is not new but has been
accelerated by the pandemic. It became
one of the most well-used buzzwords in
2021 and will continue to lead new
product launches in the foreseeable
future. Consumers’ time is precious,
every moment they invest into their
beauty regime needs to have a result,
whether in the way they feel or the way
they look. Interest in aromatherapy will
continue to surge and we look forward
to enriching our SenSpa and Argan+
portfolio of products with wellbeing/
aroma-led solutions that create unique
immersive experiences; whether that is a
daily product, such as a hand cream, or
a beautifully crafted essential oil to
induce sleep and rebalance one’s mood.
– Skin-stress
There is a growing body of scientific
evidence that links stress and body
appearance; from skin breakouts, loss of
radiance and irritation to hair loss and
breakage. The 2021 launch of Dirty Works
Good to Glow skincare collection and the
Super Facialist Anti Blemish, MR Disguise
and Kind Natured Sensitive ranges, all
offer simple, problem-solution products
that address these needs.
– Experiential destination
As travel restrictions are likely to continue
well into 2022, consumers will seek
products that bring them joy, moments of
calm, as well as a chance of escapism to a
hotter, sunnier destination. Our newly
launched Dirty Works Hawaii collection
enables consumers to enjoy a moment of
pure fun and frivolous escapism.
– Sustainability
Alongside recyclability, sustainability
remains a key concern with British
consumers and will continue to be one of
our key priorities throughout the next 12
months. We will continue to make
sustainability part of each brand identity.
The rollout of more eco-friendly
materials and a reduction in packaging
will intensify and will be the focus on Fish
and Super Facialist in 2022/23.
Brand Architekts Group plc 24
Annual Report & Accounts 2021
Project 50
A vision for
the future
In September 2020 we
launched “Project 50”,
which is our vision to
grow the business to
£50m net sales within
the next five years.
Given the pandemic’s
adverse impact on the
last financial year, we
have revised Project 50’s
end date to a year later
than originally planned,
but we remain confident
that this ambitious goal
is achievable.
We have made good progress initiating and
implementing last year’s strategy, which given the
progress of the business has evolved into the
following four pillars:
01
Brand
Development
By listening to the needs of our
customers and consumers, we will
implement NPD and communication
initiatives that ensure our brands
remain relevant and desirable.
02
Brand
Reach
In today’s society we need to
ensure that our customers can
buy our products wherever and
whenever they want. To do this
we need an omnichannel
distribution approach.
– Productivity
– UK omnichannel
– DTC
– International
– NPD – consumer
insights and trends
– Digital first
– Advertising and
promotion
– Portfolio management
M&A
Brand Architekts Group plcStrategic Report 25
Annual Report & Accounts 2021
03
04
theunexpekted
theunexpekted will become our culture
and way of life, a mantra that we live by
as a company. Our goal is to challenge
the expectations of ourselves and the
market we exist in, unconstrained by
conventional thinking or ways of working.
Environmental
& Societal
Responsibility
We aspire to be a leader in beauty
sustainability and are committed to the
journey to make a real difference. We
are committed to using recyclable,
recycled or reusable packaging.
– Sustainability
pledge – packaging
and ingredients
– Employee development
Brand Architekts Group plc 26
Annual Report & Accounts 2021
Principal Risks and Uncertainties
Managing Risk
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
continue to improve strategies for
dealing with these risks on an ongoing
basis. A formal review of these risks is
carried out by the Group once a year.
The review process involves the
classification of risks, assessment of
the likelihood and potential severity
of impact to the business and
determination of whether changes to
management processes are needed
to manage them effectively.
The directors have identified the
following as principal risks and
uncertainties:
Risk
Potential impact
Talent retention
Change
in FY21
Mitigation
Loss of key personnel and
employee churn and failure to
attract sufficient high-quality
people could impact the
Group’s ability to achieve its
Project 50 strategy.
The Remuneration Committee reviews annually key
personnel rewards so that they are competitive and
commensurate with performance. Long-term incentive
plans were implemented for the executive management
and senior leadership teams during the year. Personal
development plans and reviews as well as training
programmes were introduced for all employees to ensure
both business and personal needs are met. The business
also moved to a hybrid way of working and office culture,
to support employees with greater flexibility. Further
information on this can be found in the CEO’s Statement
on pages 16 to 19 and also in the Employees section
in Stakeholder Engagement and Section 172 on pages
28 to 30.
Consumer preferences and
buying habits could lead to
our products not meeting
consumer needs or not being
readily available for purchase,
as well as impacting our
customers’ strategies.
Regular reviews of EPOS and market dashboards, as well
as maintaining close contact with customers facilitates
our understanding and alignment with their strategies.
The creation of our DTC marketplace (see the CEO’s
Statement on pages 16 to 19) will provide a significant
change in the frequency and quality of our interaction
with consumers helping to create products that fulfil their
needs. Our investment in new product development will
closely follow their feedback and wider market trends
including sustainability (page 23).
Consumer
and customer
trends
Brand Architekts Group plcStrategic Report 27
Annual Report & Accounts 2021
Risk
Potential impact
Change
in FY21
Mitigation
Product quality,
regulations and
compliance
Supply chain
disruption
Covid-19
Cyber security
Pension fund
deficit
Inconsistent quality or non-
compliance with regulations
would have a severe impact
on service levels, customer
relationships and have
financial repercussions.
The Company has a well-defined new product
development process that incorporates product quality
and compliance verification. We also partner with
long-term, established key suppliers with excellent
product quality controls and adherence to compliance
standards. We also employ compliance consultants for
product labelling verification and registration.
Disruption to the supply
chain could limit availability
of products and thereby
reduce sales and business
performance.
The Group maintains a detailed forecast and demand
planning process to maximise product availability while
optimising its inventory levels. The team has strong,
long-term relationships with major suppliers, supported by
regular reviews to ensure continuity of supply at
competitive prices and early visibility of any issues.
Depending on circumstances, the business will invest
working capital in additional inventory for fast-moving
product lines to ensure availability of supply.
Covid-19 has the potential to
continue to impact many of our
key stakeholders including
customers, consumers,
suppliers and employees as
well as the economic
environment.
We have established and embedded new working practices
to operate in a hybrid virtual/office environment (see the
CEO’s Statement on pages 16 to 19), while customer,
consumer and supplier changes are regularly reviewed.
Our key strategic pillar of investing in our DTC platform
will enable the Group to offset changes to consumer
buying behaviours, enabling purchase of our brands.
The Group is exposed to
the risk of increasingly
sophisticated cyber-attacks
aimed at causing business
disruption, capture of
confidential data for financial
gain, and reputational damage.
The business has undertaken an assessment of its current
control environment versus the Centre for Internet Security
(CIS) controls framework. It has already progressed an
improvement plan, which will continue into next year, to
achieve sufficient maturity in this framework, investing in
software, policies, procedures and training. A cyber security
review is also being incorporated into our supplier review to
support the robustness of our supply chain. In addition, the
Group maintains cyber insurance.
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 Group’s
control and drive increases in
cash payments into the fund.
There is an agreed deficit recovery plan fixed until
November 2037. The next triennial review on which a new
schedule will be agreed will be on 5 April 2023. The 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. Further information on the pension scheme
recovery plan can be found in the Financial Review.
Brand Architekts Group plc 28
Annual Report & Accounts 2021
Stakeholder Engagement and Section 172
The Board of Directors
recognises that the long-term
success of the business is
dependent on the way we
interact with range of key
stakeholders.
As a result, the Board confirms that during the
year under review, it has acted to promote the
long-term success of the Company for the
benefit of stakeholders, whilst having due
regard to the matters set out in section 172(1)
(a) to (f) of the Companies Act 2006, being:
(a) the likely consequences of any
decision in the long term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business
relationships with suppliers, customers
and others;
(d) the impact of the Company’s operations on
the community and the environment;
(e) the desirability of the Company
maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly between members
of the Company.
Methods used by the Board
The main methods used by the directors to
perform their duties include:
– an annual strategy review incorporated into
a Board meeting in September each year,
which assesses the Group’s purpose, values
and strategy for the long-term sustainable
success of the Group;
– ongoing monitoring of the execution of
Group strategy and performance of the
business both in the formal schedule of
Board meetings and ad hoc interim
meetings as required;
– Board review of the Group’s governance
structure and review of corporate
responsibility, sustainability and
stakeholder engagement;
– corporate risk register that identifies the
potential consequences of decisions in the
short, medium and long term so that
mitigation plans can be put in place to
prevent, reduce or eliminate risks to our
business and wider stakeholders;
– external assurance received through
financial audits;
– bi-annual investor presentations both with
institutional and retail investors as well as
regular meetings with the Company’s broker;
– employee feedback through
surveys, town halls and bi-annual
development reviews; and
– training programmes based on the needs
of our directors, senior managers
and employees.
Stakeholder engagement
The Board has direct engagement principally with our employees and
shareholders but is also kept fully appraised of the material issues of other
stakeholders through the executive team and external advisers. In the section
below we outline the ways in which we engage with our key stakeholders.
Why we engage
Customers and consumers
Brand Architekts’ success has been built on numerous long-standing
customer relationships in the UK. As the business develops its omnichannel
strategy, it is important we maintain these relationships while also
developing others. In particular, we must focus on listening to our
consumers, facilitated by our new marketplace, to ensure our brands and
products meet their needs.
Employees
Brand Architekts’ history as a small owner-managed brands business has
fostered close collaboration, respect and entrepreneurism among all our
employees. As our business grows, it is imperative we maintain this culture,
while embedding effective governance structures and training for a £50m
revenue size business.
Suppliers
One of the Group’s key strengths is in the strong supplier base for its
products, both in the UK and Far East, developed over a number of years.
This network facilitates not only the product development programmes of
our brands but also the on-time delivery of quality products to our
customers and consumers.
Shareholders
The engagement with shareholders is a core responsibility for the Board
and essential in the delivery of the Project 50 strategy and future investment
in the strategic pillars of the business.
How we engage
Material topics
We engage with our customers via regular ongoing communications,
– Customer category performance vs competitors
supported by business reviews and annual joint business plans. Our
– Brand Architekts’ category performance vs
engagement with consumers will increase considerably via our DTC
competitors
platform including the creation of an online community supported
– Consumer trends, needs and habits
by relevant editorial content and how-to videos.
– Consumer journey and experience on our DTC
Our digital first initiative will prioritise consumer feedback and provide an
– Environmental and sustainability credentials of
important opportunity to create traction online for our products to the
our products
benefit of both our consumers and customers.
platform
We communicate with employees regularly through local “town hall” meetings,
– Project 50 strategy deployment including team
company events and company newsletters, we also monitor employee engagement
objectives and KPIs
and sentiment through various means, such as PDR (performance development
– Operational efficiency ideas to facilitate
reviews) and PDP (personal development plans) and employee surveys.
strategic initiatives
– Company culture incorporating theunexpekted
The regular interaction with our employees informs how we upskill our workforce to
– Training and development opportunities
ensure we have the correct structure and talent to support our Project 50 goals. An
– Compensation and incentives
example of this is the move to a hybrid office working culture.
We work together both virtually and onsite, working where possible on shared
– Overall market and category performance
development programmes and IT applications for close collaboration. This
– Consumer needs and habits versus our NPD
approach also focuses on building firm understanding of each party’s
– Environmental and sustainability credentials of
corporate strategic goals to maximise a mutually beneficial relationship.
the manufacturing process and our products
– Outlook, demand planning and supply chain
Regular business reviews with standing agenda items have helped to
– Product quality and compliance
challenge and instruct the seven brand relaunches expected in store later
this year.
The CEO and CFO, together with the Chairman, deliver the Group’s interim
– Project 50 strategy and business model updates
and final results in person, with presentations, Q&A sessions and roadshows
– Financial and operational performance and
for our major shareholders. We also organise ad hoc investor meetings and
outlook
an Annual General Meeting in November to provide an opportunity for
– Environmental, social and governance
shareholders to meet the directors and discuss the year’s results.
– Long-term, sustainable growth
– Capital allocation including capex, working
This year, we have also implemented bi-annual presentations to retail
capital, dividends and M&A
investors online, to facilitate wider access to all our shareholders.
Communities
The Group recognises the importance of social responsibility in its business,
mindful of the increasing relevance of the environmental impacts from our
products to all our stakeholders and the communities we live in. The
management of this aspect will be crucial to the long-term success of
the business.
We are committed to working with our customers and suppliers to minimise
– Compliance with regulations
any negative environment impacts from our products and supply chain.
– Social responsibility and ethical practice
– Environmental impacts, recyclability and PCR %
The expectations of our consumers and communities have informed our
of our products
Sustainability Code of Practice (see page 11).
We work with suppliers who share our principles in the reduction of waste
and energy use in the manufacturing process, focusing on production and
design processes and policies to comply with and, wherever possible,
anticipate changing legislative and customer demands.
Brand Architekts Group plcStrategic Report 29
Annual Report & Accounts 2021
Why we engage
Customers and consumers
Brand Architekts’ success has been built on numerous long-standing
customer relationships in the UK. As the business develops its omnichannel
strategy, it is important we maintain these relationships while also
developing others. In particular, we must focus on listening to our
consumers, facilitated by our new marketplace, to ensure our brands and
products meet their needs.
