Warpaint London PLC Annual Report 2020

FY2020 Annual Report · Warpaint London PLC
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Warpaint London PLC

Contents

Strategic Report 
03   Mission Statement   
04   Headline Results 
06   Chairman’s Statement 
08   Chief Executive Statement
14   Financial Review
20   Risk Management

Governance 
23   Board of Directors
25   Corporate Governance Report 
36   Section 172 Statement
38   Audit Committee Report
40   Remuneration Committee Report
43   Directors’ Report 
47   Independent Auditor’s Report 

Financial Statements 
53   Consolidated Statement of Comprehensive Income 
54   Consolidated Statement of Financial Position 
56   Consolidated Statement of Changes in Equity 
57   Consolidated Statement of Cash Flows 
58   Notes to the Consolidated Financial Statements 
83   Company Statement of Financial Position 
84   Company Statement of Changes in Equity 
85   Notes to the Company Financial Statements 

Other Information
88   Officers and Professional Advisers 

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Annual  Report 2020

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Mission Statement 

“Warpaint’s mission is to provide access 
to an extensive range of high quality 
cosmetics at an affordable price.”

We strive to fulfil our mission by:
• Utilising marketing and advertising initiatives that are efﬁ cient
• 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 high quality ingredients
• We manufacture products that are safe and kind to the user
• 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 the ﬂ exibility to style themselves based on who they want to be
• To engage customers by interacting with them directly using a variety of media platforms
• To make our products easily available to our customers
• To empower our customers by seeking their feedback, interaction and views

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Warpaint London P LC

Headline Results

Headline results for the year to 31 December 2020
 Warpaint London plc (“Warpaint”, the “Company” or the “Group”) is made up of two divisions. 

The largest division sells branded cosmetics under the lead brand names of W7 and Technic. W7 is sold in the UK primarily to 
retailers and internationally to local distributors or retail chains. The Technic brand is sold in the UK and continental Europe 
with a signiﬁ cant focus on the gifting market, principally for high street retailers and supermarkets. In addition, this division 
supplies own brand white label cosmetics produced for several major high street retailers. The Group also sells cosmetics 
using our other own brand names of Man’stuff, Body Collection, Vintage, Very Vegan, and Chit Chat.

The other division trades in close-out and excess inventory of branded cosmetics and fragrances from around the world. 

Revenue 

Proﬁ t / (loss) from operations 

Proﬁ t margin from operations 

PBT / (LBT) 

EPS / (LPS) 

Cash 

Revenue 

Adjusted proﬁ t from operations 

Adjusted proﬁ t margin from operations 

Adjusted PBT 

Adjusted EPS 

Cash 

Statutory Results

Year ended  
31 Dec 2020 

Year ended
31 Dec 2019

£40.3m 

£49.3m

£(0.9)m 

na 

£(1.1)m 

(1.3)p 

£4.9m 

£2.1m

4.3%

£1.8m

1.8p

£2.7m

Adjusted Statutory Results
Year ended 
31 Dec 2020  

Year ended
31 Dec 2019

£40.3m 

£49.3m

£2.5m* 

6.2%* 

£2.3m* 

3.1p* 

£4.9m 

£5.6m*

11.4%*

£5.2m*

6.3p*

£2.7m

*  Adjusted for £0.24 million of staff restructuring and voluntary redundancy costs (2019: £0.07 million), and inventory 

relocation costs in the US of £nil (2019: £0.08 million) and £0.08 million of legal costs (2019: £0.03 million) and £2.4 million of 
amortisation of intangible assets (2019: £2.4 million) and share based payments of £0.7 million (2019: £0.8 million). Adjusted 
numbers are closer to the underlying cash ﬂ ow performance of the business which is regularly monitored and measured by 
management.

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Annual  Report 2020

 2020 Financial Highlights
•  Group revenue of £40.3 million (2019: £49.3 million) in light of the Covid-19 pandemic and the impact of temporary closures of 

a number of customers’ retail outlets

•  Cash generated from operating activities increased by 70.7% to £7.5 million (2019: £4.4 million)
•  Adjusted proﬁ t from operations of £2.5* 1 million (2019: £5.6* 1 million)
•  Reported loss before tax of £1.1 million (2019: proﬁ t before tax £1.8 million)
•  Adjusted earnings per share of 3.1p *1 (2019: 6.3p* 1)
•  The Group continued to generate signiﬁ cant cash and cash at the year end increased by 81.5% to £4.9 million (31 December 

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2019: £2.7 million)

•  Final dividend recommended of 3.0 pence per share, bringing the total dividend for the year to 5.8 pence per share, including 

a special dividend of 1.3 pence per share paid in November 2020 to reﬂ ect that no ﬁ nal dividend was declared for 2019 

2020 Operational Highlights
• Swift reaction to the impact of Covid-19 with a plan quickly formulated and successfully executed
• Repositioned business to increase focus on mainstream high street stores and online 
• Commencement of sales of:

  (cid:190) W7 products in Tesco stores
  (cid:190) Technic and Body Collection products in wilko stores

• Launch of Amazon FBA and e-Commerce revenue signiﬁ cantly accelerated in the UK and the USA 
• Rationalisation of brand and product range in line with focused strategy

Post-Period End Highlights
•  Improved trading experienced in the ﬁ rst quarter of 2021 - sales for the ﬁ rst three months of 2021 9% ahead of the same 

period in 2020, a period that was only impacted by Covid-19 related lockdowns in its last few weeks, with sales increases seen 
in all the Group’s geographic regions

• Product gross margin improved in the ﬁ rst quarter of 2021 versus the same period in 2020.
•  Further expansion in the number of Tesco stores stocking the Group’s products and the stocking of additional W7 product 

lines

• Further product expansion in USA with W7 products now being stocked in over 1,000 Five Below stores
•  The Company is now debt free with the remaining loans and HP contracts totalling £0.3 million being repaid in full in 

April 2021. As at 27 April 2021 the Company had cash balances of £5.8 million

*1  Adjusted for £0.3 million of exceptional costs (2019 £0.2 million),£2.4 million of amortisation of intangible assets (2019: £2.4 million) 

and share based payments of £0.7 million (2019: £0.8 million). Adjusted numbers are closer to the underlying cash ﬂ ow performance 
of the business which is regularly monitored and measured by management.

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Warpaint London P LC

Chairman’s Statement

Clive Garston

2020 was a year dominated by  the 
Covid-19 pandemic. Prior to the onset 
of the pandemic, trading in the ﬁ rst two 
months of the year was strong. However, 
with global lockdowns commencing in 
March the picture changed dramatically 
and the Group witnessed a signiﬁ cant 
reduction in sales as many of our 
customers’ retail outlets in the UK which 
were regarded as non-essential and in 
other markets were forced to close, in 
particular in the EU and the USA. These 
were unprecedented trading conditions, 
with the economy and industry facing 
some of its most signiﬁ cant challenges 
ever.

Warpaint entered the pandemic in robust 
health, with a strong balance sheet and 
an agile management team capable of 
dealing with the challenges presented by 
the pandemic. During the year we took 
the opportunity to reposition the business 
to increase our focus on mainstream 
high street stores and to build our online 
presence. We also reviewed our brands 
and product lines with a subsequent 
reduction in the number of products. This 
enabled us to remove those that do not 
ﬁ t with our strategic goals and worked to 
ensure that our product range, pricing and 
customer base gives us the best possible 
opportunity for future growth as the world 
recovers.

I believe the Group has weathered 
the pandemic well and has proved its 
ﬂ exibility and resilience in dealing with 
an unprecedented and unforeseeable 
situation. I am particularly pleased to 
note the progress we have made with the 
expansion of the number and type of UK 
retailers stocking the Group’s products 
and the growth of our online presence 

during 2020. Trading improved in the 
second half of the year and we are pleased 
to report this trend has continued into the 
ﬁ rst quarter of 2021.

Results
Revenue was signiﬁ cantly impacted 
as a consequence of the pandemic, 
with a corresponding impact on Group 
proﬁ tability. It is the board’s opinion that 
without the impact of the coronavirus 
pandemic 2020 would have been a year 
of recovery and improvement in ﬁ nancial 
performance for the Group, a statement 
which is supported by the robust trading we 
saw in the ﬁ rst two months of 2020.

Adjusted proﬁ t from operations was 
£2.5 million (2019 £5.6 million) on revenue 
of £40.3 million (2019 £49.3 million) 
with basic earnings per share of (1.3)p 
(2019 1.8p) and adjusted earnings per 
share of 3.1p (2019 6.3p). Adjusted 
numbers exclude exceptional costs (staff 
restructuring and voluntary redundancy 
costs, certain legal costs and stock 
relocation costs), amortisation in relation to 
acquisitions and share based payments.

During 2020, the Group took the 
opportunity to streamline and reduce stock 
levels, with cash generated from operations 
increasing by 70.7% . The balance sheet 
remains strong, with cash at 31 December 
2020 of £4.9 million (31 December 2019 
£2.7 million), and management are 
conﬁ dent Warpaint entered 2021 as a more 
efﬁ cient business with an improved focus. 

Dividend
As announced in our results for 2019 
the board decided in the interests of 
prudence given the considerable on-going 
uncertainty caused by Covid-19 at the 

time, and in order to further preserve 
its cash resources, not to recommend a 
ﬁ nal dividend for 2019. However, as the 
business adapted to the issues presented 
by Covid-19 and the outlook improved the 
Group resumed dividend payments at the 
time of the 2020 interim results with an 
interim dividend declared of 2.8p per share, 
maintaining the prior year interim dividend 
of 1.5p per share, together with a one off 
additional 1.3p per share, to reﬂ ect that no 
ﬁ nal dividend was declared for 2019.

In accordance with the Group’s policy to 
continue to pay appropriate dividends, 
the board is pleased to recommend a 
ﬁ nal dividend of 3.0p per share which, if 
approved by shareholders at the AGM, will 
be paid on 5 July 2021 to shareholders on 
the register at 18 June 2021. The shares 
will go ex-dividend on 17 June 2021.

Board and People
The pandemic has dramatically impacted 
the personal and working lives of 
everyone. For the team at Warpaint 
this has required signiﬁ cant changes 
to working practices and personal 
uncertainties to be overcome. I am 
delighted with the way in which everyone 
has met these challenges and I would like 
to offer my particular thanks this year to 
my fellow board members and the Group’s 
employees for their exceptional efforts, 
good humour and resilience in these 
difﬁ cult times.

As announced in November 2020 the 
Company has commenced a search for an 
additional non-executive director following 
Paul Hagon’s move to an executive role 
and I anticipate that we will be able to 
make an appointment during the ﬁ rst half 
of 2021.

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We are growing sales in the UK, and the 
launch of our products in over 1,000 Five 
Below stores in the USA is a signiﬁ cant 
step for the Group. We anticipate adding 
further retailers in due course and with 
our growing online sales we are well 
positioned for the future.

I am optimistic that these encouraging 
trends will continue and that we have 
the right strategy in place to deliver 
proﬁ table future growth.

Clive Garston
Chairman
27 April 2021

Annual General Meeting
The Company’s annual general 
meeting will be held on 11 June 2021 
at 10.00 a.m. In light of the continuing 
public health restrictions associated 
with the Covid-19 pandemic, further 
details of the annual general meeting 
arrangements will be provided when the 
notice of annual general meeting is sent 
to shareholders.

Outlook 
I was pleased that despite much of the 
world having some level of lockdown 
during the ﬁ rst three months of 2021 
and the continued enforced temporary 
closure of a number of the Group’s 
customers’ retail outlets, sales for the 
ﬁ rst three months of 2021 in all the 
Group’s geographic regions were ahead 
of the same period in 2020, a period that 
was only impacted by Covid-19 related 
lockdowns in its last few weeks. Product 
gross margin has also improved in the 
ﬁ rst quarter of 2021 versus the same 
period in 2020.

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Warpaint London P LC

Chief Executive’s Statement 

Sam Bazini

The Covid-19 pandemic has had and is still 
having, a signiﬁ cant impact on people’s 
lives and businesses. Warpaint was not 
immune to its effects and whilst we 
continued to perform well with retailers 
that stayed open, the temporary closure 
of many retail outlets had a signiﬁ cant 
impact on our business.

At the beginning of the outbreak, and 
before the impact was felt in the UK, our 
initial focus was around the supply of 
our colour cosmetic products sourced in 
China, this being the main region of supply 
to the Group and I am pleased to report we 
experienced no impact on the availability 
of our product. 

As the pandemic hit the UK the wellbeing 
of the Warpaint staff was our primary 
concern, whilst also continuing to ensure 
we traded to support the durability of 
our business for stakeholders. We took 
signiﬁ cant preventative measures across 
our business, both to protect the health 
of our staff and to minimise operational 
disruption.

As countries began to lock down ﬁ rst 
in Europe, then in the UK and USA, 
consumer demand switched to essential 
items and food, and away from colour 
cosmetics, particularly as their social 
interactions were curtailed. In response 
we reduced discretionary spend, those 
staff not working because of the decrease 
in business activity were furloughed and 
we temporarily deferred rental payments. 
Those staff still working to maintain 
operations did so wherever possible from 
home, and for those staff working in our 
ofﬁ ces and warehouses social distancing 
practices were quickly put in place to 
ensure their safety. 

In the second half of the year, as the 
world adapted and some retail outlets 
reopened, demand returned for Warpaint’s 
products. As sales and orders returned 
nearer to expected levels, so too did our 
discretionary spend (with the exception of 
PR, exhibitions and travel costs), nearly all 
staff returned to work full time and rental 
payments were bought up to date and 
recommenced. The Group utilised minimal 
government Covid-19 related support 
other than the UK Government’s furlough 
scheme, which was used for a short 
period of time during the ﬁ rst lockdown 
and where affected staff continued to 
be paid in full, and a small amount of 
temporary support in the USA covering 
three employees.

We also took the opportunity in 2020 to 
review our overall strategy, rationalise 
our product range and increase our focus 
on online sales. I believe this strategy is 
already bearing fruit and I am particularly 
pleased with the trends in the UK, 
highlighted by the commencement of 
sales in Tesco and wilko stores.

