WARPAINT LONDON PLC
Units B&C
Orbital Forty Six
The Ridgeway Trading Estate
Iver
Buckinghamshire
SL0 9HW
249618 Warpaint Cover Spread.indd 1-3
14/05/2018 23:51
Warpaint London PLC
Contents
Strategic Report
03 Mission Statement
04 Headline Results
06 Chairman’s Statement
07 Chief Executive’s Statement
11 Financial Review
18 Risk Management
Governance
21 Board of Directors
22 Corporate Governance Report
24 Audit Committee Report
25 Remuneration Committee Report
26 Directors’ Report
28 Independent Auditor’s Report
Financial Statements
31 Consolidated Statement of Comprehensive Income
32 Consolidated Statement of Financial Position
34 Consolidated Statement of Changes in Equity
35 Consolidated Statement of Cash Flows
36 Notes to the Consolidated Financial Statements
58 Company Statement of Financial Position
59 Company Statement of Changes in Equity
60 Notes to the Company Financial Statements
Financial Statements
63 Officers and professional advisors
Officers and Professional Advisors
Directors
C Garston
S Bazini
E Macleod
N Rodol
K Sadler
P Hagon
Chairman
Joint Chief Executive Officer
Joint Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Company Secretary
S Craig
Registered Office
Units B&C
Orbital Forty Six
The Ridgeway Trading Estate
Iver
Buckinghamshire
SL0 9HW
Company Number
10261717
Nominated Adviser & Broker
Auditors
Solicitors
Registrars
Financial PR
Stockdale Securities Limited
100 Wood Street
London
EC2V 7AN
BDO LLP
55 Baker Street
London
W1U 7EU
DAC Beachcroft LLP
100 Fetter Lane
London
EC4A 1BN
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands,
B63 3DA
IFC Advisory Limited
15 Bishopsgate
London
EC2N 3AR
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
249618 Warpaint Cover Spread.indd 4-63
14/05/2018 23:52
2
Perivan Financial Print 249618
63
Annual Report 2017
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
R
R
e
e
p
p
o
o
r
r
t
t
Mission Statement
“Warpaint’s mission is to ensure that everybody
should have access to an extensive range of high
quality cosmetics at an affordable price.”
We strive to fulfil our mission by:
• Minimising unnecessary, costly marketing and advertising expenditure
• Creating innovative, eye catching and desirable packaging
• Creating cosmetic products of high quality
• Always striving to improve and better our brand and product offers
• Being at the cutting edge of trend
Our values
• We use the fi nest quality ingredients available
• We manufacture products that are safe and kind to users
• We follow and adhere strictly to all relevant regulatory compliance in all territories where we sell our products
Our Ethics
• We do not test our products on animals regardless of the regulatory requirements we encounter
• We always seek the best value and quality from every constituent ingredient
• We endeavour to ensure that all our suppliers mirror our values and understand our principles
Our Ethos – Who will you be today?
• To give customers the ability and fl exibility to style themselves based on whoever they want to be
• To engage with our customers by interacting with them directly using a variety of media platforms
• To enable easy purchasing for our customers by making products available through direct and third party sales
• To empower our customers by seeking their feedback, interaction and opinions
249618 Warpaint R&A pp03-pp27.indd 3
249618 Warpaint R&A pp03-pp27.indd 3
14/05/2018 23:53
14/05/2018 23:53
3
Warpaint London P LC
Headline Results
Headline proforma financial results for the year to 31 December 2017
Warpaint London plc (“Warpaint”, the “Company” or the “Group”) is made up of three trading
divisions. The largest is the own-brand division which sells the Group’s leading cosmetic brand
W7; the second, Retra Holdings Ltd (“Retra”), acquired in November 2017 is a colour cosmetics
business with a signifi cant focus on the gifting market, principally for high street retailers and
supermarkets and in addition supplies white label cosmetics produced for several major high
street retailers; the third and smallest division trades in close-out and excess stock of branded
cosmetics and fragrances from around the world.
On 30 November 2017, the Group acquired Retra for a maximum consideration of £18.2 million
(£18.4 million at fair value). This annual report has been prepared in accordance with
acquisition accounting standards, therefore in order to present to shareholders a more
consistent view of the trading of the Group we have prepared proforma consolidated
statements of comprehensive income for the years ended 31 December 2016 and 31 December
2017, with a reconciliation between the proforma and the statutory consolidated statement of
comprehensive income.
Headline results, shown below, represent the performance comparisons between the
proforma consolidated statements of income for the years ended 31 December 2017 and
31 December 2016.
The proforma numbers have been adjusted to take account of restructuring changes and other
non-recurring items in 2016, specifi cally the inclusion of the trade of the close-out division in
that year, and the exclusion of the acquisition of Retra in the year ended 31 December 2017.
Reconciliations between the proforma consolidated income statements and the statutory
consolidated income statements for the 12 months to 31 December 2016, and the 12 months to
31 December 2017 are included in the Financial Review.
The proforma consolidated statement of comprehensive income for the years ended
31 December 2016 and 31 December 2017 includes the trade of the larger own-brand division
plus the trade of the smaller close-out division for the whole of each year and exclude one
month of trade related to Retra in the year ended 31 December 2017. The statutory consolidated
statement of comprehensive income for the years ended 31 December 2016 and 31 December
2017, include the trade of the larger own-brand division for the whole of each year, plus the trade
of the smaller close-out division from the acquisition date of 11 November 2016 only, plus the
trade of the Retra division from the acquisition date of 30 November 2017 only.
In 2017, £0.4 million of acquisition costs have been treated as exceptional as they were one off
legal and professional fees and commissions incurred in acquiring Retra on 30 November 2017
(2016: £1.7 million of one off expenses related to the admission of the Group’s shares to trading
on AIM in November 2016).
249618 Warpaint R&A pp03-pp27.indd 4
249618 Warpaint R&A pp03-pp27.indd 4
14/05/2018 23:53
14/05/2018 23:53
34
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Unaudited Proforma results
Statutory results
Year ended
31 Dec 2017
Year ended
31 Dec 2016
Growth
%
Year ended
31 Dec 2017
Year ended
31 Dec 2016
Growth
%
Revenue
£31.2m
£27.0m
15.6
£32.5m
£22.5m
44.4
Adjusted profi t
from operations
Adjusted profi t from
operations margin
£7.6m*
£6.8m*
11.8
£7.7m*
£6.2m*
24.2
24.4%*
25.2%*
23.7%*
27.6%*
Adjusted PBT
£7.5m*
£6.8m*
Adjusted EPS
9.4p*
8.7p*
10.3
8.0
£7.7m*
£6.2m*
9.6p
7.9p
24.2
21.5
Net cash
£2.0m
£3.5m
£2.0m
£3.5m
* Adjusted for the £0.4 million of Retra Holdings Ltd acquisition costs incurred in the year (2016: IPO costs £1.7 million) and
£0.5 million of amortisation costs in relation to acquisitions in the year (2016: £0.04 million)
Highlights
• Proforma revenue increased by 15.6% to £31.2 million (2016: Proforma revenue: £27.0 million)
• Proforma adjusted operating margin 24.4% (2016: 25.2%)
• Proforma adjusted earnings per share increased by 8.0% to 9.4p (2016: Proforma adjusted EPS 8.7p)
• Net cash at the year end of £2.0 million (31 December 2016: £3.5 million)
• Cash generated from operating activities £5.2 million (2016: £3.0 million)
• Own -brand proforma revenue up 17.1% to £11.3 million (2016: £9.6 million) in the UK and 16.8% in the rest of the world to
£14.3 million (2016: £12.3 million)
• Acquisition of Retra Holdings Ltd (“Retra”) on 30 November 2017 adding Technic, Body Collection and Man’stuff brands.
• Final dividend for the year of 2.6p
Post-Period End Highlight
• Queens Award for Enterprise – International Trade
249618 Warpaint R&A pp03-pp27.indd 5
249618 Warpaint R&A pp03-pp27.indd 5
14/05/2018 23:53
14/05/2018 23:53
5
Warpaint London P LC
Chairman’s Statement
Clive Garston
2017 was Warpaint’s fi rst full year as
an AIM company and I am pleased to
announce that the year was one of
signifi cant growth and achievement.
Notwithstanding continuing uncertainty
caused by the prospect of Brexit and a
fl uctuating Sterling exchange rate, the
2017 results are highly satisfactory. The
effect of the US dollar exchange rate
cannot be overemphasised. Had it been
constant with 2016 the margin would have
been 2.9 % higher with an accompanying
increase in earnings. In addition, in
November 2017, Warpaint acquired Retra,
which is an own -brand and white label
colour cosmetics and gifting company
with its head offi ce in Yorkshire. Retra
brands include Technic, Body Collection
and Man’stuff. The acquisition has been
successfully integrated into the Warpaint
Group and Warpaint continues to focus
heavily on building its brand awareness,
both in the UK and its successful overseas
markets. I believe that we have made
excellent progress in doing this. Following
the Retra acquisition the Group’s earnings
are likely to be greater in the second half
of the year than the fi rst, as a result of a
substantial proportion of Retra sales being
made in connection with Christmas gifts.
Results
The proforma numbers will be quoted
throughout this annual report in
order to give shareholders clarity in
understanding the results for the year.
Profi t before tax was £6.9 million (proforma
£6.7 million) on a revenue of £32.5 million
(proforma £31.2 million) with basic
earnings per share of 8.34p. Net cash
at 31st December 2017 of £2.0 million
emphasises the Group’s strong position.
Margins were strong and our priorities
are to maximise earnings in all the
key markets.
Queen’s Award
As was announced on 23rd April 2018,
Warpaint has been awarded the Queen’s
Award for Enterprise – International
Trade. This is a very prestigious award
and we are all very excited about it. It is
further testament to the foresight and
hard work of the executive team that this
award has been made to Warpaint.
Dividend
In accordance with the Group’s
progressive dividend policy, the Board is
pleased to recommend a fi nal dividend
of 2.6p per share which, if approved by
shareholders at the AGM, will be paid on
the 20th July 2018 to shareholders on the
register at the 6th July 2018. The shares
will go ex-dividend on the 5th July 2018.
Board and People
These results would not have been
possible without the commitment,
dedication and enthusiasm of my fellow
Board members and all the Group’s
employees. I would like to thank all
of them for their contribution to the
Group’s success.
A key strength of the Company is the
commitment of its employees which
helps to make Warpaint the progressive,
energetic and dynamic company that it is.
Nowhere is this demonstrated more than
by the dedication and ambition of the
Joint Chief Executives, Sam Bazini and
Eoin Macleod and Neil Rodol, the Chief
Financial Offi cer. They are determined
to drive Warpaint forward. The Non-
Executive Directors, Keith Sadler and
Paul Hagon make a very meaningful
contribution to the Board and I regard
it as a privilege and pleasure to work
alongside them. During the year, there
have been a number of signifi cant hires,
which has strengthened the team and the
Board is fully supportive of recruiting the
right people to make the Group stronger.
Awards of EMI options were made to all
staff in June 2017 and it is proposed to
introduce an LTIP for senior management
in the current calendar year.
Annual General Meeting
The annual general meeting will be held
on 12th June 2018 at 11am at the offi ces
of DAC Beachcroft LLP, 100 Fetter Lane,
London, EC4A 1BN. I look forward to
meeting all shareholders who are able
to attend.
Outlook
After a very successful fi rst year as a
quoted company, Warpaint looks to the
future with considerable optimism. We
have had a promising start to the current
year and the Retra acquisition has been
well integrated. With a sound fi nancial
foundation and being net debt free,
prospects are encouraging and Warpaint
is well positioned to continue to deliver
increasing shareholder value in 2018. The
outlook for the Group remains positive.
Clive Garston
Chairman
24 April 2018
249618 Warpaint R&A pp03-pp27.indd 6
249618 Warpaint R&A pp03-pp27.indd 6
14/05/2018 23:53
14/05/2018 23:53
36
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Joint Chief Executive s’ Statement
Sam Bazini
Eoin Macleod
We are delighted to present the Group’s
fi rst full year results as a public company.
2017 was a very positive year for
Warpaint. Our strategy of producing an
extensive range of high quality cosmetics
at an affordable price has remained our
key focus and we are very pleased with
the reaction that our expanding product
range received during the year. The
acquisition of Retra in November 2017
was a key development for Warpaint,
which provides us with new product
ranges, new brands and new customers.
Strategy
In order to build our brands, we utilise
brand ambassadors, bloggers and
vloggers to engage with our target
audience. Much of this is done through
social media campaigns to educate and
interact with our loyal brand users.
While the majority of our brand ranges
include core colour cosmetic items,
we add on trend items and colourways
developed by our growing new product
development team, especially within
our lead brand W7. This on trend and
quick to market model is something our
customers demand and expect from us,
which we repeatedly deliver on.
Growing market share, both in our
home market and overseas, is a focus.
We are delighted to have been awarded
the Queen’s Award for Enterprise –
International Trade, this is testament to
our growth strategy in recent years and
the strength of the W7 brand and the
overall business. We have not exhausted
the potential for increased exports and
we continue to grow in the UK.
well as a number of media campaigns to
strengthen our brand awareness.
Our key focus is to supply our customers
with a wide range of affordable, high
quality cosmetics. We will achieve this
by continuing to build our internationally
recognised brand W7, as well as our
newly acquired Retra brands, Technic,
Body Collection and Man’stuff and others
we have developed such as Very Vegan.
We see this as key to supporting our
future growth.
China and the US remain of particular
focus for us in our international
expansion, which we are targeting with
focused e-commerce sites, along with
social media activities and marketing.
During the year we launched our
Chinese and US e-commerce sites with
the functionality to transact in local
currencies.
Our e-commerce platform has now been
in operation for over a year to support our
customers, both retailers and distributors
in the UK and overseas. We saw
incremental e-commerce revenue for the
fi rst time in 2017, the majority of which
came from online sales in the UK. We
engage with, and educate our customer
base through the website with the use
of beauty blogs, celebrity infl uencers
and endorsements, and social media
campaigns. During the year we hosted a
number of very successful events which
generated high profi le press coverage, as
With the acquisition of Retra in the later
part of the year, one of our main priorities
was to ensure the smooth integration of
the business with the wider Group. We
have recruited a new managing director
and fi nance director for Retra. They have
replaced the original owners who remain
available to the Group on a consultancy
basis. We are in an ever stronger position
to support our future growth with new
and existing customers, demographics,
geographies and our ability to stay
at the forefront of on trend product
development.
Acquisition of Retra
In November 2017 the Group acquired
Retra which owns three major brands:
Technic, Body Collection and Man’stuff,
allowing the Group access to an older
age range and a growing male health and
beauty market. Retra also produces white
label cosmetics for several major high
street retailers. Retra is complementary
in terms of products, customer
relationships and geographic spread.
There are natural synergy opportunities
within the enlarged Group in sourcing
and cross selling.
The integration of Retra into the Group
has been very successful and the business
is performing well, producing new
opportunities for the combined Group.
249618 Warpaint R&A pp03-pp27.indd 7
249618 Warpaint R&A pp03-pp27.indd 7
14/05/2018 23:53
14/05/2018 23:53
7
Warpaint London P LC
Joint Chief Executive s’ Statement (continued)
Brands
During 2017 Warpaint continued to focus on the development
of Warpaint’s brands which represented 79% of overall
revenue generated in comparison to 17% contributed from
the close-out side of the business. The contribution from the
Retra brands in the period was minimal due to the acquisition
completing at the end of November 2017 and totalled 4% of
overall revenue in the year.
As previously reported, we launched our Very Vegan range
during the second half of the year and we have been very
encouraged by the sales we have seen in the period. For 2017,
the range included 15 Stock Keeping Units (“SKUs”) and for
2018 we are adding 6 SKUs to provide a full range of Very Vegan
colour cosmetics.
We have seen development in some of our other brands in the
year as well as W7, increasing SKUs in a number of product
lines. Outdoor Girl now has 11 SKUs in its range, our W7
Christmas range has now grown to 75 SKUs and the everyday
range of W7 now includes 687 live SKUs.
Warpaint brands are:
• W7
• Very Vegan
• Outdoor Girl
• Smooch
• Copy Cat
• Taxi
Additional brands acquired through Retra are:
• Technic
• Body Collection
• Man’stuff
Products
W7’s largest selling product categories are eye products,
face make-up and lip products, which together represented
approximately 80% of the own-brand division’s revenue in 2017.
The 12 months to 31 December 2017 product sales split for our
W7 brand is shown below:
W7 – 2017 Sales by Product
Others
3% Nail
4%
Accessories & Sets
5%
Make Up Brushes
7%
Lip
11%
Eye
39%
Face
31%
249618 Warpaint R&A pp03-pp27.indd 8
249618 Warpaint R&A pp03-pp27.indd 8
14/05/2018 23:53
14/05/2018 23:53
38
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Customers & Geographies
Amongst our largest clients are export customers and distributers from Australia, the
US and Europe. At the end of 2017 our top ten W7 customers represented 59.2% of
revenues, compared to 56.3% in 2016. In the UK, the W7 brand had growth of 17.1%
and internationally the brand grew by 16.8%.
In 2017 W7’s global expansion increased and the brand is now sold to more than
60 countries (2016: 50 countries).
Key
Country’s where W7 is sold
Country’s where W7 is not yet sold
249618 Warpaint R&A pp03-pp27.indd 9
249618 Warpaint R&A pp03-pp27.indd 9
14/05/2018 23:53
14/05/2018 23:53
9
Warpaint London P LC
Joint Chief Executive s’ Statement (continued)
The 12 months to 31 December 2017 and 31 December 2016 regional sales split for our
W7 brand is shown below:
W7 – Sales by Region 2017
W7 – Sales by Region 2016
ROW/AUS/NZ
20%
USA
9%
EU
27%
ROW/AUS/NZ
15%
UK
44%
USA
12%
UK
46%
EU
27%
Summary
Our fi rst full year as a public company has been one of strong growth for Warpaint. We have seen geographic expansion, a
signifi cant increase in our product offering, both organically and through the acquisition of Retra, as well as growth in our
product awareness.