Employees
Brand Architekts’ history as a small owner-managed brands business has
fostered close collaboration, respect and entrepreneurism among all our
employees. As our business grows, it is imperative we maintain this culture,
while embedding effective governance structures and training for a £50m
revenue size business.
Suppliers
One of the Group’s key strengths is in the strong supplier base for its
products, both in the UK and Far East, developed over a number of years.
This network facilitates not only the product development programmes of
our brands but also the on-time delivery of quality products to our
customers and consumers.
Shareholders
The engagement with shareholders is a core responsibility for the Board
and essential in the delivery of the Project 50 strategy and future investment
in the strategic pillars of the business.
How we engage
Material topics
We engage with our customers via regular ongoing communications,
supported by business reviews and annual joint business plans. Our
engagement with consumers will increase considerably via our DTC
platform including the creation of an online community supported
by relevant editorial content and how-to videos.
Our digital first initiative will prioritise consumer feedback and provide an
important opportunity to create traction online for our products to the
benefit of both our consumers and customers.
– Customer category performance vs competitors
– Brand Architekts’ category performance vs
competitors
– Consumer trends, needs and habits
– Consumer journey and experience on our DTC
platform
– Environmental and sustainability credentials of
our products
We communicate with employees regularly through local “town hall” meetings,
company events and company newsletters, we also monitor employee engagement
and sentiment through various means, such as PDR (performance development
reviews) and PDP (personal development plans) and employee surveys.
The regular interaction with our employees informs how we upskill our workforce to
ensure we have the correct structure and talent to support our Project 50 goals. An
example of this is the move to a hybrid office working culture.
– Project 50 strategy deployment including team
objectives and KPIs
– Operational efficiency ideas to facilitate
strategic initiatives
– Company culture incorporating theunexpekted
– Training and development opportunities
– Compensation and incentives
We work together both virtually and onsite, working where possible on shared
development programmes and IT applications for close collaboration. This
approach also focuses on building firm understanding of each party’s
corporate strategic goals to maximise a mutually beneficial relationship.
Regular business reviews with standing agenda items have helped to
challenge and instruct the seven brand relaunches expected in store later
this year.
– Overall market and category performance
– Consumer needs and habits versus our NPD
– Environmental and sustainability credentials of
the manufacturing process and our products
– Outlook, demand planning and supply chain
– Product quality and compliance
The CEO and CFO, together with the Chairman, deliver the Group’s interim
and final results in person, with presentations, Q&A sessions and roadshows
for our major shareholders. We also organise ad hoc investor meetings and
an Annual General Meeting in November to provide an opportunity for
shareholders to meet the directors and discuss the year’s results.
This year, we have also implemented bi-annual presentations to retail
investors online, to facilitate wider access to all our shareholders.
– Project 50 strategy and business model updates
– Financial and operational performance and
outlook
– Environmental, social and governance
– Long-term, sustainable growth
– Capital allocation including capex, working
capital, dividends and M&A
Communities
The Group recognises the importance of social responsibility in its business,
mindful of the increasing relevance of the environmental impacts from our
products to all our stakeholders and the communities we live in. The
management of this aspect will be crucial to the long-term success of
the business.
We are committed to working with our customers and suppliers to minimise
any negative environment impacts from our products and supply chain.
– Compliance with regulations
– Social responsibility and ethical practice
– Environmental impacts, recyclability and PCR %
The expectations of our consumers and communities have informed our
Sustainability Code of Practice (see page 11).
of our products
We work with suppliers who share our principles in the reduction of waste
and energy use in the manufacturing process, focusing on production and
design processes and policies to comply with and, wherever possible,
anticipate changing legislative and customer demands.
Brand Architekts Group plc 30
Annual Report & Accounts 2021
Stakeholder Engagement and Section 172
continued
Decision-making in practice
A significant decision taken by the Board during the course of the year was the investment in our first above-the-line marketing
campaign for Super Facialist – more details can be found on pages 6 to 7.
Another important decision was the establishment of a DTC marketplace, a key part of our Channel Development strategic pillar.
The consideration of key stakeholders and consequences of this decision are summarised below:
Considerations and consequences
The long term
Further information
The Board considered many options in how to develop its DTC activity across its main brands, with the
aspiration to achieve 20% share of Group revenue by Year 5. The creation of the marketplace was considered
as the best solution to the current and future business of the Group, namely a portfolio of brands in the
Beauty sector for omnichannel distribution both in the UK and internationally. Maintaining existing
e-commerce sites for each brand was also considered, but it was deemed to limit the potential to cross-sell
our brands and also create a community to develop our presence and voice online.
Business Model
Pages 20 to 21
Accelerating our
Sustainable Journey
Pages 10 to 11
The Board reviewed the advantages and disadvantages of both approaches and approved the marketplace
proposition, leading to the development of the concept with potential marketplace providers.
Employees
The marketplace decision brought new skillset and mindset requirements to a team traditionally focused on
bricks-and-mortar customers and a product rather than a digital and marketing-led approach.
Consultation with the team and a review of internal resources triggered the recruitment of a Head of Digital with
the necessary experience to implement the marketplace creation. The business also considered the range and
extent of services on offer from potential marketplace providers, with the objective to maximise the outsourcing of
the e-commerce activities whilst focusing internal efforts on brand creation, development and marketing. The
opinions of the senior management team informed the decision-making process on the e-commerce solution and
vendor. The wider brand team have been instrumental in the selection of our marketplace name,
theunexpektedstore, its concept as well as associated logos and guidelines.
The investment in the marketplace, our intent to think “digital first” in our brand strategy, as well as
theunexpekted mantra for our corporate culture will require significant work, support and review in our business
over the coming years.
Business relationships with suppliers and customers
CEO’s Statement
Pages 16 to 19
Project 50
Pages 24 to 25
Our people, culture
and values
Pages 10 to 11
CEO’s Statement
Pages 16 to 19
On approval of the marketplace concept, the Group conducted a thorough review of potential partners,
including additional consultancy days to develop different approaches and business plans.
CEO’s Statement
Pages 16 to 19
The identification of our need to outsource non-core activities and focus on our brands and consumers
ultimately led to our decision to select THG, a proven e-commerce services provider,
as our chosen partner. This was supported by references obtained by the Board from other THG customers.
The development process with THG commenced in January 2021, with frequent interaction between THG
and our digital and brand teams to deliver the project on time. This continual feedback process between
the two companies has been essential in creating our unexpekted vision and strategic pillar, site user
experience and plan to build a community in search of everyday beauty.
With regard to our existing customers, it is envisioned that our new digital first strategy, increasing our
share of voice online, will only benefit our offline sales and customers.
Community and the environment
A key part of our marketplace concept is the creation of an online community, making beauty accessible
every day. This will only enhance our two-way communication with consumers and inform our business on
future development both from a brand and sustainability perspective.
Accelerating our
Sustainable Journey
Pages 10 to 11
Outcome
The review process has resulted in a five-year e-commerce services contract being signed with THG in August 2021, with
expected soft launch of the site by the end of H1 FY22.
Brand Architekts Group plcStrategic Report 31
Annual Report & Accounts 2021
Financial Review
Challenging
external events
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:
2021
2020
Reported results from continuing operations
Revenue (Note 2 of the financial statements)
Underlying operating (loss)/profit1
Loss before taxation
Reported results from continuing and discontinued operations
Revenue (Note 2 of the financial statements)
Underlying operating loss1
(Loss)/profit before taxation
Basic (loss)/earnings per share
Net cash
£15.9m
£(0.3)m
£(1.9)m
£15.9m
£(0.3)m
£(1.9)m
(13.1)p
£19.0m
1 Underlying operating (loss)/profit is calculated before exceptional items, share-based payments and amortisation of acquisition-related intangibles.
A reconciliation of underlying operating profit to operating profit is shown below:
Underlying (loss)/profit from operations
Exceptional cost of sales
Amortisation of acquisition-related intangibles
Charge for share-based payments
Other exceptional items
Operating (loss)/profit
2021
Continuing
£’000
2021
Discontinued
£’000
(273)
488
(240)
(38)
(1,600)
(1,663)
–
–
–
–
–
–
2021
Total
£’000
(273)
488
(240)
(38)
(1,600)
(1,663)
2020
Continuing
£’000
2020
Discontinued
£’000
121
(2,535)
(260)
(4)
(1,444)
(4,122)
(909)
–
–
–
7,460
6,551
£16.3m
£0.1m
£(4.3)m
£23.7m
£(0.8)m
£2.2m
12.9p
£18.0m
2020
Total
£’000
(788)
(2,535)
(260)
(4)
6,016
2,429
The Group implements a number of non-statutory measures which are summarised in the tables above and in more detail within
the segmental income statement (Note 2 of the financial statements). Exceptional items are also explained further in Note 3 of the
financial statements. 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. The Board receives an
overview of these as part of its Board management report.
Statement of comprehensive income
Group statutory revenue at £15.9m from continuing operations was down 2.3% against prior year, reflecting the continued adverse
impact of Covid-19 lockdowns in the UK and internationally on our customers, in particular high street retailers. This particularly
affected H1 sales which declined by 10% on the prior year to £9.0m (H1 2020: £10.0m on an adjusted basis), including a £0.6m
reduction in Christmas gift sales as customers reduced their Christmas ranges in store. Sales of male grooming products also
declined in line with consumer usage during the national lockdowns. This was nearly offset on a full-year basis by a 10% increase in
H2 sales to £6.9m (H2 2020: £6.3m on an adjusted basis) as footfall in stores improved. The shift in consumer purchasing during the
pandemic to online could only be partly captured by our current DTC proposition and e-tail sales channel, underlining our strategic
need to invest in our new marketplace.
From a brands performance perspective, Super Facialist continued to excel with a 30% improvement versus the prior year, while
other brands declined. This was foreseen at the start of the year and supported the time and resource spent by the team on
preparing a relaunch of seven of our brands. The impact of these relaunches, however, was delayed as our customers postponed
implementation of their range changes in store to later in this calendar year.
Brand Architekts Group plc
32
Annual Report & Accounts 2021
Financial Review continued
Underlying gross profit margin, which excludes exceptional adjustments improved to 36.9% (2020: 35.2%). The improvement in
margin was mainly driven by lower promotional spend in High Street stores from lower footfall as well as product and channel mix,
offsetting the emerging threat of cost pressures and volatility from our supply chain towards the end of H2, in particular with
respect to packaging materials and logistics costs. On a statutory basis, gross profit margin was 40.0% (2020: 19.6%), which
included a £0.5m partial reversal of prior year exceptional inventory provisioning as the Group managed a better sell down of aged
inventory lines as the brand relaunches were delayed and a lower-than-expected settlement of prior year supplier liabilities (further
detail in Segmental Analysis Note 2 of the financial statements).
The Group made an underlying operating loss of £0.3m (2020: underlying operating profit £0.1m on a continuing operations basis),
which is shown before acquisition related amortisation of intangibles, exceptional costs and charges for share-based payments.
This result absorbed the increase in costs relating to the Super Facialist above the line marketing campaign in May/June 2021, as
well as the NPD programme resources required for the brand relaunches. These investments exemplified our intention to invest
further in our Brand Development strategic pillar, through advertising and promotion of key brands and development of new
brands and products for our existing ranges.
The Group made a loss before tax of £1.9m which included other exceptional items of £1.6m from the partial impairment of the
intangible value of male styling brand, Fish. The impairment review, under IAS 36, reflected the impact of a reduction in consumer
usage and habits that have affected the male grooming category in the UK (further detail in Note 13 of the financial statements).
Financing costs were £0.2m (2020: £0.3m) relating to the defined benefit pension plan notional finance charge.
The effective tax rate for the period was negative 17% (2020: negative 1%) of pre-tax profits. The effective rate is below the
statutory rate of 19% due to the losses in the period and the non-recognition of deferred tax assets in relation to taxable losses
carried forward. The current year tax charge reflects standard UK rates of taxation.
Financial position and cash flow
The Group’s net cash position at the year ended 30 June 2021 was £19.0m (2020: net cash £18.0m). The £1m improvement in cash
was due to an improvement in working capital, in particular from a strong reduction in inventory levels to £2.3m (2020: £3.7m). As
part of our operational efficiency strategy, full focus was made during the year to dissipation of aged inventory across our sales
channels, as well as implementing a robust demand planning system for efficient purchasing while maintaining good product
availability. The inventory sell down was managed within the provisioning set by the Group in FY20, with no further provisions
required in the year.
It was decided in H1 to repay all outstanding term loans (£2.1m) as well as the commercial invoice discounting facility (£1.1m) to
leave the Group debt free. The strong net cash balance is planned primarily to drive the M&A agenda of the Group over the next
few years as we identify assets that are complementary to our portfolio and Project 50 strategy.
The Group also did not utilise any government furlough or loans scheme in the period.
Defined benefit pension plan
The defined benefit pension plan underwent its last triennial valuation on 5 April 2020. The actuarial deficit was calculated as
£21.1m, but including an allowance for the impact of changes in financial market conditions up to 31 March 2021 this was reduced
to £15.1m. The Group entered a revised deficit recovery plan and schedule of contributions in July 2021. Under this there is a
commitment to make a one-off deficit reduction payment of £1m by 31 July 2021, £318k payment per annum for four years,
followed by £791k for a further 13 years, and to pay certain administration costs and the PPF levy for the life of the plan. This
commitment will be reassessed at the next triennial valuation on 5 April 2023.