W7

The Group’s most signiﬁ cant brand 
remains W7, with sales in 2020 accounting 
for 45% of total Group revenue (2019: 
46%). Overall W7 sales reduced by 19% in 
2020 compared to 2019.

However, in the UK, W7 revenues in 2020 
increased by 8%, despite the impact of 
the pandemic and an 18% reduction in 
H1 2020 sales compared to H1 2019. The 
UK is the most important market for W7, 
having grown in importance to account 
for 47% of sales in 2020, compared to 
35% in 2019. We have implemented a 
strategy in the UK which we believe will 
increase sales of the W7 brand further 

and are seeing the fruits of this with the 
successful launch of the W7 brand into 
Tesco, including a further increase in both 
the number of Tesco stores stocking W7, 
and the number of W7 products being 
stocked, in the ﬁ rst quarter of 2021. 
We are in discussions with other major 
retailers in the UK with a view to them 
stocking W7 products.

Internationally W7 sales were down in 
all reported regions due to the strict 
lockdowns imposed due to the Covid-19 
pandemic, particularly in the ﬁ rst half 
of the year. In Europe sales fell by 29% 
compared to 2019, in the USA sales fell by 
53% compared to 2019, and in the rest of 
the world sales fell by 34% compared to 
2019.

Towards the end of the year, as Covid-19 
lockdowns eased, we saw a strong 
recovery for W7 in the UK, Europe and 
the rest of the world, with sales in the 
later months of the year in line with the 
board’s budget for the year, set prior 
to the Covid-19 pandemic. This trend 
has continued through the ﬁ rst quarter 
of 2021, with an especially positive 
performance for W7 in the UK, despite the 
reintroduction of lockdowns in the UK and 
elsewhere.

We believe that W7 has a compelling 
brand proposition and will continue to 
beneﬁ t from consumers wanting a high 
quality but cost effective product.

Technic

The Technic brands comprise Technic, 
Body Collection and Man’stuff. Since 
the acquisition of the Technic brands, 
through the acquisition of Retra Holdings 
in November 2017, we have taken steps 
to improve the sales of the all year round 

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Annual  Report 2020

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cosmetics sold under the brands, and to 
make the business proﬁ table throughout 
the whole year, not only in the second half 
when Christmas gifting is delivered. The 
split of gifting at 48% and single products 
at 52% remained the same as in 2019, 
although there was a shift to more all year 
round from speciﬁ c Christmas focus ed 
gifting product.

Sales of branded Technic product in 2020 
was 36% of total Group revenue (2019: 
34%). Overall Technic sales only declined 
by 10% despite the Covid-19 impact, as the 
brands have a strong presence in essential 
retailers, although the largest customer 
for the Technic brands was closed for 
signiﬁ cant parts of the year.

In 2020, UK revenues were 49% of 
Technic’s sales and they decreased by 
11% over the year, despite being down 
30% in the ﬁ rst half. The improved second 
half performance was predominantly 
a reﬂ ection of the successful launch in 
September of a range of Technic and Body 
Collection branded products in wilko, with 
Christmas gifting delivered to wilko from 
October. We anticipate sales will continue 
to grow through wilko, particularly as store 
footfall increases following the opening of 
non-essential retail on the high street.

In Europe, Technic’s largest market in 2019, 
sales fell by 9% compared to 2019. As with 
W7, sales fell in Europe due to the strict 
lockdowns in the key countries.

In the USA, sales increased by 11% 
compared to 2019, and in the rest of the 
world sales fell by 34% compared to 2019, 
albeit the sales were small in these regions 
in the context of the Group as a whole.

The business encompassing the Technic 
brands also produces and sells own brand 
white label cosmetics for several major 
high street retailers, with such sales being 
7% of Group revenue (2019: 5%). These 
sales grew by 7% in 2020, compared to 

2019. We continue to assess private label 
opportunities on a case by case basis, 
based on the return they can deliver.

As with W7 we saw a strong recovery in 
sales for Technic in the UK, Europe and 
the rest of the world since the easing of 
the Covid-19 lockdowns in the later part of 
2020, with this trend continuing into 2021, 
despite the reintroduction of lockdowns in 
some territories.

Close-out 

Whilst the Group’s close-out division 
continues to provide a good source of 
intelligence in the colour cosmetics 
market the focus on these activities 
further reduced in 2020, particularly with 
the decision taken to signiﬁ cantly reduce 
close-out sales in the USA, as the Group 
concentrated on selling its own brands 
there. Consequently, the close-out division 
represented 12% of Group revenue in 
2020, down from 15% in 2019 and 16% 
in 2018. Close-out sales have been 
intentionally reduced further in the ﬁ rst 
quarter of 2021, as the Group focuses on 
sales of its brands.

New Product Development

New product development remained a 
key focus of the Group’s activity in 2020, 
despite the pandemic, and will continue 
to be core to the Group’s proposition 
to provide new products that are on 
trend, fast to market and that meet the 
consumer’s quickly changing needs.

Our New Product Development Team 
continues to develop a strong pipeline of 
new products, focus ed on the demands of 
our customers. New products introduced 
in 2020 included the W7 skincare range, 
which has been extremely well received, 
with many positive online reviews, 
together with a revamping of the vegan 
range.

Our new product development strategy 
continues to utilise manufacturing 
partners, predominantly in China and 
Europe, that provide the best product 
quickly, for the best price, and meet 
our legal and ethical compliance 
requirements. This process is supported 
by the Group’s Hong Kong based 
subsidiary sourcing ofﬁ ce and its China 
subsidiary (Jinhua Badgequo Cosmetics 
Trading Company Ltd), with local 
employees able to explore new factories 
and oversee quality control and ethical 
sourcing.

The Group is also focus ed on the 
environmental impact of its products and 
has removed all plastics from the outer 
packaging of its gifting and all year-round 
products, and has virtually eliminated 
the use of single use packaging in its 
products completely. The Group’s product 
packaging therefore uses paper and 
cardboard wherever practicable, which 
enables the Group, the wholesaler and 
end user to recycle the waste effectively. 
In terms of the Group’s product casings, 
the use of plastic is sometimes practically 
unavoidable but recyclable packaging is 
used wherever possible.

All new W7 brand products are being 
manufactured without parabens and 
the Company is reformulating existing 
products where feasible. The Group aims 
to be paraben free for all products in the 
next 24 to 36 months.

e-Commerce

During 2020 we placed an increased 
emphasis on driving online sales and 
ensuring that our online pricing was 
closely matched to that of our larger 
retailers. Whilst direct online sales remain 
a modest proportion of the Group’s overall 
sales, they more than doubled from 
£0.2 million in 2019 to over £0.5 million in 
2020, and we anticipate further signiﬁ cant 
progress in 2021. In Q1 2021 the Group’s 
e-commerce sales were £0.24 million.

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Warpaint London P LC

Chief Executive’s Statement (continued) 

In 2020 we listed our brands in the UK, in 
May, and the USA, in August, on Amazon 
FBA (Fulﬁ lment by Amazon), in addition to 
using our own websites, which has helped 
accelerate our online sales. The strategy 
is to appropriately apply marketing 
spend in order to generate further sales 
momentum and a further launch on 
Amazon EU is planned to be implemented 
in the near future.

Marketing and PR
In 2020 we continued our focus on ensuring 
our marketing programmes were both 
fresh and innovative, in both the traditional 
and social media environment. In particular 
we instituted a loyalty programme and 
speciﬁ c social media programme targeted 
at driving website visit conversions into 
sales and increasing basket size. 

Strategy 

As previously outlined, in early 2018, the 
board adopted a three-year strategic 
plan for the business. This is measured, 
monitored and reviewed regularly and 
was updated by the board in 2021 with a 
view to it forming the basis of the Group’s 
development through to the end of 2024. 
The plan is designed to drive shareholder 
value and has deﬁ ned targets for sales, 
EBITDA, earnings per share and cash 
generation, with a particular emphasis on 
driving incremental EBITDA growth. The 
strategic plan comprises six key pillars:

•  Develop and build the Group’s brands and 
provide new product development that 
meets changing trend and consumer needs

The Group continues to review, evaluate 
and develop the Group’s portfolio of 
brands to ensure there is a clear brand 
hierarchy; a clear proposition by brand; 
non-core brands and product stock are 
eliminated; and that the Group delivers 
new product development and gifting sets 
that meet customer needs.

•  Develop and nurture the current core 

business

A major objective of the Group is to 
continue to develop and grow the presence 
of the Warpaint brands beyond their 
existing worldwide customer base. There 
is still, however, signiﬁ cant potential to 
be realised in the current customer base 
and the Group is committed to ensuring 
this potential is maximised. The Group 
is focused on ensuring there is a clarity 
of product offering to each customer 
segment and to supporting its customers 
with relevant new products; by using 
appropriate marketing to draw consumers 
into customer stores; and by cross selling 
the Group’s brands where appropriate. 

 • Grow Market Share in the UK

The business continues to focus on 
increasing the presence of the Group’s 
brands in channels that our consumers 
shop in, to increase accessibility and 
drive proﬁ table market share growth. As 
a result of this strategy, the Group has 
successfully launched the W7 brand into 
Tesco and the Technic brands into wilko. 
It continues to have active discussions 
with other major retailers who are 
currently in channels that the Group is 
yet to materially supply to and expanding 
the UK customer base is a key focus 
of management. This is particularly 
opportune as retailers across all sectors 
are increasingly looking to provide 
quality products to their customers at 
affordable prices. 

• Grow market share in the USA and China

The USA and China continue to provide a 
major growth opportunity for the Group. 
In the USA, the Group continues to 
investigate the optimal route to market 
through established agency channels and/
or direct to retailers, and is establishing 
a core product range for the USA with 
minimum margin requirements. 

In China the Group conducts business 
locally through its Chinese subsidiary 
company. We are also continuing to 
register products for sale in China in order 
to grow our total offering and increase 
sales. This has led to the development 
of relationships with distributors in the 
region who have the capability to drive 
sales of the W7 brand there.

•  Develop the online/e- Commerce strategy 

for brand development and proﬁ table sales

The Group aims to grow its proﬁ table sales 
across the Group’s online sales channels, 
ensuring the process is optimised and 
efﬁ cient. The Group continues to develop 
and build its brands by utilising brand 
ambassadors, inﬂ uencers and make-up 
artists to engage actively with its target 
audience. The Group wants to ensure that 
consumers are adequately inspired and 
educated on how the Group’s products 
can be used to experiment and achieve 
different looks. The Group has launched 
a loyalty programme that creates a W7 
community of customers to drive sales 
conversion on the Company’s website. 
The aim of these activities is to create an 
interactive community of consumers and 
drive recommendation. Developing the 
social media strategy also directly impacts 
the Group’s online sales strategy. As an 
example, 45% of W7’s target customers 
are buying cosmetics online.

•  Develop the appropriate organisational 

structure, people strategy and 
organisational efﬁ ciency

Warpaint continues to review the 
businesses’ structures, resources and 
capabilities with the objective of delivering 
the strategic plan, communicating the 
plan to ensure that all employees are 
engaged, and rewarding employees 
suitably for doing a good job.

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 Brands
During 2020 we undertook a review 
of all our brands, removing from sale 
those small number of brands that were 
sub-scale and did not have a compelling 
market position. This exercise has enabled 
the Group to focus on its core W7, Technic, 
Body Collection, Man’stuff, Chit Chat and 
Very Vegan brands. We are also developing 
Body Collection as a key brand, which we 
believe has untapped potential given it is 
currently sold in only one UK retailer.

  Customers & Geographies
UK
The UK accounted for 52.5% of Group 
sales in 2020 (2019: 46.1%), with UK sales 
reducing by only 6.9% to £21.1 million (2019: 
£22.7 million) despite the effects of Covid-19 
forcing temporary UK high street store 
closures. In the UK the Group performed 
better through the Covid-19 crisis than 
in our international regions because the 
imposed lockdown was not as severe and 
some of our UK customers were deemed 
“essential”, so they remained open for 
business.

The top ten UK Group customers accounted 
for 63% of UK sales in 2020 (2019: 64%). 
Those customers that remained open 
through Covid-19 performed well in 2020. 
Additionally the Group beneﬁ ted in the 
second half of the year from the sales of W7 
product in Tesco and the Technic brands in 
wilko, both of which were new retailers for 
the Group.

Europe
Europe has for some time been an area 
of excellent growth for the Group and 
accounted for 37.5% of Group sales in 
2020 (2019: 38.2%). However the Covid-19 
pandemic impacted sales severely once 
country wide lockdowns started in March 

2020 and stores were forced to close. 
Sales for the Group’s brands into Europe 
are mainly to Spain, Denmark, Sweden 
and Germany.

European sales for 2020 reduced 19.7% 
to £15.1 million (2019: £18.8 million). 
However, with Group sales overall in 
Europe decreasing in H1 2020 by 35% 
compared to the same period in 2019, 
there was a signiﬁ cant recovery in the 
second half of the year as the Covid-19 
lockdowns were eased.

Advance plans were made to ensure 
business continuity, as far as possible, 
whilst the nature of the UK’s future 
trading relationship with the EU remained 
uncertain. Following the UK trade deal 
with the EU at the end of the year there 
has been some disruption in early 2021, 
however, this has now largely been 
overcome. The Group is utilising the 
Company’s wholly owned subsidiary, 
Warpaint Cosmetics (ROI) Limited, in the 
Republic of Ireland, which was formed 
speciﬁ cally to facilitate the Group’s EU 
trading and to help mitigate against UK/
EU cross-border disruption.

 USA
The USA was the hardest hit of any of 
the Group’s markets by the impact of 
Covid-19. USA sales, in sterling terms, 
reduced by 56.7% in 2020 to £2.1 million 
(2019: £5.0 million) and equated to 5.3% 
of overall 2020 Group sales. Current 
customers in the USA include Macys 
Backstage, Marshalls, and TJ Maxx, all of 
whom have been required to shut stores 
for periods during 2020. Post year end, 
following a successful trial with store 
group Five Below, W7 products are now 
being stocked in over 1,000 of their stores 
in the USA.