We remain a leader in the sale of on trend colour cosmetics for our growing customer base and are very encouraged by the
continued appetite we see from both UK and international customers, further aiding us in growing our sales in the global colour
cosmetics market. We intend to continue to drive UK and export sales to new and existing markets, develop our portfolio of brands,
as well as maximising the opportunities presented by the Retra acquisition.
We are exceedingly grateful to our employees for their loyalty, commitment and hard work during 2017, a year that has seen yet
another big change for Warpaint as we welcomed the Retra team into our Group.
Sam Bazini & Eoin Macleod
Joint Chief Executive Offi cers
24 April 2018
249618 Warpaint R&A pp03-pp27.indd 10
249618 Warpaint R&A pp03-pp27.indd 10
14/05/2018 23:53
14/05/2018 23:53
310310
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Financial Review
Neil Rodol
2017 was the fi rst full year for the Group as an AIM company following 24 years as a private
business. We delivered continued organic growth in the UK and internationally as well as
making the signifi cant acquisition on the 30 November 2017 of Retra. Our KPIs of revenue (on
a proforma basis) and profi t before tax (on an adjusted proforma basis) improved in the year
by 16% and 10% respectively. We remain focused on margin, being debt free (notwithstanding
£1.4 million of debt outstanding at the year end from the acquisition of Retra which we intend to
repay during 2018), generating cash and delivering a progressive dividend policy.
In order to aid shareholders’ understanding of the underlying performance of the business
we have focused our comments on the proforma consolidated statement of income for the 12
months to 31 December 2017 compared with the proforma consolidated statement of income
for the 12 months to 31 December 2016.
Headline results represent the performance comparisons between the proforma consolidated
statements of income for the years ended 31 December 2016 and 31 December 2017. The
proforma numbers have been adjusted to take account of restructuring changes and other
non-recurring items in 2016, specifi cally the inclusion of the trade of the close-out division in
that year, and the exclusion of the acquisition of Retra in the year ended 31 December 2017.
Reconciliations between the proforma consolidated income statements and the statutory
consolidated income statements for the 12 months to 31 December 2017, and the 12 months to
31 December 2016 are shown below.
KPIs
2014
2015
2016
2017
Unaudited proforma revenue (£m)
2017: £31.2 million + 16%
Unaudited proforma adjusted profi t before tax* (£m)
2017: £7.5 million +10%
17.0
22.3
27.0
31.2
2014
2015
2015
2017
4.1
5.4
6.8
7.5
0
5
10
15
20
25
30
35
0
1
2
3
4
5
6
7
8
*Adjusted for the £0.4 million of one off Retra
acquisition costs in 2017 (2016: £1.7 million of
one off IPO costs) and £0.5 million of amorti-
sation costs in relation to acquisitions (2016:
£0.04 million).
249618 Warpaint R&A pp03-pp27.indd 11
249618 Warpaint R&A pp03-pp27.indd 11
14/05/2018 23:53
14/05/2018 23:53
11
11
Warpaint London P LC
Financial Review (continued)
Proforma Headline Consolidated Income Statement
Revenue
Cost of sales
Gross profi t
2017
Unaudited
Proforma
Statement
£’000
2016
Unaudited
Proforma
Statement
£’000
31,226
(19,115)
26,968
(16,745)
12,111
10,223
Administrative expenses
(5,376)
(5,205)
Analysed as:
Profi t from operations before exceptional items
Exceptional items
Profi t from operations
Finance expense
Profi t before tax
Tax expense
Profi t for the year
7,121
(386)
6,757
(1,739)
6,735
5,018
(17)
(16)
6,718
5,002
(1,363)
(1,384)
5,355
3,618
249618 Warpaint R&A pp03-pp27.indd 12
249618 Warpaint R&A pp03-pp27.indd 12
14/05/2018 23:53
14/05/2018 23:53
312
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Reconciliation between the statutory consolidated income statement and the proforma consolidated
income statement for the 12 months to 31 December 2017
Revenue
Cost of sales
Gross profi t
Administrative expenses
Analysed as:
Profi t from operations before exceptional items
Exceptional items
Profi t from operations
Finance expense
Profi t before tax
Tax expense
Profi t for the year
Retra business
post-acquisition
30 November
2017
(see Note 8)
£’000
2017
Unaudited
Proforma
Statement
£’000
1,323
(796)
527
(368)
159
–
159
(20)
139
(21)
118
31,226
(19,115)
12,111
(5376)
7,121
(386)
6,735
(17)
6,718
(1,363)
5,355
2017
Statutory
Accounts
£’000
32,549
(19,911)
12,638
(5,744)
7,280
(386)
6,894
(37)
6,857
(1,384)
5,473
Weighted number of ordinary shares
Earnings per share
65,575,658
8.34p
65,575,658
8.17p
Profi t for the year
Add back exceptional items
Add back amortisation costs in relation to acquisitions
Adjusted profi t for the year
Weighted number of ordinary shares
Adjusted earnings per share
5,473
386
445
6,304
5,355
386
445
6,186
65,575,658
9.61p
65,575,658
9.43p
249618 Warpaint R&A pp03-pp27.indd 13
249618 Warpaint R&A pp03-pp27.indd 13
14/05/2018 23:53
14/05/2018 23:53
13
13
Warpaint London P LC
Financial Review (continued)
Reconciliation between the statutory consolidated income statement and the proforma consolidated
income statement for the 12 months to 31 December 2016
Close-out
business
pre-acquisition
11 November
2016
£’000
2016
Unaudited
Proforma
Statement
£’000
4,485
(3,053)
1,432
(831)
601
–
601
–
601
(124)
26,968
(16,745)
10,223
(5,205)
6,757
(1,739)
5,018
(16)
5,002
(1,384)
477
3,618
2016
Statutory
Accounts
£’000
22,483
(13,692)
8,791
(4,374)
6,156
(1,739)
4,417
(16)
4,401
(1,260)
3,141
Revenue
Cost of sales
Gross profi t
Administrative expenses
Analysed as:
Profi t from operations before exceptional items
Exceptional items
Profi t from operations
Finance expense
Profi t before tax
Tax expense
Profi t for the year
Weighted number of ordinary shares
Earnings per share
61,981,720
5.07p
61,981,720
5.84p
Profi t for the year
Add back exceptional items
Add back amortisation costs in relation to acquisitions
Adjusted profi t for the year
3,141
1,739
44
4,924
3,618
1,739
44
5,401
Weighted number of ordinary shares
Adjusted earnings per share
61,981,720
7.94p
61,981,720
8.71p
249618 Warpaint R&A pp03-pp27.indd 14
249618 Warpaint R&A pp03-pp27.indd 14
14/05/2018 23:53
14/05/2018 23:53
314
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Operating Expenses
Underlying proforma operating expenses(1)
grew 32.8% year on year, however
expressed as a percentage of proforma
turnover underlying proforma operating
expenses(1) increased to 14.6% in 2017
from 12.7% in 2016. Underlying proforma
operating expenses(1) have increased in
absolute terms, refl ecting the investment
of key hires in the business in 2017,
increased spend on marketing and PR,
foreign exchange loss, amortisation of
intangibles and the cost of the PLC board
and other AIM costs in the year. However,
other operating expenses remain at a
similar level to those in 2016.
Statutory operating expenses(1) grew
89.6% year on year, however expressed
as a percentage of statutory turnover,
operating expenses(1) increased to 15.1%
in 2017 from 11.5% in 2016. Statutory
operating costs grew because of the
factors discussed above, the inclusion
of the operating costs of the close-out
division for a full year in 2017 and the
operating costs of Retra for the month of
December only.
Most operating expenses are relatively
fi xed, however we continue to monitor
and examine signifi cant costs to ensure
they are controlled and see if they can be
reduced, in addition the increased scale
of the business now incorporating Retra
has given the Group increased buying.
(1) Before exceptional items and
amortisation costs in relation to
acquisitions.
Acquisition and Related Equity Issue
The Group acquired Retra on
30 November 2017. Retra is a colour
cosmetics business focusing on the
gifting market principally for high street
retailers and supermarkets. Retra’s
revenue is predominantly in the second
half of the year when Christmas gifting is
delivered, with early visibility of the order
book in the fi rst half of the year.
The purchase price was £18.2 million
(£16.2 million in cash and £2 million of
consideration shares, £18.4 million at
fair value). This is subject to adjustment
in the event that the 2017 EBITDA is less
than £2.85 million. On delivery of a fi nal
EBITDA statement to the previous owners
of Retra, which will be after the date of
these accounts, the actual consideration
will be determined and this is likely to
lead to a repayment to the Group (see
note 8).
The Group raised £21.2 million in cash
by issuing 11,157,894 new shares at
£1.90 to fund the acquisition of Retra,
the associated costs of the placing and
to reduce Retra’s reliance on its funding
arrangements. In addition, a further
1,052,631 new consideration shares
were issued as part of the amount
paid for Retra.
Revenue
Group proforma revenue for the year
grew by 15.6% from £27.0 million in 2016
to £31.2 million in 2017. The sales of W7
branded product grew by 16.4% from
£21.9 million in 2016 to £25.5 million in
2017. The close-out business revenue
grew by 11.8% from £5.1 million in 2016 to
£5.7 million in 2017. Christmas W7 gifting
was more signifi cant in 2017 with sales
delivered in the second half of the year
totalling £2.7 million (2016: £1.6 million).
Following the addition of Retra, sales will
be more weighted to the second half of
the year and are expected to represent
two thirds of the total for 2018.
Our growth strategy remains on track
and our recently received honour of the
Queens Award for Enterprise – International
Trade is testament to this. Revenue
continues to be driven by increased
sales in the UK as we continue to grow
our market share and internationally by
our growing export business. A detailed
commentary on our sales growth strategy
and trading performance is included in
the CEO’s report.
Total statutory revenue grew by 44.4%
from £22.5 million in 2016 to £32.5 million
in 2017. Statutory revenue includes
£1.3 million from the newly acquired
Retra business being the sales made in
December 2017.
Product Gross Margin
Proforma gross margin improved this
year by 2.4% over 2016 to 38.8%. The
cost impact of Brexit has been mitigated
with a ratcheted discount mechanism
from our key supplier in China, by moving
production to new factories of equal
quality to improve margin, from US dollar
revenue which continues to provide a
natural hedge and from enjoying margin
growth as the W7 brand continues to grow
in global awareness. Further contributing
to Group margin is the close-out business
which has delivered gross margin of
31.1% compared to 25.4% in 2016. We
remain focused on improving gross
margin in both our own-brand and close-
out businesses and now in the enlarged
Group including Retra.
Statutory gross margin decreased by
0.8% over 2016 to 38.8%.
249618 Warpaint R&A pp03-pp27.indd 15
249618 Warpaint R&A pp03-pp27.indd 15
14/05/2018 23:53
14/05/2018 23:53
15
Warpaint London P LC
Financial Review (continued)
Profit from Operations Margin
Proforma profi t from operations before
exceptional items was £7.1 million for
the year being 22.8% of revenue (2016:
£6.8 million, 25.1%). During 2017, there
were certain costs that were not on a
like for like basis with 2016 and were not
a function of the natural growth of the
business, these were:
•
Cost of the PLC board and other AIM
costs for a full year: £0.35 million
(2016: £0.05 million)
Amortisation of intangibles from
acquisitions for a full year: £0.45
million (2016: £0.04 million)
Foreign exchange loss: £0.07 million
(2016: £0.03 million gain)
•
•
Taking these costs into account on an
underlying basis profi t from operations
before exceptional items was £7.9 million
for the year being 25.4% of revenue, an
improvement of 1.2% on 2016. Profi t from
operations is a focus of the Group to grow
year on year.
Profit Before Tax and Exceptional Items
Proforma Profi t Before Tax (“PBT”)
was £6.7 million (2016: £5.0 million),
an increase of 34.0% on the prior year.
Underlying PBT (profi t before tax and
exceptional items) was £7.1 million (2016:
£6.7 million), an increase of 6.0% on the
prior year. Adding back the additional
costs in the year detailed above, like for
like underlying PBT was £7.9 million, an
increase of 17.9% on 2016.
In the year to 31 December 2017, £0.4
million of Retra acquisition costs have been
treated as exceptional (total acquisition
costs were £1.2 million of which £0.8
million relates to the issue of new shares to
fund the purchase of Retra and these have
been charged against the share premium
account). In 2016, £1.7 million of expenses
were treated as exceptional as they related
to the admission of the Group’s shares to
trading on AIM.
Statutory Profi t Before Tax (“PBT”)
was £6.9 million (2016: £4.4 million),
an increase of 56.8% on the prior year.
Underlying PBT (profi t before tax and
exceptional items) was £7.2 million (2016:
£6.1 million), an increase of 18.0% on the
prior year.
Exceptional Items
In 2017, £0.4 million of acquisition
costs (see Note 3) have been treated
as exceptional as they related to one
off legal and professional fees and
commissions incurred in acquiring Retra
on 30 November 2017 (2016: £1.7 million
of one off legal and professional fees
and commissions incurred in relation to
the admission of the Group’s shares to
trading on AIM in November 2016).
Tax
The proforma tax rate for the Group for
2017 was 20.3% compared to the UK
corporation tax standard rate of 19.25%
for the year. Some of the costs of the
acquisition of Retra have been disallowed
for tax purposes, which has increased
the effective tax rate. We would expect
the tax rate on adjusted profi ts to be
approximately 19% in 2018 and falling in
line with the UK Government measures
to reduce corporation tax to 17% by 2020.
The statutory tax rate for the Group for
2017 was 20.2% compared to the UK
corporation tax standard rate of 19.25%
for the year.
Earnings Per Share
The underlying proforma basic earnings
per share before exceptional items
and amortisation costs in relation
to acquisitions was 9.4p in 2017, an
increase of 8.1% on the 8.7p achieved in
2016, as a result of improved sales and
gross margin.
The statutory basic earnings per
share before exceptional items and
amortisation costs in relation to
acquisitions was 9.6p in 2017, an increase
of 21.5% on the 7.9p achieved in 2016.
Dividends
The board is recommending a fi nal
dividend for 2017 of 2.6 pence per share,
making a total dividend of 4.0 pence per
share of which 1.4 pence per share was
paid on 17 November 2017 (2016: 5.8
pence per share of which 4.3 pence per
share was paid prior to the IPO). The
dividend for the year is covered 2.4 times
by proforma adjusted earnings per share
and with the additional full year earnings
of Retra coming through in 2018 there
is scope to increase the dividend in the
future, in line with the progressive dividend
policy outlined at the time of the IPO.
EMI Share Options
On 29 June 2017 options were granted
over 277,788 ordinary shares of 25p each
in the Company under the Warpaint
London PLC Enterprise Management
Incentive Scheme. The options provide
the right to acquire 277,788 ordinary
shares at an exercise price of 237.5p per
ordinary share. The options had a dilutive
impact on earnings per share in the
period (see Note 26). The share-based
payment charge of the options for the
year £0.05 million has been taken to the
share option reserve.
249618 Warpaint R&A pp03-pp27.indd 16
249618 Warpaint R&A pp03-pp27.indd 16
14/05/2018 23:53
14/05/2018 23:53
316
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Foreign Exchange
The Group imports the majority of its
fi nished goods from China paid for in
US dollars, which strengthened on
average against Sterling by 5% in 2017
compared to 2016 ($1.289 v $1.355). The
Group has a natural hedge from sales to
the US which are entirely in US dollars,
in 2017 these sales were $3.2 million
(2016: $3.4 million) and together with
the ratcheted discount mechanism from
our main supplier in China, sourcing
product from new factories where it
makes commercial sense to do so, by
growing our margin through increased
brand awareness and by hedging when
rates are favourable, we have been able
to mitigate the 5% fall in value of Sterling
and at the same time deliver an improved
gross margin.
As we start 2018 it is pleasing to see that
Sterling has strengthened against the
US dollar, nevertheless management
continue with the same strategy as 2017
to ensure delivery of satisfactory results.
Conclusion
The Group has delivered a good year
for shareholders culminating in an
acquisition that is expected to be
earnings enhancing. Our fi rst full year
on AIM has seen the Group grow in
size and profi ts and the Board have put
in place personnel and strategies to
continue the progress of the Group for
the foreseeable future.
Neil Rodol
Chief Financial Officer
24 April 2018
Cash Flow and Cash Position
Net cash fl ow generated from operating
activities was £5.2 million (2016: £3.0
million), after payment of the £0.4 million
(2016: £1.7 million) exceptional items
previously referred to. The Group’s cash
balance decreased by £0.1 million to
£3.4 million in 2017 (2016: £3.5 million).
The cash generated was principally used
to make dividend payments in the year
and reduce debt in Retra.
Capital expenditure requirements of the
Group remain modest and we expect it to
continue to be so. In 2017 £0.20 million
(2016: £0.16 million) was spent on new
offi ce space for additional staff, the
purchase of a promotional taxi for the
W7 brand and general fi xtures and plant
upgrades. (Also included in the fi nancial
statements is capital expenditure of
£0.35 million for sales display units that
have been reclassifi ed in the balance
sheet for 2017).
Balance Sheet
Management are continually monitoring
trade receivables and stock levels to avoid
working capital lock up as the business
continues to grow.
Trade receivables are monitored by
management to ensure collection is
made to terms, to reduce the risk of bad
debt and to control debtor days. At the
year end trade receivables were £12.1
million (2016: £2.7 million), the increase
on 2016 is due to higher sales and the
acquisition of Retra. In 2017 there was
a bad and doubtful debt credit of £0.05
million because of the collection of
debts previously provided for in 2016.
The provision at the year end for bad and
doubtful debts carried forward is £0.17
million, 1.4% of gross trade receivables
(2016: £0.11 million, 0.41%).
Stock was higher at the year end at £11.6
million (2016: £7.9 million), this increase
was due to the growth of the business,
the increase in range offering and the
acquisition of Retra. The provision for old
and slow stock was £0.11 million, 1.0% at
the year end (2016: £0.19 million, 2.5%).