The April 2020 timing of the last triennial valuation increased the pension deficit significantly, as the start of the pandemic
depressed the valuation of scheme assets while lower discount rates linked to bond yields increased estimated scheme liabilities.
Extensive reviews were held with the Trustee to balance the assurance needed by the pension scheme in light of the increased
deficit, while aligning with Project 50’s objective of investing cash reserves in the business to the long-term benefit of all
stakeholders, including the pension scheme.
Accounting standards require the discount rate used for valuations under IAS 19 “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 higher than they were at 30 June 2020. This has resulted in higher discount rates being adopted for accounting
purposes compared to last year. This has decreased the fair value of the plan liabilities as measured under IAS 19, which combined
with an improvement in the fair value of the scheme’s assets, has translated into a decreased liability under the IAS 19 methodology.
For accounting purposes, at 30 June 2021, the Group recognised under IAS 19 a net liability of £10.4m (2020: £13.2m).
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. The Group has significant cash reserves of £19.0m. Accordingly, we continue to adopt the
going concern basis in preparing the Annual Report and Accounts.
Brand Architekts Group plcStrategic Report 33
Annual Report & Accounts 2021
Board of Directors
Roger McDowell
Non-Executive Chairman
Roger was reappointed to the Board in March 2012 having previously served as a Non-Executive
Director from July 2011 to January 2012. Roger is an experienced director of over 30 years’ standing:
he led the Oliver Ashworth Group through dramatic growth, Main Market listing and sale to Saint-
Gobain, following which he was appointed to a number of non-executive roles, including
chairmanships in both public and private equity backed businesses. Roger currently serves as
Chairman of Avingtrans plc and Chairman of Flowtech Fluidpower plc. He is also a non-executive
director of Tribal Group plc, Proteome Sciences plc, ThinkSmart plc, Augean plc and British Smaller
Companies VCT2 plc. Roger is a member of the Remuneration, Audit and Nomination Committees.
Edward Beale
Independent Non-Executive Director
Edward joined the Company as a Non-Executive Director on 1 July 2014. He is a Chartered
Accountant and is the Finance Director of Marshall Monteagle plc. He is a member, previously
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 31 August 2013. He is also a non-executive director of London Finance & Investment Group plc,
Western Selection plc, Heartstone Inns Limited, and some of their subsidiary and associated
companies. Edward chairs the Audit Committee and is a member of the Remuneration Committee.
Chris How
Independent Non-Executive Director
Chris was formerly the CEO of Swallowfield plc (the previous name of the Group) and has recently
held the position of interim CEO of Brand Architekts. Chris brings continuity, detailed knowledge
of the business and extensive, relevant sector experience, having previously held senior UK and
international leadership positions at PZ Cussons and Colgate Palmolive. Chris is the Chair of the
Remuneration Committee.
Quentin Higham
Chief Executive Officer
Quentin was previously Managing Director of Yardley of London Ltd/Wipro Consumer Care
between 2010 and 2020. Prior to that, he was Marketing Director at Coty, with responsibility for the
Rimmel cosmetics brand; UK Brand Director at Swatch between 1999 and 2001 and Head of UK
Marketing at global cosmetics company Revlon between 1992 and 1999. In addition, he has
first-hand knowledge of our brands, having been Commercial Director between 2002 and 2006 at
KMI brands with responsibility for the Fish brand and King of Shaves.
Tom Carter
Chief Financial Officer
Tom was previously Group Finance and Operations Director at Technetix Group Limited, a market-
leading technology company. Prior to that, he was Regional Business Controller at Alliance Boots,
Financial Controller at Sky Media and Finance Manager at Procter and Gamble. Tom trained as a
Chartered Accountant with PwC.
Brand Architekts Group plc 34
Annual Report & Accounts 2021
Corporate Governance Report
Annual General Meeting
Note on this year’s AGM…
The Board, recognising the importance of sound corporate governance, has decided to adopt the QCA’s 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 10 principles of the QCA Code (the Principles) to its governance.
Governance principle/Explanation
Further reading
1. Establish a strategy and business model which promote
long-term value for shareholders.
The Board meets annually to review the strategy for the Group.
The strategic plan and business model are reviewed by the executive leadership on a monthly
basis with relevant operational and management updates being reported to demonstrate
delivery and progress to the Board.
Decisions of the Board are made in line with the strategic plan and business model for the Group.
CEO’s Statement, pages 16
to 19
Project 50, pages 24 to 25
Business Model, pages 20
to 21
Status: Compliant
2. Seek to understand and meet shareholder needs and
expectations.
Regular dialogues are held with shareholders, including holding briefings with analysts and
other investors and staff shareholders. The Company also uses the Annual General Meeting as
an opportunity to communicate with its shareholders. The Chairman of the Board is the primary
point of contact for all shareholders.
The Company produces year-end and interim announcements as well as a full Annual Report,
all of which are available on the Results, Reports and Presentations section of the Company’s
website and hard copies of the Annual Report are distributed to those shareholders who have
requested to continue to receive them.
Status: Compliant
3. Take into account wider stakeholder and social
responsibilities and their implications for long-term success.
The Group’s stakeholders include shareholders, members of staff, customers, suppliers,
regulators, partners, industry bodies and creditors. The principal way in which their feedback on
the Group is gathered is via the meetings, conversations and feedback processes. This, as well as
the actions generated from this feedback, is detailed in the Stakeholder Engagement and
Section 172 section on pages 28 to 30.
Status: Compliant
Stakeholder Engagement and
Section 172, pages 28 to 30
Reports and Presentations
section, Company website
(www.brandarchitektsplc.com)
Corporate Governance
section, Company website
(www.brandarchitektsplc.com)
Shareholder and Company
News section, Company
website
(www.brandarchitektsplc.com)
Stakeholder Engagement and
Section 172, pages 28 to 30
Corporate Governance
section, Company website
(www.brandarchitektsplc.com)
Brand Architekts Group plcGovernance 35
Annual Report & Accounts 2021
Governance principle/Explanation
Further reading
Principal Risks and
Uncertainties, pages 26 to 27
Corporate Governance
section, Company website
(www.brandarchitektsplc.com)
Board of Directors, page 33
Corporate Governance
section, Company website
(www.brandarchitektsplc.com)
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation.
The Company’s principal risks and uncertainties are set out in the Strategic Report and the main
risks arising from the Company’s operations and how these are managed by the Board are also
set out in the Notes to the Accounts. The Company’s strategy and business model, and the
Company’s risks and uncertainties, are reviewed annually.
The Board regularly considers potential risks to its strategy and the Company’s business during
formal Board meetings, including agenda items focusing on KPIs, lessons learned from recent
initiatives and post investment reviews. The Board concludes its annual risks assessment prior to
the preparation of the Annual Report and Accounts, and the impact of these risks on the
interests of its key stakeholders including suppliers and customers are also considered.
During the year, the Company has maintained insurance cover for its directors and officers under
a directors’ and officers’ liability insurance policy. The Company has not provided any qualifying
third-party indemnity cover for the directors although under the Company’s Articles of
Association, the Company may indemnify any director or other officer against any such liability.
Status: Compliant
5. Maintain the board as a well-functioning, balanced team led
by the chair.
The Non-Executive Chairman is responsible for the running of the Board while the Executive
Directors have executive responsibility for running the Group’s business and implementing
Group strategy.
The Board comprises the Non-Executive Chairman, the CEO, one executive director and two
non-executive directors. The Board considers that all non-executive directors bring an
independent judgement to bear notwithstanding the varying lengths of service.
The Board as a whole manages the business of the Company on behalf of the shareholders and
in accordance with the Articles of Association. This is achieved through its decision-making and,
where appropriate, through the delegation of certain responsibilities to Committees.
The Board meets formally six times a year, while this is supplemented by ad hoc interim meetings
focusing on items requiring discussion, review and approval as required. All meetings were 100%
attended during the year.
Non-Executive Directors’ terms of appointment provide that they will commit such time as
necessary for the fulfilment of their duties. This is anticipated to be in the order of 20 days
per annum.
The Board has a formal schedule of matters reserved to it (available on the Company’s website
www.brandarchitektsplc.com) and is supported by the Audit, Remuneration and Nomination
Committees which take place separate to the formal Board meetings.
Status: Compliant
Brand Architekts Group plc 36
Annual Report & Accounts 2021
Corporate Governance Report
continued
Governance principle/Explanation
Further reading
Board of Directors, page 33
6. Ensure that between them the directors have the necessary
up-to-date experience, skills and capabilities.
The Board as a whole is confident that it has a strong team which contains the necessary mix
and balance of experience, skills, personal qualities and capabilities to deliver the Company’s
strategy for the benefit of the shareholders. The Board will continue to review the collective
resources of its directors and whether further resource and skills may be required to deliver
on the Company’s strategic objectives, in particular Project 50.
The directors of the Company, as non-executives, are expected to not only play a part in
the management of the Company but also to challenge and contribute to the development
of strategy and the achievement of the Company’s objectives. They all play their part by
being experienced and commercial people who bring a wide range of skills and capabilities
to the Board.
Further active review of the Board composition is now planned, as referenced in the CEO’s
Statement.
Status: Compliant
7. Evaluate board performance based on clear and relevant
objectives, seeking continuous improvement.
The Board continually considers and evaluates its own performance and effectiveness and that
of the individual directors and Board Committee members. The Board also provides regular
feedback to the CEO on both personal, executive leadership team and Company performance
and will continue to do so on an ongoing basis.
Status: Compliant
8. Promote a corporate culture that is based on ethical values
and behaviours.
Brand Architekts is committed to high standards of ethical behaviour. This culture is monitored
in both its Board, executive and senior manager meetings and is formalised in the Group’s ethical
policy, Sustainability Blueprint Code of Conduct and Company Handbook.
Responsibilities section,
Company website
(www.brandarchitektsplc.com)
The Group created an ethical policy in order to ensure that both its organisation and its suppliers
manufacture and supply safe, legal products that meet statutory and customer requirements,
and that business is conducted in accordance with industry and internationally approved
standards of good ethical, employment and environmental practice.
Sustainability Blueprint Code
of Conduct
Further details on the Sustainability Blueprint Code of Conduct can be found on page 11.
For employees, the Company implemented a Company Handbook during the year, setting out
our key policies and expectations.
Insider trading
The Board has appropriate policies and procedures in place to guard against insider trading by
employees, including directors. Appropriate clearances are required in order that trades can be
made and all employees are made aware, via Company-wide emails, of relevant close periods
prior to financial results being announced.
Conflicts of interest
Under the Companies Act 2006, directors must avoid situations where a direct or indirect conflict
of interest may occur. The Company has in place procedures to deal with any situation where a
conflict may be perceived.
Status: Compliant
Brand Architekts Group plcGovernance 37
Annual Report & Accounts 2021
Governance principle/Explanation
Further reading
Corporate Governance
section, Company website
(www.brandarchitektsplc.com)
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the board.
The role of the Board is to ensure delivery of the business strategy and long-term shareholder
value.
The general obligations of the Board and the roles and responsibilities of the Chairman and the
CEO are set out in the Corporate Governance section of our corporate website. This section
includes details of the schedule of matters reserved for Board approval by our Audit,
Remuneration and Nomination Committee members and their terms of reference.
The Board fulfils its role by approving the annual strategic plan and monitoring business
performance throughout the year. The Board holds formal scheduled Board meetings during
the financial year and in addition held a number of unscheduled ad hoc meetings, typically by
conference call. There is a schedule of matters reserved for Board approval that can be found on
the Company’s website.
The Board has approved an annual Board calendar setting out the dates, location and standing
agenda items for each formal scheduled Board and Committee meeting and scheduled Board
calls. Board papers are circulated to directors in advance of scheduled and unscheduled
meetings, which are of an appropriate quality to enable the directors to fulfil their obligations
and adequately monitor the performance of the business. Directors who are unable to attend
a meeting are expected to provide their comments to the Chairman, the CEO, or the Company
Secretary as appropriate. The Board also receives management information on a regular basis
that sets out the performance of the business. The CEO and Chief Financial Officer are invited to
attend the Audit and Remuneration Committee meetings, if appropriate.
All directors receive regular and timely information on the Group’s operational and financial
performance. Relevant information is circulated to the directors in advance of meetings. The
business reports monthly on its headline performance against its agreed budget, and the Board
reviews the monthly update on performance and any significant variances are reviewed at each
meeting. Senior executives below Board level attend Board meetings where appropriate to
present business updates.
Status: Compliant
10. Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders
and other relevant stakeholders.
The Company encourages two-way communication with both its institutional and private
investors and responds quickly to all queries received. The Chairman talks regularly with the
Group’s major shareholders and ensures that their views are communicated fully to the Board.
Reports and Presentations
section, Company website
(www.brandarchitektsplc.com)
In addition, the Company communicates with shareholders through the Annual Report, full-year
and half-year announcements, the Annual General Meeting, general meetings and one-to-one
meetings with large existing or potential new shareholders. Further details of these reports can
be found on the Company’s website.
Shareholder and Company
News section, Company
website
(www.brandarchitektsplc.com)
Status: Compliant
Brand Architekts Group plc 38
Annual Report & Accounts 2021
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 30 June 2021.
The Corporate Governance Report set out
on pages 34 to 37 forms part of this report.