The Group’s USA subsidiary, LMS, is now 
fully integrated into the Group. Prior to 
its acquisition in August 2018 two thirds 
of LMS revenue was from distributing W7 
products, the remainder being the sale 
of other branded cosmetics through its 
close-out activities. Since the acquisition 
the focus has been more on own brands 
and leveraging the marketing and other 
synergies contributed at a Group level. 
The USA is the largest colour cosmetics 
market in the world and developing sales 
there is a strategic goal for the Group. As 
previously reported, we implemented a 
number of measures to improve margins 
in the USA business, including changing 
our third party warehousing arrangements 
to reduce costs and by restructuring 
the staff levels in the USA, saving 
US$0.4  million in 2020.

Nevertheless, despite these actions, 
the impact of the Covid-19 lockdown on 
the USA business has been signiﬁ cant, 
and therefore we have re-evaluated 
our strategy for the USA and we have 
accelerated our online sales strategy via 
Amazon FBA, and reduced the locally 
sourced close-out.

Rest of the World 
Sales in the rest of the world reduced 
from £2.8 million in 2019 to £1.9 million in 
2020, accounting for 4.7% of overall Group 
sales. As with our other international 
regions, overall sales were down due to 
the Covid-19 pandemic. However, sales 
did recover in the later part of the year as 
Covid-19 lockdowns eased, although some 
countries retain signiﬁ cant restrictions. 
In Australia which is a key country in the 
rest of the world region sales increased 
slightly. 

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Chief Executive’s Statement (continued) 

 Summary and Outlook
Whilst 2020 was undoubtably a 
challenging year and the pandemic had 
a signiﬁ cant impact on the Warpaint 
business, I am pleased with the 
progress that we were able to make 
and I believe Warpaint has emerged 
as stronger business. In particular, we 
made substantial advances with our 
retail presence in the UK, commencing 
signiﬁ cant sales through Tesco and wilko 
for the ﬁ rst time. Our W7 products are 
selling well at Tesco and we have further 
expanded the number of Tesco stores 
that are stocking our products, and the 
number of products being stocked, post 
period end. Likewise our Body Collection 
and Technic ranges have been very well 
received by wilko customers. We intend 
to further expand our UK retail presence 
in 2021.

We have also taken the opportunity 
to review all elements of our strategy 
in 2020 and I believe that we have a 
compelling product proposition that 
is attractive to our global customer 
base. The late Brexit trade deal led to 
unexpected issues in the early part of 
2021 for our sales into the EU, but I am 
pleased to say that these are now largely 
overcome.

The USA remains a challenging market, 
but I believe we now have an appropriate 
strategy for proﬁ table growth in this 
region, including accelerating our online 
proposition. In the USA I am particularly 
pleased to see our W7 products now 
being stocked in over 1,000 Five Below 
stores following a successful trial.

Trading in 2021 has started strongly 
with sales for the ﬁ rst three months 

of 2021 9% ahead of the same period 
in 2020, with sales increasing in all 
our geographic regions, despite the 
continuing lockdowns and enforced 
temporary customer store closures in 
many of our markets. I am encouraged 
by the outlook for the rest of the year 
and beyond as we seek to increase our 
high street penetration and online sales, 
together with looking to grow our sales 
through our existing customer outlets. 

In closing, I would like to thank all our 
staff for their efforts in 2020 and helping 
us to overcome the challenges of the 
pandemic.

Sam Bazini
Chief Executive Ofﬁ cer
27 April 2021

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Annual  Report 2020

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Warpaint London P LC

Financial Review

Neil Rodol

The Covid-19 pandemic had a material impact on our ﬁ nancial performance in the year, 
resulting in lower than budgeted sales and proﬁ ts. Group revenue decreased in the year by 18%, 
and adjusted proﬁ t before tax decreased in the year by 56%. 

The actions we took as a business in response to Covid-19 enabled us to remain focused on 
margin, being net debt free, generating cash and safeguarding the business and the jobs of our 
employees.

Headline results, shown below, represent the performance comparisons between 
the consolidated statements of income for the years ended 31 December 2019 and 
31 December 2020.

KPIs

2014

2015

2016

2017

2018

2019

2020

Revenue (£m)
2020: £40.3 million -18%

Adjusted proﬁ t before tax* (£m)
2020: £2.3 million -56%

17.0

22.3

27.0

32.5

0

10

20

30

2014

2015

2016

2017

2018

2019

2020

50

0

48.5

49.3

40.3

40

4.1

5.4

5.2

6.8

7.7

8.3

2.3

2

4

6

8

10

*Adjusted for £0.24 million of staff restructuring and 
voluntary redundancy costs (2019: £0.07 million), 
and inventory relocation costs in the US of £nil (2019: 
£0.08 million) and £0.08 million of legal costs (2019: 
£0.03 million) and £2.4 million of amortisation of 
intangible assets (2019: £2.4 million) and share based 
payments of £0.7 million (2019: £0.8 million).

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Covid-19 Stress Testing and Liquidity 
The lockdowns in 2020 throughout the 
world in response to Covid-19 meant 
the Group traded in a very uncertain and 
difﬁ cult time. In response, the board 
reacted swiftly and decisively with a plan 
to protect our staff, the business and to 
put in place measures to conserve cash, 
including not recommending a ﬁ nal 
dividend for 2019.

In the second half of the year trade across 
the Group returned to near normal levels 
and consequently dividends were resumed 
against a background of good control of 
cash and continued cash generation, plus a 
testament to the response of the business 
through Covid-19. The board declared 
an interim dividend of 2.8p per share, 
maintaining the prior year interim dividend 
of 1.5p per share, together with a one off 
additional 1.3p per share, to reﬂ ect that no 
ﬁ nal dividend was declared for 2019. The 
dividend payment of 2.8p per share was 
paid on 20 November 2020. 

With Covid-19 still causing economic 
uncertainty in 2021 we have modelled 
a range of scenarios based on varying 
levels of annual sales revenue, through 
to the end of 2022. In each scenario, 
mitigating actions within the control of 
management have been modelled, each 
showing there are sufﬁ cient cash balances 
to meet liabilities as they fall due and so 
the board is conﬁ dent that the Group has 
sufﬁ cient ﬁ nancial strength to withstand 
the current disruption to its activities. The 
board therefore believes that it remains 
appropriate to prepare the ﬁ nancial 
statements on a going concern basis (see 
Note 1 to the ﬁ nancial statements).

Revenue
Group revenue for the year reduced 
by 18.3% from £49.3 million in 2019 to 
£40.3 million in 2020. The fall in sales 
year on year was due to the Covid-19 
lockdowns in the UK and internationally.

Company branded sales were 
£32.8 million in the year (2019: 
£39.2 million). Our W7 brand had sales 
in the year of £18.2 million (2019: 
£22.5 million). Our Technic brand 
contributed sales of £14.5 million in the 
year (2019: £16.7 million).

In the UK Group sales reduced 6.9% 
from 22.7 million in 2019, to £21.1 million 
in 2020, with a strong recovery in the 
second half of the year. Internationally, 
Group revenue reduced 28.0% from 
£26.6 million in 2019, to £19.1 million 
in 2020. In Europe Group sales reduced 
by 19.7% to £15.1 million (2019: 
£18.8 million). In the rest of the world 
Group sales fell by 32.6% to £1.9 million 
(2019: £2.8 million). In the USA Group 
sales fell by 56.7% to £2.1 million 
(2019: £5.0 million), in part because of the 
decision to concentrate on the sale of our 
Group brands ahead of locally sourced 
close-out opportunities, and from the 
disruption caused by Covid-19.

Our strategy for growth includes 
continuing to develop and build our 
Group brands and provide new product 
development that meets changing trends 
and consumer needs, to develop and 
nurture the current core business, to 
grow market share in the UK, USA and 
China, to develop an online strategy for 
brand development and sales and, to 
put in place appropriate organisational 
structure, people and efﬁ ciencies in the 
business. A detailed commentary on 
our sales growth strategy and trading 

performance is included in the Chief 
Executive Ofﬁ cer’s statement.

Our Retra business had sales of retailer 
own brand white label cosmetics 
of £2.6 million in the year (2019: 
£2.5 million). The white label business is 
traditionally cost competitive and Retra 
chooses which projects to undertake 
based on commercial viability, and in 
particular margin. 

The close-out business revenue reduced 
by 36.2% from £7.7 million in 2019 to 
£4.9 million in 2020.

Other income of £0.4 million was received 
from the UK Government’s furlough 
scheme in the year.

Product Gross Margin
Gross margin for the Group decreased by 
2.4% from 33.5% to 31.1%. 

Gross margin reduced largely due to sales 
of inventory at lower than normal margin 
across the Group. This was in response 
to Covid-19 in order to maximise cash 
generated in the business and reduce 
overall inventory holding by the year end 
in the UK and USA. In the USA this was an 
acceleration of our strategy to exit sales 
of locally sourced close-out brands and to 
focus on the sale of our Group brands.

A thorough review of inventory was carried 
out considering stock turn, margin, and 
stock age, so that those with the worst 
scores in each category and combined 
could be identiﬁ ed and sold off. In total 
£1.5 million of inventory identiﬁ ed in 
this process was sold in the year for 
£0.9 million. Without this action gross 
margin for the year would have been in 
line with 2019 at 33.4%.

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Warpaint London P LC

Financial Review (continued)

During the year we did not experience 
pressure on the cost of inventory and 
made good use of our Hong Kong buying 
ofﬁ ce to ensure this continued. However, 
since the start of 2021 we have noticed 
slight price increases coming from our 
supply base in China and container freight 
rates have increased dramatically before 
falling back steadily, both these cost 
increases have been offset by a weakening 
dollar.

To counter currency pressure we have 
in place a discount mechanism linked to 
the US dollar exchange rate from one of 
our key suppliers in China, although in 
2020 this did not apply as buying volumes 
were greatly reduced because of Covid-19. 
When business levels return to normal, 
we expect to be making use of this US 
dollar discount mechanism again. We 
also continue to move production to new 
factories of equal quality to retain or 
improve margin and have a natural hedge 
from our US dollar revenue. We remain 
focused on improving gross margin in all 
our businesses.

The Group brands segment had sales 
of £35.4 million at a margin of 31.1% 
(2019: £41.6 million at a margin of 34.9%). 
Margin reduced because of the inventory 
reduction plan implemented in response 
to Covid-19. 

The close-out segment of the Group had 
sales of £4.9 million at a margin of 31.2% 
(2019: £7.7 million at a margin of 25.7%). 
The inventory reduction plan also applied 
to close-out, however any negative effect 
on close-out margin was more than 
offset by the availability in the year of 
some high margin close-out parcels and 
consequently close-out margin improved 
in the year.

At 31 December 2019 options were in 
place for the purchase of US$15 million 
at US$1.3142/£ and this helped to protect 
our margin through a turbulent period in 
the foreign exchange markets, in which 
the US dollar strengthened to US$1.15/£ 
during the peak of the Covid-19 pandemic. 
Similarly, at 31 December 2020 options 
were in place for the purchase of US$18 
million at US$1.3260/£.

Operating Expenses
Total operating expenses before 
exceptional items, amortisation 
costs, depreciation, foreign exchange 
movements and share based payments, 
decreased by £0.8 million to £8.7 million 
in the year. This decrease was made up 
of a reduction in discretionary spend on 
travel, planned events and exhibitions 
totalling £0.9 million in response to 
Covid-19, an increase in cost in trading 
online of £0.1 million as sales online 
increased sharply in response to 
Co vid-19, an increase in the charge for 

bad debts of £0.2 million in the USA 
from a large retail customer entering 
Chapter 11 bankruptcy as a result of 
the pandemic, and a decrease in other 
overheads of £0.2 million.

The most signiﬁ cant operating costs 
in the Group are wages and salaries 
of £5.5 million (2019: £5.5 million) and 
planned events and exhibitions for our 
brands of £0.6 million (2019: £1.2 million). 

Wages and salaries remained unchanged 
year on year. During the ﬁ rst Covid-19 
lockdown in 2020 use was made of the 
government job retention scheme (and 
a similar grant scheme in the USA) 
giving rise to other operating income of 
£0.36 million. All staff were paid 100% 
of their salaries whilst furloughed. 
The reduction in planned events and 
exhibitions was in response to the 
Covid-19 pandemic, exhibitions were 
cancelled across the world and planned 
events and promotional activity had to be 
postponed or cancelled.

Warpaint remains a business with most 
operating expenses relatively ﬁ xed and 
evenly spread across the whole year. 
We continue to monitor and examine 
signiﬁ cant costs to ensure they are 
controlled and strive to reduce them. 
In addition, the increased scale of the 
business has given the Group increased 
buying power.

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Profit Before Tax
In 2020 Group loss before tax was £1.1 million compared to a proﬁ t before tax of £1.8 million in 2019. 

The material changes in proﬁ tability between 2020 and 2019 were:

•  Reduction in Group gross margin of 2.4% for 2020

•  Gross margin on decrease in sales for 2020 at 33.5%

•  Increase in other operating income in 2020 (job retention scheme)

•  Decrease in operating expenses (see above heading)

•  Increase in exceptional costs in the year

•  FX charge in the year £0.4 million (2019: £0.2 million) 

•  Decrease in the cost of the LTIP and EMI share option schemes

Annual  Report 2020

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Effect on Proﬁ t

(£1.0) million

(£3.0) million

£0.4 million

£0.8 million

(£0.1) million

(£0.2) million

£0.2 million

Adjusted proﬁ t before tax (before exceptional items, amortisation costs, and share based payments) was £2.3 million compared to 
£5.2 million in 2019, a fall of 55.8%.

Exceptional Items
Exceptional costs in 2020 included £0.24 million of staff restructuring and voluntary redundancy costs and £0.08 million of legal 
costs (2019: £0.15 million of staff restructuring plus inventory relocation costs, and £0.03 million of legal costs).