The reduction in provision refl ects the
close attention of management in dealing
with slower stock items as they occur and
on stock purchase order levels that are
reasoned. Whilst provisioning for older
and slow stock is prudent, the reality is
that any such items are generally sold
through our close-out division without a
loss to the business.
On acquiring Retra the Group took on their
debt of £8.7 million being £7.6 million of
invoice and trade fi nance facilities, term
loans of £0.3 million and HP contracts
of £0.8 million. £6.0 million of debt was
repaid immediately upon acquisition using
surplus cash and some of the funds raised
to acquire Retra. A further £1.3 million of
Retra debt was repaid during December
from their own positive cash fl ow, leaving
£1.4 million of debt outstanding at the year
end. We intend to repay the remaining
debt in 2018 from Group generated normal
cash fl ow.
The Group’s balance sheet remains in a very
healthy position being net debt free. Net
assets totaled £40.4 million at 31 December
2017, an increase of £26.1 million from 2016,
refl ecting the retained profi ts generated in
the year and the issue of new share capital
to fund the purchase of Retra. The majority
of the balance sheet is made up of liquid
assets of stock, trade receivables and cash.
Included in the balance sheet is £8.0 million
of goodwill (2016: £0.5 million) and £10.7
million of intangible fi xed assets (2016:
£1.3 million) arising from the acquisition
accounting adopted to refl ect the purchase
of Retra in the year and the purchase of
the close-out business by the much larger
own-brand colour cosmetics business in
November 2016, in preparation of the Group
joining AIM.
249618 Warpaint R&A pp03-pp27.indd 17
249618 Warpaint R&A pp03-pp27.indd 17
14/05/2018 23:53
14/05/2018 23:53
17
Warpaint London P LC
Risk Management
Warpaint London is exposed to a
variety of risks that can have fi nancial,
operational and regulatory impacts on
our business performance. The Board
recognises that creating shareholder
returns is the reward for taking and
accepting risk. The effective management
of risk is therefore critical to supporting
the delivery of the Group’s strategic
objectives.
Currency/Foreign Exchange
Due to the Group’s goods being
manufactured overseas and its extensive
export business, it both generates
revenues and incurs manufacturing
costs in foreign currencies. As a result,
the Group is exposed to the risk that
adverse exchange rate movements
cause the value (relative to its reporting
currency) of its revenues to decrease, or
costs to increase, resulting in reduced
profi tability.
Reliance on Key Suppliers
In 2017 one key supplier from China
was responsible for approximately 44%
(2016: 50%) of the Group’s W7 brand
range of colour cosmetics. If there were
some catastrophic event that reduced or
stopped the supply from this key supplier
then the Directors are able to place
orders with other existing suppliers.
However, this would take several months
to implement and such an event would
therefore have a material adverse effect
on the Group’s fi nancial position, results
of operations and future prospects.
Product Liability
All products are manufactured in
facilities approved by relevant authorities.
The ingredients in each product are
compliant with and meet the relevant
standards required by the markets to
which the products will be sold into.
There is however always the risk that
an end user could have an allergic or
other reaction to an individual product
leading to the possibility of compensation
claims and potentially damaging the good
reputation of the Group’s brands.
The Directors have every colour cosmetic
item independently checked by a
qualifi ed chemist for compliance with
EU legislation and maintain adequate
product and public liability insurance so
as to ensure that any claims have little
impact on the Group’s profi tability.
Significant Customers
The Group has one customer in Australia
with over 300 stores who has an exclusive
rolling one year distribution agreement
for the W7 brand of colour cosmetics
in Australia. In 2017 this customer
represented 14.6% (2016: 10.7%) of own-
brand/W7 revenues and we currently
have an excellent working relationship
with this customer. Signifi cant goodwill
in the W7 brand has been built up by
this customer. The Directors believe
that, should the customer decide
to end the distribution agreement, a
large amount (if not all) of the existing
business will be taken up by other
retailers, local wholesalers or other
distributors in Australia. In addition,
the Group’s US distributor represented
9.6% of own-brand/W7 revenues in 2017
(2016: 12.3%). Since the year end this
exclusive distribution agreement has
been terminated and the US distributor
remains a customer on good terms.
Location
The Group, its operations, and most of
its assets are at one location in Iver; if a
fi re were to befall the premises occupied
by the Group, most of its assets might be
destroyed or damaged and – although the
Group has insurance cover in place – the
Group’s business, fi nancial results and
prospects might be negatively affected by
such an event.
This Strategic Report was approved by
the Board on 24 April 2018 and signed on
its behalf.
Neil Rodol
Chief Financial Offi cer
24 April 2018
249618 Warpaint R&A pp03-pp27.indd 18
249618 Warpaint R&A pp03-pp27.indd 18
14/05/2018 23:53
14/05/2018 23:53
318
Annual Report 2017
Annual Report 2017
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
249618 Warpaint R&A pp03-pp27.indd 19
249618 Warpaint R&A pp03-pp27.indd 19
14/05/2018 23:53
14/05/2018 23:53
19
Warpaint London P LC
Members of the Board
From left to right: Eoin Macleod, Sam Bazini, Clive Garston, Neil Rodol, Keith Sadler and Paul Hagon
249618 Warpaint R&A pp03-pp27.indd 20
249618 Warpaint R&A pp03-pp27.indd 20
14/05/2018 23:53
14/05/2018 23:53
320
Annual Report 2017
Board of Directors
Sam Bazini, Joint Chief Executive Offi cer
On leaving school at 16, Sam started work in a cosmetics warehouse, supplementing his income by selling
cosmetics directly to the public at numerous London street markets. Selling directly to the public gave Sam
an invaluable insight into consumer needs and in 1981 at the age of 18, using £500 he had saved he set up
his own business, buying and selling close-out and end of line cosmetics and fragrance. During the course
of the next ten years, Sam and Eoin’s paths crossed on numerous occasions, working intermittently with
each other on a joint venture basis until they formally went into business together in 1992.
Eoin Macleod, Joint Chief Executive Offi cer
Eoin’s fi rst introduction to the world of beauty was at the age of 14 through a Saturday job in an indoor
market selling cosmetics and perfumes. After leaving college, Eoin decided to set up his own business
selling fragrance directly to the public through London street markets as well as selling into the wholesale
sector and then expanding into selling cosmetics. In 1992 he formally went into business with Sam,
operating initially in the close-out cosmetics and fragrance industry.
G
o
v
e
r
n
a
n
c
e
Neil Rodol, Chief Financial Offi cer
Neil joined the Group in August 2015, having previously been an advisor to the business for several years. He
has overseen the introduction of new systems and procedures. Over the last 17 years he has been involved
in several corporate purchases and acquisitions. In 2006, he sold his publishing company to a quoted group
and became the group licensing director; in 2014 he completed a management buyout. Neil trained as an
accountant at BDO Stoy Hayward and holds an honours degree in Maths and Computer Science.
Clive Garston, Non-Executive Chairman
Clive has been a corporate lawyer for over 40 years specialising in corporate fi nance and mergers and
acquisitions, and he is currently a consultant at DAC Beachcroft LLP. He has been on the boards of a
number of public and private companies and has been the deputy chairman of a fully-listed company and
chairman of a number of AIM companies. He has signifi cant experience in small and medium quoted
companies. He is a fellow of the Chartered Institute for Securities and Investment (CISI) and chairman of its
corporate fi nance forum. Clive has been closely connected with the Quoted Company Alliance and is one of
the authors of its corporate governance guidelines.
Paul Hagon, Non-Executive Director
Having worked in the Grocery Sector for over 30 years in both wholesaling and major branded suppliers,
Paul is currently providing consultancy services for a number of retail, manufacturing and wholesale
businesses to assist with strategies, change programmes and the implementation of practical business
plans. Prior to this, Paul has worked in selling, marketing and business management roles with Nestle and
more recently, Palmer and Harvey, where his latter role was as Group Strategy and Development Director.
Paul has also served as Chairman of the Association of Convenience Stores for whom he had also been a
Board Member for 20 years.
Keith Sadler, Non-Executive Director
Keith is chief fi nancial offi cer of A Spokesman Said Limited, a radio station operating under the name
Love Sport and an online price comparison site. He is also a non-executive director of TLA Worldwide
plc, a global sports management and events business, for which he chairs the audit committee. He was,
until December 2014, chief fi nancial offi cer of Dods Group PLC, a political communications business, and
formerly chief operations offi cer and group fi nance director of WEARE 2020 plc. Prior to this he was chief
executive and group fi nance director of SPG Media Group plc, a marketing services business, group fi nance
director of The Wireless Group and two quoted regional newspaper publishers; News Communication and
Media plc and Bristol United Press plc. Before this he was treasurer of Mirror Group Newspapers plc. Keith
is a chartered accountant and holds an honours degree in economics from the University of Kent.
249618 Warpaint R&A pp03-pp27.indd 21
249618 Warpaint R&A pp03-pp27.indd 21
14/05/2018 23:53
14/05/2018 23:53
21
Warpaint London P LC
Corporate Governance Report
The Directors recognise the importance
of sound corporate governance and
confi rm that the Company complies,
so far as practicable and to the extent
appropriate for a company of its nature
and size, with the recommendations in
the QCA Guidelines, which have become
a widely recognised benchmark for
corporate governance of smaller quoted
companies, particularly AIM companies.
Following the revision of the AIM Rules
for Companies effective 30 March 2018
and specifi cally AIM Rule 26, which
comes into effect on 28 September 2018,
it is the Company’s present intention
to adopt the updated QCA Corporate
Governance Code and to comply as far as
practically possible with its terms.
Given the size of the Group, the Board
currently comprises of three Non-Executive
Directors (including the Chairman), Clive
Garston, Paul Hagon and Keith Sadler,
and three Executive Directors, Sam Bazini,
Eoin Macleod and Neil Rodol. The Board
considers this to be appropriate at this
stage of the Company’s development, but
will reconsider this as the Group grows in
size. The Board retains a range of fi nancial,
commercial and entrepreneurial experience
and that there is a good balance of skills,
independence, diversity and knowledge
of both the Company and the sectors in
which it operates. The Non-Executive
Directors have been appointed on merit
and for their specifi c areas of expertise
and knowledge. This enables them to
bring independent judgement on issues of
strategy and performance and to debate
matters constructively. No single Director is
dominant in the decision-making process.
The Board met eight times during the
year for formal Board meetings and
a further eight times in between for
business including informal business
reviews, to review budgets and focus on
strategy. It is intended that the Board will
meet at least ten times a year to review,
formulate and approve the Group’s
strategy, budgets, corporate actions and
oversee the Group’s progress towards
its goals with at least one meeting
on the premises of Retra, its newly
acquired subsidiary, providing the Board
an opportunity to meet with its senior
management and be involved with the
business of the wider Group.
The Board has established the Audit
Committee, Remuneration Committee
and Insider Committee with formally
delegated duties and responsibilities
and with written terms of reference.
From time to time separate committees
may be set up by the Board to consider
specifi c issues when the need arises. Due
to the size of the Group, the Directors
have decided that issues concerning the
nomination of Directors will be dealt with
by the Board rather than a committee,
but will regularly reconsider whether a
nominations committee is required.
The Group has adopted a code for
Directors’ and certain employee share
dealings which the Directors believe is
appropriate for an AIM quoted company.
The Directors will comply with the Market
Abuse Regime and Rule 21 of the AIM
Rules relating to Directors’ dealings and
in addition will take all reasonable steps
to ensure compliance by the Group’s
applicable employees (as defi ned in the
AIM Rules).
The Board of Directors
The Board of Directors is responsible for
formulating, reviewing and approving the
Group’s strategy, budgets, major items
of capital expenditure and acquisitions,
and reporting to the shareholders.
Dialogue occurs regularly between
Directors outside of scheduled meetings.
Meeting agendas include review and
approval of minutes recorded, matters
arising, a review of material operational
matters relating to Group’s businesses
and other special items for discussion
or consideration. Board papers are
circulated in advance to allow Directors
adequate time for consideration.
All Non-Executive Directors are
independent of management and free
from any business or other relationship
which could materially interfere with the
exercise of their independent judgement.
Compliance with the Bribery Act
The Group has in place an anti-bribery
and anti-corruption policy which sets
out its zero-tolerance position and
provides information and guidance to
those working for the Group on how
to recognise and deal with bribery and
corruption issues. During the period,
there were no incidents for consideration.
Internal financial control and reporting
The Board is responsible for establishing
and maintaining the Group’s system
of internal controls and reviewing its
effectiveness. The procedures, which
include fi nancial, compliance and risk
management, are reviewed on an on-going
basis. The Board approves the annual
budget and performance against budget is
monitored and reported by the Board. The
internal control system can only provide
reasonable and not absolute assurance
against material misstatement or loss.
The Board has considered the need for
an internal audit function but does not
consider it necessary at the current time
with the current controls in place and the
relative complexity of the business.
249618 Warpaint R&A pp03-pp27.indd 22
249618 Warpaint R&A pp03-pp27.indd 22
14/05/2018 23:53
14/05/2018 23:53
322
Annual Report 2017
G
o
v
e
r
n
a
n
c
e
Whistleblowing procedures
The Group’s ’whistleblowing’ procedures
ensure that arrangements are in place to
enable employees and suppliers to raise
concerns about possible improprieties on
a confi dential basis. Any issues raised are
investigated and appropriate actions are
taken. Should any signifi cant issue arise
they are highlighted to the Board.
Relations with shareholders
The Group reports to shareholders twice
a year. The Group dispatches the notice
of its Annual General Meeting, together
with a description of the items of special
business, at least 21 days before the
meeting. Each substantially separate issue
is the subject of a separate resolution and
all shareholders have the opportunity to
put questions to the Board at the Annual
General Meeting. The Chairmen of the
Audit and Remuneration Committees
normally attend the Annual General
Meeting and will answer questions which
may be relevant to their responsibilities.
Insider Committee
The Company has an Insider Committee
which consists of Clive Garston (as
Chairman), Samuel Bazini and Neil Rodol.
The Insider Committee is responsible,
inter alia, for the identifi cation of inside
information for the purpose of maintaining
the Company’s insider lists and for
reporting that information in accordance
with Market Abuse Regulation (EU)
596/2014.
249618 Warpaint R&A pp03-pp27.indd 23
249618 Warpaint R&A pp03-pp27.indd 23
14/05/2018 23:53
14/05/2018 23:53
23
Warpaint London P LC
Audit Committee Report
Keith Sadler
The Audit Committee consists of
Keith Sadler (as Chairman), Clive
Garston and Paul Hagon. The Audit
Committee is convened as required. It
has responsibility for ensuring that the
fi nancial performance of the Group is
properly reported on and reviewed, and
its role includes monitoring the integrity
of the fi nancial statements of the Group
(including annual and interim accounts
and results announcements), reviewing
internal control and risk management
systems, reviewing any changes to
accounting policies, reviewing and
monitoring the extent of the non-audit
services undertaken by external auditors,
reviewing fi ndings of an audit with the
auditors, meeting regularly with the
auditors and advising on the appointment
of external auditors.
Whilst the Board as a whole has a duty to
act in the best interests of the Company,
the Committee has a particular role,
acting independently of management, to
ensure that the interests of shareholders
are properly protected in relation to
fi nancial reporting and the effectiveness of
the Group’s systems of fi nancial internal
controls.
The key responsibilities of the
Committee are to:
•
Review the signifi cant issues and
judgements of management, and
the methodology and assumptions
used in relation to the Group’s
fi nancial statements and formal
announcements on the Group’s
fi nancial performance;
•
•
•
•
Review the Group’s going concern
assumptions;
Assess the effectiveness of the Group’s
system of internal controls, including
fi nancial reporting and fi nancial
controls;
Consider and make recommendations
to the Board on the appointment,
reappointment, dismissal or
resignation and remuneration of the
external auditor; and
Assess the independence and
objectivity of the external auditor and
approve and monitor the application of
the external auditor business standard.
The Group paid £86,000 to BDO for
audit services in 2017, relating to the
statutory audit of the Group and Company
fi nancial statements, the audit of Group
subsidiaries, and audit-related assurance
services. In addition, the Group paid
£115,000 to BDO in 2017, for tax advice
and services relating to the acquisition of
Retra Holdings Ltd on 30 November 2017.
Committee performance and
effectiveness
As this is the fi rst full year reporting
period for the Company and Group as a
PLC no review of the performance and
effectiveness of the Committee took place.
The full terms of reference for the
Committee can be found on the Company’s
website at www.warpaintlondonplc.com
and are also available from the Group
Company Secretary.
Audit Committee Report
This Audit Committee Report was
reviewed and approved by the Board on
24 April 2018.
Keith Sadler
Audit Committee Chairman
24 April 2018
The Chief Financial Offi cer and the
external auditor normally attend
Committee meetings. The Committee
meet with the external auditor without
management present during the year.
External auditor
BDO was appointed by the Board as the
Company’s external auditor on 26 June
2017 for the 2017 reporting period and it
is their intention to put them forward at
the AGM to stand as auditors for the next
fi nancial period. There are no contractual
obligations that restrict the Committee’s
choice of external auditor.
249618 Warpaint R&A pp03-pp27.indd 24
249618 Warpaint R&A pp03-pp27.indd 24
14/05/2018 23:53
14/05/2018 23:53
324
Annual Report 2017
Remuneration Committee Report
Paul Hagon
The Remuneration Committee consists of Paul Hagon (as Chairman), Clive Garston and Keith Sadler. The Remuneration Committee
is convened not less than twice a year and otherwise as required. It has responsibility for determining, within the agreed terms of
reference, the Group’s policy on the remuneration packages of the Company’s Chairman, and the Executive Directors and such
other members of the senior management as it is designated to consider. The Remuneration Committee also has responsibility for
determining (within the terms of the Group’s policy and in consultation with the Chairman of the Board and/or the Chief Executive
Offi cers) the total individual remuneration package for each Executive Director and other senior managers (including bonuses,
incentive payments and share options or other share awards). The remuneration of Non-Executive Directors will be a matter for the
Board. No Director or manager will be allowed to partake in any discussions as to their own remuneration. In exercising this role,
the Directors shall have regard to the recommendations put forward in the relevant QCA Guidelines.