Directors
The Company’s current directors are listed on page 33,
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
(resigned 30 September 2020)
Substantial shareholdings
As at 21 September 2021, the following shareholders had
notified the Company that they held an interest in 3% or more
of its issued Ordinary Share capital:
Significant shareholders
Soros Fund Mgt
BGF Investments
Octopus Investments
River & Mercantile Asset Mgt
Hargreaves Lansdown Asset Mgt
FIL Investment International
R & A Persey
Interactive Investor
City Asset Mgt
Jarvis Investment Mgt
ISPartners Investment Solutions
Shareholding
Percentage of
issued shares
2,121,426
1,601,250
1,504,400
1,500,000
1,375,694
1,281,437
982,271
651,123
602,844
542,163
516,793
12.3
9.3
8.7
8.7
8.0
7.4
5.7
3.8
3.5
3.1
3.0
R S McDowell
E J Beale
C G How
Q G A Higham
T R J Carter
(appointed 14 July 2020)
Strategic Report
The Strategic Report set out on pages 2 to 32 provides a fair
review of the Group’s business for the year ended 30 June
2020. 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.
Employee engagement
For employee engagement please refer to the Stakeholder
Engagement and Section 172 section on pages 28 to 30.
Key stakeholders
For our key stakeholders please refer to the Stakeholder
Engagement and Section 172 section on pages 28 to 30.
Carbon energy reporting
As the Company consumed 40,000kWh of energy or less in
the United Kingdom during the period in respect of which the
Directors’ Report is prepared, no further disclosures are being
made with respect to carbon energy usage. Further information
with regard to the initiatives taken with regard to our products
and their environmental impact can be in found in our
Sustainability blueprint on page 11.
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.
Directors’ interests in the Company are disclosed within
Note 26 of the financial statements.
Notice of Meeting
This year’s Annual General Meeting will be held on Monday
29 November 2021. A separate circular will be sent to
shareholders and includes the following:
– notice of meeting;
– Form of Proxy; and
– details and information on the resolutions to be proposed.
PKF Francis Clark have expressed their willingness to continue
in office as auditor 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 (IFRSs) 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 IFRSs 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.
Brand Architekts Group plcGovernance
39
Annual Report & Accounts 2021
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 auditor
At the date of making this report, each of the Company’s
directors, as set out on page 33, confirm the following:
– so far as each director is aware, there is no relevant
information needed by the Company’s auditor 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 auditor in
connection with preparing their report and to establish that
the Company’s auditor is aware of that information.
By Order of the Board
Roger McDowell
Non-Executive Chairman
28 September 2021
Registered number: 01975376
Brand Architekts Group plc 40
Annual Report & Accounts 2021
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 period
ended 30 June 2021, 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 in accordance with International Financial Reporting Standards
(IFRSs) in conformity with the requirements 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 30 June 2021 and
of the Group’s loss for the period then ended;
– the Group and Company financial statements have been properly prepared in accordance with IFRSs in conformity with the
requirements 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s ability to continue
to adopt the going concern basis of accounting included:
– Reviewing the Group’s cash flow forecast for the next 12 months.
– Consideration of the levels of cash held by the Group.
– Assessing the level of fixed overheads in forecasts compared to the cash balances held by the Group.
– Reviewing going concern related disclosures in the financial statements to ensure they are appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
Brand Architekts Group plcFinancial Statements 41
Annual Report & Accounts 2021
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 comprised of the following active companies during the
period:
– 1 UK trading Parent Company; and
– 2 UK trading subsidiary companies (1 wholly owned and 1 51% owned).
All 3 trading companies were subject to full scope audits performed by the Group audit team.
Those components subject to audit and specific audit procedures cover 100% (2020: 100%) of the Group’s revenue from continuing
and discontinued operations and 100% (2020: 98%) of the Group’s consolidated profit after tax from continued and discontinued
operations for the period. Our audit work at the component level is executed at levels of materiality appropriate for such components.
As is usual in our audits we also addressed the risk of management override of controls, including evaluating whether there was
evidence of bias by directors that misrepresented a risk of material misstatement due to fraud.
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 for the current period. They comprise 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. This is not
a complete list of all risks identified by our audit.
Goodwill and brands impairment
Work done
As identified in the accounting policies, the
impairment review of the Group’s carrying value
of goodwill and brands is one of the main areas
of estimation. At 30 June 2021, the carrying
value of these balances in the Group balance
sheet was £8.8m (2020: £10.4m).
We identified that the audit risk relates to
ensuring that management’s impairment review
is robust and reliable in identifying potential
impairment, and that the assumptions made
are reasonable.
Our audit work included:
– Assessing and challenging the key assumptions and calculations applied by
management in their impairment reviews.
– Reviewing the historical accuracy of management judgements made in
previous impairment reviews, specifically reviewing the outcome of brands
impaired in previous periods.
– Corroborating evidence that supported management’s assumptions
surrounding the impairment of Fish, with a focus on historical performance
against budget and general trends of the brand.
– Benchmarking the long-term growth rate to independent market data to
confirm it as appropriate.
– Review of post year-end performance of brands to assess for any further
indicators of impairment or where brands had performed better than
expected.
– Assessing and challenging management’s sensitivity analysis on key
assumptions and calculations, by performing our own sensitivity analysis on
short-term growth forecasts and assessing their impact on the impairment
charge of £1.6m recognised in relation to Fish.
As a result of the procedures performed, we are satisfied that the key assumptions used in the impairment models and the resulting
conclusions drawn by management are appropriate. The impairment of £1.6m in relation to Fish reflects management’s assessment
that the brand will not significantly outperform current levels of trade.
Brand Architekts Group plc 42
Annual Report & Accounts 2021
Independent Auditor’s Report to the Members of Brand
Architekts Group plc continued
Inventory valuation and provisioning
Work done
At 30 June 2021 the Group carried inventory of
£2.3m (2020: £3.7m).
An inventory provision of £0.7m is held at the
period end (2020: £2.1m).
We identified that the audit risk relates to
ensuring that inventory is carried at the lower
of cost and net realisable value. As disclosed
within the accounting policies, the carrying
value of inventory is considered a key source
of estimation.
Our audit work included:
– Reviewing the outcome of the prior year estimates made by management in
calculating the inventory provision and assessing the impact on the current
year.
– Reviewing and challenging the estimates and judgements made by
management in calculating inventory provisions. We have corroborated
estimates used by management surrounding the usable life of inventory to
industry data and customer preferences.
– Recalculating the inventory provision using the inputs and assumptions
made by management.
– Reviewing the net realisable value of inventory by reference to sales prices
achieved since the year end. We have considered the average sales prices
of inventory achieved by category and quantities held and extrapolated the
results across the entire population to assess management’s judgements
surrounding net realisable value.
Investigating inventory which has not sold during the period under review
or since the year end, along with inventory which had sold for below cost to
ensure that it had been adequately provided for.
–
– Performing sensitivity analysis on the inputs of the inventory provision and
considering the impacts of this on the net realisable value of inventory.
– Reviewing the level of disclosures surrounding the inventory provision,
especially in understanding the impact of the changes in estimates have
had on the gross profit margin of the Group.
– Corroborating the cost of a sample of inventory lines to latest purchase
invoices and direct costs associated with their acquisition.
– Corroborating the need for new provisions against certain product lines to
market information that reflect current regulations.
– Assessing the business circumstances and financial impact of releasing part
of the prior period exceptional inventory provision, created following the
disposal of the contract manufacturing division in the comparative period.
– Ensuring consistency of disclosure and presentation of the above provision
release with the comparative period.
As a result of the procedures performed, we are satisfied that inventory is carried at the lower of cost and net realisable value.
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:
£158,000 (2020: £162,500)
£158,000 (2020: £162,500)
75% of financial statement materiality
Basis for determination for the Group
1% of revenue (2020: 1% of revenue from continuing operations)
Basis for determination for the Company:
1% of the gross assets (2020: 1% of gross assets) (see comments below)
Range of materiality at 3 components subject to
full scope audits:
Misstatements above which were reported to
the audit committee:
£5,000 – £158,000
£4,700
Rationale for the benchmark applied for the Group: We consider revenue as the most appropriate measure for materiality.
Based on the benchmarks used in the Annual Report and our assessment of the Group operating in a low margin industry,
revenue is a primary measure used by the shareholders in assessing the performance of the Group, and is a generally accepted
auditing benchmark.
Brand Architekts Group plcFinancial Statements 43
Annual Report & Accounts 2021
Rationale for the benchmark applied for the Company: The Company is currently responsible for the central costs of the Group and
holds the investments in the trading subsidiaries. As such revenue is not considered a relevant benchmark for setting materiality for
the individual Company. We have instead considered the gross asset value of Company to be the best benchmark to set materiality,
reflecting the change in status of the Company. This is a generally accepted auditing benchmark for holding companies. However,
we have restricted materiality in order that Company materiality was not greater than that of the Group.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of
the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
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.
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 set out on pages 38 and 39, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the 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 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below.
Brand Architekts Group plc 44
Annual Report & Accounts 2021
Independent Auditor’s Report to the Members of Brand
Architekts Group plc continued
We obtained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it
operates. We identified the principal risks of non-compliance with laws and regulations as relating to breaches around Cosmetic
Safety Regulations, specifically around the labelling of products. We also considered those laws and regulations that have a direct
impact on the preparation of the financial statements such as financial reporting legislation (including the Companies Act 2006) and
taxation legislation. We considered the extent to which any non-compliance with these laws and regulations may have a negative
impact on the Group’s ability to continue trading and the risk of a material misstatement in the financial statements.
We also evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements and
determined that the principal risks related to the misstatement of the result for the year, goodwill impairment and inventory
valuation.
Based on this understanding we designed our audit procedures to identify irregularities. Our procedures involved the following:
– Both goodwill impairment and inventory valuation were assessed as Key Audit Matters and our work in respect of them is
detailed above.
– We made enquiries of senior management as to their knowledge of any non-compliance or potential non-compliance with laws
and regulations that could affect the financial statements. As part of these enquiries, we also discussed with management
whether there have been any known instances of material fraud, of which there were none.
– We identified the individuals, including where this is managed by third parties, with responsibility for ensuring compliance with
laws and regulations and discussed with them the procedures and policies in place.
– We reviewed minutes of meetings of senior management and those charged with governance.
– We challenged the assumptions and judgements made by management in its significant accounting estimates.
– We reviewed legal fees incurred in the period to identify potential breaches in laws and regulations.
– We obtained direct confirmation from the Group’s legal representative to confirm they were not aware of any ongoing litigation,
including that caused by non-compliance with laws and regulations.
– We audited the risk of management override of controls, including through substantively testing journal entries and other
adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of
business.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the 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
28 September 2021
Brand Architekts Group plcFinancial Statements 45
Annual Report & Accounts 2021
Group Statement of Comprehensive Income
For the period ended 30 June 2021 and 52 weeks ended 27 June 2020
Revenue
Cost of sales (including Exceptional credits /(costs))
Gross profit
Commercial and administrative costs
Operating loss before other exceptional items
Other exceptional items
Operating loss
Finance income
Finance expense
Loss before taxation
Taxation
Loss for the year
Profit on discontinued operations after taxation
(Loss)/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
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
(Loss)/profit attributable to:
Equity shareholders
Non-controlling interests
Total comprehensive income/(loss) 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)
The accompanying accounting policies and notes form part of the financial statements.
Notes
2
3
3
7
8
4
9
27
11
10
2021
£’000
15,875
(9,530)
6,345
(6,408)
(63)
(1,600)
(1,663)
2
(224)
(1,885)
(314)
(2,199)
–
(2,199)
2,786
–
2,786
587
2020
£’000
16,250
(13,069)
3,181
(5,859)
(2,678)
(1,444)
(4,122)
77
(301)
(4,346)
55
(4,291)
6,529
2,238
(4,086)
(49)
(4,135)
(1,897)
(2,253)
54
2,217
21
533
54
(1,918)
21
(13.1)p
(13.1)p
Nil
Nil
Nil
Nil
12.9p
12.9p
745
4.35p
Nil
Nil
Brand Architekts Group plc 46
Annual Report & Accounts 2021
Group Statement of Financial Position
For the period ended 30 June 2021 and 52 weeks ended 27 June 2020
Notes
2021
£’000
2020
£’000
12
13
22
15
16
17
18
19
25
20
22
23
23
23
23
23
23
67
10,118
2,605
12,790
2,299
3,651
19,018
432
25,400
38,190
2,602
–
2,602
–
10,418
–
1,475
11,893
14,495
23,695
862
11,987
–
–
(7,802)
18,496
23,543
152
23,695
142
11,714
2,515
14,371
3,724
3,969
21,240
836
29,769
44,140
4,503
1,029
5,532
1,066
13,237
81
1,154
15,538
21,070
23,070
862
11,987
–
–
(10,588)
20,711
22,972
98
23,070
ASSETS
Non-current assets
Property, plant and equipment including right-of-use assets
Intangible assets
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current tax receivable
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Post-retirement benefit obligations
Lease liabilities
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
The accompanying accounting policies and notes form part of the financial statements.