Tax
The tax rate for the Group for 2020 was 10% compared to the UK corporation tax standard rate of 19% for the year. Since the 
acquisition of LMS, the Group is exposed to tax in the USA at an effective rate of approximately 25% and in other jurisdictions the 
Group operates cost centres, but these are not materially exposed to changes in tax rates. 

Earnings Per Share
The statutory basic earnings per share was a loss of 1.31p in 2020, compared to the 1.78p achieved in 2019.

Adjusted earnings per share before exceptional items, amortisation costs and share based payment costs was 3.11p in 2020, a 
decrease of 50.3% on the 6.26p achieved in 2019.

Dividends
The board is recommending a ﬁ nal dividend for 2020 of 3.0 pence per share, making a total dividend for the year of 
5.8 pence per share of which 2.8 pence per share, including a special dividend of 1.3 pence per share to reﬂ ect that no ﬁ nal 
dividend was declared for 2019, was paid on 20 November 2020 (2019: The board in the interests of prudence given the considerable 
on-going uncertainty due to Covid-19, and in order to further preserve the Company’s cash resources, resolved not to recommend 
a ﬁ nal dividend for 2019, making the interim dividend of 1.5 pence per share in effect the only dividend declared in respect of 2019). 
The dividend for the year was covered 0.5 times by adjusted earnings per share.

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Warpaint London P LC

Financial Review (continued)

Cash Flow and Cash Position
Net cash ﬂ ow generated from 
operating activities was £7.5 million 
(2019: £4.4 million), after payment of 
the £0.3 million (2019: £0.2 million) 
exceptional items previously referred 
to. The Group’s cash balance increased 
by £2.2 million to £4.9 million in 2019 
(2019: £2.7 million). The cash generated 
was principally used to make dividend 
payments in the year. 

We expect capital expenditure 
requirements of the Group to remain low, 
however as part of our strategy to grow 
market share in the UK and USA there 
will be occasions where investment in 
store furniture is required to secure that 
business. In 2020 £0.66 million was spent 
on store furniture for Tesco and wilko 
(2019: £0.05 million), and £0.18 million 
was spent on new computer software 
and equipment, and other general ofﬁ ce 
ﬁ xtures and ﬁ ttings and plant upgrades 
(2019: 0.23 million).

LTIP, EMI & CSOP Share Options
On 20 May 2020 CSOP share options were 
granted over a total of 454,686 ordinary 
shares of 25p each in the Company under 
the Warpaint London PLC Company 
Share Option Plan. The options provide 
the right to acquire 454,686 ordinary 
shares at an exercise price of 49.5p per 
ordinary share.

The LTIP, EMI & CSOP share options had 
no dilutive impact on earnings per share 
in the period. The share-based payment 
charge of the LTIP, EMI and CSOP share 
options for the year was £0.66 million 
(2019: £0.82 million) and has been taken 
to the share option reserve. 

Balance Sheet
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, excluding 
other receivables, were £7.7 million 
(2019: £10.3 million), the decrease on 
2019 is mainly due to the fall in sales 
year on year because of the Covid-19 
lockdowns. Apart from writing off a 
bad debt in the USA of £0.2 million, 
collection of cash was excellent in the 
year including payments from those 
customers that were in some distress 
because of the pandemic lockdowns in 
2020. The provision at the year end for 
bad and doubtful debts carried forward 
is £0.04 million, 0.6% of gross trade 
receivables (2019: £0.04 million, 0.4%).

Inventory was lower at the year end at 
£14.9 million (2019: £16.4 million). The fall 
in inventory was due to the action taken 
to reduce inventory across the group in 
response to Covid-19, and our strategy of 
exiting the sale of locally sourced close-
out brands in the USA. The provision 
for old and slow inventory was £0.52 
million, 3.5% at the year end (2019: £0.19 
million, 1.2%). The increase in provision 
arises from the Group policy of providing 
for 50% of the cost of perishable items 
that are over two years old, and mainly 
from providing for inventory in our USA 
business, LMS, that has aged to over two 
years old, without the chance of a sale 
because of the Covid-19 crisis. However, 
we remain comforted by the fact that in 
reality many such items in the normal 
course of business are eventually sold 
through our close-out division without a 
loss to the Group. 

On acquiring Retra in 2017 the Group 
took on their debt of £8.7 million being 
£7.6 million of invoice and trade ﬁ nance 
facilities, and £1.1 million of term loans 
and HP contracts. At the year end 
£0.3 million of invoice ﬁ nance remained 
outstanding which was repaid in full 
by March 2021 (2019: £1.2 million). 
The balance outstanding on the term 
loans and HP contracts at the year end 
totalled £0.3 million (2019: £0.6 million). 
The remaining loans and HP contracts 
totalling £0.3 million were repaid in full in 
April 2021.

Working capital decreased by £2.3 million 
in the year, to £25.4 million. The main 
components were a decrease in inventory 
of £1.8 million, a decrease in trade 
and other receivables of £0.2 million, 
an increase in cash at the year end of 
£2.1 million, and an increase in trade and 
other payables of £0.6 million. 

Free cash ﬂ ow remained strong at 
£6.6 million (2019: £4.1 million). 

The Group’s balance sheet remains in a 
very healthy position. Net assets totalled 
£37.4 million at 31 December 2020, a 
decrease of £2.4 million from 2019. The 
majority of the balance sheet is made 
up of liquid assets of inventory, trade 
receivables and cash. Included in the 
balance sheet is £7.3 million of goodwill 
(2019: £7.3 million) and £4.7 million of 
intangible ﬁ xed assets (2019: £7.1 million) 
arising from acquisition accounting. As 
at the year end cash totalled £4.9 million 
(31 December 2019: £2.7 million).

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The Group has a natural hedge from 
sales to the US which are entirely in 
US dollars, in 2020 these sales were 
$2.74 million (2019: $6.32 million). 
Together with the discount mechanism 
available from one of our main suppliers 
in China, sourcing product from new 
factories where it makes commercial 
sense to do so and by buying dollars 
when rates are favourable, we are able to 
mitigate the effect of a strong US dollar 
against sterling.

Induction materials provided on 
appointment include an explanation of 
directors’ duties, and the board is 
regularly reminded of the Section.172(1) 
Matters, including as a rolling agenda 
item at every main board meeting.

Further information on how the directors 
have had regard to the Section.172(1) 
Matters can be found on pages 3 6 to  37. 
This information forms part of the 
strategic report and has been approved 
for issue by the board on 27 April 2021.

Neil Rodol
Chief Financial Ofﬁ cer
27 April 2021

Section 172(1) Statement
The directors are well aware of their 
duty under section 172 of the Companies 
Act 2006 to act in the way which they 
consider, in good faith, would be most 
likely to promote the success of the 
Company for the beneﬁ t of its members 
as a whole, and in doing so have regard 
(amongst other matters) to:

•   the likely consequences of any decision 

in the long term;

•   the interests of the Company’s 

employees;

•   the need to foster the Company’s 

business relationships with suppliers, 
customers and others;

•   the impact of the Company’s operations 

on the community and the 
environment;

•   the desirability of the Company 

maintaining a reputation for high 
standards of business conduct, and

•   the need to act fairly as between 

members of the Company
(the “Section 172 (1) Matters”).

The balance sheet also includes 
£3.8 million of right-of-use assets. 
£3.5 million is the inclusion of the Group 
leasehold properties, now recognised 
as right-of-use assets as directed by 
IFRS 16. An equivalent lease liability is 
included of £3.7 million at the balance 
sheet date.

Foreign Exchange
The Group imports most of its ﬁ nished 
goods from China paid for in US dollars, 
which are purchased throughout the year 
at spot as needed, or by taking forward 
purchase foreign exchange options 
when rates are deemed favourable, and 
with consideration for the budget rate 
set by the board for the year. Similarly, 
foreign exchange options are taken to 
sell forward our expected Euro income 
in the year to ensure our sales margin is 
protected. 

We started 2020 with options in place 
for the purchase of US$15 million @ 
US$1.3142, this allowed us to purchase 
goods in the ﬁ rst half of the year at 
contracted dollar rates well above the 
spot rate which at one time fell as low as 
$1.1492. 

Around the time of Brexit being ﬁ nalised 
in 2020 when currency rates were 
favourable, we purchased 42 foreign 
exchange options which were outstanding 
at 31 December 2020 (31 December 
2019: 33). In total at 31 December 2020 
options were in place for the purchase 
of US$18 million at US$1.3260, and 
the sale of £5.1 million @ £1.1077 (31 
December 2019: $15 million @ $1.3142 , 
and £4.4 million @ £1.1402).

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Risk Management

Warpaint 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 (“FX”)
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. We have improved our 
processes within our hedging policy to 
ensure it remains robust while we look 
to increase our international business. 
There is a Group FX committee made up 
of senior management who communicate 
regularly. Whenever possible FX is 
purchased (using foreign exchange 
forward options) at, or as close as 
possible to, the budget rate to cover the 
annual needs of the business.

Reliance on Key Suppliers
In 2020 one key supplier from China 
was responsible for approximately 19% 
(2019: 15%) of the Group’s brand ranges 
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. 
Management retain close relations 
with suppliers with relatively short lead 
times, and the Group typically holds 
four to six months of stock at any one 
time, nevertheless the sourcing of new 
suppliers in a wider geographic location 
is ongoing.

claims and potentially damaging the 
good reputation of the Group’s brands. 
The directors have every colour cosmetic 
ingredient independently checked by a 
qualiﬁ ed chemist for compliance with 
UK, EU and when necessary and any 
other relevant legislation, including in the 
USA, and maintain adequate product and 
public liability insurance so as to ensure 
that any claims have little impact on the 
Group’s proﬁ tability.

The vast majority of the Group’s colour 
cosmetics are manufactured in China. 
Currently there is a possibility that global 
tensions between countries in the region 
could lead to a trade war, new tariffs or 
price increases. The identiﬁ cation of new 
low priced, but high quality, suppliers 
in other geographic locations remains 
under review on an ongoing basis. Any 
increased costs or duty would be passed 
on to the consumer where possible.

Our supply base in China was temporarily 
affected by the Covid-19 virus at the start 
of 2020 with all our suppliers closed for a 
month. Whilst causing some initial delays 
to deliveries normal operating levels were 
soon resumed and there was no material 
impact on our inventory levels.

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 

Significant Customers 
The Group has one customer in Denmark 
with over 240 stores across Denmark, 
Norway, Sweden, Holland and France. 
In 2020 this customer represented 9.7% 
(2019: 7.7%) of own brand and close-out 
revenues, we currently have an excellent 
working relationship with this customer. 
Signiﬁ cant goodwill in our own brands 
has been built up by this customer. 
The directors believe that, should the 
customer decide not to sell our brands, 
a large amount (if not all) of the existing 
business will be taken up by other 
retailers in Denmark, Norway, Sweden, 
Holland and France.

Location
The Group has the majority of its 
operations and assets split across 
two locations in Iver and Silsden in 
the UK; if a ﬁ re were to befall either of 
the premises occupied by the Group, a 
signiﬁ cant amount of 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. Fire alarm systems are 
tested weekly, smoke detectors inspected 
quarterly, ﬁ re extinguishers tested 

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annually, and trained ﬁ re marshals are 
onsite. Staff have regular ﬁ re drills and 
ﬁ re risk assessments are carried out to 
ensure compliance with ﬁ re regulations.

Brexit
In December 2020 Brexit was ﬁ nalised. 
From 1 January 2021 new terms of 
trading with our EU customers have been 
in place using internationally recognised 
INCO terms. There is now an extra 
layer of cross border compliance and 
paperwork required which we are well 
prepared for having taken expert advice 
from customs experts and shippers. 
We have made good use since the start 
of 2021 of our wholly owned subsidiary 
Warpaint Cosmetics (ROI) Limited in the 
Republic of Ireland speciﬁ cally to help 
protect us against any UK/EU cross-
border disruption, and to serve our 
European customers from a Euro Hub 
in order to provide an alternative supply 
route. The Group is closely watching 
developments in the movement of goods 
within the EU and adapting its strategy as 
the full effect of Brexit becomes clearer.

Cyber Attacks
There is an increasing risk that 
cybercrime will cause business 
interruption, loss of key systems, loss of 
online sales, theft of data or damage to 
reputation. The Group regularly review 
and invest in the development and 
maintenance of our IT infrastructure, 
systems and security. We have in place 
disaster recovery and business continuity 
plans that are tested annually. 

Covid-19 Pandemic
Covid-19 or another similar virus 
pandemic will cause major disruption 
to the business. Staff will be absent 
either through illness or from isolation 
measures, the business strategy will 
be affected, delayed and perhaps will 
require reassessment, capital markets 
and foreign exchange markets will 
become volatile, and the supply chain 
and our customer base may temporarily 
close down. In a pandemic situation we 
will follow Government guidelines and 
enable staff to work remotely where 
possible, until such time that they can 
return to work with new workplace safety 
measures in place, we will explore and 

examine liquidity continuity measures 
and implement business continuity 
plans. The business protects against 
foreign exchange and credit risk through 
various ﬁ nancial instruments such as the 
forward purchase of foreign exchange 
and credit insurance of certain customer 
receivable balances, particularly those 
deemed higher risk. Our initial response 
to Covid-19 was to enhance our review of 
risks facing the group and focus on cash 
spend and ensure there was sufﬁ cient 
cash resource to secure the long term 
ﬁ nances of the Group. A committee made 
up of the Chief Executive Ofﬁ cer, the 
managing director of Retra and Keith 
Sadler, a non-executive director has 
been formed to formulate and implement 
a Group wide response in the event of 
a further pandemic or other similar 
disruptive event.

This Strategic Report was approved by 
the board on 27 April 2021 and signed on 
its behalf. 