Directors Remuneration Report
The Group takes into account both Group and individual performance, market value and sector conditions in determining Director
and senior employee remuneration. The Group has maintained a policy of paying salaries comparable with peer companies in the
sector in order to attract and retain key personnel.
G
o
v
e
r
n
a
n
c
e
Directors’ remuneration and Directors’ interests
Salary
Pension
Bonus
Total
Remuneration
2017 £
Fair Value
of Options
Total
Remuneration
2016 £
S Bazini
E Macleod
N Rodol
C Garston
P Hagon
K Sadler
200,000
200,000
112,000
60,000
30,000
40,000
–
–
–
–
–
–
–
–
–
–
–
–
200,000
200,000
112,000
60,000
30,000
40,000
–
–
101,406
–
–
–
165,000
165,000
166,667
10,000
5,000
6,667
The Directors, who held offi ce at 31 December 2017, had the following interests in the shares of the Group:
Number of share
options held at
31 December 2017(c)
Ordinary Shares as %
of issued share capital
Number of
Ordinary Shares held
at 31 December 2017
Number of
Ordinary Shares held
at 31 December 2016
S Bazini(a)
E Macleod(b)
N Rodol
C Garston
P Hagon
K Sadler
–
–
105,262
–
–
–
22.86
22.86
0.14
0.16
0.04
0.04
17,545,208
17,505,208
103,961
126,315
31,145
31,145
20,413,630
20,413,630
61,856
100,000
20,619
20,619
In addition to the above holdings:
(a) 3,000,000 (2016: Nil) shares are held by the wife of S Bazini
(b) 3,000,000 (2016: Nil) shares are held by the wife of E Macleod
(c) For details of the share option scheme see Note 20 on Page 51
There were no changes in the shareholdings of the Directors between 31 December 2017 and the date of this report.
Paul Hagon
Remuneration Committee Chairman
24 April 2018
249618 Warpaint R&A pp03-pp27.indd 25
249618 Warpaint R&A pp03-pp27.indd 25
14/05/2018 23:53
14/05/2018 23:53
25
Warpaint London P LC
Directors’ Report
The Directors present their annual report on the affairs of the Group, together with the fi nancial statements and auditor’s report for
the year ended 31 December 2017. The Corporate Governance Statement on pages 22-23 forms part of this report.
Going concern
The Company’s going concern statement can be found in the Consolidated Financial Statements on page 60.
Results and dividends
Results for the year ended 31 December 2017 are set out in the Consolidated Income Statement on page 3 1.
Directors
The following Directors held offi ce during the year and to the date of authorisation of the accounts:
Non-Executive Chairman
C Garston
Executive Directors
S Bazini
E Macleod
N Rodol
Non-Executive Directors
P Hagon
K Sadler
In accordance with the Company’s articles of association Keith Sadler and Eoin Macleod will retire and stand for re-election at the
forthcoming Annual General Meeting.
Future development
For details of future developments refer to the Strategic report set out on pages 3-1 8.
Substantial shareholdings
The Group is aware of the following shareholdings of 3% or more in the share capital as at 31 December 2017:
Shareholder
S Bazini
E Macleod
Blackrock Investment Management Limited
Schroder Investment Management Limited
Mrs S Bazini
Mrs L Macleod
Canaccord Genuity Group Inc.
Number of Shares
17,545,208
17,545,208
8,411,020
6,268,000
3,000,000
3,000,000
2,348,612
%
22.86
22.86
11.84
8.17
3.91
3.91
3.06
Financial instruments
The Group’s fi nancial risk management objectives and policies are discussed in note 2 2 to the consolidated fi nancial statements.
Auditors
In accordance with section 485 of the Companies Act 2006, a resolution proposing that BDO LLP be re-appointed as auditors of the
Group will be put to the Annual General Meeting.
249618 Warpaint R&A pp03-pp27.indd 26
249618 Warpaint R&A pp03-pp27.indd 26
14/05/2018 23:53
14/05/2018 23:53
326
Annual Report 2017
G
o
v
e
r
n
a
n
c
e
employment, efforts are made to provide
appropriate re-training. The Company
places enormous importance on the
contributions of its employees and aims
to keep them informed of developments
in the Company through a combination of
meetings and electronic communication.
Statement of disclosure to the auditors
So far as the Directors are aware:
(a) there is no relevant audit information
of which the Company’s auditors are
unaware, and
(b) they have taken all the steps that they
ought to have taken as a Director in
order to make themselves aware of
any relevant audit information and to
establish that the Company’s auditors
are aware of that information.
On behalf of the Board
Neil Rodol
Chief Financial Offi cer
24 April 2018
Indemnity of Directors
The Group has purchased and maintains,
for all Directors, insurance against
any liability and the Group maintains
appropriate insurance cover against legal
action bought against its Directors.
The Directors are responsible for preparing
the Strategic and Directors’ report and the
Group fi nancial statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare Group fi nancial statements
for each fi nancial year. Under that law
they have elected to prepare the Group
fi nancial statements in accordance
with International Financial Reporting
Standards as adopted by the EU and
applicable law.
Under company law the Directors
must not approve the Group fi nancial
statements unless they are satisfi ed that
they give a true and fair view of the state
of affairs of the Group and of its profi t or
loss for that period. In preparing the Group
fi nancial 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 they have been prepared
in accordance with IFRSs as adopted
by the EU; and
•
Prepare the Group fi nancial
statements on the going concern
basis unless it is inappropriate to
presume that the Group will continue
in business.
The Directors are responsible for keeping
adequate accounting records that are
suffi cient to show and explain the Group’s
transactions and disclose with reasonable
accuracy at any time the fi nancial position
of the Group and enable them to ensure
that its fi nancial statements comply
with the Companies Act 2006. They have
general responsibility for taking such
steps as are reasonably open to them to
safeguard the assets of the Group and
to prevent and detect fraud and other
irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and fi nancial information included on
the Group’s website. Legislation in
the UK governing the preparation and
dissemination of fi nancial statements
may differ from legislation in other
jurisdictions.
Employees
It is the Company’s policy not to
discriminate between employees or
potential employees on any grounds.
Full and fair consideration is given to the
recruitment, training and promotion of
disabled people and, should staff become
disabled during the course of their
249618 Warpaint R&A pp03-pp27.indd 27
249618 Warpaint R&A pp03-pp27.indd 27
14/05/2018 23:53
14/05/2018 23:53
27
Warpaint London P LC
Independent Auditors’ Report
to the members of Warpaint London P LC
Opinion
We have audited the fi nancial statements of Warpaint London PLC
(the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2017 which comprise the consolidated statement
of comprehensive income, the consolidated and company statement
of changes in equity, the consolidated and company statements of
fi nancial position, the consolidated statement of cash fl ows and
notes to the fi nancial statements, including a summary of signifi cant
accounting policies.
The fi nancial reporting framework that has been applied in the
preparation of the group fi nancial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The fi nancial reporting framework that has been
applied in the preparation of the parent company fi nancial statements
is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 102 The Financial Reporting Standard in
the United Kingdom and Republic of Ireland (United Kingdom Generally
Accepted Accounting Practice).
In our opinion:
• the fi nancial statements give a true and fair view of the state of the
group’s and of the parent company’s affairs as at 31 December 2017
and of the group’s profi t for the year then ended;
• the group fi nancial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company fi nancial statements have been properly prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice; and
• the fi nancial 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 fi nancial statements section of our report. We are
independent of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the fi nancial
statements in the UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfi lled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence
we have obtained is suffi cient and appropriate to provide a basis for
our opinion.
Use of our report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Parent company and the Parent company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Conclusions relating to going concern
• the directors’ use of the going concern basis of accounting in the
preparation of the fi nancial statements is not appropriate; or
• the directors have not disclosed in the fi nancial statements any
identifi ed material uncertainties that may cast signifi cant doubt about
the group’s or the parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at least twelve
months from the date when the fi nancial statements are authorised
for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment,
were of most signifi cance in our audit of the fi nancial statements of the
current period and include the most signifi cant assessed risks of material
misstatement (whether or not due to fraud) we identifi ed, 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
fi nancial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
The following matters were identifi ed by us as the most signifi cant
assessed risks of material misstatement:
Accounting for business combination
As disclosed in note 8, the group acquired Retra Group Holdings Limited
and its subsidiaries (“the acquired group”) on 30 November 2017. The
acquisition of this business has been accounted for as a business
combination under IFRS 3.
The issue – Accounting for business combinations consists of signifi cant
judgment in determining the fair value of both the consideration paid
for the acquired group and the underlying assets and liabilities of that
group, including intangible assets such as customer relationships and
brands. Judgment is also exercised in determining the appropriate
period over which to amortise the intangible asset in relation to customer
relationships and brands. We also consider that there is a risk that
the disclosures in the fi nancial statements may not be presented in
accordance with the requirements of the accounting standards.
How we addressed the risk – Our audit procedures included challenging
the Directors’ assessment of the fair value of the consideration paid,
the assets acquired and liabilities assumed with reference to evidence
provided by third party experts engaged by management. We critically
evaluated the capabilities, competence and objectivity of the external
valuers engaged by the Directors involved in assessing the fair value of
intangible assets and the fair value of the consideration paid by checking
their qualifi cations and background, as well as evaluating and concluding
on the appropriateness of their conclusions by comparing them to our
knowledge of the industry and market information.
We used our own valuation specialists to challenge the acquisition
accounting including the identifi cation of amounts related to customer
relationships and brand while we have tested the valuation of the
consideration paid by agreement to supporting documents and
quoted market price. We also challenged the third party experts and
management regarding the amortisation period of the intangible assets
in relation to customer relationships and brands. We have considered the
period over which the intangibles are to be amortised and benchmarked
these against similar assets in competitor businesses.
We have nothing to report in respect of the following matters in relation
to which the ISAs (UK) require us to report to you where:
In addition, we considered the adequacy of the Group’s disclosures in
respect of the business combinations by checking its appropriateness
249618 Warpaint R&A pp28-pp62.indd 28
249618 Warpaint R&A pp28-pp62.indd 28
14/05/2018 23:56
14/05/2018 23:56
328
Annual Report 2017
based on our workings and its compliance with the requirements of
the standards.
Carrying value of inventory
See accounting policy in note 1.
Limited and its subsidiaries during the year that brings the total of trading
subgroups to three. Retra Group Holdings Limited and its subsidiaries
only contributed one month of its post-acquisition trading in these group
fi nancial statements. In establishing the overall approach to the group
audit, we completed full scope audits on the underlying subgroups and
the parent company.
The issue – The group holds signifi cant levels of inventory and a number
of estimates are involved in valuing slow moving and obsolete inventories,
some of which have a limited shelf life. There are inherent uncertainties
in consumer preferences and spending patterns, which are primarily
driven by wider trends in the fashion and cosmetics industry. There is
a recoverability risk associated with new product launches as well as
with close out stock purchased at the end of ranges or seasons with
judgement required in forecasting demand.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the fi nancial statements and our auditor’s report thereon. Our
opinion on the fi nancial 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.
How we addressed the risk – Our procedures included assessing the
principles and appropriateness of the Group’s inventory provisioning
policies based on our understanding of the business and the accuracy
of previous provisioning estimates. In assessing inventory provisions our
procedures included testing the methodology applied by management
in preparing their provision including the identifi cation of slow moving
and obsolete items. We considered the inventory write off fi gure during
the year and compared this to the Group’s expected recoveries brought
forward and to the position at the year end date. Further, we tested the
unprovided inventory balance by reviewing sales volumes and values
after the balance sheet date.
In connection with our audit of the fi nancial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the fi nancial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether
there is a material misstatement in the fi nancial statements or a material
misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to
report in this regard.
Our application of materiality
The scope of our audit was infl uenced by our application of materiality.
We set certain quantitative thresholds for materiality which, together
with qualitative considerations, help us to determine the nature, timing
and extent of our audit procedures on the individual fi nancial statement
areas and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the fi nancial statements as a whole.
We determined materiality for the fi nancial statements as a whole to be
£388,000 which represents 5% of profi t before tax and exceptional items.
In the prior year materiality was based on 8.5% of profi t before tax and
exceptional items at £515,000.
Whilst materiality for the fi nancial statements of a whole was £388,000,
each component of the Group was audited to a lower level of materiality.
Component materiality ranged from £45,000 to £349,200.
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 fi nancial year for which the fi nancial statements are prepared is
consistent with the fi nancial statements; and
• the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the audit,
we have not identifi ed material misstatements in the strategic report or
the directors’ report.
Performance materiality is the application of materiality at the individual
account or balance level set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the fi nancial statements as a
whole. Performance materiality was set at £271,600 (2016: £381,550)
which represents 70% (2016 65%) of the above materiality levels.
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept, or returns adequate
for our audit have not been received from branches not visited by us; or
We agreed with the audit committee that we would report to them
misstatements identifi ed during our audit above £19,400 (2016: £25,000).
We also agreed to report differences below these thresholds that, in our
view, warranted reporting on qualitative grounds.
We used profi t before tax before exceptional items as a benchmark given
the importance of profi t as a measure for shareholders in assessing the
performance of the Group.
An overview of the scope of our audit
The group consists of three trading subgroups, all of which are run from
the UK. As mentioned above, the group acquired Retra Group Holdings
• the parent company fi nancial statements are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’ remuneration specifi ed by law are not
made; or
• we have not received all the information and explanations we require
for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out
in the Directors’ report, the directors are responsible for the preparation
of the fi nancial statements and for being satisfi ed that they give a true
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
249618 Warpaint R&A pp28-pp62.indd 29
249618 Warpaint R&A pp28-pp62.indd 29
14/05/2018 23:56
14/05/2018 23:56
29
Warpaint London P LC
Independent Auditors’ Report (continued)
to the members of Warpaint London P LC
and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of fi nancial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the fi nancial statements, the directors are responsible
for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the fi nancial statements
Our objectives are to obtain reasonable assurance about whether the
fi nancial 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
infl uence the economic decisions of users taken on the basis of these
fi nancial statements.
A further description of our responsibilities for the audit of the fi nancial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Mark RA Edwards
(Senior Statutory Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
London
24 April 2018
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
249618 Warpaint R&A pp28-pp62.indd 30
249618 Warpaint R&A pp28-pp62.indd 30
14/05/2018 23:56
14/05/2018 23:56
330
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
Revenue
Cost of sales
Gross profi t
Administrative expenses
Analysed as:
Profi t from operations before exceptional items
Exceptional items
Profi t from operations
Finance expense
Profi t before tax
Tax expense
Profi t for the year attributable to equity holders of the parent company
Other comprehensive income
Total comprehensive income attributable to equity holders of the parent company
Basic earnings per share (pence)
Diluted earnings per share (pence)
Annual Report 2017
Year ended 31 December
Note
1,2
2017
£’000
32,549
2016
£’000
22,483
(19,911)
(13,692)
12,638
3,4
(5,744)
7,280
(386)
6,894
(37)
6,857
(1,384)
5,473
–
5,473
8.34
8.34
3
3
5
6
26
26
8,791
(4,374)
6,156
(1,739)
4,417
(16)
4,401
(1,260)
3,141
–
3,141
5.07
5.07
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
249618 Warpaint R&A pp28-pp62.indd 31
249618 Warpaint R&A pp28-pp62.indd 31
14/05/2018 23:56
14/05/2018 23:56
31
Warpaint London P LC
Consolidated Statement of Financial Position
as at 31 December 2017
Registered Number: 10261717
Non-current assets
Goodwill
Intangibles
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative fi nancial instruments
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Loans and borrowings
Corporation tax liability
Derivative fi nancial instruments
Total current liabilities
Non-current liabilities
Bank loan
Deferred tax liability
Total non-current liabilities
Total liabilities
NET ASSETS
Note
9
10
11
12
13
22
14
15
22
15
16
Year ended 31 December
2017
£’000
7,982
10,653
1,497
20,132
11,531
13,226
–
3,369
28,126
48,258
2016
£’000
513
1,403
237
2,153
7,669
5,364
37
3,503
16,573
18,726
(3,537)
(2,841)
(582)
(939)
(3)
–
(1,329)
–
(5,061)
(4,170)
(814)
(1,959)
(2,773)
(7,834)
40,424
–
(278)
(278)
(4,448)
14,278
249618 Warpaint R&A pp28-pp62.indd 32
249618 Warpaint R&A pp28-pp62.indd 32
14/05/2018 23:56
14/05/2018 23:56
332
Consolidated Statement of Financial Position
as at 31 December 2017
Registered Number: 10261717
Equities
Share capital
Share premium
Merger reserve
Other reserves
Retained earnings
TOTAL EQUITY
Annual Report 2017
Note
18
19, 20
2017
£’000
19,187
19,359
2016
£’000
16,135
1,806
(16,100)
(17,995)
45
17,933
40,424
–
14,332
14,278
The fi nancial statements of Warpaint London PLC were approved and authorised for issue by the Board of Directors on 24 April 2018 and were signed
on its behalf by:
Neil Rodol
Chief Financial Offi cer
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
249618 Warpaint R&A pp28-pp62.indd 33
249618 Warpaint R&A pp28-pp62.indd 33
14/05/2018 23:56
14/05/2018 23:56
33
Warpaint London P LC
Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
Share Capital
Share Premium
Merger Reserve
option reserve
Share
Note
£’000
£’000
£’000
At 1 January 2016
Shares issued for cash
Shares issued for Treasured Scents
Share capital reduction
Profi t for the year
Dividends paid
As at 31 December 2016
Shares issued during the year
Shares issued for Retra Holdings
Share issue costs
18
18
18
17
18
18
Movement in other reserves
19, 20
Profi t for the year
Dividends paid
17
15,000
644
1,340
(849)
–
–
£’000
–
1,806
–
–
–
–
(20,000)
–
2,005
–
–
–
16,135
1,806
(17,995)
2,789
18,410
–
263
–
1,895
–
–
–
–
(857)
–
–
–
–
–
–
–
As at 31 December 2017
19,187
19,359
(16,100)
Retained
Earnings
£’000
13,991
–
–
–
Total Equity
£’000
8,991
2,450
3,345
(849)
3,141
3,141
(2,800)
(2,800)
14,332
14,278
–
–
–
–
21,199
2,158
(857)
45
5,473
5,473
(1,872)
(1,872)
17,933
40,424
–
–
–
–
–
–
–
–
–
45
–
–
45
249618 Warpaint R&A pp28-pp62.indd 34
249618 Warpaint R&A pp28-pp62.indd 34
14/05/2018 23:56
14/05/2018 23:56
334
Consolidated Statement of Cash Flows
for the year ended 31 December 2017
Operating activities
Profi t before tax
Interest paid
Amortisation of intangible assets
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Share based payment
Decrease/(Increase) in trade and other receivables
Decrease/(Increase) in inventories
(Decrease)/Increase in trade and other payables
Cash generated from operations
Tax paid
Interest paid
Net cash fl ows from operating activities
Investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Acquisition of business
Bank balances acquired
Sale of investments
Proceeds from sale of property, plant and equipment
Net cash used in by investing activities
Financing activities
Proceeds from new share capital subscribed
Share issue costs
Reduction in borrowings
Dividends
Net cash generated by/ (used in) fi nancing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Cash and cash equivalents consists:
Cash and cash equivalents
Annual Report 2017
Year ended 31 December
2017
£’000
2016
£’000
6,857
4,401
37
469
184
6
45
869
224
(1,356)
7,335
(2,077)
(37)
5,221
(52)
(555)
(16,200)
242
–
33
16
57
58
8
–
(289)
(1,413)
1,601
4,439
(1,465)
(16)
2,958
(77)
(163)
–
98
(6)
–
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
(16,532)
(148)
21,199
(857)
(7,293)
(1,872)
11,177
(134)
3,503
3,369
3,369
3,369
2,500
(53)
(712)
(2,800)
(1,065)
1,745
1,758
3,503
3,503
3,503
Note
5
10
11
10
11
8
8
17
249618 Warpaint R&A pp28-pp62.indd 35
249618 Warpaint R&A pp28-pp62.indd 35
14/05/2018 23:56
14/05/2018 23:56
35
Warpaint London P LC
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017
1.