Approved by the Board on 28 September 2021 and signed on its behalf by
Thomas Carter
Chief Financial Officer and Company Secretary
Company Number: 01975376
Brand Architekts Group plcFinancial Statements 47
Annual Report & Accounts 2021
Company Statement of Financial Position
For the period ended 30 June 2021 and 52 weeks ended 27 June 2020
Notes
2021
£’000
2020
£’000
13
22
14
16
17
18
19
25
23
23
23
23
23
1,271
2,605
12,084
15,960
254
16,681
–
16,935
32,895
4,487
–
4,487
–
10,418
10,418
14,905
17,990
862
11,987
467
(7,802)
12,476
17,990
2,949
2,515
12,084
17,548
218
20,499
373
21,090
38,638
5,281
1,029
6,310
1,066
13,237
14,303
20,613
18,025
862
11,987
467
(10,588)
15,297
18,025
ASSETS
Non-current assets
Intangible assets
Deferred tax assets
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Current tax receivable
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Post-retirement benefit obligations
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Capital reserve
Pension re-measurement reserve
Retained earnings
Total equity
The accompanying accounting policies and notes form part of the financial statements.
Approved by the Board on 28 September 2021 and signed on its behalf by
Thomas Carter
Chief Financial Officer and Company Secretary
Company Number: 01975376
Brand Architekts Group plc 48
Annual Report & Accounts 2021
Group Statement of Changes in Equity
For the period ended 30 June 2021 and 52 weeks ended 27 June 2020
Group
Balance as at June 2020
Non-controlling interest
Share-based payments
Transactions with owners
Loss for the year
attributable to equity
shareholders
Other comprehensive
income:
Re-measurement of defined
benefit liability
Total comprehensive
income for the year
Share
capital
£’000
862
Share
premium
£’000
11,987
–
–
–
–
–
–
–
–
–
–
–
–
Balance as at June 2021
862
11,987
Group
Balance as at June 2019
Dividends
Issue of new shares
Non-controlling interest
Share-based payments
charge
Realisation of exchange
differences on sale of
subsidiary
Transactions with owners
Profit for the year
attributable to equity
shareholders
Other comprehensive
income:
Re-measurement of defined
benefit liability
Exchange difference on
translating foreign
operations
Realised profit on
asset sold
Total comprehensive
income for the year
Share
capital
£’000
857
Share
premium
£’000
11,987
–
5
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance as at June 2020
862
11,987
Revaluation of
investment
reserve
£’000
Exchange
reserve
£’000
Pension
re-measurement
reserve
£’000
Retained
earnings
£’000
Non-controlling
interest
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10,588)
20,711
–
–
–
–
–
38
38
(2,253)
2,786
–
98
54
–
54
–
–
2,786
(2,253)
(7,802)
18,496
–
152
Revaluation of
investment
reserve
£’000
Exchange
reserve
£’000
Pension
re-measurement
reserve
£’000
Retained
earnings
£’000
Non-controlling
interest
£’000
1,241
(147)
(6,502)
18,160
–
–
–
–
–
–
–
–
–
(1,241)
(1,241)
–
–
–
–
–
196
196
–
–
(49)
–
(49)
–
–
–
–
–
–
–
–
(4,086)
–
–
(4,086)
(10,588)
(745)
–
–
(162)
–
(907)
2,217
–
–
1,241
3,458
20,711
145
(68)
–
21
–
–
(47)
–
–
–
–
The accompanying accounting policies and notes form part of the financial statements.
Total
equity
£’000
23,070
54
38
92
(2,253)
2,786
533
23,695
Total
equity
£’000
25,741
(813)
5
21
(162)
196
(753)
2,217
(4,086)
(49)
–
–
98
(1,918)
23,070
Brand Architekts Group plcFinancial Statements 49
Annual Report & Accounts 2021
Company Statement of Changes in Equity
For the period ended 30 June 2021 and 52 weeks ended 27 June 2020
Company
Balance as at June 2020
Share-based payments
Transactions with owners
Loss for the year
Other comprehensive income:
Re-measurement of defined benefit
liability
Total comprehensive income for the year
Share
capital
£’000
862
Share
premium
£’000
11,987
–
–
–
–
–
–
–
–
–
–
Balance as at June 2021
862
11,987
Revaluation of
investment
reserve
£’000
Capital
reserve
£’000
Pension
re-measurement
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
–
–
–
–
–
–
–
467
(10,588)
15,297
18,025
–
–
–
–
–
–
–
–
31
31
31
31
(2,852)
(2,852)
2,786
2,786
–
(2,852)
2,786
(66)
467
(7,802)
12,476
17,990
Share
capital
£’000
857
Share
premium
£’000
11,987
Revaluation of
investment
reserve
£’000
1,241
Capital
reserve
£’000
467
Pension
re-measurement
reserve
£’000
(6,502)
Company
Balance as at June 2019
Dividends
Issue of new shares
Share-based payments
Transactions with owners
Profit for the year
Other comprehensive income:
Re-measurement of defined benefit
liability
Realised profit on asset sold
Total comprehensive income for the year
–
5
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,241)
(1,241)
–
Retained
earnings
£’000
9,445
(745)
–
(162)
(907)
Total
equity
£’000
17,495
(745)
5
(162)
(902)
5,518
5,518
–
–
–
–
–
(4,086)
–
(4,086)
–
1,241
6,759
(4,086)
–
1,432
–
–
–
–
–
–
–
–
Balance as at June 2020
862
11,987
467
(10,588)
15,297
18,025
The accompanying accounting policies and notes form part of the financial statements.
Brand Architekts Group plc 50
Annual Report & Accounts 2021
Cash Flow Statement
For the period ended 30 June 2021 and 52 weeks ended 27 June 2020
Cash flow from operating activities
(Loss)/profit before taxation
Depreciation
Amortisation/impairment
Gain on disposal of subsidiaries
Change in value of assets held for resale prior to sale in period
Finance income
Finance cost
Decrease in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Share-based payment expense/(credit)
Contributions to defined benefit plans
Cash generated from operations
Finance expense paid
Taxation received/(paid)
Net cash flow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from the sale of subsidiaries
Cost associated with disposal of subsidiaries
Net cash flow from investing activities
Cash flow from financing activities
Repayment of movements in invoice discounting facility
Finance income received
Repayment of loans
Lease payments
Issue of new shares
Dividends paid
Net cash flow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Group
2021
£’000
(1,885)
7
1,880
–
–
(2)
224
1,425
318
(687)
38
(318)
1,000
(28)
381
1,353
(66)
(284)
–
–
(350)
(1,132)
2
(2,095)
–
–
–
(3,225)
(2,222)
21,240
19,018
2020
£’000
2,183
93
1,204
(8,922)
(3,225)
(77)
324
1,487
(494)
923
(124)
(318)
(6,946)
(128)
(773)
(7,847)
(28)
(101)
35,255
(1,315)
33,811
(3,187)
77
(1,135)
(52)
5
(813)
(5,105)
20,859
381
21,240
Company
2021
£’000
(3,116)
–
1,678
–
–
(2)
221
–
227
(799)
36
(318)
(2,073)
(25)
373
2020
£’000
5,627
–
1,020
(9,015)
(3,681)
(149)
278
–
(214)
(1,562)
(124)
(318)
(8,138)
(82)
(50)
(1,725)
(8,270)
–
–
–
–
–
–
2
(2,095)
–
–
–
(2,093)
(3,818)
20,499
16,681
–
–
35,255
(1,315)
33,940
(3,592)
149
(1,135)
–
5
(745)
(5,318)
20,352
147
20,499
The accompanying accounting policies and notes form part of the financial statements.
Brand Architekts Group plcFinancial Statements 51
Annual Report & Accounts 2021
Notes to the Accounts
Note 1 Significant accounting policies
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 at the end of the financial report. The nature of the Group’s operations and its principal activities are set
out in the Strategic Report. The Group have moved to a traditional 12 month calendar year and as such have drawn the accounts to
30 June 2021. In prior years, the accounts were prepared 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)
in conformity with the requirements of the Companies Act 2006 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 level of cash
held, 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 disposal of the manufacturing business (completed 23 August 2019), these operations have been disclosed
as discontinued within the comparative information. No operations have been classified as discontinued in the period to
30 June 2021.
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 loss after tax for the year to June 2021 was £2.852m (2020: profit after tax £5.518m).
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 30 June 2021. 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 30 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.
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 three years. Amortisation is recognised at the point an asset is complete.
(ii) Brand names and customer relationships
Brand names and customer relationships acquired are recognised as intangible assets at their fair values (see Note 13).
Customer relationships are amortised on a straight-line basis over 5 or 10 years, based on evaluation at point of acquisition.
Amortisation is charged to commercial and administrative expenses and adjusted for in the calculation of underlying result.
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.
(iii) 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 cash-generating unit (CGU) and tested together using a discounted cash flow approach.
Brand Architekts Group plc 52
Annual Report & Accounts 2021
Note 1 Significant accounting policies continued
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:
Plant and machinery
5% to 33% per annum
Depreciation is charged to administrative expenses and is recognised at the point an asset is complete.
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, which in the main constitute the purchase price of the goods. Net realisable value is based on estimated
selling price.
Inventory is written down to net realisable value where there is a reasonable expectation that it will not be able to be sold for
greater than cost. Associated disposal costs are also provided for where necessary.
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 pension
scheme re-measurement) 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.
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 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 contract as contracts tend to be satisfied in a period of less than 12 months.
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 53
Annual Report & Accounts 2021
Leased assets
The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is
the lessee, except for short-term leases (defined as leases with a term of 12 months or less) and leases of low-value assets. For these
leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the lease term.
The lease liability is presented as a separate line in the Consolidated Balance Sheet. The lease liability is initially measured at the
present value of all future lease payments, discounted at the rate implicit in the lease, or if this rate is not readily determined, the
incremental borrowing rate of the Group.
Employee benefits
Pension obligations
The Group operates both defined benefit and defined contribution pension plans.
i) Defined benefit plans
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 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 plans
Costs of defined contribution pension plans are charged to the profit or loss in the year they fall due.
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.
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.
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.
Brand Architekts Group plc 54
Annual Report & Accounts 2021
Note 1 Significant accounting policies continued
Distributions to shareholders
Dividends and other distributions to shareholders are reflected in the financial statements when approved by shareholders in a
general meeting, except for interim dividends which are included in the 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 is the significant management judgement in applying the accounting policies of the Group that has the most
significant impact on the financial statements:
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 25. These future cash flows relate to services that have yet to be provided and which cannot be
provided for under IFRS.
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:
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 £10.4m (2020: £13.2m) 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 25.
Carrying value of inventory/inventory provisioning
As part of the business transformation to focus on owned brands business with a new management team, a number of decisions
were taken to reshape the brand portfolio, triggering adjustments to these brands and related inventory. This business
transformation and refocus has resulted in updated estimates in assessing the carrying value of inventory as discussed in the
Chairman’s Statement.
Inventory provisioning includes a number of judgements and estimates and gives rise to inherent uncertainty. If the estimated net
realisable value were to decrease by 5% for inventory lines that are expected to be sold for below cost price, a further provision of
£128,000 (2020: £165,000) would be required at the year end. Equally, if the estimated net realisable value were to increase by 5%
the provision would reduce by £128,000 (2020: £165,000).
Impact of new standards adopted during the period
No new standards have been adopted during the period.
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.
No new standards in issue but not yet effective are expected to have a material impact on the Group.
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 55
Annual Report & Accounts 2021
Note 2 Segmental analysis
During the year, there were only two reportable segments of the Group (three in the comparative period); the reportable segments
of the Group were 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 those organically developed plus the acquisitions of the portfolio of brands included in the
Brand Architekts acquisition (in 2016) and the Fish brand acquired during 2018.
– Manufacturing – the contracted development, formulation and production of quality products for many of the world’s leading
personal care and beauty brands. Disposal of the manufacturing business completed on 23 August 2019.
– Eliminations and central costs. Other Group-wide activities and expenses, including defined benefit pension costs, share-based
payment expenses/(credits), amortisation of acquisition-related intangibles, interest, taxation and eliminations of inter-segment
items, are presented within “Eliminations and central costs”.
This is the basis on which the Group presents its operating results to the directors, who are 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.
IFRS 15 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 IFRS 15 and have 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 period ended
30 June 2021 and 52 weeks ending 27 June 2020:
Period ended 30 June 2021
UK revenue
International revenue
Revenue – external
Revenue – internal
Total revenue
Discontinued operation
Total revenue – continuing operations
Underlying profit/(loss) from operations1
Charge for share-based payments
Amortisation of acquisition-related intangibles
Exceptional items included in cost of sales (Note 3)
Other exceptional items (Note 3)
Net borrowing costs
Segment profit included in discontinued operations
Profit/(loss) before taxation
Tax (charge)/credit
Profit for the period from continuing activities
Eliminations
and central
costs
£’000
–
–
–
–
–
–
–
(1,190)
(32)
(240)
–
(1,600)
(218)
Total
£’000
13,447
2,428
15,875
–
15,875
–
15,875
(273)
(38)
(240)
488
(1,600)
(222)
–
–
Brands
£’000
13,447
2,428
15,875
–
15,875
–
15,875
917
(6)
–
488
–
(4)
–
1,395
(3,280)
(1,885)
(259)
(55)
(314)
1,136
(3,335)
(2,199)
2020
£’000
18,637
5,093
23,730
–
23,730
(7,480)
16,250
(788)
(4)
(260)
(2,535)
6,016
(246)
(6,529)
(4,346)
55
(4,291)
Brand Architekts Group plc 56
Annual Report & Accounts 2021
Note 2 Segmental analysis continued
52 weeks ended 27 June 2020
UK revenue
International revenue
Revenue – external
Revenue – internal
Total revenue
Discontinued operation
Total revenue – continuing operations
Underlying profit from operations1
Charge for share-based payments
Amortisation of acquisition-related intangibles
Exceptional items included in cost of sales (Note 3)
Other exceptional items (Note 3)
Net borrowing costs
Tax charge on discontinued operations
Segment profit included in discontinued operations
Profit/(loss) before taxation
Tax credit/(charge)
Profit for the period from continuing activities
* The underlying result is calculated net of eliminations.