Neil Rodol
Chief Financial Ofﬁ cer
27 April 2021

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Members of the Board

From left to right: Paul Hagon, Neil Rodol, Clive Garston, Sam Bazini, Sally Craig, Eoin Macleod and Keith Sadler

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Board of Directors 

Clive Garston (76), Non-Executive Chairman (Insider Committee (Chair), Remuneration Committee, Audit Committee)
Clive has been Non-Executive Chairman of the Group since November 2016. He 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. 

Sam Bazini (58), Chief Executive Ofﬁ cer (Insider Committee)
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 fragrances. 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. Together with 
Eoin Macleod, Sam developed the business which resulted in the formation of W7.

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Eoin Macleod (58), Managing Director
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 fragrances 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. Together with Sam Bazini, Eoin 
developed the business which resulted in the formation of W7.

Neil Rodol (58), Chief Financial Ofﬁ cer (Insider Committee)
Neil joined the Group in August 2015, having previously been an adviser to the business for several years. 
He has overseen the introduction of new systems and procedures. He joined the board as Chief Financial 
Ofﬁ cer in November 2016. Over the last 21 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. 

Sally Craig (60), Group Counsel & Company Secretary
Sally has been Company Secretary to Warpaint London plc since February 2017 and was appointed to the 
board in September 2018. She is also the Corporate Finance, Legal and Regulatory Ofﬁ cer & Company 
Secretary of Diaceutics plc, an AIM quoted diagnostic commercialisation company for the precision 
medicine industry. She is a solicitor and has previously practised as a corporate lawyer. She has many years’ 
experience providing company secretarial services to private and public companies in the UK including then 
AIM listed, Osmetech plc. She holds an honours degree in law from Manchester Metropolitan University.

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Board of Directors (continued)

Paul Hagon (57), Executive Director
Paul joined the Group as a Non-Executive Director in November 2016, subsequently becoming an executive 
director on 1 January 2021, the effective date of the renewal Company’s strategic consultancy agreement 
with Ward & Hagon Management LLP. 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 (62), Non-Executive Director (Audit Committee (Chair), Remuneration Committee (Chair))
Keith joined the Group as a Non-Executive Director in November 2016. He is also a non-executive director 
of Hawkwing plc (formerly TLA Worldwide plc, a global sports management and events business and now 
a cash shell listed on AIM), for which he chairs the audit committee. He is a non-executive director of HR 
Dept. Limited, a professional services business, and Silver Bullet Data Services Group Ltd, a contextual 
data management marketing organisation. Historically, Keith has been CEO or CFO of a number of quoted 
companies in the marketing services, telecoms and media industries. Keith is a chartered accountant and 
holds an honours degree in economics from the University of Kent.

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Corporate Governance Report 

Chairman’s Introduction 
I am pleased to introduce the 
Corporate Governance Report for the 
year ended 31 December 2020. As an 
AIM quoted company, we recognise 
the importance of sound corporate 
governance in supporting and delivering 
the strategy of the Company and its 
subsidiaries (together the “Group”). 
This involves managing the Group in an 
efﬁ cient manner for the beneﬁ t of its 
shareholders and other stakeholders 
whilst maintaining a corporate culture 
which is consistent with our values. The 
Company adopted the QCA Corporate 
Governance Code (“QCA Code”) on 
25 September 2018. The Company’s 
Corporate Governance Statement is 
available to view on the Company’s 
website at www.warpaintlondon.com 

their investment and that the Company 
is managed for the long-term beneﬁ t of 
all shareholders and other stakeholders. 
Appropriate Corporate Governance 
procedures will ensure that that is the 
case and reduce the risk of failure. 

This section of the Report from pages 2 3 
to  46  sets out our approach to governance 
and provides further information on the 
operation of the board and its committees 
and how the Group seeks to comply with 
the ten principles of the QCA Code. The 
instances where we do not comply are few 
and explanations for non-compliance are 
provided in the report below.

Clive Garston
Chairman
27 April 2021

The board of directors is responsible for 
the long-term success of the Company 
and, as such, devises the Group strategy 
and ensures that it is implemented. The 
board is determined that the Company 
protects and respects the interests 
of all stakeholders and in particular, 
is very focused upon creating the 
right environment for its employees. 
We want a happy workplace and we 
want our employees to be fully and 
properly rewarded and to feel that they 
are an integral part of the Warpaint 
family. A reward structure is therefore 
in place, which includes the grant of 
share options, enabling members of 
staff to participate in the growth of the 
Company, as appropriate. We want our 
suppliers, who are an essential part of 
the Company, to also feel part of the 
Warpaint family and we work closely 
with them to ensure that this is the case. 
Above all, the Company wishes to ensure 
that shareholders obtain a good return on 

Principle 1 - Establish a strategy and 
business model which promote long 
term value for shareholders

Business Overview 
The Company is a producer and supplier 
of colour cosmetics. We are extremely 
creative and design-focused, aiming to 
provide our customers with an extensive 
range of high quality cosmetics at an 
affordable price, The Group is made up of 
two divisions. 

The largest division sells own brand 
cosmetics under the lead brand names 
of W7 and Technic. W7 is sold in the UK 
primarily to retailers and internationally 
to local distributors or retail chains. 
The Technic brand is sold in the UK and 
continental Europe with a signiﬁ cant focus 
on the gifting market, principally to high 
street retailers and supermarkets. In 
addition, this division supplies own brand 
white label cosmetics produced for several 

major high street retailers. The Group also 
sells cosmetics using our other own brand 
names of Man’stuff, Body Collection, 
Vintage, Very Vegan, and Chit Chat.

The other division trades in close-out and 
excess inventory of branded cosmetics 
and fragrances from around the world. 

Strategy
In early 2018, the Board adopted a three-
year strategic plan for the business. This 
is measured, monitored and reviewed 
annually and reset using market insight 
and trend information in line with the 
budget process, and was updated by the 
board in 2021 with a view to it forming 
the basis of the Group’s development 
through to the end of 2024. The plan 
is designed to drive shareholder value 
and has deﬁ ned targets for sales, 
EBITDA, earnings per share and cash 
generation, with a particular emphasis 
on driving incremental EBITDA growth. 
The strategic plan is also outlined in 
the Strategic Report on page  1 0  and 
comprises six key pillars: 

• 

 Develop and build the Group’s 
brands and provide new product 
development that meets changing 
trend and consumer needs 
 The Group continues to review, evaluate 
and develop the Group’s portfolio of 
brands to ensure there is a clear brand 
hierarchy; a clear proposition by brand; 
non-core brands and product stock are 
eliminated; and that the Group delivers 
new product development and gifting 
sets that meet customer needs.

• 

 Develop and nurture the current core 
business
 A major objective of the business is 
to continue to develop and grow the 

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Corporate Governance Report (continued)

• 

presence of the Warpaint brands 
beyond their existing worldwide 
customer base. There is still however, 
signiﬁ cant potential to be realised in 
the current customer base and the 
Group is committed to ensuring this 
potential is maximised. The Group 
is focused on ensuring there is a 
clarity of product offering to each 
customer segment and to supporting 
its customers with relevant new 
products; by using appropriate 
marketing to draw consumers 
into customer stores; and by cross 
selling the Group’s brands where 
appropriate. 

 Grow Market Share in the UK
 The business continues to focus 
on increasing the presence of the 
Group’s brands in channels that 
our consumers shop in, to increase 
accessibility and drive proﬁ table 
market share growth. As a result 
of this strategy, the Group has 
successfully launched the W7 brand 
into Tesco and the Technic brand 
into wilko. It continues to have active 
discussions with other major retailers 
who are currently in channels that the 
Group is yet to materially supply to 
and expanding the UK customer base 
is a key focus of management. This 
is particularly opportune as retailers 
across all sectors are increasingly 
looking to provide quality products to 
their customers at affordable prices. 

•  

 Grow market share in the USA and 
China
 The USA and China continue to 
provide a major growth opportunity 
for the Group. In the USA, the Group 
continues to investigate the optimal 
route to market through established 

• 

agency channels and/or direct to 
retailers, and is establishing a core 
product range for the USA with 
minimum margin requirements. 
In China the Group conducts business 
locally through its Chinese subsidiary 
Company. We are also continuing to 
register products for sale in China in 
order to grow our total offering and 
increase sales. This has led to the 
development of relationships with 
distributors in the region who have 
the capability to drive sales of the 
W7 brand there.

 Develop the online/e- Commerce 
strategy for brand development and 
proﬁ table sales
 The Group aims to grow its proﬁ table 
sales across the Group’s online 
sales channels, ensuring the 
process is optimised and efﬁ cient. 
The Group continues to develop and 
build its brands by utilising brand 
ambassadors, inﬂ uencers and 
make-up artists to engage actively 
with its target audience. The Group 
wants to ensure that consumers are 
adequately inspired and educated on 
how the Group’s products can be used 
to experiment and achieve different 
looks. The Group has launched a 
loyalty programme that creates 
a W7 community of customers 
to drive sales conversion on the 
Company’s website. The aim of these 
activities is to create an interactive 
community of consumers and drive 
recommendation. Developing the 
social media strategy also directly 
impacts the Groups online sales 
strategy. As an example, 45% of 
W7’s target customers are buying 
cosmetics online. 

• 

 Develop the appropriate 
organisational structure, people 
strategy and organisational efﬁ ciency
 The Company continues to review the 
businesses’ structures, resources 
and capabilities with the objective 
of delivering the strategic plan, 
communicating the plan to ensure 
that all employees are engaged, and 
rewarding employees suitably for 
doing a good job.

Principle 2 - Seek to understand 
and meet shareholder needs and 
expectations
The Company remains committed 
to communicating openly with all of 
our shareholders, both private and 
institutional. This enables the Company 
to ensure that its strategy, business 
model and performance are clearly 
understood. It also enables the Company 
to appreciate the needs and expectations 
of shareholders and respond to queries 
promptly and comprehensively. As 
previously announced, the board did not 
recommend a ﬁ nal dividend for 2019, due 
to the uncertainty surrounding Covid-19 
and the decision to preserve cash in the 
business. However, dividend payments 
were resumed at the interim stage in 
2020 with payment of an interim dividend, 
together with a one off additional dividend 
per share, to reﬂ ect that no ﬁ nal dividend 
was declared for 2019. In accordance 
with the Group’s policy to pay appropriate 
dividends, the board is recommending a 
ﬁ nal dividend for 2020. 

All individual investor queries should be 
addressed to the Company Secretary at: 
investors@warpaintlondonplc.com

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Private Investors

The  board recognises that the Annual 
General Meeting (AGM) is an important 
opportunity to meet private shareholders. 
Each substantially separate issue is 
the subject of a separate resolution 
at the AGM and all shareholders have 
the opportunity to put questions to the 
 board. All board directors endeavour to 
attend AGMs and answer questions put 
to them which may be relevant to their 
responsibilities. In addition, the directors 
are available to listen informally to the 
views of shareholders immediately 
following the AGM. In the light of the 
public health restrictions associated with 
Covid-19, this was not possible for the 
2020 AGM. It will remain under review 
for the 2021 AGM which will be held in 
line with best practice and government 
guidelines.

For each vote, the number of proxy votes 
received for, against and withheld is 
announced at the meeting. The results of 
the AGM are published on the Company’s 
corporate website.

Institutional Shareholders

The Chief Executive Ofﬁ cer, the Managing 
Director and the Chief Financial Ofﬁ cer 
make presentations to institutional 
shareholders and participate in 
Investor Presentations both following 
the announcement of the full-year 
and half-year results and, at other 
times throughout the year. Not every 
executive ofﬁ cer participates in every 
investor presentation. The Chairman 
will participate in these presentations in 
future where appropriate and is always 
available to speak with shareholders. 
Dialogue with individual institutional 
shareholders also takes place in order 
to understand and work with these 
investors to seek to comply with their 

investor principles where practicable. The 
 board responds to and will take account 
wherever possible of recommendations 
made by proxy adviser companies. 

•  

The Covid-19 pandemic largely prevented 
face to face communication during 2020 
but this was maintained virtually through 
the year wherever possible with both 
private and institutional shareholders. 

Principle 3 - Take into account wider 
stakeholder and social responsibilities 
and their implications for long-term 
success 

The key stakeholders for the Group 
are customers, distributors, suppliers, 
employees, shareholders and the 
community in which we live. Whilst 
interactions take place at all levels of 
the Group, the directors are aware of 
the importance of the relationships 
with key stakeholders and feedback is 
utilised wherever possible to sustain 
these relationships in order to drive the 
long term success of the business. Face 
to face communications were largely 
curtailed in 2020 due to Covid-19, and 
many interactions with our stakeholders 
have taken place virtually. This has not 
only maintained, but in many instances 
enhanced our relationships with several of 
our key stakeholders and will be continued 
for the foreseeable future, irrespective of 
the restoration of face to face interaction. 

Business relationships with the following 
stakeholders are described below. 
The effect of any such engagement on 
key decisions in the ﬁ nancial year to 
31 December 2020 are set out below and 
detailed on pages 4 4 to  46.

• 

 Customers
 Feedback with trade customers is 
initially directed through dedicated 
account managers followed by 
engagement with our administration 
teams. For end user customers 
feedback is garnered through the peer 
to peer review site Yotpo, and social 
media such as Facebook, Twitter, 
Instagram and Pinterest. The Group’s 
consumer customers frequently contact 
the Company by writing, by email, direct 
calls to the head ofﬁ ce and through the 
website www.w7 makeup.co.uk where 
they are also able to leave comments. 
We endeavour to respond to all 
customers who contact us in a swift and 
efﬁ cient manner typically by email or 
direct calls with all responses followed 
up to seek to achieve a positive outcome. 
During 2020 we have sought to support 
our trade customers wherever possible 
throughout the Covid-19 lockdowns. 
Trends in the cosmetic business are 
dynamic and swift reaction to feedback 
is also vital in introducing new products 
and updating our product range.