Signifi cant accounting policies
Basis of preparation
The fi nancial statements of Warpaint London PLC (the “Company” or
“Warpaint”) and its subsidiaries (together the “Group”) for the year ended
31 December 2017 were authorised for issue by the board of directors on
24 April 2018 and the statement of fi nancial position was signed on the
board’s behalf by Neil Rodol.
Warpaint London PLC is a public limited Company incorporated and
domiciled in England and Wales. Its registered offi ce is Units B&C,
Orbital Forty Six, The Ridgeway Trading Estate, Iver, Bucks., SL0 9HW.
The Group’s fi nancial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted
by the European Union and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS. The fi nancial
statements are presented in pounds sterling because that is the currency
of the primary economic environment in which the Group operates.
All values are rounded to the nearest thousand (£’000) except where
otherwise indicated.
The annual fi nancial statements have been prepared on the historical
cost basis, except for certain fi nancial assets and liabilities which are
carried at fair value or amortised cost as appropriate.
The preparation of fi nancial statements in conformity with International
Financial Reporting Standards adopted by the European Union requires
the use of estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the fi nancial statements and the reported amounts of
revenues and expenses during the reported period. Although these
estimates are based on management’s best knowledge of current events
and actions, actual results ultimately may differ from those estimates.
The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated fi nancial statements
incorporates the fi nancial
statements of the Group and all of its subsidiary undertakings. The
fi nancial statements of all Group companies are adjusted, where
necessary, to ensure the use of consistent accounting policies.
Acquisitions are accounted for under the acquisition method from the
date control passed to the Group. On acquisition, the assets and liabilities
of a subsidiary are measured at their fair values. Any excess of the cost
of acquisition over the fair values of the identifi able net assets acquired
is recognised as goodwill.
The group was formed after the company, prior to its IPO and listing on
AIM, completed share for share transactions for two separate groups
owned by the same shareholders. In the fi nancial year ended 31 December
2016, the Board took the view that the most appropriate way to account
for these in line with IFRS was to deem the share for share exchange with
the Warpaint Group (the own -brand business) as a group reconstruction.
This has been accounted for under the basis of merger accounting given
that the ultimate ownership before and after the transaction remained
the same. Merged subsidiaries undertakings are treated as if they have
always been a member of the Group. Any difference between the nominal
value of the shares acquired by the Company and those issued by the
Company to acquire them is taken to the merger reserve.
There is currently no specifi c guidance on accounting for group
reconstructions such as this transaction under IFRSs. In the absence
of specifi c guidance, entities should select an appropriate accounting
policy and IFRS permits the consideration of pronouncements of other
standard-setting bodies. This group reconstruction as scoped out of
IFRS 3 has therefore been accounted for in the year ended 31 December
2016 using predecessor accounting principles resulting in the following
practical effects;
(a)
(b)
(c)
(d)
The net assets of the two companies are combined using existing
book values, with adjustments made as necessary to ensure that
the same accounting policies are applied to the calculation of the
net assets of both companies;
No amount is recognised as consideration for goodwill or negative
goodwill;
The consolidated profi t and loss account includes the profi ts or
losses of each company for the entire period, regardless of the
date of the reconstruction, and the comparative amounts in the
consolidated fi nancial statements are restated to the fi gures
presented by the predecessor company Warpaint Cosmetics
Group Limited;
The retained earnings reserve includes the cumulative results of
each company, regardless of the date of the reconstruction, and
the comparative amounts in the statement of fi nancial position
were restated in 2016 to that presented by the predecessor
company Warpaint Cosmetics Group Limited
The share for share exchange of the other group of companies, namely
Treasured Scents (the close-out business) was acquired on 11 November
2016 and has been treated as an acquisition under IFRS 3.
On 21 November 2016, the Company also undertook a capital reduction
pursuant to which 16,340,000 B ordinary shares of £0.052 each held by
Sam Bazini and Eoin Macleod where cancelled in consideration for the
transfer of the entire issued share capital of Warpaint Cosmetics Limited
to a company owned and controlled by Sam Bazini and Eoin Macleod.
On 30 November 2017, the company acquired 100% of the share capital
of Retra Holdings Limited by way of a share for share exchange which
has been treated as an acquisition under IFRS 3. All subsidiaries have
a reporting date of December. All transactions and balances between
Groups companies are eliminated on consolidation. The amounts
reported in the fi nancial statements of subsidiaries have been adjusted
where necessary to ensure the consistency with the accounting policies
of the Group.
Going concern
The Directors have prepared a detailed forecast with a supporting business
plan for the foreseeable future. The forecast indicates that the Group
will remain in a positive cash position throughout the forecast period.
As such, the Directors have a reasonable expectation the Company and
Group will have adequate resources to continue in operational existence
for the foreseeable future. As such, they continue to prepare the fi nancial
statements on the basis of going concern.
Revenue Recognition
Revenue for the Group is measured at the fair value of the consideration
received or receivable. The Group recognises revenue for goods sold net
of discounts and provisions when the amount of revenue can be reliably
measured and it is probable that future economic benefi ts will fl ow to
the entity.
249618 Warpaint R&A pp28-pp62.indd 36
249618 Warpaint R&A pp28-pp62.indd 36
14/05/2018 23:56
14/05/2018 23:56
336336
Annual Report 2017
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
1.
Signifi cant accounting policies (continued)
Intangible assets acquired separately
Sale of goods
Revenue from the sale of goods is recognised when all of the following
conditions are satisfi ed:
• the Group has transferred the signifi cant risks and rewards of
ownership to the buyer;
• the Group retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control over the
goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the Group will receive the consideration due under
the transaction; and
• the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
UK sales are recognised and invoiced to the customer once the goods
have been delivered to the customer. Overseas sales are recognised
and invoiced to the customer once the goods have been delivered to the
customer, or collected by the customer from the company’s warehouse
according to the terms of sale.
Where the company has entered in to distributor arrangements the risk
and rewards are considered to be with the distributor from the date
of dispatch from either the company’s overseas supplier or from the
company’s UK warehouse. Revenue will therefore be recognised from
the date of dispatch.
Expenditure and provisions
Expenditure is recognised in respect of goods and services received when
supplied in accordance with contractual terms. Provision is made when
an obligation exists for a future liability relating to a past event and where
the amount of the obligation can be reliably estimated.
Retirement Benefi ts: Defi ned contribution schemes
Contributions to defi ned contribution schemes are charged to the
consolidated statement of comprehensive income in the year to which
they relate.
Exceptional items
Exceptional items which have been disclosed separately on the face of
the income statement in order to summarise the underlying results.
Exceptional items, relate to legal and professional fees incurred on the
acquisition of Retra Holdings Limited (2016: costs in relation to listing
the company on AIM). Neither ‘underlying profi t or loss’ nor ‘exceptional
items’ are defi ned by IFRS however the directors believe that the
disclosures presented in this manner provide clear presentation of the
fi nancial performance of the Group.
Intangible assets
Patents
Patents are used by the Group in order to generate future economic value
through normal business operations. Patents are acquired separately
and carried at cost less amortisation and impairment. The underlying
assets are amortised over the period from which the Group expects to
benefi t, which is typically between fi ve to ten years.
Intangible assets with fi nite useful lives that are acquired separately
are carried at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a straight-line basis over
their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect
of any changes in estimate being accounted for on a prospective basis.
Intangible assets with indefi nite useful lives that are acquired separately
are carried at cost less accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised
separately from goodwill are initially recognised at their fair value at
the acquisition date (which is regarded as their cost). Subsequent to
initial recognition, intangible assets acquired in a business combination
are reported at cost less accumulated amortisation and accumulated
impairment losses, on the same basis as intangible assets that are
acquired separately. Amortisation is provided on customer lists and
brands so as to write off the carrying value over the expected useful
economic life of fi ve years. Other details of the acquisition are detailed
in note 8.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future
economic benefi ts are expected from use or disposal. Gains or losses
arising from derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of
the asset, are recognised in profi t or loss when the asset is derecognised.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost.
As well as the purchase price, cost includes directly attributable costs.
Depreciation is provided on all items of property, plant and equipment
so as to write off their carrying value over the expected useful economic
lives. It is provided at the following rates:
Land and buildings
Plant and machinery
Fixtures and fi ttings
Computer equipment
Motor vehicles
Financial assets
– 50 years
– 25% reducing balance
– 25% reducing balance
– 25% reducing balance
– 20% straight line
The Group classifi es its fi nancial assets into the categories, discussed
below, due to the purpose for which the asset was acquired. The Group
has not classifi ed any of its fi nancial assets as held to maturity.
Loans and receivables
These assets are non-derivative fi nancial assets with fi xed or determinable
payments that are not quoted in an active market. They arise principally
through the supply of goods to customers (e.g. trade receivables), but
also incorporate other types of contractual monetary asset. They are
initially recognised at fair value plus transactions costs that are directly
attributable to their acquisition or issue, and are subsequently carried at
amortised cost using the effective interest rate method, less provision
for impairment.
The Group’s loans and receivables comprise of trade and other receivables
included within the combined statement of fi nancial position.
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
249618 Warpaint R&A pp28-pp62.indd 37
249618 Warpaint R&A pp28-pp62.indd 37
14/05/2018 23:56
14/05/2018 23:56
37
37
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
1.
Signifi cant accounting policies (continued)
Cash and cash equivalents include cash held at bank and bank overdrafts.
Bank overdrafts are shown within loans and borrowings in current
liabilities in the combined statement of fi nancial position.
items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible.
The Group’s current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
Impairment provisions are recognised when there is objective evidence
(such as signifi cant fi nancial diffi culties on the part of the counterparty
or default or signifi cant delay in payment) that the Group will be unable
to collect all of the amounts due under the terms receivable, the amount
of such a provision being the difference between the net carrying amount
and the present value of the future expected cash fl ows associated with
the impaired receivable. For trade receivables, which are reported net,
such provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the income
statement. On confi rmation that the trade receivables will not be
collectable, the gross carrying value of the asset is written off against the
associated provision.
Financial liabilities
The Group classifi es its fi nancial liabilities as other fi nancial liabilities
which include the following:
• Bank loans which are initially recognised at fair value net of any
transaction costs directly attributable to the issue of the instrument.
Such
interest-bearing liabilities are subsequently measured at
amortised cost ensuring the interest element of the borrowing is
expensed over the repayment period at a constant rate.
• Trade payables, other borrowings and other short-term monetary
liabilities, which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
Leased assets
Assets obtained under hire purchase contract and fi nance leases are
capitalised as tangible fi xed assets. Assets acquired by fi nance lease
are depreciated over the shorter of the lease term and their useful lives.
Assets acquired by hire purchase are depreciated over their useful lives.
Finance leases are those where substantially all of the benefi ts and
risks of ownership are assumed by the company. Obligations under such
agreements are included in creditors net of the fi nance charge allocated
to future periods. The fi nance element of the rental payment is charged
to the profi t and loss account so as to produce a constant periodic rate of
charge on the net obligation outstanding in each period.
Operating Leases
Where substantially all of the risks and rewards incidental to ownership
are not transferred to the Group (an ‘operating lease’), the total rentals
payable under the lease are charged to the combined statement of
comprehensive income on a straight-line basis over the lease term. The
aggregate benefi t of lease incentives is recognised as a reduction of the
rental expense over the lease term on a straight-line basis.
Taxation
Income tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
The tax currently payable is based on taxable profi t for the year. Taxable
profi t differs from ‘profi t before tax’ as reported in the consolidated
statement of profi t or loss and other comprehensive income because of
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying
amount of an asset or liability in the combined statement of fi nancial
position differs from its tax base, except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is
not a business combination and at the time of the transaction affects
neither accounting or taxable profi t; and
• investments in subsidiaries and jointly controlled entities where the
Group is able to control the timing of the reversal of the difference and
it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where
it is probable that taxable profi t will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that
have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the deferred tax liabilities or assets are
settled or recovered. Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
• the same taxable group company; or
• different company entities which intend either to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which signifi cant
amounts of deferred tax assets and liabilities are expected to be settled
or recovered.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower
of the cost and net realisable value. Cost comprises all costs of purchase,
costs of conversion and other costs incurred in bringing the inventories to
their present location and condition.
Foreign currencies
Assets and liabilities in foreign currencies are translated into Sterling at
the rates of exchange ruling of the Statement of Financial Position date.
Transactions in foreign currencies are translated into Sterling at the rate
of exchange ruling at the date of the transaction. Exchange differences
are taken into account in arriving at operating profi t.
Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief
operating decision maker has been identifi ed as the management team
including the Chief Executive Offi cers and the Chief Financial Offi cer.
249618 Warpaint R&A pp28-pp62.indd 38
249618 Warpaint R&A pp28-pp62.indd 38
14/05/2018 23:56
14/05/2018 23:56
338
Annual Report 2017
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
1.
Signifi cant accounting policies (continued)
The Board considers that the Group’s project activity constitutes two
operating and two reporting segments, as defi ned under IFRS 8.
Management reviews the performance of the Group by reference to total
results against budget.
The total profi t measures are operating profi t and profi t for the year, both
disclosed on the face of the combined income statement. No differences
exist between the basis of preparation of the performance measures
used by management and the fi gures in the Group fi nancial information.
several revenue-related interpretations. The new standard establishes
a control-based revenue recognition model and provides additional
guidance in many areas not covered in detail under existing IFRSs,
including how to account for arrangements with multiple performance
obligations, variable pricing, customer refund rights, supplier repurchase
options, and other common complexities. IFRS 15 is effective for reporting
periods beginning on or after 1 January 2018. The Group’s management
have not yet assessed the impact of IFRS 15 on these consolidated
fi nancial statements.
Derivative fi nancial instruments
The Group enters into a variety of derivative fi nancial instruments to
manage its exposure to foreign exchange rate risk, through the use of
foreign exchange rate forward contracts.
Derivatives are initially recognised at fair value at the date the derivative
contracts are entered into and are subsequently re-measured to their fair
value at the end of each reporting period. The resulting gain or loss is
recognised in profi t or loss immediately unless the derivative is designated
and effective as a hedging instrument, in which event the timing of the
recognition in profi t or loss depends on the nature of the hedge relationship.
Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders of the parent by the weighted average number
of ordinary shares outstanding during the year, excluding treasury shares
and shares in employee benefi t trusts, determined in accordance with
the provisions of IAS 33 earnings per Share. Diluted earnings per share
is calculated by dividing earnings attributable to ordinary shareholders of
the parent by the weighted average number of ordinary shares outstanding
during the year adjusted for the potentially dilutive ordinary shares.
Changes in accounting policies
At the date of authorisation of these fi nancial 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 fi rst period beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that are
expected to be relevant to the Group’s fi nancial statements is provided
below. Certain other new standards and interpretations have been
issued but are not expected to have a material impact on the Group’s
fi nancial statements.
IFRS 9 ‘Financial instruments’
The IASB have released IFRS 9 ‘Financial Instruments’, representing
the completion of its project to replace IAS 39 ‘Financial Instruments:
Recognition and Measurement’. The new standard introduces extensive
changes to IAS 39’s guidance on the classifi cation and measurement of
fi nancial assets and introduces a new ‘expected credit loss’ model for the
impairment of fi nancial assets. IFRS 9 also provides new guidance on the
application of hedge accounting. The Group’s management have yet to
assess the impact of IFRS 9 on these consolidated fi nancial statements.
The new standard is required to be applied for annual reporting periods
beginning on or after 1 January 2018.