Brands
£’000
Manufacturing
£’000
Eliminations and
central costs
£’000
13,796
2,454
16,250
5
16,255
–
16,255
1,204
–
–
(2,535)
(176)
(46)
–
–
(1,553)
328
(1,225)
4,841
2,639
7,480
444
7,924
(7,924)
–
(909)
–
–
–
7,460
(22)
–
(6,529)
–
–
–
Total
£’000
18,637
5,093
23,730
–
–
–
–
(449)
(449)
23,730
444
(5)
(1,083)
(4)
(260)
–
(1,268)
(178)
–
–
(7,480)
16,250
(788)
(4)
(260)
(2,535)
6,016
(246)
–
(6,529)
(2,793)
(4,346)
(273)
55
2019
Total
£’000
52,144
25,194
77,338
–
77,338
(57,662)
19,676
4,428
(115)
(260)
–
(717)
757
(255)
(2,050)
1,788
(198)
(3,066)
(4,291)
1,590
The underlying result in the period to 30 June 2021 is derived wholly from continuing activities. For the 52 week period ended
27 June 2020 underlying result was split between continuing and discontinued activities as follows:
Underlying profit/(loss) from operations – operating segments
Eliminations and central costs
Underlying profit/(loss) from operations
Continuing
operations
– Brands
£’000
Discontinued
operations
– Manufacturing
£’000
1,204
(1,083)
121
(909)
–
(909)
Total
£’000
295
(1,083)
(788)
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, prior to disposal.
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:
Period ended 30 June 2021
Depreciation
Amortisation/impairment1
52 weeks ended 27 June 2020
Depreciation
Amortisation/impairment1
1 Impairment losses of £1.6m (2020: £0.9m) in central costs is included in exceptional items.
Brands
£’000
Manufacturing
£’000
Eliminations and
central costs
£’000
7
280
–
–
–
1,600
Brands
£’000
Manufacturing
£’000
Eliminations and
central costs
£’000
93
16
–
–
–
1,188
Total
£’000
7
1,880
Total
£’000
93
1,204
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 57
Annual Report & Accounts 2021
c) Principal measures of assets and liabilities
The Group’s 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. All assets and liabilities in relation to the contract
manufacturing division were sold during the period.
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 – continuing operations
UK
Other European Union countries
Rest of the world
Period ended
30 June 2021
£’000
52 weeks ended
27 June 2020
£’000
13,447
970
1,458
15,875
18,637
2,683
2,410
23,730
Period ended
30 June 2021
£’000
52 weeks ended
27 June 2020
£’000
13,447
970
1,458
15,875
13,796
541
1,913
16,250
In the period ended 30 June 2021, the Group had one customer that exceeded 10% of total revenues, being 24%. In the 52 weeks
ended 27 June 2020, the Group had three customers from continuing operations (being the Brands business) that exceeded 10% of
total revenues, being 26%, 13% and 11% respectively.
Note 3 Exceptional items
Exceptional charges/(credits) from continuing operations:
Included within cost of sales:
Inventory related
Other exceptional items:
Impairment of intangible assets
Severance costs (including social security costs)
Consultancy fees
Total exceptional items from continuing operations
Period ended
30 June 2021
£’000
52 weeks ended
27 June 2020
£’000
(488)
2,535
1,600
–
–
1,600
1,112
928
311
205
1,444
3,979
Exceptional cost of sales includes a partial write back of prior year provision relating to inventory (£0.5m), where the corresponding
cost in the comparative period was treated as exceptional. Other Exceptional items include £1.6m impairment of the Fish brand.
The comparative period exceptional items charge represents a provision of £2.5m for payments due to manufacturers for inventory
not expected to be utilised and changes in estimates surrounding the valuation of inventory. Other exceptional items included
£0.9m impairment of the RSC brand, £0.3m cost in relation to the departure of the former Chief Executive Officer and £0.2m
exceptional consultancy fees following the reorganisation of the group.
Exceptional charges/(credits) from discontinued operations (Note 27):
Other exceptional items:
Profit on disposal of the manufacturing division
Bonus payments
Inventory write offs and disposal costs
Period ended
30 June 2021
£’000
52 weeks ended
27 June 2020
£’000
–
–
–
–
(8,922)
1,116
346
(7,460)
Brand Architekts Group plc 58
Annual Report & Accounts 2021
Note 4 Loss before taxation
(a) This is stated after charging/(crediting)
Depreciation of property, plant and equipment of purchased assets
Amortisation of intangible assets
Impairment of intangible assets (classified as exceptional – Note 3)
Research
Foreign exchange (gains)/losses
Gain on disposal of subsidiaries
Amounts expensed for short-term and low-value leases
(b) Auditors’ remuneration
Audit services:
Audit of the Company financial statements
Audit of subsidiary undertakings
Audit-related services:
Interim review
Other non-audit services:
Corporate finance advice
Note 5 Staff costs
Wages and salaries
Social security costs
Other pension costs
2021
£’000
2020
£’000
7
280
1,600
–
21
–
59
28
12
2
–
2021
£’000
2,266
280
69
2,615
93
276
928
177
3
8,922
5
41
11
7
9
2020
£’000
2,928
337
153
3,418
For the comparative period, the above table excludes wages and salaries included within Exceptional Items (being severance costs
and employee bonuses paid on disposal of the manufacturing division – see Note 3).
The average monthly number of employees, including executive directors, during the year was:
Production
Distribution
Administration
Remuneration in respect of directors and key management personnel was as follows:
2021
Number
2020
Number
–
–
40
40
61
2
44
107
Executive Directors
T J Perman (resigned 30 September 2019)
J M Fletcher (resigned 23 August 2019)
M Gazzard (resigned 23 August 2019)
Q G A Higham
T R J Carter
Non-Executive Directors
B M Hynes (resigned 28 September 2020)
E J Beale
R S McDowell
F P Berrebi (resigned 29 June 2019)
C G How
Salary/fees
£’000
Bonuses
£’000
Pension
contributions
£’000
Total
2021
£’000
Total
2020
£’000
–
–
–
185
157
15
29
53
–
29
468
–
–
–
88
73
–
–
–
–
–
161
–
–
–
17
12
–
–
–
–
–
29
–
–
–
290
242
15
29
53
–
29
624
251
201
30
–
76
28
29
1
311
658
1,551
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 59
Annual Report & Accounts 2021
Directors’ and former directors’ interest in share-based options:
Share options:
Q Higham
T Carter
Total share options
Number of share
options at
June 2020
Number of share
options lapsed
in year
Number of share
options awarded
in year
Number of share
options exercised
in the year
Number of
share options at
June 2021
Exercise
price
Earliest
exercise
date
Exercise
expiry
date
–
–
–
–
–
–
145,228
102,282
247,510
–
–
–
145,228
102,282
247,510
Nil
Nil
30/09/23
30/09/23
30/09/30
30/09/30
The mid-market price of the Ordinary Shares on 30 June 2021 was 189.0p (2020: 125.0p) and the range during the period to
30 June 2021 was 109.8p to 200.0p (52 weeks to 27 June 2020: 97.5p to 245.0p).
Note 6 Share-based employee remuneration
Executive and managers share option scheme
The Group operates both approved and unapproved share option schemes.
Date of grant
2020 Share options – managers
2020 LTIP – executives’ share options
Total options granted
Number of share
options granted
Number of
phantom options
granted
89,000
247,510
336,510
–
–
–
Exercise
price
120.5p
Nil
Fair value
pence
32p
51p
Amount
expensed in
year-ended
June 2021
£’000
6
32
38
Period of
expense
3 years
3 years
The total number of Ordinary Shares subject to options and which could, in the future, be issued, is 336,510. This represents 1.95%
of the issued share capital of the Company which comprised 17,230,702 Ordinary Shares at the reporting date.
The Group 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 manager share options.
The Group has calculated the fair value of the LTIP options using a Monte Carlo simulation, as they include market-based
performance criteria.
Period-ended June 2021 awards
All of the options granted under the LTIP on 30 September 2020 had two performance conditions attached to them. 100% of the
award is linked to certain share price targets and the achievement of the individual performance targets over the plan cycle. 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, 100% of the award will be made in shares.
The 34,000 manager share options which remained in place at the year ended 27 June 2020 were cancelled in September 2020.
New options were granted over the same number of Ordinary Shares to certain employees under a Company Share Option Scheme
(CSOP). These options have an exercise price of 120.5p and no performance conditions attached, other than continued
employment of staff, vesting after a minimum of three years and a maximum exercise date of 10 years. The Company also granted
new options over 51,000 Ordinary Shares in the Company to employees under the same scheme and conditions.
Brand Architekts Group plc 60
Annual Report & Accounts 2021
Note 7 Finance income
Attributable entirely to ongoing operations
Bank interest receivable
Note 8 Finance costs
Total
Bank loans, overdrafts and lease interest
Pension plan notional finance charge
Ongoing operations
Bank loans, overdrafts and lease interest
Pension plan notional finance charge
2021
£’000
2
2
2021
£’000
28
196
224
2021
£’000
28
196
224
Included within bank loans, overdrafts and lease interest is an interest charge of £2,000 in relation to leases associated with
right-of-use assets.
Note 9 Taxation
(a) Analysis of tax charge in the year
UK corporation tax:
– on profit for the year
– adjustment in respect of previous years
Total current tax (credit)/charge
Deferred tax:
– current year (credit)
– prior year charge/(credit)
– effect of tax rate change on opening balance
– non-recognition of deferred tax asset for losses
Total deferred tax charge
Tax charge/(credit)
2021
£’000
–
(1)
(1)
(36)
–
351
–
315
314
2020
£’000
77
77
2020
£’000
128
196
324
2020
£’000
105
196
301
2020
£’000
14
(323)
(309)
(283)
115
(122)
544
254
(55)
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 61
Annual Report & Accounts 2021
(b) Factors affecting total tax charge for the year
The tax assessed on the profit before taxation for the year is at the standard rate of UK corporation tax of 19.00% (2020: 19.00%).
The differences are reconciled below:
(Loss)/profit before taxation (from continuing and discontinued activities)
Tax at the applicable rate of 19.00% (2020: 19.00%)
Effect of:
Adjustment in respect of previous years
Expenses not deductible for tax purposes
Income not taxable for tax purposes
Deferred tax asset not recognised on taxable losses
Remeasurement of deferred tax for changes in tax rates
Actual tax charge
2021
£’000
(1,885)
(358)
(1)
6
(3)
319
351
314
2020
£’000
2,183
415
(208)
–
(806)
–
544
(55)
The Group has tax losses of £4.9m (2020: £2.9m) which have not been recognised as there is no certainty that they can be utilised.
Note 10 Payments to shareholders
Final dividend paid – £nil (2020: 4.35p) per share
Interim dividend paid – £nil (2020: £nil) per share
2021
£’000
–
–
–
2020
£’000
745
–
745
No dividends were paid to the non-controlling interests in the period (2020: £68,000).
The Group has not delivered an operating profit this year as a result of the difficult trading conditions due to Covid-19. Accordingly,
the Board will not be proposing a final dividend. The Group’s dividend policy will be kept under review and further updates made
as appropriate.
Note 11 Earnings per share
Basic and diluted
(Loss)/profit for the year attributable to equity holders (£’000)
(Loss)/profit for the year from continuing operations attributable to equity holders (£’000)
Basic weighted average number of Ordinary Shares in issue during the year
Diluted number of shares
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Basic (loss)/earnings per share from continuing operations
Diluted (loss)/earnings per share from continuing operations
2021
2020
(2,253)
(2,253)
2,217
(4,312)
17,230,702
17,319,702
17,143,646
17,143,646
(13.1)p
(13.1)p
(13.1)p
(13.1)p
12.9p
12.9p
(25.2)p
(25.2)p
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 30 June 2021 and 27 June 2020 respectively.
Brand Architekts Group plc 62
Annual Report & Accounts 2021
Note 12 Property, plant and equipment
Group
Cost:
At June 2019
IFRS 16 – right-of-use assets recognised on transition
Additions
At June 2020
IFRS 16 – right-of-use asset disposed of
Additions
At June 2021
Depreciation:
At June 2019
Provided during the year
Disposals
At June 2020
Provided during the year
IFRS 16 – right-of-use asset disposed of
Disposals
At June 2021
Net book value:
At June 2021
At June 2020
Plant and
machinery
£’000
40
186
28
254
(186)
66
134
19
93
–
112
7
(52)
–
67
67
142
During the period a lease, for which a right-of-use asset was previously recognised, was renegotiated on a rolling six-month basis.
This resulted in the de-recognition of the right of use asset and the associated lease liability.
The carrying value of right of uses assets included in plant and machinery is £nil (2020: £134,000).