 Distributors
 We seek to strengthen our 
relationships with our distributors to 
garner feedback and provide support 
with regular meetings, attendance 
at trade shows (which, during 2020 
have been largely virtual) and by 
maintaining close contact with them 
through our sales representatives. 
During 2020, we have maintained our 
relationships with our distributors 
and supported them wherever 
possible. Our distributors provide 
feedback on product suitability 
including in regions of the world such 
as the Middle East where there may 
be cultural sensitivities in the product 

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•  

• 

packaging and branding. Different 
regions may also call for particular 
colour mixes and shades and such 
feedback enables us to optimise and 
tailor products in these regions. The 
aim is to align the interests of the 
distributor with those of the Group.

 Suppliers
 Suppliers are visited at least annually 
and regular contact maintained at other 
times through trade shows, meetings 
and other close communications, which 
during 2020 have been largely virtual. 
The Group’s principal suppliers are 
made to feel part of the organisation 
with an open and honest dialogue 
encouraged so that feedback can be 
communicated and a rapid response 
provided. The Group has an ofﬁ ce in 
Hong Kong enabling more frequent 
visits and enhanced supplier contact. 
A strong relationship with the Group’s 
suppliers is vital to the long term 
success of the Company. 

 Employees 
 The Group places enormous 
importance on the contributions 
of its employees and aims to keep 
them informed of developments in 
the Group through a combination 
of meetings and electronic 
communication. The Group operates 
an open-door policy, everyone 
is known by name to the senior 
managers and executive directors 
with the Chief Executive Ofﬁ cer and 
the Managing Director engaging 
daily with employees across the 
business. Communication is 
encouraged both on an informal basis 
and through regular departmental 
meetings, where input from 
colleagues is welcomed in any area. 
Communication channels within the 
business are key and the open-door 
policy and regular meetings aid this. 

 Where practicable, consideration 
is given to ﬂ exible working and this 
was increasingly important during 
2020 to minimise the impact on our 
employees of the Covid-19 pandemic 
and lockdowns. Flexibility was offered 
wherever possible, with help with 
working from home and ﬂ exible 
working where practicable for mothers 
and fathers home schooling. All 
employees received 100% of their 
salaries when furloughed and safe 
working conditions were implemented. 
As always, the well-being of our staff is 
paramount and particularly so during 
the current climate. 

 Shareholders
 The means of engagement with 
shareholders is detailed in Principle 2 
above. 

 Community 
 Wherever possible we employ staff 
from the local area and encourage 
the use of car sharing and public 
transport to reduce the impact on 
local roads. We manage the times of 
our incoming and outgoing deliveries 
in order to limit any disturbance to 
residents in the local area. As a rule, 
we use local trade’s people for goods 
and services creating employment 
and income within the area. We often 
support local charities, including 
South Bucks Hospice and provide 
donations of our products for local 
school fairs and fetes, these requests 
coming via our local suppliers. 

•  

• 

• 

 Environment 
 The Group is focus ed on the 
environmental impact of its products 
and has removed all plastics from the 
outer packaging of its gifting and all 
year-round products, and has virtually 
eliminated the use of single use 
packaging in its products completely. 

The Group’s product packaging 
therefore uses paper and cardboard 
wherever practicable, which enables 
the Group, the wholesaler and end 
user to recycle the waste effectively. 
This means that the business 
consumes considerable amounts of 
paper and cardboard, and the Group 
utilises a regular recycling collection 
service. This programme will be 
extended to utilise sustainable or 
recycled packaging where feasible, 
and the Group aims to be a market 
leader in this area. In terms of the 
Group’s product casings, the use 
of plastic is sometimes practically 
unavoidable but recyclable packaging 
is used wherever possible. 

 All new W7 brand products are being 
manufactured without parabens and 
the Company is reformulating existing 
products where feasible. The Group 
aims to be paraben free for W7 in the 
next 24  to 36 months and Technic/
Badgequo products are already 
paraben free. 

 The environmental goals described 
above are embedded in the Group’s 
long term strategy.

 The Covid-19 pandemic necessarily 
resulted in a reduction of travel 
within the Group, with business 
being conducted with customers and 
others virtually, where practicable. 
This has had a positive impact on 
the Group with business and trading 
relationships improving as a result. 
Hence, travel, and particularly air 
travel, will be restricted in future with 
customer, supplier, management 
and employee meetings being held 
virtually where feasible. This will not 
detract from the need to hold face to 
face meetings where this is conducive 
to a more productive relationship. 

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Principle 4 - Embed effective risk 
management, considering both 
opportunities and threats, throughout 
the organisation

The Company 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.

Internal Control and Risk Management
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 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. 

The assessment and management 
of risk is primarily the function of the 
executive ofﬁ cers, most speciﬁ cally the 
Chief Executive Ofﬁ cer for strategic and 
business risk and the Chief Financial 
Ofﬁ cer for ﬁ nancial risk. The Group 
maintains a formal risk register which 
is reviewed periodically and, where 
appropriate, matters of risk are referred 
to the board for consideration. The 
principal risks identiﬁ ed by the board 
are set out in the Strategic Report on 
pages 2 0 to 2 1.

Principle 5 - Maintain the board as a 
well-functioning, balanced team led by 
the Chair 

Composition, Role and Responsibilities 
The board is responsible for the 
long-term success of the Company. This 
includes formulating, reviewing and 
approving the Group’s strategy, budgets, 
major items of capital expenditure 
and acquisitions and, reporting to the 
shareholders.

The board currently comprises of 
the Chairman, Clive Garston one 
non-executive director, Keith Sadler, 
and ﬁ ve executive directors, Sam Bazini, 
Eoin Macleod, Neil Rodol, Paul Hagon 
and Sally Craig, who is also the Company 
Secretary.

From 1 January 2020 the positions of 
the two joint Chief Executives were split, 
Sam Bazini remained as Chief Executive 
Ofﬁ cer and Eoin Macleod was appointed 
to the newly created position of Managing 
Director, reﬂ ecting his more operational 
focus. 

There were no changes to the 
responsibilities of the non-executive 
directors during the year to 31 December 
2020. However, as announced by the 
Company on 6 February 2020, Ward & 
Hagon Management Consulting LLP 
(“Ward & Hagon”) was appointed to 
provide additional strategic resource and 
to assist the Company in implementing 
its strategic growth plans. Paul Hagon, 
then a non-executive director, is a 
partner of Ward & Hagon and as part 
of the Ward & Hagon appointment, he 
fulﬁ lled the role of Interim Strategy 
and Business Development Director, a 
non-board role for an initial period of one 

year. During that period, he remained a 
non-executive member of the board, but 
was not independent. On 17 November 
2020, the Company announced its 
intention to renew the contract with 
Ward & Hagon for a further 12 months. 
As a result of this, Paul Hagon would 
no longer be a non-executive director 
and his position changed to that of 
an executive director with effect from 
1 January 2021, the effective date of the 
renewal of the Ward & Hagon contract. 
Although the UK Corporate Governance 
Code 2018 does not apply to the 
Company, under this code the Chairman 
would not be deemed independent 
and the board has therefore decided 
that only the non-executive director, 
Keith Sadler, is presently independent. 
No single director is dominant in the 
decision-making process. 

The Company has commenced a 
search for an additional independent 
non-executive director and hopes to 
make this appointment in the ﬁ rst half of 
2021. Subject to this, the board considers 
its composition to be appropriate at this 
stage of the Company’s development, but 
this remains constantly under review as 
the Group grows in size. At this stage in 
the Company’s development the board 
does not consider that having a senior 
independent director is appropriate, but 
this will also remain under review.

Board Operation 
There is a formal schedule of matters 
reserved to the board for its decision. 
These include formulating, reviewing and 
approving the Group’s strategy, budgets, 
major items of capital expenditure 
and acquisitions, and reporting to the 
shareholders. 

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Corporate Governance Report (continued)

The board aims to meet ten times each year for regular board meetings, which are scheduled prior to the commencement of each 
ﬁ nancial year. These meetings are scheduled to coincide with the announcement of the Company’s annual and half yearly accounts 
and throughout the remainder of the year at regular monthly intervals. These are supplemented by additional meetings where 
required for business including informal business reviews, to review budgets and focus on strategy. Dialogue occurs regularly 
between directors outside of scheduled meetings. 

A formal agenda is produced for each meeting and for in person board meetings which includes the 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 to board and committee members in advance to allow directors adequate 
time for consideration. Any speciﬁ c actions arising from such meetings are agreed by the board or relevant committee, circulated 
after the relevant meeting by the Company Secretary and then followed up by the Company’s management. 

Board Meetings
The board met 16 times during the ﬁ nancial year ended 31 December 2020, with two in person board meetings and 14 virtual board 
meetings. 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 its 
subsidiary Retra, providing the board an opportunity to meet with its senior management and be involved with the business of the 
wider Group. The on-site Retra board meeting did not take place in 2020, primarily due to the Covid-19 restrictions. In addition, the 
board held a focused, dedicated meeting on strategy on 27 January 2020 and intends to schedule similar meetings annually. The 
strategy meeting for 2021, was held on 8 February 2021.

In the event that directors are unable to attend a meeting, their comments on papers submitted may be discussed in advance with 
the Chairman enabling their contribution to be included in the wider board discussion.

Board and Committee Meeting attendance for the year ended 31 December 2020
The following table shows directors’ attendance at all board and committee meetings during the year.

Clive Garston 
Sam Bazini  
Eoin Macleod  
Neil Rodol 
Sally Craig  
Paul Hagon 
Keith Sadler 

Board 
16/16 
16/16 
16/16 
16/16 
16/16 
16/16 
16/16 

Audit 
2/2 
n/a 
n/a 
n/a 
n/a 
2/2 
2/2 

Remuneration 
2/2 
n/a 
n/a 
n/a 
n/a 
1/2 
2/2 

Insider
1/1
1/1
n/a
1/1
n/a
n/a
n/a

The following directors are each required to commit at least the following number of days per week to their roles: The Chief 
Executive Ofﬁ cer and Managing Director, ﬁ ve days; the Chief Financial Ofﬁ cer, four days and the General Counsel & Company 
Secretary, three days (26 hours). Paul Hagon, executive director, and the non-executive directors are required to provide such time 
as is required to fully and diligently perform their duties. All board members are expected to attend all meetings of the board and 
the committees on which they sit, wherever possible.

Board Rotation 
The Articles of Association of the Company (the “Articles”) require that one-third of the directors must stand for re-election by 
shareholders annually in rotation and that any new directors appointed during the year must stand for re-election at the AGM 
immediately following their appointment. Directors are required to seek re-election once every three years.

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Principle 6 - Ensure that between 
them the Directors have the necessary 
up-to-date experience, skills and 
capabilities

The board retains a range of ﬁ nancial, 
commercial and entrepreneurial 
experience and there is a good balance 
of skills, independence, diversity and 
knowledge of both the Company and the 
sectors in which it operates including 
cosmetics, retailing, ﬁ nance and 
computing, innovation, international 
trading, e-commerce, marketing and 
public markets. The non-executive 
director has been appointed on merit and 
for his speciﬁ c areas of expertise and 
knowledge. This enables him to bring 
independent judgement on issues of 
strategy and performance and to debate 
matters constructively. The appointment 
of an additional non-executive director 
will be made upon the same grounds. 

The biographies of each of the directors, 
including the committees on which they 
serve and chair, are shown on pages 2 3 
to 2 4.

The skills brought to the board are as 
follows:

Clive Garston (Chairman)
Corporate ﬁ nance, legal, public 
companies and markets, corporate 
governance
Sam Bazini (Chief Executive Ofﬁ cer)
Co-Founder of W7, entrepreneurship, 
industry knowledge and experience
Eoin Macleod (Managing Director)
Co-Founder of W7, entrepreneurship, 
industry knowledge and experience
Neil Rodol (Chief Finance Ofﬁ cer)
Financial skills, industry and public 
company experience

Sally Craig (General Counsel & Company 
Secretary)
Legal, company secretarial and public 
company experience
Paul Hagon (Executive Director)
Retail and wholesale business experience 
and strategic planning 
Keith Sadler (Non-Executive Director)
Financial skills, communications and 
public company experience

Directors attend seminars and other 
regulatory and trade events where 
appropriate to ensure that their 
knowledge and industry sector contacts 
remain  current.

External and Internal Advice
The board seeks external advice from 
time to time to enable it to effectively 
perform its duties including from its 
lawyers, accountants, nominated adviser 
and corporate broker, ﬁ nancial PR 
advisers and insurance brokers. During 
the ﬁ nancial year ended 31 December 
2020, advice was provided by BDO LLP 
in connection with the introduction in 
May 2020, of the Warpaint London plc 
Company Share Option Plan. 

All directors have access to the advice 
and services of the General Counsel & 
Company Secretary, who is responsible 
for ensuring that board procedures are 
followed and that the Company complies 
with applicable rules, regulations and 
obligations. 

Principle 7 - Evaluate board 
performance based on clear and 
relevant objectives, seeking continuous 
improvement

The Group’s performance is reported 
monthly against headline performance 
and agreed budgets and reviewed by the 

board (as a minimum) at each monthly 
board meeting. The board challenges 
the executive directors and senior 
management on performance against 
budgets, forecasts and key business 
milestones. The board have adopted a set 
of KPI’s against which the performance 
of the Company and therefore the board, 
can be measured.

The Company remains at a relatively 
early stage in its development as a 
quoted company and is yet to adopt a 
formal performance evaluation procedure 
for the board and directors individually. 
This will remain under review and the 
board will consider the implementation 
of performance evaluations facilitated 
by external advisers for the board, both 
individually and as a group, to ensure 
the efﬁ cient and productive operation 
of the board. As the business of the 
Group grows, the expertise required 
at management level is expanded 
and developed although there are no 
prescribed procedures for succession 
planning at board level.

Principle 8 - Promote a corporate 
culture that is based on ethical values 
and behaviours

The board maintains a corporate culture 
consistent with the Group’s strategic 
objectives which aims to promote an 
ethical and responsible business. 