IFRS 15 ‘Revenue from contracts with customers’
IFRS 15 presents new requirements for the recognition of revenue,
replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and
IFRS 16 ‘Leases’
IFRS 16 represents new requirements for the recognition of operating
leases, replacing IAS 17 ‘Leases’. The new standard requires that
certain operating leases are disclosed within the Statement of Financial
Position. The Group’s management have yet to assess the impact of
IFRS 16 on these consolidated fi nancial statements. The new standard is
required to be applied for annual reporting periods beginning on or after
1 January 2019.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectations of
future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and
assumptions. The estimates and assumptions that have a signifi cant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next fi nancial year are discussed below.
Judgements and accounting estimates and assumptions
(a)
Inventories
Inventories are initially recognised at cost, and subsequently at the
lower of the cost and net realisable value. There is judgement involved
in assessing the level of inventory provision required in respect of slow
moving inventory.
The Group make a 50% provision for perishable items of stock that are
greater than 18 months old. Should the Group increase the provision to
100% of perishable items that are greater than 18 months old, this would
decrease profi t by £114,000.
(b)
Intangible assets acquired
On acquisition of Treasured Scents (2014) Limited the group has
recognised the customer list also obtained in the business combination.
The valuation of the customer list is based on judgement involved in
assessing the projected future cashfl ows arising from those customers.
Further judgement is involved in assessing the life of the intangible asset
and a suitable discount rate to be used to measure the future revenues
to present value.
On acquisition of Retra Holdings Limited the group has recognised the
customer list and brands obtained in the business combination.
The valuation of the customer list is based on judgement involved in
assessing the projected future cashfl ows arising from those customers.
Further judgement is involved in assessing the life of the intangible asset
and a suitable discount rate to be used to measure the future revenues
to present value. A one per cent increase in the discount rate from 15%
to 16% would reduce the fair value of customer lists by approximately
£220,000. A reduction in the growth rate of cash fl ows beyond the fi ve-
year period from 4.5% to 3.5% would reduce the fair value of customer
list by approximately £130,000.
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
249618 Warpaint R&A pp28-pp62.indd 39
249618 Warpaint R&A pp28-pp62.indd 39
14/05/2018 23:56
14/05/2018 23:56
39
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
1.
Signifi cant accounting policies (continued)
The valuation of the brands is based on judgement involved in assessing the future royalties arising from the ‘Technic’ and ‘Man’Stuff’ brands. Further
judgement is involved in assessing the life of the intangible asset and a suitable discount rate to be used to measure the future revenues to present
value. A one per cent increase in the discount rate from 15% to 16% would reduce the fair value of brands by approximately £150,000.
2.
Segmental information
For management purposes, the Group is organised into two operating segments; Branded and Close-out. The segment ‘W7 Branded’ relates to the
sale of own -branded products whereas ‘close-out’ relates to the purchase of third party stock which is then repackaged for sale. These segments are
the basis on which the Group reports internally to the Board.
2017
2017
Own -Brand
Close-out
2016
Own -Brand
2016
Close-out
Year ended 31 December
Revenue
Cost of sales
Gross profi t
Administrative expenses
Exceptional items
Segment result
Reconciliation of segment result to profi t
before tax:
Segment result
Finance expense
Profi t before tax
Analysis of total revenue by geographical
market:
UK
USA
Australia
Rest of World
Total
£’000
26,890
(16,012)
10,878
(4,423)
(386)
6,069
6,069
(37)
6,032
12,070
2,483
3,740
8,597
26,890
2017
Total
£’000
32,549
(19,911)
12,638
(5,358)
(386)
6,894
6,894
(37)
6,857
£’000
5,659
(3,899)
1,760
(935)
–
825
825
–
825
4,507
16,577
160
156
836
2,643
3,896
9,433
5,659
32,549
21,868
£’000
21,862
(13,078)
8,784
(2,483)
(1,739)
4,562
4,562
(16)
4,546
9,617
2,612
2,315
7,324
2016
Total
£’000
22,483
(13,692)
8,791
(2,635)
(1,739)
4,417
4,417
(16)
4,401
10,232
2,612
2,315
7,324
22,483
£’000
621
(614)
7
(152)
–
(145)
(145)
–
(145)
615
–
–
–
615
During the year ended 31 December 2017, the Group had 1 customer that exceeded 10% of total revenue being 11%. During the year ended 31
December 2016, the Group had 1 customer that exceeded 10% of total revenue being 12%.
Information regarding segment assets and liabilities as at 31 December 2017 and capital expenditure for the period then ended:
Total assets
Total liabilities
Tangible asset additions
Intangible asset additions
Total capital expenditure
Own -Brand
Close–out
Eliminations*
£’000
76,389
(5,112)
1,483
12,539
14,022
£’000
3,108
(817)
–
–
–
£’000
(31,239)
(1,905)
–
–
–
Total
£’000
48,258
(7,834)
1,483
12,539
14,022
* The eliminations are as a result of adjustments arising on consolidation of the fi nancial statements.
249618 Warpaint R&A pp28-pp62.indd 40
249618 Warpaint R&A pp28-pp62.indd 40
14/05/2018 23:56
14/05/2018 23:56
340
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
3.
Operating profi t
Operating profi t for the period is stated after charging/ (crediting):
Foreign exchange loss/(gain)
Depreciation and amortisation
Loss on disposal of fi xed asset
Operating lease costs
Exceptional costs
Annual Report 2017
Year ended 31 December
2017
£’000
71
653
6
373
386
2016
£’000
(28)
115
8
263
1,739
Exceptional costs in the year ended 31 December 2017 of £386,000 relate to legal and professional fees incurred on the acquisition of Retra Holdings
Limited (2016: costs in relation to listing the company on AIM £1,739,000).
Analysis of auditor’s remuneration is as follows:
Fees payable to the Company’s auditor for the audit of the Group’s annual accounts
Fees payable to the Company’s auditor for the audit of subsidiary companies
Other services pursuant to legislation:
Tax advice
Transaction related services
Total non-audit fees
4.
Staff costs
Wages and salaries
Social security costs
Pension costs
The average monthly number of employees during the period was as follows:
Directors
Administrative
Finance
Warehouse
Sales
Other
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
Year ended 31 December
2017
£’000
20
66
86
1
114
115
2016
£’000
13
49
62
30
308
338
Year ended 31 December
2017
£’000
2,789
2 43
1 9
3, 051
2016
£’000
1,413
159
6
1,578
Year ended 31 December
2017
No.
6
6
3
25
4
8
52
2016
No.
3
5
2
22
4
4
40
249618 Warpaint R&A pp28-pp62.indd 41
249618 Warpaint R&A pp28-pp62.indd 41
14/05/2018 23:56
14/05/2018 23:56
41
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
4.
Staff costs (continued)
Directors’ remuneration, included in staff costs
Salaries
Bonus
Pension contributions
Remuneration in respect of Directors was as follows:
2017
£’000
653
–
–
653
2016
£’000
330
150
–
480
Executive Directors
C Garston
S Bazini
E Macleod
N Rodol
Non-executive Directors
K Sadler
P Hagon
Salary /fees
£’000
Bonus
£’000
Benefi ts
contribution
£’000
£’000
2017
£’000
2016
£’000
Pension
–
–
–
–
–
–
–
–
6
5
–
–
–
11
–
–
–
–
–
–
–
60
206
205
112
40
30
653
10
146
146
166
7
5
480
60
200
200
112
40
30
642
Number of Shares
Number of Shares
Awarded in the
Number of shares
Number of Shares
Earliest Exercise
Exercise Expiry
at January 2017
year
Lapsed in the year
at December 2017
Exercise Price
Date
Date
N Rodol
Total share options
–
–
105,262
105,262
–
–
105,262
105,262
237.5p
29/06/2020
29/06/2027
The directors of the Group are the only key management personnel.
5.
Finance expense
Loan interest
HP interest
Other interest
Year ended 31 December
2017
£’000
15
5
17
37
2016
£’000
16
–
–
16
249618 Warpaint R&A pp28-pp62.indd 42
249618 Warpaint R&A pp28-pp62.indd 42
14/05/2018 23:56
14/05/2018 23:56
342
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
6.
Income tax
Current tax expense
Current tax on profi ts for the period
Adjustment in respect of previous periods
Deferred tax expense
Origination and reversal of temporary differences
Total tax expense
Annual Report 2017
Year ended 31 December
2017
£’000
1,473
(30)
1,443
(59)
1,384
2016
£’000
1,225
19
1,244
16
1,260
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to
profi t for the year as follows:
Profi t for the period before tax
Expected tax charge based on corporation tax rate of 19.25% (2016: 20%)
Expenses not deductible for tax purposes
Other adjustments
Prior year adjustments
Adjustment to deferred tax to average rate
Total tax expense
The UK corporation tax at the standard rate for the year is 19.0% (2016: 20.0%).
Year ended 31 December
2017
£’000
6,857
1,319
178
(30)
(87)
1,384
2016
£’000
4,401
880
361
3
19
(3)
1,260
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
In the Finance Act 2016 the UK government announced its intention to reduce the standard corporation tax rate to 17% by 2020. The measure to reduce
the rate to 19% for the fi nancial year beginning 1 April 2017 and to 17% for the fi nancial year beginning 1 April 2020 were substantively enacted on
6 September 2016 and have been refl ected in the calculation of deferred tax in the December 2017 numbers.
7.
Subsidiaries
At the period end, the Group has the following subsidiaries:
Subsidiary name
Warpaint Cosmetic Group Limited
Warpaint Cosmetics (2014) Limited*
Treasured Scents (2014) Limited
Treasured Scents Limited*
Warpaint Cosmetics Inc.
Retra Holdings Limited
Badgequo Limited*
Retra Own Label Limited*
Badgequo Deutschland GmbH*
Badgequo Hong Kong Limited*
* indicates indirect interest
Nature of business
Holding company
Wholesaler
Wholesaler
Holding company
Dormant
Holding company
Wholesaler
Dormant
Place of incorporation
England and Wales
England and Wales
England and Wales
England and Wales
U.S.A.
England and Wales
England and Wales
England and Wales
Supply chain management
Supply chain management
Germany
Hong Kong
Percentage owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
On 30 November 2017, the Company acquired 100% of the issued share capital of Retra Holdings Limited and its subsidiary undertaking Badgequo
Limited, Retra Own Label Limited, Badgequo Deutschland GmbH and Badgequo Hong Kong Limited.
All the other entities detailed above have been in existence for the whole of the reporting period.
The registered offi ce for all UK incorporated subsidiaries is Units B&C, Orbital Forty Six, The Ridgeway Trading Estate, Iver, Bucks. SL0 9HW.
The registered offi ce for the USA incorporated subsidiary is 160 Greentree Drive, Suite 101, Dover, DE 19904, Kent County, USA.
249618 Warpaint R&A pp28-pp62.indd 43
249618 Warpaint R&A pp28-pp62.indd 43
14/05/2018 23:56
14/05/2018 23:56
43
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
7.
Subsidiaries (continued)
The registered offi ce for the German incorporated subsidiary is Robert-Bosch-Straße 10, Haus 1, 56410 Montabaur, Germany.
The registered offi ce for the Hong Kong incorporated subsidiary is 12F, 3 Lockhart Road, Wanchai, Hong Kong.
8.
Acquisitions
Retra Holdings Limited
On 30 November 2017, the Group acquired the entire share capital of Retra Holdings Limited (“Retra Holdings)”), a cosmetics wholesaler based in
the UK. The principal reason for acquiring Retra Holdings was due to the company operating in the same industry, it also holds additional customer
base, product ranges and brands.
Retra has contributed £1,323,000 to revenue for the period between the date of acquisition and the balance sheet date. Had Retra Holdings been
consolidated from 1 January 2017, the consolidated income statement for the year ended 31 December 2017 would show additional revenue of
£18,944,000 and profi t before tax of £1,849,000.
The provisional fair value of the net assets at the acquisition date is as follows:
Brands
Customer lists
Property, plant and equipment
Stock
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporation tax
Loans
Deferred tax liability
Net assets acquired
Goodwill arising on acquisition
Consideration
Book value
£’000
–
–
929
4,088
8,698
242
(2,234)
(74)
(8,687)
–
2,962
Fair value
adjustment
£’000
3,802
5,865
–
–
–
–
–
–
–
(1,740)
7,927
Total
£’000
3,802
5,865
929
4,088
8,698
242
(2,234)
(74)
(8,687)
(1,740)
10,889
7,469
18,358
The gross contractual amount of trade receivables is equal to the fair value.
Goodwill comprises the value of expected synergies and other opportunities arising from the acquisition, management know how, the skilled work
force employed by Retra Holdings Limited and other intangible assets that do not qualify for separate recognition. None of the goodwill recognised is
expected to be deductible for tax purposes.
The fair value of consideration paid is as follows:
Cash consideration
Share consideration
£’000
16,200
2,158
18,358
Share consideration is based on the issue of 1,052,631 shares at a market value on 30 November 2017 at £2.05 per share.
The fi nal consideration amount is dependent on an EBITDA statement to be agreed according to the Sale and Purchase agreement terms and delivery
of the statutory accounts of Retra Holdings Limited. The purchase price was £18.36 million (£16.2 million in cash and £2 million of consideration
shares) this being the maximum amount payable. On delivery of a fi nal EBITDA statement to the previous owners of Retra, which will be after the date
of these accounts the actual consideration will be determined and this is likely to lead to a repayment to the Group, although the amount at the date
of these accounts is not certain.
249618 Warpaint R&A pp28-pp62.indd 44
249618 Warpaint R&A pp28-pp62.indd 44
14/05/2018 23:56
14/05/2018 23:56
344
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
8.
Acquisitions (continued)
The profi t and loss for Retra Holdings Limited from the date of acquisition to 31 December 2017 is as follows:
Revenue
Cost of sales
Gross profi t
Administrative expenses
Finance expense
Profi t before tax
Tax expense
Total comprehensive income for the period
Treasured Scents (2014) Limited
Annual Report 2017
£’000
1,323
(796)
527
(368)
(20)
139
(21)
118
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
On 11 November 2016, the Group acquired the entire share capital of Treasured Scents (2014) Limited (“Treasured Scents (2014)”), a close-out
cosmetics wholesaler based in the UK. The principal reason for acquiring Treasured Scents was due to the company operating in the same industry
and the client relationships maintained by the directors, Mr E. Macleod and Mr S. Bazini.
Treasured Scents (2014) has contributed £621,260 to revenue for the period between the date of acquisition and the balance sheet date. Had Treasured
Scents been consolidated from 1 January 2016, the consolidated income statement for the year ended 31 December 2016 would show revenue of
£26,968,000 and profi t before tax of £4,927,000.
The fair value of the net assets at the acquisition date is as follows:
Client relationships
Property, plant and equipment
Stock
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Deferred tax liabilities
Net assets acquired
Goodwill arising on acquisition
Consideration
Book value
£’000
–
14
960
1,142
98
(334)
(116)
–
1,764
Fair value
adjustment
£’000
1,318
–
–
–
–
–
–
(250)
1,068
Total
£’000
1,318
14
960
1,142
98
(334)
(116)
(250)
2,832
513
3,345
The gross contractual amount of trade receivables is equal to the fair value.
Goodwill comprises the value of expected synergies and other opportunities arising from the acquisition, management know how, the skilled work
force employed by Treasured Scents (2014) Limited and other intangible assets that do not qualify for separate recognition. None of the goodwill
recognised is expected to be deductible for tax purposes. The fair value of consideration has been calculated by means of an EBITDA multiple
supported by a discounted cashfl ow model.
The fair value of consideration paid is as follows:
Share consideration
£’000
3,345
3,345
249618 Warpaint R&A pp28-pp62.indd 45
249618 Warpaint R&A pp28-pp62.indd 45
14/05/2018 23:56
14/05/2018 23:56
45
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
8.
Acquisitions (continued)
The profi t and loss for Treasured Scents (2014) Limited from the date of acquisition to 31 December 2016 is as follows:
Revenue
Cost of sales
Gross profi t
Administrative expenses
Loss before tax
Tax expense
Total comprehensive loss for the period
9.
Goodwill
Cost
At 1 January 2017
Arising on acquisition of Retra Holdings Limited
At 31 December 2017
Impairment
At 31 December 2016 and 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
£’000
615
(614)
1
(152)
(151)
19
(132)
£’000
513
7,469
7,982
–
7,982
513
Goodwill represents the excess of consideration over the fair value of the Group’s share of the net identifi able assets of the acquired subsidiary at the
date of acquisition.
Goodwill arising on acquisition in the year ended 31 December 2016 relates to the Group’s acquisition of Treasured Scents (2014) Limited. Goodwill
arising on acquisition in the year ended 31 December 2017 relates to the Group’s acquisition of Retra Holdings Limited.
Impairment is calculated by comparing the carrying amounts to the value in use derived from discounted cash fl ow projections for Treasured Scents
and Retra Holdings. A CGU is deemed to be an individual division and these have been grouped together into similar classes for the purpose of
formulating operating segments as reported in note 2. Value in use calculations are based on a discounted cash fl ow model (“DCF”) for the subsidiary,
which discounts expected cash fl ows over a fi ve-year period using a pre-tax discount rate of 15% (2016: 15%). Cash fl ows beyond the fi ve-year period
are extrapolated using the average growth rate of 4.5% (2016: 0.5%). The average growth rate beyond the fi ve-year period is lower than current growth
rates and is in line with Management’s expectations for the business. Management have performed the annual impairment review as recognised by
IAS 36 and have concluded that no impairment is indicated with the fair value of goodwill exceeding book value.
Key Assumptions and sensitivity to changes in assumptions
The key assumptions are based upon management’s historical experience. The calculation of VIU is most sensitive to the following assumptions:
• Sales and EBITDA – this is based on reasonable forecasts for the fi rst year. These have been forecasted for years two to fi ve based on expected sales trends
• Discount Rate – pre-tax discount rate of 15% refl ects the Directors’ estimate of an appropriate rate of return, taking into account the relevant risk factors
• Growth Rate – used to extrapolate beyond the budget period and for terminal values based on a long term average growth rate of 4.5% (2016: 0.5%).
Management believe that no reasonably possible change in key assumptions would lead to an impairment of goodwill.