No property, plant and equipment was held by the Company during the year ending 30 June 2021, or the comparative period.
Note 13 Intangible assets
Group
Cost:
At June 2019
Additions
At June 2020
Additions
At June 2021
Amortisation:
At June 2019
Provided during the year
Impairment charge during the year
Disposals
At June 2020
Provided during the year
Impairment charge during the year
Disposals
At June 2021
Net book value:
At June 2021
At June 2020
Software
£’000
Brand
names
£’000
Customer
relationships
£’000
Goodwill
£’000
Total
£’000
–
101
101
284
385
–
16
–
–
16
40
–
–
56
329
85
8,715
–
8,715
–
8,715
–
–
924
–
924
1,600
–
2,524
6,191
7,791
2,126
–
2,126
–
2,126
642
260
4
–
906
240
–
–
1,146
980
1,220
2,618
13,459
–
101
2,618
13,560
–
284
2,618
13,844
–
–
–
–
–
–
–
–
–
642
276
928
–
1,846
280
1,600
–
3,726
2,618
2,618
10,118
11,714
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 63
Annual Report & Accounts 2021
Company
Cost:
At June 2019
At June 2020
At June 2021
Amortisation:
At June 2019
Provided during the year
Impairment charge during the year
At June 2020
Provided during the year
Impairment charge during the year
At June 2021
Net book value:
At June 2021
At June 2020
Software
£’000
Brand names
£’000
Customer
relationships
£’000
Total
£’000
–
–
–
–
–
–
–
–
–
–
–
–
3,624
3,624
3,624
–
–
924
924
–
1,600
2,524
1,100
2,700
480
480
480
135
92
4
231
78
–
309
171
249
4,104
4,104
4,104
135
92
928
1,155
78
1,600
2,833
1,271
2,949
Impairment testing
The two brands (Brand Architekts and Fish) and associated goodwill have been tested for impairment as they have indefinite
useful lives. Brand Architekts gave a valuation in excess of its carrying values, however Fish was partially impaired by £1,600,000
given the decline in revenue for the brand, reflecting the pressures on the male grooming category in the UK and the high street
retail channel.
Sensitivity analysis on the discount rate and growth rates was carried out on Brand Architekts to ascertain whether any reasonable
change in assumptions would cause an impairment; no such impairment was found. A similar sensitivity analysis was carried out on
Fish, which informed the impairment charge of £1,600,000.
As per previous years, the recoverable amount of each brand was determined based on value-in-use calculations, covering
underlying one to two-year forecasts, 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 for current market assessments of
the time value of money and risks specific to the brand. The discount rate applied is a pre-tax 8%, an increase of 2% versus the prior
year, reflecting expected returns for AIM-listed businesses as well as the debt-free capital structure of the Group.
Growth assumptions
Management have assumed a base case growth rate of 2%, in line with wider industry forecasts, in the calculations including into
perpetuity.
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 with indefinite useful
lives for Brand Architekts remains at £7,709,000 (comprising goodwill of £2,618,000 and brands of £5,091,000), while the Fish brand
net carry value, after the partial impairment, is £1,100,000.
Brand Architekts Group plc
64
Annual Report & Accounts 2021
Note 14 Investments
Company
Cost:
At June 2020
At June 2021
Provision for impairment:
At June 2020
At June 2021
Net book value:
Investments in
subsidiaries
£’000
18,318
18,318
(6,234)
(6,234)
12,084
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
Bagsy Beauty Limited
The Brand Architekts Limited
Mr. Haircare Limited – 51%
Country of registration
Nature of business
England
England
England
England
Dormant
Dormant
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.
During the period several dormant subsidiaries of the Company were dissolved. The cost of these dormant subsidiaries had been
impaired down to nil historically.
Note 15 Inventories
Group
Raw materials
Finished goods and goods for resale
2021
£’000
16
2,283
2,299
2020
£’000
27
3,697
3,724
The Group consumed inventories (from continuing activities) totalling £9.5m during the year (2020: £16.3m from continuing and
discontinued activities). No items are being carried at fair value less cost to sell (2020: £nil).
Detailed below is the movement on the inventory provision for the Group:
Opening balance
Utilised/released in the period
Closing balance
2021
£’000
(2,055)
1,378
(677)
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 65
Annual Report & Accounts 2021
Note 16 Trade and other receivables
Trade receivables
Amounts owed by Group undertakings
Other receivables
Prepayments
Group
Company
2021
£’000
2,818
–
617
216
3,651
2020
£’000
3,665
–
170
134
3,969
2021
£’000
4
230
2
18
254
2020
£’000
–
193
3
22
218
The amounts owed by Group undertakings relate to intercompany receivables. The increase in other receivables relates to deposits
paid to Far East suppliers for Christmas Gift stock orders.
Detailed below is the movement on the bad and doubtful debt provision for the Group:
Group
Opening balance
Impairment loss recognised
(Credit)/charge to profit and loss
Closing balance
2021
£’000
43
–
(11)
32
2020
£’000
–
(11)
54
43
An allowance has been made for estimated irrecoverable amounts of £32,000 (2020: £43,000). 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
1.1% (2020: 1.2%). The directors consider that the carrying amount of trade and other receivables approximates their fair value.
Ageing of trade receivables:
Group
Current
Overdue but less than 90 days
More than 90 days overdue
2021
£’000
2,587
206
25
2,818
2020
£’000
3,098
482
85
3,665
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
Commercial Invoice Discounting facility
Lease liabilities
Other payables
Group
2021
£’000
1,040
–
64
1,492
–
–
6
2,602
2020
£’000
1,376
–
412
1,497
1,132
52
34
4,503
Company
2021
£’000
15
4,139
–
319
–
–
14
4,487
2020
£’000
64
4,917
–
287
–
–
13
5,281
The directors consider that the carrying value of trade and other payables approximates to their fair value.
The Commercial Invoice Discounting (CID) facility was repaid in the period. In the prior year, it allowed a regular drawdown of cash
funds in sterling and foreign currencies, and was secured on the book debts of the Group. This facility carried an interest rate of
1.5% over base and was repayable on demand.
Brand Architekts Group plc 66
Annual Report & Accounts 2021
Note 18 Interest-bearing loans and borrowings – amounts falling due within one year
Group and Company
Secured loans
2021
£’000
–
2020
£’000
1,029
The Group’s loan facilities were repaid in full in the period. The loans were secured by fixed and floating charges over all of the
Group’s assets, and were over fixed terms of between one and three years at a fixed annual interest rate of 2.35%.
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
Secured loans:
Between one and two years
Between two and five years
Note 20 Lease liabilities
At the Statement of Financial Position date, the Group had outstanding commitments for leases:
Group
Within one year
In the second to fifth years inclusive
The Company had no lease commitments.
Note 21 Financial instruments
2021
£’000
2020
£’000
–
–
–
650
416
1,066
2021
£’000
–
–
–
2020
£’000
52
81
133
At 30 June 2021, there were sums totalling £532,000 (2020: £403,000) held in foreign currency bank accounts.
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, and Canadian dollars. 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 Statement of Financial Position also includes financial assets in the form of cash at bank and in hand totalling
£19,018,000 (2020: £21,240,000) which are exposed to floating interest rates based on bank base rates.
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, and Canadian dollars, and prior to the disposal of the manufacturing business, also using bank
facilities denominated in 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 1% (2020: 7%) of the Group’s total sales in the year were invoiced in euros and 6% (2020: 10%) 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.
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 67
Annual Report & Accounts 2021
A 5% weakening of sterling would result in a £59,000 decrease in reported profits and equity, while a 5% strengthening of sterling
would result in a £57,000 increase in profits and equity.
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 have contractual maturities as summarised below:
Group
Financial liabilities at amortised cost through profit or loss
Company
Financial liabilities at amortised cost through profit or loss
Group
Loans and payables (including interest)
Financial liabilities at amortised cost through profit or loss
Company
Loans and payables (including interest)
Financial liabilities at amortised cost through profit or loss
30 June 2021
Current
Non-current
Within 6 months
£’000
6 – 12 months
£’000
1 – 5 years
£’000
Over 5 years
£’000
2,602
2,602
–
–
–
–
–
–
30 June 2021
Current
Non-current
Within 6 months
£’000
6 – 12 months
£’000
1 – 5 years
£’000
Over 5 years
£’000
4,487
4,487
–
–
–
–
–
–
27 June 2020
Current
Non-current
Within 6 months
£’000
6 – 12 months
£’000
1 – 5 years
£’000
Over 5 years
£’000
528
4,503
5,031
528
–
528
1,081
–
1,081
27 June 2020
–
–
–
Current
Non-current
Within 6 months
£’000
6 – 12 months
£’000
1 – 5 years
£’000
Over 5 years
£’000
528
5,281
5,809
528
–
528
1,081
–
1,081
–
–
–
Working capital
The Group’s working capital policy is to fund short-term movements through excess cash generated from the trading business.
The Group has no undrawn committed borrowing facilities available at June 2021 (2020: £3.9m).
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.
Brand Architekts Group plc 68
Annual Report & Accounts 2021
Note 21 Financial instruments continued
Financial assets
Financial assets included in the Statement of Financial Position relate to the following IFRS 9 categories:
Loans and receivables
Group
Company
2021
£’000
22,668
22,668
2020
£’000
25,209
25,209
2021
£’000
16,935
16,935
2020
£’000
20,717
20,717
The financial assets are included in the Statement of Financial Position within the following headings:
Current assets:
Trade receivables
Other receivables and prepayments
Intercompany receivables
Cash and cash equivalents
Group
2021
£’000
2,818
833
–
19,018
22,669
2020
£’000
3,665
304
–
21,240
25,209
Company
2021
£’000
2020
£’000
4
20
230
16,681
16,935
–
25
193
20,499
20,717
Financial liabilities
Financial liabilities included in the Statement of Financial Position relate to the following categories:
Current liabilities:
Borrowings
Trade payables
Intercompany payables
Accruals
Other payables
Non-current liabilities:
Borrowings
Group
2021
£’000
–
1,040
–
1,492
70
–
2,602
2020
£’000
1,029
1,376
–
1,497
1,624
1,066
6,592
Note 22 Deferred tax
The movement in deferred tax provisions is analysed as follows:
Group
Deferred taxation
At June 2019 (net asset)
Recognised in profit or loss1
Recognised in other comprehensive income
At June 2020 (net asset)
Recognised in profit or loss (including adjustments to the rate at which deferred tax is provided)
Recognised in other comprehensive income (including adjustments to the rate at which deferred tax is provided)
At June 2021 (net asset)
Company
2021
£’000
2020
£’000
–
15
4,139
319
14
–
4,487
1,029
64
4,917
287
11
1,066
7,374
£’000
(90)
(312)
(959)
(1,361)
321
(90)
(1,130)
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 69
Annual Report & Accounts 2021
Deferred tax is represented by:
Differences between book value and tax written down value
Temporary difference on post-retirement benefit obligations
Recognised as:
Deferred tax assets
Deferred tax liabilities
Company
Deferred taxation
At June 2019 (net asset)
Recognised in profit or loss1
Recognised in other comprehensive income
At June 2020 (net asset)
Recognised in profit or loss
Recognised in other comprehensive income (including adjustments to the rate at which deferred tax is provided)
At June 2021
Deferred tax is represented by:
Temporary difference on post-retirement benefit obligations
Recognised as:
Deferred tax assets
2021
£’000
1,475
(2,605)
2020
£’000
1,154
(2,515)
1,130
(1,361)
(2,605)
1,475
(1,130)
2021
£’000
(2,605)
(2,605)
(2,605)
(2,605)
(2,515)
1,154
(1,361)
£’000
(1,148)
(408)
(959)
(2,515)
(90)
(2,605)
2020
£’000
(2,515)
(2,515)
(2,515)
(2,515)
1 Amounts recognised within profit and loss in the prior period include £561,000 of deferred tax liabilities disposed of with the manufacturing division (processed through the profit
on disposal – see Note 27).
All deferred tax assets relate to UK operations/Group companies.
Deferred tax has been provided for based on a tax rate of 25% (2020: 19%), being the substantively enacted tax rate.
No deferred tax assets have been recognised for taxable losses carried forward due to the uncertainty over their utilisation in the
current economic environment. The Group and Company have taxable losses of £4.9m (2020: £2.9m for Group and Company) for
which no deferred tax asset has been recognised.
Brand Architekts Group plc 70
Annual Report & Accounts 2021
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 30 June 2021 and 27 June 2020
Shares in issue
There have been no new shares issued in the year.
Share premium
Share premium reserve includes the accumulated premium on the issue of share capital.
2021
£’000
2020
£’000
1,290
1,290
862
862
Revaluation of investment reserve
This reserve represented gains and losses on equity investments that were disposed of as part of the manufacturing business.
Exchange reserve
This reserve represents exchange differences that had arisen on translation of the foreign controlled entity that had been
recognised in other comprehensive income and accumulated in a separate reserve within equity. All foreign subsidiaries were
disposed of as part of the manufacturing business.
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. This forms part of distributable reserves.
Retained earnings
Retained earnings account includes all current and prior period profits and losses.