The corporate culture is monitored by the 
Chief Executive Ofﬁ cer who appraises the 
board of any issues arising. The culture 
is implemented through a number of 
policies on Anti-Bribery, Whistleblowing 
and Modern Slavery. These policies, along 
with the Group’s approach to employees 
and equal opportunities, the environment, 
product testing, manufacture and 

31

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Corporate Governance Report (continued)

materials and charitable causes are 
regularly reviewed, and are described 
below:

•  Anti-Bribery 

 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.

•  Whistleblowing 

 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.

• 

 Modern Slavery and Human 
Trafﬁ cking 
 The Group has relationships with 
businesses around the world and 
is opposed to modern slavery and 
human trafﬁ cking wherever it may 
occur. The Group’s processes and 
supply chains are examined and 
reviewed at least annually to ensure 
that slavery and human trafﬁ cking 
are prevented in its business and 
supply chains. Compliance with 
the Modern Slavery Act 2015 or 
equivalent anti-slavery, human 
trafﬁ cking laws are mandatory in 
all supply contracts. The Group’s 
statement pursuant to the Modern 
Slavery Act 2015 which contains 
further information, is available at 
www.warpaintlondonplc.com

•  Employees and Equal Opportunities

•  Environment

 The well-being of our staff is 
paramount and particularly so during 
2020 where it was vital to minimise 
the impact on our employees of the 
Covid-19 pandemic and lockdowns. 
All employees received 100% of 
their salaries when furloughed 
and safe working conditions were 
implemented. Where practicable, 
assistance is given to ﬂ exible working 
and this was increasingly important in 
2020. Flexibility was offered wherever 
possible, with help with working from 
home and ﬂ exible working where 
practicable for mothers and fathers 
home schooling. 

 The Group has an extremely loyal 
work force with a low staff churn rate, 
promoting from within, offering staff 
mobility from the warehouse ﬂ oor to 
administrative roles and managerial 
positions. A reward structure is in 
place, which includes the grant of 
share options, enabling members of 
staff to participate in the growth of the 
Company, as appropriate. 

 Employee communication is 
encouraged throughout the Group 
both on an informal basis and 
through regular departmental 
meetings, where input from 
colleagues is welcomed in any area. 
Communication is key and the open-
door policy operated by the Group and 
regular meetings aid this. 

 The Group’s employment policy is 
set out in the Directors’ Report. At 
senior management level there are 
13 female managers and 9 male 
managers, excluding the board. 
Throughout the Group, the proportion 
of female to male employees is 
approximately 67% to 33%. 

 The Group is focus ed on the 
environmental impact of its products 
and has removed all plastics from the 
outer packaging of its gifting and all 
year-round products, and has virtually 
eliminated the use of single use 
packaging in its products completely. 
The Group’s product packaging 
therefore uses paper and cardboard 
wherever practicable, which enables 
the Group, the wholesaler and end 
user to recycle the waste effectively. 
This means that the business 
consumes considerable amounts of 
paper and cardboard, and the Group 
utilises a regular recycling collection 
service. This programme will be 
extended to utilise sustainable or 
recycled packaging where feasible, 
and the Group aims to be a market 
leader in this area. In terms of the 
Group’s product casings, the use 
of plastic is sometimes practically 
unavoidable but recyclable packaging 
is used wherever possible.

 All new W7 brand products are being 
manufactured without parabens and 
the Company is reformulating existing 
products where feasible. The Group 
aims to be paraben free for W7 in the 
next  24 to 36 months and Technic/
Badgequo products are already 
paraben free. 

 The Covid-19 pandemic necessarily 
resulted in a reduction of travel 
within the Group, with business 
being conducted with customers and 
others virtually, where practicable. 
This has had a positive impact on 
the Group with business and trading 
relationships improving as a result. 
Hence, travel, and particularly air 
travel, will be restricted in future with 
customer, supplier, management 

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and employee meetings being held 
virtually where feasible. This will not 
detract from the need to hold face to 
face meetings where this is conducive 
to a more productive relationship.

• 

 Product Testing, Manufacture and 
Materials
 The Group does not test any of its 
cosmetic products on animals and 
animal testing of cosmetics has been 
banned in Europe since 2013. The 
board is aware that in other parts of 
the world there is still a requirement 
to test on animals. Wherever and 
whenever the Group comes across 
this requirement and are given no 
choice, it withdraws from sales 
activity in the territory concerned. 
The board is keen for cruelty free 
alternatives to animal testing to 
become compulsory and animal 
testing overall to be ceased globally.

 Suppliers provide Good Manufacturing 
Practice  certiﬁ cates for all of the 
factories used in the manufacture of 
the Group’s goods. The Group’s main 
suppliers also produce for worldwide 
brands, and comfort is taken from 
the public ethical and sustainability 
stance around the world of these 
brands. The Group’s suppliers are 
encouraged to share with the Group 
the results of their BSCI and Sedex 
audits when they have taken place.

 Heavy metals such as TBTO 
(preservative) and other ingredients of 
concern are not added to the Group’s 
colour cosmetic products and we 
ensure all raw materials comply with 
the strict regulations applicable in the 
EU, USA and Canada.

•  Charitable Causes

 Along with local charities and events, 
the Company supports a number 
of national charities. We invite our 
employees to choose charities and 
events that are close to their hearts 
and we collaborate with them. These 
events are often put out on our social 
media and are linked to the charity to 
raise their proﬁ le. In 2020 the number 
of charity events available to support 
was fewer than in previous years, but 
the Group supported several local 
charities and Save The Children - 
Christmas Jumper Day, nationally. 
A number of Retra employees will 
be participating in the Yorkshire 
Marathon in the coming year, raising 
funds for a local hospice.

Principle 9 - Maintain governance 
structures and processes that are 
fit for purpose and support good 
decision-making by the  board

The Group’s governance structures 
have been reviewed in the light of the 
QCA Code. The board believes them to 
be in accordance with best practice as 
adapted to best comply with the Group’s 
circumstances and stage of development. 

The board has overall responsibility for 
implementing the Group’s strategy and 
promoting the long term success of 
the Group. The executive directors have 
overall responsibility for managing the 
day to day operational, commercial and 
ﬁ nancial activities. The non-executive 
directors are responsible for bringing 
independent and objective judgement to 
board decisions. 

The board is responsible for the 
long-term success of the Company. 
There is a formal schedule of matters 

reserved to the board for its decision. 
These include formulating, reviewing and 
approving the Group’s strategy, budgets, 
major items of capital expenditure 
and acquisitions, and reporting to the 
shareholders.

The board aims to meet ten times 
each year for regular board meetings, 
which are scheduled prior to the 
commencement of each ﬁ nancial 
year. These meetings are scheduled 
to coincide with the announcement of 
the Company’s annual and half yearly 
accounts and throughout the remainder 
of the year at regular monthly intervals. 
These are supplemented by additional 
meetings where required for business 
including informal business reviews, to 
review budgets and focus on strategy. 
Dialogue occurs regularly between 
directors outside of scheduled meetings.

A formal agenda is produced for each 
meeting and for in person board 
meetings which includes the 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 to board and committee 
members in advance to allow directors 
adequate time for consideration. Any 
speciﬁ c actions arising from such 
meetings are agreed by the board or 
relevant Committee, circulated after 
the relevant meeting by the Company 
Secretary and then followed up by the 
Company’s management.

At each meeting the board considers 
directors’ conﬂ icts of interest. The 
Company’s Articles provide for the board 
to authorise any actual or potential 
conﬂ icts of interest. 

33

 
 
 
 
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Corporate Governance Report (continued)

The business reports monthly on its 
headline performance against its agreed 
budget, and the board reviews the 
monthly update on performance and 
any signiﬁ cant variances are reviewed 
at each scheduled meeting. The board 
challenges the executive directors and 
senior management on performance 
against budgets, forecasts and key 
business milestones. Monthly updates 
on performance are reviewed at each 
formal board meeting. The board have 
adopted a set of KPI’s against which 
the performance of the Company and 
therefore the board, can be measured.

Roles of the Chairman, Chief Executive 
Officer, Managing Director, Chief 
Financial Officer and General Counsel 
& Company Secretary
The Chairman is responsible for running 
the business of the board and for 
ensuring appropriate strategic focus and 
direction. The Chief Executive Ofﬁ cer is 
primarily responsible for implementing 
and driving the Group strategy once it 
has been approved, investor relations 
and overseeing the management of the 
Company through the executive team. 
The Managing Director is responsible for 
driving sales operations and proﬁ tability. 

The Chief Financial Ofﬁ cer works closely 
with the Chief Executive Ofﬁ cer and 
Managing Director and is responsible 
for all the ﬁ nancial affairs of the Group. 
In particular, the oversight of cash 
ﬂ ow, the provision of monthly ﬁ nancial 
information to the board, control of 
working capital, overseeing the audit 
and preparation of all Group company 
statutory accounts and consolidated 
Interim Statements along with the 
overall ﬁ nancial management of the 
Group and its processes. The executive 
ofﬁ cers are responsible for formulation 
of the Group strategy for submission to 
the board, the day-to-day management 
of the Group’s businesses and its overall 
trading, operational and ﬁ nancial 

performance in fulﬁ lment of that 
strategy, as well as plans and budgets to 
be approved by the board of directors. 

are set up by the board to consider speciﬁ c 
issues when the need arises. 

The General Counsel & Company 
Secretary is responsible for the 
oversight of legal issues and regulatory 
compliance along with executive share 
schemes, investor queries, insurances 
and policy implementation. In addition, 
she assists the Chairman and other 
committee chairs in ensuring all 
meetings of the board and committees 
are informed and effective.

Audit, Remuneration and Insider 
Committees
The board has established the Audit 
Committee, Remuneration Committee 
and Insider Committee with formally 
delegated duties and responsibilities and 
with written terms of reference. The full 
terms of reference of each committee 
are available from the Company’s 
website at www.warpaintlondon.com

The Audit Committee and the 
Remuneration Committee each comprises 
two non-executive directors: Keith Sadler 
(Chair) and Clive Garston. During the year 
ended 31 December 2020, Paul Hagon was 
a member of both committees but stepped 
down as Chairman of the Remuneration 
Committee. He subsequently ceased 
to be a member of these committees 
on becoming an executive director with 
effect from 1 January 2021. The new 
non-executive director, proposed to 
be appointed will become a member 
of both the Audit Committee and the 
Remuneration Committee. The Insider 
Committee comprises one non-executive 
director and two executive directors: Clive 
Garston (Chair), Sam Bazini and Neil Rodol. 

During the ﬁ nancial year ended 
31 December 2020, the Audit Committee 
met twice, the Remuneration Committee 
twice and the Insider Committee met once. 
From time to time separate committees 

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. 
In November 2020 the board formed 
an ad hoc nomination subcommittee 
comprising of Keith Sadler (Chair), 
Sam Bazini and Clive Garston, to identify 
and make a recommendation to the board 
for a candidate for a new non-executive 
director. 

Principle 10 - Communicate how 
the Company is governed and is 
performing by maintaining a dialogue 
with shareholders and other relevant 
stakeholders

The Company’s principal means of 
communication with shareholders is 
through the Annual Report and Financial 
Statements, the full-year and half-year 
announcements and the AGM. 

The board recognises that the AGM 
is an important opportunity to meet 
private shareholders. Each substantially 
separate issue is the subject of a 
separate resolution at the AGM and all 
shareholders have the opportunity to 
put questions to the board. All board 
directors endeavour to attend AGMs and 
answer questions put to them which 
may be relevant to their responsibilities. 
In addition, the directors are available 
to listen informally to the views of 
shareholders immediately following 
the AGM. For each vote, the number 
of proxy votes received for, against 
and withheld is announced at the 
meeting. The results of the AGM are 
published on the Company’s corporate 
website. In the light of the public health 
restrictions associated with Covid-19, 
this was not be possible for the 2020 

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AGM. This will remain under review 
for the 2021 AGM which will be held in 
line with best practice and government 
guidelines.

The board receives regular updates 
on the views of shareholders through 
brieﬁ ngs and reports from the executive 
directors, the Company’s brokers and 
PR advisers. The Chief Executive Ofﬁ cer, 
the Managing Director and the Chief 
Financial Ofﬁ cer make presentations 
to institutional shareholders and 
participate in Investor Road Shows 
both following the announcement of 
the full-year and half-year results and, 
at other times throughout the year. 
Not every executive ofﬁ cer participates 
in every investor presentation. The 
Chairman will participate in these 
presentations in future where 
appropriate and is always available to 
speak with shareholders. 

Dialogue with individual institutional 
shareholders also takes place in order 
to understand and work with these 
investors to seek to comply with their 
investor principles where practicable.

Investor queries may be addressed 
to the Company Secretary at 
investors@warpaintlondonplc.com 
A range of corporate information 
(including all Company announcements) 
is also available to shareholders, 
investors and the public on the 
Company’s corporate website 
www.warpaintlondon.com

The Company’s means of communicating 
with its other stakeholders are set out on 
pages 27 and 28.

The Reports of the Audit Committee and 
the Remuneration Committee can be 
found on pages  38 and  40 and describe the 
responsibilities of those committees and 
the work undertaken throughout the year.

35

 
Warpaint London P LC

 Section 172 Statement

Section 172 Companies Act 2006 
The directors are well aware of their 
duty under section 172 of the Companies 
Act 2006 to act in the way which they 
consider, in good faith, would be most 
likely to promote the success of the 
Company for the beneﬁ t of its members 
as a whole, and in doing so have regard 
(amongst other matters) to:

can only prosper over the long term if 
it understands and respects the views 
and needs of its customers, distributors, 
employees, suppliers and the wider 
community in which it operates. A ﬁ rm 
understanding of investor needs is also 
vital to the Company’s success along 
with a sustainable and environmentally 
responsible culture.