249618 Warpaint R&A pp28-pp62.indd 46
249618 Warpaint R&A pp28-pp62.indd 46
14/05/2018 23:56
14/05/2018 23:56
346
Annual Report 2017
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
10.
Intangible assets
Cost
At 1 January 2016
On acquisition of subsidiaries
Additions
At 31 December 2016
On acquisition of subsidiaries
Additions
At 31 December 2017
Accumulated amortisation
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
At 1 January 2016
Brands
£’000
Customer list
£’000
Patents
£’000
Website
£’000
Licences
£’000
–
–
–
–
3,802
–
3,802
–
–
–
63
63
3,739
–
–
–
1,318
–
1,318
5,865
–
7,183
–
44
44
382
426
6,757
1,274
–
91
–
41
132
–
42
174
26
8
34
16
50
124
98
65
–
–
30
30
–
10
40
–
4
4
7
11
29
26
–
–
–
6
6
–
–
6
–
1
1
1
2
4
5
–
11.
Property, plant and equipment
Land and buildings
Plant and machinery
Fixtures and fi ttings Computer equipment
Motor vehicles
£’000
£’000
£’000
£’000
£’000
Costs
At 1 January 2016
Additions
On acquisition of subsidiary
Disposals
At 31 December 2016
Additions
On acquisition of subsidiary
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charge for year
On disposals
At 31 December 2016
Charge for year
On disposals
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
At 1 January 2016
1,400
–
–
(1,400)
–
–
–
–
–
37
14
(51)
–
–
–
–
–
–
1,363
26
43
4
–
73
440
60
–
573
3
9
–
12
122
–
134
439
61
23
35
42
–
(9)
68
22
137
–
227
3
10
(1)
12
16
–
28
199
56
32
–
72
8
–
80
88
–
(40)
128
–
11
–
11
21
(1)
31
97
69
–
83
6
2
–
91
5
731
–
827
26
14
–
40
25
–
65
762
51
57
47
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
Total
£’000
91
1,318
77
1,486
9,667
52
11,205
26
57
83
469
552
10,653
1,403
65
Total
£’000
1,544
163
14
(1,409)
312
555
928
(40)
1,755
69
58
(52)
75
184
(1)
258
1,497
237
1,475
249618 Warpaint R&A pp28-pp62.indd 47
249618 Warpaint R&A pp28-pp62.indd 47
14/05/2018 23:56
14/05/2018 23:56
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
11.
Property, plant and equipment (continued)
The net book value of assets held under fi nance leases or hire purchase contracts, included above are as follows:
Plant and machinery
Computer equipment
12.
Inventories
Finished goods
Provision
As at 31 December
2017
£’000
21
67
88
2016
£’000
–
–
–
As at 31 December
2017
£’000
11,645
(114)
11,531
2016
£’000
7,858
(189)
7,669
The cost of inventories recognised as an expense and included in ‘cost of sales’ amounted to £19,215,000 in the year ended 31 December 2017 (2016:
£11,690,172).
13.
Trade and other receivables
Trade receivables – gross
Allowance for doubtful debts
Trade receivables – net
Other receivables
Prepayments and accrued income
Total
As at 31 December
2017
£’000
12,076
(173)
11,903
572
751
13,226
2016
£’000
2,674
(110)
2,564
16
2,784
5,364
The directors consider that the carrying value of trade and other receivables measured at book value and amortised cost approximates to fair value.
The individually impaired receivables are over three months past due and relate to the supply of goods to customers. A provision is recognised for
amounts not expected to be recovered. Movements in the accumulated impairment losses on trade receivables were as follows:
Accumulated impairment losses at 1 January
Additional impairment losses recognised during the year, net
Amounts written off during the year as uncollectible
Effect of translation to presentation currency
Accumulated impairment losses at 31 December
As at 31 December
2017
£’000
110
93
(30)
–
173
2016
£’000
100
12
(2)
–
110
The impairment losses recognised during the year are net of a credit of £52,000 (2016: £2,000) relating to the recovery of amounts previously written
off as uncollectable.
249618 Warpaint R&A pp28-pp62.indd 48
249618 Warpaint R&A pp28-pp62.indd 48
14/05/2018 23:56
14/05/2018 23:56
348
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
14.
Trade and other payables
Current
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
Total
Annual Report 2017
As at 31 December
2017
£’000
1,671
568
41
1,257
3,537
2016
£’000
2,537
–
23
281
2,841
The directors consider that the carrying value of trade and other payables measured at book value and amortised cost approximates to fair value.
Included in other payables are amounts owed to directors of £nil as at 31 December 2017 (2016: £16,918). The amounts owed to the directors are
interest free and are repayable on demand.
15.
Loans and borrowings
Bank loans
Repayable within 1 year
Repayable within 2 – 5 years
Hire purchase fi nance
Repayable within 1 year
Repayable within 2 – 5 years
Total
Repayable within 1 year
Repayable within 2 – 5 years
The interest rates expected are as follows:
Finance loans
Bank loans
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
As at 31 December
2016
£’000
–
–
–
–
–
–
–
–
–
2016
%
–
–
–
As at 31 December
2017
£’000
401
221
622
181
593
774
582
814
1,396
2017
%
7
10
622
249618 Warpaint R&A pp28-pp62.indd 49
249618 Warpaint R&A pp28-pp62.indd 49
14/05/2018 23:56
14/05/2018 23:56
49
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
16.
Deferred Tax
Deferred tax is calculated in full on temporary differences under the liability method using tax rate of 19%-20%.
The movement on the deferred tax account is as shown below:
Opening balance
On acquisition of subsidiary
Recognised in profi t and loss:
Tax expense
Closing balance
Year ended 31 December
2017
£’000
278
1,740
(59)
1,959
2016
£’000
11
251
16
278
The deferred tax has arisen due to the timing difference on accelerated capital allowances amounting to £57,000 (2016: £36,000) and on the intangible
assets acquired in a business combination amounting to £1,902,000 (2016: £242,000).
In July 2015 the UK government announced its intention to reduce the standard corporation tax rate to 17% by 2020. The measure to reduce the rate
to 19% for the fi nancial year beginning 1 April 2017 and to 18% for the fi nancial year beginning 1 April 2020 were substantively enacted on 26 October
2015 and have been refl ected in the calculation of deferred tax in the December 2017 numbers.
17. Dividends
Year to December 2017
Final dividend – 2016
Interim dividend – 2017
Year to December 2016
Interim dividend
Interim dividend
Paid
Amount per share
13 Jul 17
13 Nov 17
1.5p
1.4p
Paid
Amount per share
4 April 16
25 Nov 16
£12,000
9.79p
Total
£’000
968
904
1,872
Total
£’000
1,200
1,600
2,800
The payment of dividends prior to the group restructuring on 11 November 2016 were based on 100 ordinary shares in issue.
18.
Called up share capital
Allotted and issued
Ordinary shares of £1 each
Share issue on incorporation
Sub-division to A and B shares
Cancellation of B shares
Consolidation and subdivision of shares into ordinary shares 25p
Ordinary shares of £0.25 each
New share issue
At 1 January 2017
New share issue
As at 31 December
Date
No of shares
£’000
2017
£’000
11 Nov 16
15 Nov 16
21 Nov 16
24 Nov 16
30 Nov 16
30 Nov 17
16,340
16,340
(16,340)
45,621
61,961
2,577
64,538
12,211
76,749
16,340
–
(849)
–
15,491
644
16,135
3,052
19,187
On 30 November 2017, the company issued 12,210,525 ordinary £0.25 shares resulting in an increased share capital of £3,052,631.
All ordinary shares carry equal rights.
249618 Warpaint R&A pp28-pp62.indd 50
249618 Warpaint R&A pp28-pp62.indd 50
14/05/2018 23:56
14/05/2018 23:56
350
Annual Report 2017
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
19.
Other Reserves
Share premium
The share premium reserve contains the premium arising on the issue of equity shares, net of issue expenses incurred by the company. On 30
November 2017, the company issued 11,157,894 ordinary £0.25 shares at a price of £1.90 for cash and 1,052,631 shares at a price of £2.05 per share
as consideration for an acquisition, resulting in share premium of £20,216,000 less directly attributable share issue costs of £857,000.
Retained earnings
Retained earnings represent cumulative profi ts or losses, net of dividends and other adjustments.
Merger reserve
The merger reserve arose due to the group reconstruction in 2016. The effect of the application of merger accounting principles on the merger reserve
is that the share capital and other distributable reserves that existed in Warpaint Cosmetics Group Limited (the company) as at the point Warpaint
London PLC legally acquired Warpaint Cosmetics Group Limited is accounted for as if it had been in existence as at 31 December 2015 and as at the
1 January 2015. The corresponding entry being the merger reserve so the overall net assets as at the comparative dates are not affected.
The 2016 movement on the merger reserve arose due to the acquisition of Treasured Scent (2014) Limited on 11 November 2016. The shareholders of
Treasured Scent (2014) Limited transferred their shares to Warpaint London PLC in exchange for shares in Warpaint London PLC, the difference in fair
value of the consideration was £2,005,233. This is adjusted through the merger reserve as it is considered part of the consideration paid by Warpaint
London PLC to acquire Treasured Scents (2014) Limited.
The 2017 movement in merger reserve represents the difference between the issue price and the nominal value of shares issued as consideration for
the acquisition of subsidiary undertaking.
Other reserves
‘Other reserves’ have arisen from the share-based payment charge. The shares over which the options were issued are that of the parent company.
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
20.
Share based payments
Movements in the number of options and their weighted average exercise prices are as follows:
Outstanding at the beginning of the year
Granted during the year
Expired during the year
Outstanding at the end of the year
The weighted average remaining contractual life of the options is 2.5 years.
The following options over ordinary shares have been granted by the Company:
Weighted average
exercise price (pence)
Number of options
2017
–
237.5
–
237.5
2017
–
277,788
(21,896)
255,892
29 June 2017
Exercise price
Exercise period
Pence
237.50
(years)
Number of options
3
277,788
At the date of grant, the options were valued using the Black-Scholes option pricing model. The fair value per options granted and the assumptions
used in the calculations were as follows:
Expected volatility
Expected life (years)
Risk-free interest rate
Expected dividend yield
Fair value per option (£)
29 June 17
64%
3
0.38%
2%
0.963
249618 Warpaint R&A pp28-pp62.indd 51
249618 Warpaint R&A pp28-pp62.indd 51
14/05/2018 23:56
14/05/2018 23:56
51
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
During the year, the company advanced £12,500 (2016: £15,000) to Mr E
Macleod, a director of the company. During the year, the director repaid
£17,711 (2016: £84,803). Mr E Macleod was reimbursed expenses on
behalf of the company totalling £4,071 (2016: £2,663). At the year end the
company owed the sums of £Nil (2016: £1,140) to Mr E MacLeod.
Dividends paid to Mr S Bazini prior to the company listing on AIM in 2016
totalled £600,000 . Dividends paid to Mr E Macleod prior to the company
listing on AIM in 2016 totalled £600,000 .
22.
Financial instruments
Capital risk management
The Board has overall responsibility for the determination of the Group’s
risk management objectives and policies. The overall objective of
the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Group’s competitiveness and fl exibility. The
Group reports in Sterling. All funding requirements and fi nancial risks
are managed based on policies and procedures adopted by the Board of
Directors.
The Group manages its capital to ensure its ability to continue as a going
concern and to maintain an optimal capital structure to reduce cost of
capital. The capital structure of the Group comprises equity attributable to
equity holders of the Company consisting of invested capital as disclosed
in the Statement of Changes in Equity and cash and cash equivalents.
The Group’s invested capital is made up of share capital and retained
earnings totalling £37,120,000 as at 31 December 2017 (2016: £30,467,000)
as shown in the statement of changes in equity.
The Group maintains or adjusts its capital structure through the payment
of dividends to shareholders and issue of new shares.
20.
Share based payments (continued)
On 29 June 2017, Warpaint London PLC granted in aggregate over 277,788
ordinary shares of 25 pence each in the Company under the Enterprise
Management Incentive Scheme to all staff members, including the
Company’s Chief Financial Offi cer, Neil Rodol, but excluding all other
directors. The Options are exercisable for a period of seven years from
29 June 2020, subject to certain performance conditions being met,
including that the compound annual growth rate in the Company’s
earnings per share must exceed 8 per cent over the three fi nancial years
commencing 1 January 2017, subject to the discretion of the Company’s
remuneration committee. The charge in the statement of comprehensive
income for the share-based payments during the year was £45,091.
21.
Related party transactions
Transactions between the company and its subsidiaries, which are
related parties, have been eliminated on consolidation. Related party
transactions are considered to be conducted at arm’s length.
Key management personnel are considered to be the Directors.
Compensation of key management personnel (including Directors) is
disclosed in note 4 with the exception of dividends and drawings which
are disclosed in note 17.
During 2017, Treasured Scents (2014) Ltd paid rent in the sum of £Nil
(2016: £123,750) to Trading Scents Group Limited, of which Mr Macleod
is a director. At the year end the amount due to Trading Scents Group
Limited was £Nil (2016: £Nil).
During 2017, Warpaint Cosmetics (2014) Ltd paid rent in the sum of
£120,000 (2016: £30,000) to Trading Scents Group Limited, of which Mr
Macleod is a director. At the year end the amount due to Trading Scents
Group Limited was £80,000 (2016: £Nil).
During 2017, Warpaint Cosmetics (2014) Ltd paid rent in the sum of
£120,000 (2016: £153,750) to Direct Supplies (2014) Group Limited, of
which Mr Bazini is a director. At the year end the amount due to Direct
Supplies (2014) Group Limited was £Nil (2016: £Nil).
During 2017, Warpaint Cosmetics (2014) Ltd paid consultancy fees in the
sum of £nil (2016: £150,000) to Outdoor Girl Limited, of which Mr Rodol
is a director.
During the year, the company advanced £12,500 (2016: £15,000) to Mr
S Bazini, a director of the company. During the year, the director repaid
£26,276 (2016: £93,803). Mr S Bazini incurred expenses on behalf of the
company totalling £1,804 (2016: £2,002). At the year end the company
owed the sums of £Nil (2016: £15,779) to Mr S Bazini.
249618 Warpaint R&A pp28-pp62.indd 52
249618 Warpaint R&A pp28-pp62.indd 52
14/05/2018 23:56
14/05/2018 23:56
352
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
22.
Financial instruments (continued)
Capital risk management (continued)
Financial assets
Loans and receivables at amortised cost including cash and cash equivalents:
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Bank loan
Net
Cash and cash equivalents
Annual Report 2017
Year ended 31 December
2017
£’000
3,369
12,475
15,844
(2,969)
(1,396)
(4,365)
11,479
2016
£’000
3,503
2,617
6,120
(2,841)
–
(2,841)
3,279
This comprises cash and short-term deposits held by the Group. The carrying amount of these assets approximates their fair value.
General risk management principles
The Group’s activities expose it to a variety of risks including market risk (interest rate risk), credit risk and liquidity risk. The Group manages these
risks through an effective risk management programme and through this programme, the Board seeks to minimise potential adverse effects on
the Group’s fi nancial performance. The Directors have an overall responsibility for the establishment of the Group’s risk management framework.
A formal risk assessment and management framework for assessing, monitoring and managing the strategic, operational and fi nancial risks of the
Group is in place to ensure appropriate risk management of its operations.
The following represent the key fi nancial risks that the Group faces:
Market risk
The Group’s activities expose it to the fi nancial risk of interest rates.
Interest rate risk
The Group’s interest rate exposure arises mainly from its interest-bearing borrowings. Contractual agreements entered into at fl oating rates expose
the entity to cash fl ow risk. Interest rate risk also arises on the Group’s cash and cash equivalents. The Group does not enter into derivative transactions
in order to hedge against its exposure to interest rate fl uctuations. An increase in the rate of interest by 100 basis points would decrease profi ts by
£13,000 (2016: £Nil) with an increase in profi ts by the same amount for a decrease in the rate of interest by 100 basis points.
Credit risk
Credit risk is the risk of fi nancial loss to the Group if a customer or a counterparty to a fi nancial instrument fails to meet its contractual obligations.
The Group’s principal fi nancial assets are trade and other receivables and bank balances and cash. The credit risk on liquid funds is limited because
the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
The Group’s credit risk is primarily attributable to trade receivables. The Group has a policy of assessing credit worthiness of potential and existing
customers before entering into transactions. There is ongoing credit evaluation on the fi nancial condition of accounts receivable using independent
ratings where available or by assessment of the customer’s credit quality based on its fi nancial position, past experience and other factors. The Group
manages the collection of its receivables through its ongoing contact with customers so as to ensure that any potential issues that could result in
non-payment of the amounts due are addressed as soon as identifi ed.
The maximum exposure to credit risk in respect of the above is the carrying value of fi nancial assets recorded in the fi nancial statements. At
31 December 2017, the Group has trade receivables of £11,903,000 (2016: £2,564,000).
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
249618 Warpaint R&A pp28-pp62.indd 53
249618 Warpaint R&A pp28-pp62.indd 53
14/05/2018 23:56
14/05/2018 23:56
53
53
Warpaint London P LC
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
22.
Financial instruments (continued)
The following table provides an analysis of trade receivables that were due, but not impaired, at each fi nancial year end. The Group believes that the
balances are ultimately recoverable based on a review of past impairment history and the current fi nancial status of customers.
Credit risk (continued)
Current
1 – 30 days
31 – 60 days
61 – 90 days
91 + days
Allowance for doubtful debts
Total trade receivables – gross
As at 31 December
2017
£’000
4,241
3,550
2,623
868
794
(173)
11,903
2016
£’000
1,296
1,084
112
89
93
(110)
2,564
The Directors are unaware of any factors affecting the recoverability of outstanding balances at 31 December 2017 and, consequently, no further
provisions have been made for bad and doubtful debts.