Note 24 Notes to Cash Flow Statement
Group
(Decrease)/increase in cash and cash equivalents
Net cash outflow from decrease in borrowings
Change in net cash/(debt)
Opening net cash/(debt)
Closing net cash/(debt)
Analysis of net cash/(debt):
Cash at bank and in hand
CID facility
Borrowings due within one year
Borrowings due after one year
2021
£’000
(2,222)
3,227
1,005
18,013
19,018
2020
£’000
20,859
4,322
25,181
(7,168)
18,013
Closing 2020
£’000
Cash flow
£’000
Closing 2021
£’000
21,240
(1,132)
(1,029)
(1,066)
18,013
(2,222)
1,132
1,029
1,066
1,005
19,018
–
–
–
19,018
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 71
Annual Report & Accounts 2021
Company
Increase/(decrease) in cash and cash equivalents
Net cash outflow from decrease in borrowings
Change in net cash/(debt)
Opening net cash/(debt)
Closing net cash/(debt)
Analysis of net cash/(debt):
Cash at bank and in hand
Borrowings due within one year
Borrowings due after one year
2021
£’000
(3,818)
2,095
(1,723)
18,404
16,681
2020
£’000
20,352
4,727
25,079
(6,675)
18,404
Closing 2020
£’000
Cash flow
£’000
Closing 2021
£’000
20,499
(1,029)
(1,066)
18,404
(3,818)
1,029
1,066
(1,723)
16,681
–
–
16,681
Note 25 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.
Contributions to defined contribution plans are expensed when they become due for payment and amounted to £69,000
(2020: £120,000). Employer contributions to these plans varied between 2% and 7% of salary depending on the plan and the level
of employee contributions.
The Group and Company operate 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.
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 disposed of 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.
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. The last scheme funding valuation of the Plan was at 5 April 2020 and revealed a deficit of £21,125,000. The deficit
reduction payments were based on the actuarial deficit including an allowance for the impact of changes in financial market
conditions up to 31 March 2021, which was £15,100,000. The next triennial valuation of the Plan will take place on 5 April 2023.
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
2021
£’000
–
318
155
165
638
2020
£’000
–
318
121
121
560
Brand Architekts Group plc 72
Annual Report & Accounts 2021
Note 25 Post-retirement benefits continued
The amounts expensed in the Group Statement of Comprehensive Income were:
In operating profit:
Plan administrative expenses
Pension Protection Fund premium
In exceptional items (Note 3):
Past service measurement gain on pension scheme – included in profit on disposal
of manufacturing division – see Note 27
In finance costs:
Unwinding of notional discount factor
Total
2021
£’000
155
165
320
–
–
196
516
2020
£’000
121
121
242
–
(1,103)
196
(665)
The deficit reduction payment will be £318,000 per annum for three years to 2024, as well as an additional one-off payment of £1m
in 2021, followed by £791,000 per annum for a further 13 years to 2037.
Anticipated payments by the Company in respect of plan administrative expenses and the Pension Protection Fund premium in the
year ending 30 June 2022 are expected to be of a similar order of magnitude to payments in 2021.
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 IAS 19 on the Statement of Financial Position at
June 2021 are:
Decrease in pension and other benefit obligations
Increase in related deferred tax asset
Increase in equity
2021
£’000
2,696
90
2,786
The related deferred tax asset to the pension liability has increased although the pension liability has decreased. This is because of
the change in rate at which deferred tax is provided. See Note 22.
Accounting standards require the discount rate used for valuations under IAS 19 “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 higher than they were at 30 June 2020. This has resulted in higher discount rates being adopted for accounting
purposes compared to last year. This has decreased the fair value of the plan liabilities as measured under IAS 19, which combined
with an improvement in the fair value of the scheme’s assets, has translated into a decreased liability under the IAS 19
methodology. For accounting purposes at 30 June 2021, the Group recognised, under IAS 19, a net liability of £10.4m
(2020: £13.2m).
(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
Deferred members
Rate of increase in pensions in payment:
CPI, max 3%
RPI, max 5%
RPI, 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
2021
2.00%
3.10%
2.75%
2.75%
2.18%
2.99%
2.07%
23.4
24.9
21.0
22.4
2020
1.50%
2.75%
1.85%
1.85%
1.74%
2.73%
2.06%
21.0
23.3
22.4
24.8
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 73
Annual Report & Accounts 2021
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
The actual return on plan assets was an increase of £2,624,000 (2020: increase £472,000).
(c) Amounts recognised in the Statement of Financial Position:
Present value of funded obligations
Fair value of plan assets
(Deficit)
Net liability recognised in the Statement of Financial Position
2021
Market value
2020
Market value
9,937
1,755
2,496
2,156
7,639
1,770
382
8,343
1,628
2,639
2,011
6,728
2,278
460
26,135
24,087
2021
£’000
(36,553)
26,135
(10,418)
(10,418)
2020
£’000
(37,324)
24,087
(13,237)
(13,237)
(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 gains/(losses) – demographic
Actuarial gains/(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
2021
£’000
2020
£’000
(37,324)
(33,562)
(553)
(219)
–
648
–
895
(769)
(4,936)
(92)
84
1,103
848
(36,553)
(37,324)
2021
£’000
2020
£’000
24,087
24,145
357
2,268
318
(895)
573
(101)
318
(848)
26,135
24,087
Brand Architekts Group plc 74
Annual Report & Accounts 2021
Note 25 Post-retirement benefits continued
(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
(g) History of plan – the history of the plan for the current year and prior years is as follows:
2021
£’000
(219)
–
648
2,268
2,697
90
2,787
2020
£’000
(4,936)
(92)
84
(101)
(5,045)
959
(4,086)
Statement of Financial Position
Present value of defined benefit obligation
Fair value of plan assets
At end of year
2021
£’000
(36,553)
26,135
(10,418)
2020
£’000
(37,324)
24,087
(13,237)
2019
£’000
(33,562)
24,145
(9,417)
2018
£’000
(27,502)
23,013
(4,489)
2017
£’000
(29,438)
23,306
(6,132)
2016
£’000
(24,694)
20,199
(4,495)
Characteristics of the Plan and the risks associated with the Plan
a) Information about the characteristics of the Plan
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.
ii. The Plan is a registered plan under UK legislation and was contracted out of the State Second Pension.
iii. The Plan is subject to the plan funding requirements outlined in UK legislation. The last scheme funding valuation of the Plan
was as at 5 April 2020 and revealed a deficit of £15,100,000.
iv. The Plan membership as at 5 April 2020 comprised of 247 deferred pensioner members and 141 pensioner members.
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
On 26 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 was 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 in calculating the defined benefit obligation.
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 75
Annual Report & Accounts 2021
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 2021:
Discount rate (increase of 0.25% p.a.)
Rate of RPI inflation (increase of 0.25% p.a.)
Mortality (1.5% long-term rate, rather than 1.25%)
Decrease by
Increase by
Increase by
June 2021
£’000
1,700
1,400
400
b) Description of asset-liability matching strategies
The Trustees hold 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 an index-
linked gilts fund are used to provide a degree of price inflation and interest rate matching with the liabilities.
c) The Plan’s investment strategy
The Plan’s investment strategy is to invest broadly 75% in return-seeking assets 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 Company’s attitude to risk.
The Plan holds a number of annuity policies which match a portion of pensions in payment.
Note 26 Related parties
Compensation of key management personnel (including directors):
Short term employee benefits1
Post-employment benefits
2021
£’000
629
29
658
2020
£’000
1,542
9
1,551
1 Short-term employee benefits for 2020 includes £0.6m bonuses paid on completion of the sale of the manufacturing business, £0.3m settlement costs, £0.2m LTIP and £0.4m salary/
fees. See Notes 3 and 5.
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
R S McDowell
E J Beale
T R J Carter
Q G A Higham
30 June 2021
Ordinary Shares
27 June 2020
Ordinary Shares
29 June 2019
Ordinary Shares
–
196,698
899,105
–
13,324
37,037
74,914
196,698
389,105
–
–
–
74,914
201,698
389,205
–
–
–
Mr E J Beale’s director’s fees have been surrendered to his primary employer, City Group plc. Director’s fees of £29,000 were paid
or are payable for the year ended June 2021 (2020: £28,000). Mr E J Beale is a director of Western Selection plc, who had a
beneficial interest in 7.5% of the Company’s issued share capital. On 29 September 2020, Western Selection plc sold 100% of its
shareholding in the Company.
Mr C G How’s fees have been surrendered to his primary employer, Braebrook Limited. Mr C How is a 50% shareholder and sole
director of Braebrook Limited. Director’s fees of £35,000 were paid or are payable for the year ended June 2021 (2020: £112,000).
In the year to June 2021, the Company sold products to the value of £nil (2020: £24,000) to Mr. Haircare Limited, a joint venture
with Jamie Stevens (Media) Limited. At the 2021 year end, the Company had receivables due from Mr. Haircare Limited of £230,000
(2020: £193,000) being disclosed within “Trade and other receivables” (see Note 16). In the year to June 2021, Mr. Haircare Limited
made a profit after tax of £109,000 (2020: £89,000) and this is reported in the Group results.
Brand Architekts Group plc 76
Annual Report & Accounts 2021
Note 26 Related parties continued
In the year to June 2021, the Company sold products to the value of £nil (2020: £420,000) and also operated an inter-company
current account with Brand Architekts Limited, a wholly owned subsidiary. At the 2021 year end, the Company had payables due
to Brand Architekts Limited of £4,380,000 (2020: £4,917,000) being disclosed within “Trade and other payables” (see Note 17).
In the year to June 2021, Brand Architekts Limited made a profit after tax of £1,258,000 (2020: £1,409,000 loss after tax) and this
is reported in the Group results.
In the year to June 2021, the Group purchased finished products for resale amounting to £nil (2020: £101,000) from SCCTC, a
Chinese manufacturer of cosmetics products in which the Group held a 13.3% shareholding up until the date of disposal of the
manufacturing business. At the 2021 year end, the Group had payables due to SCCTC amounting to £nil (2020: £nil).
Note 27 Discontinued operations
On 23 August 2019, the Group sold its 100% interest in Curzon Supplies Ltd for consideration of £35,255,000 (completing the
disposal of the manufacturing division) which is the only operation presented as discontinued operations in 2020. Curzon
Supplies Ltd was incorporated in March 2019. Assets relating to the manufacturing division, along with the related investments
in Swallowfield Consumer Products Limited, Swallowfield SARL, Swallowfield s.r.o. and Swallowfield Inc, were transferred to
Curzon Supplies Ltd prior to its disposal.
Profit on disposal
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
Post-retirement pension obligations1
Realisation of exchange differences
Deal costs
Profit on disposal2
Satisfied by:
Cash consideration
Group
at disposal
23 August 2019
£’000
11,338
695
1,558
9,724
13,196
(10,025)
(561)
(1,103)
196
25,018
1,315
8,922
35,255
1 Post-retirement pension scheme obligations figure of £1,103,000 in this table relates to reassessment of annual uprating of pension liabilities.
2 Profit on disposal increased by £161,000 versus the interim accounts owing mainly to recovery of VAT on deal-related costs and changes in consideration following agreement on
the final completion accounts.
Brand Architekts Group plcFinancial StatementsNotes to the Accounts continued 77
Annual Report & Accounts 2021
Result of discontinued operations
Revenue
Expenses other than finance costs
(Finance costs)/investment income
Exceptional costs
Profit on disposal of manufacturing business
Tax expense
Profit for the year
2021
£’000
–
–
–
–
–
–
–
2020
£’000
7,480
(8,389)
(22)
(1,462)
8,922
–
6,529
Included in 2020 exceptional costs in discontinued operations are £1.1m employee bonuses paid out following disposal of the
manufacturing business and £0.3m relating to specific branded inventory write offs that were intrinsically linked to the
manufacturing division.
No tax charge has been allocated to discontinued operations as the division was loss-making, excluding the profit on disposal,
in the period from 30 June 2019 to disposal. These taxable losses were transferred with the trade.
Earnings per share from discontinued operations:
Basic earnings per share
Diluted earnings per share
Cash flow in respect of discontinued activities
Operating cash flows
Investing cash flows
Financing cash flows
Total cash flows
2021
p
–
–
2021
£’000
–
–
–
–
2020
p
38.1
38.1
2020
£’000
(5,761)
32,255
(3,592)
25,902
Brand Architekts Group plc 78
Annual Report & Accounts 2021
Auditor
PKF Francis Clark
Centenary House
Peninsula Park
Rydon Lane
Exeter
EX2 7XE
Solicitors
Ashfords LLP
Grenadier Road
Exeter
EX1 3LH
Bankers
HSBC Bank plc
3 Rivergate
Temple Quay
Bristol
BS1 6ER
Website address
www.brandarchitektsplc.com
Corporate Directory
Directors
R S McDowell (Non-Executive Chairman)
E J Beale (Non-Executive Director)
C G How (Non-Executive Director)
Q G A Higham
T R J Carter
Secretary
T R J Carter
Registered office
8 Waldegrave Road
Teddington
TW11 8GT
Stockbrokers
Singer Capital Markets
One Bartholomew Lane
London
EC2N 2AX
Financial PR
Alma PR
Aldwych House
71–91 Aldwych
London
WC2B 4HN
Registered number
01975376
Registrars
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgewater Road
Bristol
BS99 7NH
Financial calendar
2021 Annual General Meeting
Interim results announcement
Announcement of 2022 final results
2022 Annual General Meeting
29 November 2021
March 2022
September 2022
November 2022
Brand Architekts Group plcFinancial Statements
www.brandarchitektsplc.com