Credit quality of fi nancial assets
Trade receivable, gross (Note 13):
Receivable from large companies
Receivable from small or medium-sized companies
Total neither past due nor impaired
Past due but not impaired:
Less than 30 days overdue
30 – 90 days overdue
Total past due but not impaired
Individually determined to be impaired (gross):
Less than 30 days overdue
30 – 90 days overdue
Total individually determined to be impaired (gross)
Less: Impairment provision
Total trade receivables, net of provision for impairment
Cash and cash equivalents, neither past due nor impaired (Moody’s ratings of respective counterparties):
A rated
BAA rated
Total cash and cash equivalents
As at 31 December
2017
£’000
3,929
312
4,241
3,550
4,112
7,662
–
173
173
(173)
11,903
2016
£’000
984
312
1,296
1,084
184
1,268
–
110
110
(110)
2,564
As at 31 December
2017
£’000
800
2,569
3,369
2016
£’000
–
3,502
3,502
For the purpose of the groups monitoring of credit quality, large companies or groups are those that, based on information available to management
at the point of initially contracting with the entity, have annual turnover in excess of £100,000 (2016: £100,000).
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter diffi culty in meeting its fi nancial
obligations as they fall due. The Group’s policy is to ensure that it will always have suffi cient cash to allow it to meet its liabilities when they become
due. To achieve this aim, it closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments on a regular
basis to ensure that it has suffi cient funds to meet the obligations as they fall due.
The Board receives regular forecasts which estimate cash fl ows over the next eighteen months, so that management can ensure that suffi cient
funding is in place as it is required.
354
249618 Warpaint R&A pp28-pp62.indd 54
249618 Warpaint R&A pp28-pp62.indd 54
14/05/2018 23:56
14/05/2018 23:56
Annual Report 2017
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
22.
Financial instruments (continued)
Liquidity risk (continued)
The tables below summarise the maturity profi le of the combined group’s non-derivative fi nancial liabilities at each fi nancial year end based on
contractual undiscounted payments, including estimated interest payments where applicable:
Year ended 31 December 2017
Trade payables
Other payables
Accruals
Bank loans
Estimated interest
Year ended 31 December 2016
Trade payables
Other payables
Accruals
Bank loans
Foreign exchange risk
Less than 6 months
Between 6 months
and 1 year
£’000
1,671
41
1,257
–
102
3,071
£’000
–
–
–
582
63
645
Between 1
and 5 years
£’000
–
–
–
814
201
1,015
Less than 6 months
£’000
2,537
23
281
–
2,841
Between 6 months
and 1 year
£’000
Between 1
and 5 years
£’000
–
–
–
–
–
–
–
–
–
–
Total
£’000
1,671
41
1,257
1,396
366
4,731
Total
£’000
2,537
23
281
–
2,841
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
The Group operates in a number of markets across the world and is exposed to foreign exchange risk arising from various currency exposure in
respect of cash and cash equivalents, trade receivables and trade payables, in particular with respect to the US dollar. The Group mitigates its foreign
exchange risk by negotiating contracts with key suppliers that offer a fl exible discount structure to offset any adverse foreign exchange movements
and through the use of forward currency contracts.
At December 2017, there were total sums of £304,527 (2016: £495,146) held in foreign currency.
A 5% weakening of sterling would result in a £16,000 increase in reported profi ts and equity, while a 5% strengthening of sterling would result in
£14,000 decrease in profi ts and equity.
Derivatives carried at fair value:
Exchange (loss)/gain on forward foreign currency contracts
2017
£’000
(3)
2016
£’000
37
The Group, along with other businesses, will face the risk of infl ationary pressures through commodities cost increases, further driven by currency
weakness post Brexit.
Forward contracts and options
The Group enters into forward foreign exchange contracts and options to manage the risk associated with anticipated sale and purchase transactions
which are denominated in foreign currencies.
As at 31 December 2017, the group has 1 (2016: 2) forward foreign exchange contracts outstanding. Derivative fi nancial instruments are carried at
fair value.
249618 Warpaint R&A pp28-pp62.indd 55
249618 Warpaint R&A pp28-pp62.indd 55
14/05/2018 23:56
14/05/2018 23:56
55
Warpaint London P LC
Notes to the Company Financial Statements (continued)
for the year ended 31 December 2016
22.
Financial instruments (continued)
Forward contracts and options (continued)
The following table details the USD foreign currency contracts outstanding as at the balance sheet date.
a) Contracted exchange rate £/$ rate
3 months or less
3 to 6 months
b) Contract value
3 months or less
3 to 6 months
c) Foreign currency
3 months or less
3 to 6 months
2017
2016
1.3393
1.2411 – 1.266
–
2017
£’000
359
–
359
2017
£’000
481
–
481
–
2016
£’000
1,398
–
1,398
2016
£’000
1,750
–
1,750
Fair value of fi nancial assets and liabilities
Financial instruments are measured in accordance with the accounting policy set out in Note 1. All fi nancial instruments are considered to be Level 3
with the exception of foreign currency forward contracts and options which are considered Level 2. The Directors consider that there is no signifi cant
difference between the book value and fair value of the Group’s fi nancial assets and liabilities and is considered to be immaterial.
23. Pension costs
The Group operates a defi ned contribution pension scheme. Contributions payable to the company’s pension scheme are charged to the statement of
comprehensive income in the period to which they relate. The amount charged to profi t in each period was £13,800 (2016: £6,228).
24. Operating lease commitments – Group company as lessee
The group leases offi ces and warehouses under non-cancellable operating lease agreements. The lease terms are between 5-10 years, and are
renewable at the end of the lease period at market rate.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Land and buildings
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total
25.
Controlling party
In the opinion of the Directors there is no ultimate controlling party.
26.
Earnings per share
2017
£’000
466
1,542
1,290
3,298
2016
£’000
360
1,440
1,650
3,450
Basic earnings per share are calculated by dividing profi t or loss attributable to ordinary equity holders by the weighted average number of ordinary
shares in issue during the period.
The acquisition of Warpaint Cosmetics Group Limited by Warpaint London PLC on 11 November 2016 has been accounted for using merger accounting
principles. The effect of using merger accounting principles on share capital is that the capital that existed as at the point Warpaint London PLC legally
acquired Warpaint Cosmetics Group Limited is accounted for as if it had been in existence as at the comparative period end (31 December 2015) and
as at the opening balance sheet date (1 January 2015).
249618 Warpaint R&A pp28-pp62.indd 56
249618 Warpaint R&A pp28-pp62.indd 56
14/05/2018 23:56
14/05/2018 23:56
356
Annual Report 2017
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2017
26.
Earnings per share (continued)
The weighted average number of shares in issue for the prior year has therefore been stated to refl ect the post IPO share capital structure, this
adjustment assumes the total shares issued during the IPO were in issue throughout the whole of the current and previous period presented.
The weighted average number of shares includes the shares issued as consideration for the acquisition of Treasured Scents (2014) Limited on
11 November 2016.
The weighted average number of shares for the current year includes the shares issued as consideration for the acquisition of Retra Holdings Limited
on 30 November 2017.
Basic earnings per share (pence)
Diluted earnings per share (pence)
The calculation of basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purpose of basic earnings per share, being the net profi t
Number of shares
Weighted number of ordinary shares for the purpose of basic earnings per share
Potentially dilutive shares awarded
Weighted number of ordinary shares for the purpose of diluted earnings per share
2017
8.34
8.34
2017
£’000
5,473
2016
5.07
5.07
2016
£’000
3,141
2017
2016
65,575,658
61,981,720
–
–
65,575,658
61,981,720
The 255,862 share options issued during the year has not been included in the computation of diluted earnings per share, as per IAs 33, the share
options are not dilutive as they are not likely to be exercised given that the exercise price is higher than the average market price.
27. Notes supporting statement of cash fl ows
Signifi cant non-cash transactions from investing activities is the equity consideration for the business combination of £2,158,000. The non-cash
transactions arising on the acquisition of Retra are as follows:
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
Property, plant and equipment
Stock
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporation tax
Loans
Non-cash transactions from fi nancing activities are shown in the table below.
At 1 January 2017
Non-cash fl ows:
– Amounts recognised on business combinations
Cash fl ows
At 31 December 2017
Total
£’000
929
4,088
8,698
292
(2,234)
(74)
(8,687)
2,962
Total
£’000
–
8,689
(7,293)
1,396
Non-current
loans and
borrowing
£’000
–
834
(20)
814
Current
loans and
borrowings
£’000
–
7,855
(7,273)
582
249618 Warpaint R&A pp28-pp62.indd 57
249618 Warpaint R&A pp28-pp62.indd 57
14/05/2018 23:56
14/05/2018 23:56
57
Warpaint London P LC
Company Statement of Financial Position
for the year ended 31 December 2017
Fixed assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Corporation tax liability
Total current liabilities
Net current assets
Total assets less current liabilities
Capital and reserves
Share capital
Share premium
Merger reserve
Share option reserve
Retained earnings
Shareholders’ funds
Note
3
4
5
6
7
8
2017
£’000
34,698
34,698
10,799
149
10,948
189
–
189
10,779
45,457
19,187
19,359
1,895
45
4,971
45,457
2016
£’000
16,340
16,340
3,060
859
3,919
67
–
67
3,852
20,192
16,135
1,806
–
–
2,251
20,192
As permitted by section 408 of the Companies Act 2006, the profi t and loss account is not presented. The profi t for the year amounted to £4,592,000
(2016: £3,851,000).
The fi nancial statements on pages 58 to 61 were approved and authorised for issue by the Board of Directors on 24 April 2018 and were signed on its
behalf by:
Neil Rodol
Chief Financial Offi cer
249618 Warpaint R&A pp28-pp62.indd 58
249618 Warpaint R&A pp28-pp62.indd 58
14/05/2018 23:56
14/05/2018 23:56
358
Company Statement of Changes in Equity
for the year ended 31 December 2017
Share Capital
Share Premium
Share Option
£’000
Merger reserve
Reserve
On incorporation
Shares issued during the period
Profi t for the year
Share capital reduction
Dividends paid
As at 31 December 2016
Shares issued during the year
Shares issued for Retra Holdings
Share issue costs
Movement in other reserves
Profi t for the year
Dividends paid
Note
6/7
6
6/7
6/7
£’000
16,340
644
–
(849)
–
16,135
2,789
263
–
–
–
–
–
1,806
–
–
–
1,806
18,410
–
(857)
–
–
–
–
–
–
–
–
–
–
1,895
–
–
–
–
As at 31 December 2017
19,187
19,359
1,895
–
–
–
–
–
–
–
–
–
45
–
–
45
Annual Report 2017
Retained
Earnings
£’000
–
–
3,851
–
Total
Equity
£’000
16,340
2,450
3,851
(849)
(1,600)
(1,600)
2,251
20,192
–
–
–
–
4,592
21,199
2,158
(857)
45
4,592
(1,872)
(1,872)
4,971
45,457
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
249618 Warpaint R&A pp28-pp62.indd 59
249618 Warpaint R&A pp28-pp62.indd 59
14/05/2018 23:56
14/05/2018 23:56
59
Warpaint London P LC
Notes to the Company Financial Statements
for the year ended 31 December 2017
1.
Signifi cant accounting policies
Judgements and accounting estimates and assumptions
Basis of preparation
Impairment of investments
These separate fi nancial statements of Warpaint London PLC have been
prepared in accordance with applicable United Kingdom accounting
standards, including Financial Reporting Standard 102 – The Financial
Reporting Standard Applicable in the United Kingdom and Republic of
Ireland (FRS 102), and with the Companies Act 2006.
The Company’s fi nancial statements are presented in GBP.
An impairment test is undertaken where there are indicators of the
value of the investment being impaired. The directors use judgement in
assessing the value of investments held.
Recoverability of intercompany balances
The directors assess the recoverability of balances from group companies
based on the estimated trading results o f the subsidiary companies.
In preparing these fi nancial statements the company has taken advantage
of the disclosure exemptions conferred by FRS 102. Therefore, these
fi nancial statements do not include:
2.
Staff costs
• a statement of cash fl ows;
• fi nancial instruments;
Wages and salaries
• the disclosure of the remuneration of key management personnel; and
Social security costs
• disclosure of related party transactions with wholly owned fellow
group companies.
Pension costs
Year ended 31 December
2017
£’000
147
16
–
163
2016
£’000
24
–
–
24
The fi nancial statements have been prepared under the historical cost
convention. The principal accounting policies adopted are the same as
those set out in note 1 to the consolidated fi nancial statements except
as set out below.
Investments
Investments in subsidiaries are measured at cost less accumulated
impairment.
Investments in unlisted Company shares, whose market value can be
reliably determined, are remeasured to market value at each balance
sheet date. Gains and losses on remeasurement are recognised in the
Statement of comprehensive income for the period. Where market value
cannot be reliably determined, such investments are stated at historic
cost less impairment.
Going Concern
Going concern for the company has been considered along with the group
by the directors. The consideration is set out in note 1 of the consolidated
fi nancial statements.
Critical accounting estimates and judgements
The company makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectations of
future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and
assumptions. The estimates and assumptions that have a signifi cant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next fi nancial year are discussed below.
The average monthly number of employees during the period was
as follows:
Year ended 31 December
Directors
Directors’ remuneration, included in staff costs
Salaries
2017
No.
6
6
2017
£’000
147
147
2016
No.
6
6
2016
£’000
24
24
The directors are the only key management personnel.
3.
Investments
Cost
At January 2017
Additions
At December 2017
Net book value
At 31 December 2017
At 31 December 2016
At 31 December 2017
£’000
16,340
18,358
34,698
34,698
16,340
On 30 November 2017 Warpaint London PLC acquired the entire share
capital in Retra Holdings Limited.
The company subsidiaries, as at the period end are shown in note 8 of the
consolidated fi nancial statements.
249618 Warpaint R&A pp28-pp62.indd 60
249618 Warpaint R&A pp28-pp62.indd 60
14/05/2018 23:56
14/05/2018 23:56
360
Notes to the Company Financial Statements (continued)
for the year ended 31 December 2017
4.
Debtors
Due from group undertakings
Other debtors
Prepayments and accrued income
5.
Creditors due within one year
Trade payables
Other taxation and social security
Accruals and deferred income
6.
Called up share capital
Allotted and issued
Ordinary shares of £1 each
Share issue on incorporation
Sub-division to A and B shares
Cancellation of B shares
Consolidation and subdivision of shares into
ordinary shares 25p
Ordinary shares of £0.25 each
New share issue
At 1 January 2017
New share issue
Annual Report 2017
2017
£’000
10,791
–
8
10,799
2017
£’000
135
27
27
189
2016
£’000
3,036
16
8
3,060
2016
£’000
47
–
20
67
As at 31 December
Date
No of shares
’000
11 Nov 16
15 Nov 16
21 Nov 16
24 Nov 16
30 Nov 16
30 Nov 17
16,340
16,340
(16,340)
45,621
61,961
2,577
64,538
12,211
76,749
2017
£’000
16,340
–
(849)
–
15,491
644
16,135
3,052
19,187
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
On 30 November 2017, the company issued 12,210,525 ordinary £0.25 shares resulting in an increased share capital of £3,052,631.
All ordinary shares carry equal rights.
7.
Share premium
Share premium
2017
£’000
19,359
2016
£’000
1,806
The share premium reserve contains the premium arising on the issue of equity shares, net of issue expenses incurred by the company. On
30 November 2017, the company issued 11,157,894 ordinary £0.25 shares at a price of £1.90 for cash and 1,052,631 shares at a price of £2.05 per share
as consideration for an acquisition, resulting in share premium of £20,216,000 less directly attributable share issue costs of £857,000.
8.
Other reserves
The movement in merger reserve represents the difference between the issue price and the nominal value of shares issued as consideration for the
acquisition of subsidiary undertaking.
9.
Related party transactions
The Company has taken advantage of the disclosure of related party transactions with wholly owned fellow group companies. Related party transactions
with key management personnel (including Directors) are shown in note 21 of the Consolidated Financial Statements.
249618 Warpaint R&A pp28-pp62.indd 61
249618 Warpaint R&A pp28-pp62.indd 61
14/05/2018 23:56
14/05/2018 23:56
61
249618 Warpaint R&A pp28-pp62.indd 62
249618 Warpaint R&A pp28-pp62.indd 62
14/05/2018 23:56
14/05/2018 23:56
362
Warpaint London PLC
Contents
Strategic Report
03 Mission Statement
04 Headline Results
06 Chairman’s Statement
07 Chief Executive’s Statement
11 Financial Review
18 Risk Management
Governance
21 Board of Directors
22 Corporate Governance Report
24 Audit Committee Report
25 Remuneration Committee Report
26 Directors’ Report
28 Independent Auditor’s Report
Financial Statements
31 Consolidated Statement of Comprehensive Income
32 Consolidated Statement of Financial Position
34 Consolidated Statement of Changes in Equity
35 Consolidated Statement of Cash Flows
36 Notes to the Consolidated Financial Statements
58 Company Statement of Financial Position
59 Company Statement of Changes in Equity
60 Notes to the Company Financial Statements
Financial Statements
63 Officers and professional advisors
Officers and Professional Advisors
Directors
C Garston
S Bazini
E Macleod
N Rodol
K Sadler
P Hagon
Chairman
Joint Chief Executive Officer
Joint Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Company Secretary
S Craig
Registered Office
Units B&C
Orbital Forty Six
The Ridgeway Trading Estate
Iver
Buckinghamshire
SL0 9HW
Company Number
10261717
Nominated Adviser & Broker
Auditors
Solicitors
Registrars
Financial PR
Stockdale Securities Limited
100 Wood Street
London
EC2V 7AN
BDO LLP
55 Baker Street
London
W1U 7EU
DAC Beachcroft LLP
100 Fetter Lane
London
EC4A 1BN
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands,
B63 3DA
IFC Advisory Limited
15 Bishopsgate
London
EC2N 3AR
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
249618 Warpaint Cover Spread.indd 4-63
14/05/2018 23:52
2
Perivan Financial Print 249618
63
WARPAINT LONDON PLC
Units B&C
Orbital Forty Six
The Ridgeway Trading Estate
Iver
Buckinghamshire
SL0 9HW
249618 Warpaint Cover Spread.indd 1-3
14/05/2018 23:51