• 

• 

• 

• 

• 

• 

 the likely consequences of any 
decision in the long term;
 the interests of the Company’s 
employees;
 the need to foster the Company’s 
business relationships with suppliers, 
customers and others;
 the impact of the Company’s 
operations on the community and the 
environment;
  the desirability of the Company 
maintaining a reputation for high 
standards of business conduct, and
 the need to act fairly as between 
members of the Company

The board always takes decisions for 
the long term, and collectively and 
individually aims to uphold the highest 
standards of conduct. Similarly, the 
board understands that the Company 

The directors are fully aware of their 
responsibilities to promote the success 
of the Company in accordance with 
Section 172 of the Companies Act 
2006. An in-depth review of these 
responsibilities and how the Company 
engages with its stakeholders was 
considered at the Company’s board 
meeting on 3 April 2020. The text of 
Section 172 of the Companies Act 2006 
has subsequently been set out by the 
General Counsel & Company Secretary 
on each main board agenda by way of a 
reminder. 

Relations with shareholders are detailed 
on pages 26 and 27, and  34 and 3 5. 
Relations with other key stakeholders 
such as employees, distributors, 
customers and suppliers are considered 
in more detail on pages  44 and  46.

 The board ensures that the 
requirements are met, and the interests 
of stakeholders are considered as 
referred to elsewhere in this report and 
through a combination of the following:

• 

• 

• 

• 

 A rolling agenda of matters to be 
considered by the board through 
the year, which includes an annual 
strategy review meeting, where the 
strategic plan for the following year 
is developed, which is implemented 
and supported by a budget and a 
medium term (three year) ﬁ nancial 
plan.
 Standing agenda points and papers 
presented at each board meeting, 
which report on customers, 
employees and other colleagues, 
health and safety matters and 
investors.
 A review of certain of these topics 
through the Audit Committee and the 
Remuneration Committee agenda 
items referred to in this report.
 Detailed consideration is given to of 
any of these factors where they are 
relevant to any major decisions taken 
by the board during the year. 

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Annual  Report 2020

 Key board decisions taken during the year ended 31 December 2020, all of which have long term implications for the ultimate 
success of the Company, and the Section 172 and stakeholder considerations are set out below.

Key Board Decision

Section 172 and Stakeholder Consideration

Review in January 2020 of the Group’s three-year Strategic Plan and 
the update of KPIs

In order to minimise the impact of Covid-19 and support the Group’s 
employees, the determination that all employees should receive 100% 
of their salaries when furloughed. Safe working conditions for 
employees and colleagues were implemented throughout to safeguard 
their safety and wellbeing and ﬂ exible working arrangements were 
offered where practicable, to support staff in the changes to family 
arrangements such as home schooling. 

This is aimed at optimising and promoting the success of the Company 
in the long term, whilst providing measures for success, both vital for 
the beneﬁ t of members and stakeholders

Together, these actions and decisions were aimed at protecting 
employees and supporting them through the uncertainty of Covid-19. 

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The accelerated development of the online business to support sales 
whilst “bricks and mortar” stores were in lockdown due to Covid-19, 
and the drive of sales in retail outlets, including Tesco and  wilko, which 
remained open throughout lockdowns.

These actions were important to optimise and develop the Group’s 
business during the uncertain period of the Covid-19 lockdowns, 
preserving and enhancing the Group’s business whilst driving the 
Group’s strategic plan for the beneﬁ t of members. 

Strong engagement with customers, suppliers and colleagues was 
maintained via virtual means to ensure that these relationships were 
not only unaffected but, in many cases, thrived through the Covid-19 
pandemic

For customers and suppliers, it was important to sustain these 
important relationships, maintaining and enhancing the Company’s 
high standards of business conduct and to support the Group’s 
employees through the uncertainty of Covid 19. 

The decision to extend credit terms and payment plans with certain 
customers during the year, whilst closely monitoring these situations to 
manage the risk to the business

This enabled the Company to assist customers who were impacted 
by the Covid-19 restrictions and thereby maintaining good business 
conduct and supporting these customers. This decision was carefully 
managed to ensure that any risk to the business was minimised.

The implementation of the Warpaint London plc Company Share Option 
Plan in May 2020 and the grant of options thereunder to Group 
employees 

This was implemented to incentivise the Group’s employees, rewarding 
their loyalty and success, whilst also contributing to the growth of the 
business and thereby enhancing shareholder value over the long term.

The drive the ensure that the Retra Gift offering for 2021 will be the ﬁ rst 
range to be as plastic free as possible. Implementation of plans for 
products to be paraben free ahead of the legally required date. The 
decision to restrict travel (particularly air travel) in future and to 
conduct business virtually where practicable.

To reduce the impact of the Company’s operations on the environment.

The decision to declare an interim dividend in September to continue 
with the Company’s declared dividend policy and an enhanced interim 
dividend to take account of the Company’s ﬁ nancial position and given 
that the ﬁ nal 2019 dividend was cancelled. 

To reward all shareholders whilst protecting the long-term value of the 
Company with a prudent dividend payment of 2.8p in total (comprising 
a 1.5p interim dividend and a 1.3p enhanced interim dividend 
respectively).

The decision made in November to renew the contract with Ward & 
Hagon Management Consultancy LLP, to provide continued strategic 
resource particularly to access new retail channels with a view to 
further growing UK market share and developing the USA business.

This appointment will impact employees, customers and suppliers 
and maintain and enhance the Company’s high standards of business 
conduct and drive the Group’s strategic plan for the beneﬁ t of 
members.

37

Warpaint London P LC

Audit Committee Report

 Keith Sadler 

On behalf of the board, I am pleased to 
present the Audit Committee Report for 
the year ended 31 December 2020. 

number of public limited companies in 
ﬁ nance roles including as chief ﬁ nancial 
ofﬁ cer, group ﬁ nance director and 
treasurer.

The full terms of reference for the 
Committee can be found on the Company’s 
website at www.warpaintlondonplc.com 

The Audit Committee is responsible 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.

During the year, the Committee consisted 
of three non-executive directors: me (as 
Chairman), Clive Garston and Paul Hagon. 
Paul Hagon subsequently stepped down 
as a member with effect from 1 January 
2021 upon becoming an executive director. 
The Audit Committee is convened as 
required and met two times during the 
year ended 31 December 2020 to discharge 
its responsibilities inter alia in connection 
with the Group’s Financial Statements 
for the year ended 31 December 2019 
and the Interim Financial Statements 
for the six months ended 30 June 2020. 
A further planning meeting took place 
with the external auditor BDO LLP during 
the year. The Chief Financial Ofﬁ cer and 
the external auditor normally attend 
Committee meetings. The Committee 
met with the external auditor without 
management present during the year.

• 

• 

• 

• 

• 

The board is satisﬁ ed that I, as Chairman 
of the Committee, have recent and 
relevant ﬁ nancial experience. I am a 
Chartered Accountant and, over the past 
25 years have served on the board of a 

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:
• 

 Monitor the integrity of the Group’s 
ﬁ nancial statements and other 
statements and announcements 
relating to its ﬁ nancial performance, 
reviewing and challenging the 
methodology and assumptions used 
where necessary;
 Consider the Group’s accounting 
policies and practices along with its 
application of accounting standards 
and signiﬁ cant judgements;
 Review the effectiveness of the Group’s 
system of internal controls, including 
ﬁ nancial reporting and controls and 
risk management systems;
 Review the adequacy and security of 
the Group’s procedures and controls 
for whistleblowing; the detection of 
fraud and the prevention of bribery;
 Consider and make recommendations 
to the board on the appointment, 
reappointment, removal or resignation 
and remuneration of the external 
auditor; and
 Oversee the relationship with the 
Group’s external auditor including 
consideration of the objectivity and 
independence of the external audit 
process.

Key Activities during the Year 
During the year ended 31 December 2020, 
the Audit Committee has:
• 

 Reviewed and discussed with the 
external auditor the key accounting 
considerations, estimates and 
judgements reﬂ ected in the Group’s 
interim results for the six-month 
period ended 30 June 2020;
 Reviewed and agreed the external 
auditors audit strategy memorandum 
in advance of its audit for the year 
ended 31 December 2020, including 
a statement on it independence and 
objectivity;
 Agreed the terms of engagement and 
fees to be paid to the external auditor 
for the audit of the 2020 ﬁ nancial 
statements;
 Received and reviewed statements 
from management regarding 
their approach to key accounting 
considerations, estimates and 
judgements in the ﬁ nancial statements 
for the year ended 31 December 2020;
 Discussed the report received from 
the external auditor regarding its 
audit in respect of the year ended 
31 December 2020;
 Reviewed the half-year and full-year 
ﬁ nancial statements; and 
 Reviewed and approved the 
Group’s viability/going concern 
statement, including the approach 
and assumptions taken, giving 
consideration to key risks.

• 

• 

• 

• 

• 

• 

338

Annual  Report 2020

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External auditor
BDO LLP was appointed by the board as 
the Company’s external auditor on 26 June 
2020 for the 2020 reporting period and it is 
their intention to put themselves 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.

The Group paid £149,000 to BDO for audit 
services in 2020, 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 £29,000 to BDO in 
2020, for advice in relation to the adoption 
of a Company Share Option Scheme, tax 
advice and interim reviews.

Committee performance and 
effectiveness
The Company is at a relatively early stage 
in its development and is yet to adopt a 
formal performance evaluation procedure 
for the board, its committees and directors 
individually. 

Audit Committee Report
This Audit Committee Report was reviewed 
and approved by the board on 27 April 2021. 

Keith Sadler
Audit Committee Chairman 
27 April 2021

39

Warpaint London P LC

Remuneration Committee Report

Keith Sadler 

On behalf of the board, I am pleased to present the Remuneration Committee Report for the year ended 31 December 2020. 

The main objectives of the Remuneration Committee are to develop and implement compensation packages designed to attract 
and retain staff, creating opportunities for senior management and employees to participate in share option schemes and develop 
bonus arrangements which reward performance and incentivise employees, thus increasing shareholder value over the long term.

The Remuneration Committee 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 cer) 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.

In the year to 31 December 2020, the Remuneration Committee consisted of three non-executive directors: me (as Chairman), Clive 
Garston and Paul Hagon. Paul Hagon subsequently stepped down as a member with effect from 1 January 2021 upon becoming an 
executive director. The Remuneration Committee is convened not less than twice a year and otherwise as required. The Committee 
met two times during the year ended 31 December 2020. 

The full terms of reference for the Committee can be found on the Company’s website at www.warpaintlondonplc.com

Key Activities during the Year 
During the year ended 31 December 2020, the Remuneration Committee:

• 

• 

 Recommended the introduction in May 2020, of the Warpaint London plc Company Share Option Plan (“CSOP”) in which all 
Group employees and certain executive directors are entitled to participate. The CSOP has been established to incentivise 
employees, reward success and increase shareholder value over the long term. 
 Reviewed the salary and bonus proposals for the executive directors and senior management at or above the committee’s 
review threshold together with the director’s fee payable to Paul Hagon under his revised appointment letter effective from 
1 January 2021. Paul Hagon was not present at the review meeting as his salary was one of the subjects of the review and, at the 
date of the meeting, Paul was moving towards his role as an executive director. 

External Advice
The Remuneration Committee was assisted in meeting its responsibilities in relation to the recommendation of the CSOP by 
BDO LLP. In the year to 31 December 2020 BDO LLP received fees of £9,000 for this advice. The Remuneration Committee is 
satisﬁ ed that the advice it receives from BDO LLP is objective and independent.

Directors Remuneration Policy
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.

340

Annual  Report 2020

Directors’ Remuneration for the year ended 31 December 2020

S Bazini

E Macleod 

N Rodol

S Craig 

C Garston

P Hagon

K Sadler

Salary

Pension

Benefits

200,000

200,000

150,000

52,500

60,000

40,000

40,000

–

–

1,314

1,314 

–

–

–

9,773

7,818

–

– 

–

–

– 

Bonus

30,000

30,000

30,000

5,000

–

–

–

Total 
Remuneration 
2020 £

Fair Value of 
Options
£

Total 
Remuneration 
2019 £

239,773

237,818

181,314

58,814

60,000

40,000

40,000

1,749,884

1,749,884

441,553

10,800

–

–

–

208,960

206,952

151,188

51,188

60,000

40,000

40,000

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Directors’ interests in share options for year ended 31 December 2020
As at 31 December 2020 the following directors held the following performance related share awards (Enterprise Management 
Incentive Scheme Options, LTIPs or CSOPs) over ordinary shares of 25p each under the Warpaint London plc Enterprise Management 
Incentive Scheme, the Long Term Incentive Plan and the Warpaint London plc Company Share Option Plan. For details of the share 
option schemes see Note 22 on  pages  75 to  76.

Type of Share 
Award

LTIP

LTIP

EMI

LTIP

EMI

CSOP

–

–

–

Date of Grant

21.09.2018

21.09.2018

29.06.2017

21.09.2018

29.06.2017

20.05.2020

–

–

–

Number of 
Shares at 
31 December 
2020

1,534,986

1,534,986

105,262

306,996

10,000

10,000

–

–

–

Exercise Price

254.5p

254.5p

237.5p

254.5p

237.5p

49.5P

–

–

–

Number of 
Shares at 31 
December 
2019 (or date of 
appointment if 
later)

1,534,986

1,534,986

105,262

306,996

10,000

–

–

–

–

End of 
Performance 
Period/First 
Exercise Date

31 Dec 2022

31 Dec 2022

29 June 2020

31 Dec 2022

29 June 2020

20 May 2020

–

–

–

S Bazini

E Macleod 

N Rodol

S Craig 

P Hagon

C Garston

K Sadler

41

Warpaint London P LC

Remuneration Committee Report (continued)

The directors, who held ofﬁ ce at 31 December 2020, had the following interests in the ordinary shares of 25p each in the capital of the 
Company:

Number of share options 
held at 31 December 
2020(c)

Number of 
Ordinary Shares held 
at 31 December 2020

Ordinary Shares as % of 
issued share capital 

Number of 
Ordinary Shares held 
at 31 December 2019

1,534,986

1,534,986

412,258

20,000

–

–

–

15,195,208

15,195,208

103,961

–

31,145

126,315

31,145

19.80

19.80

0.14

–

0.04

0.16

0.04

15,195,208

15,195,208

103,961

–

31,145

126,315

31,145

S Bazini(a)

E Macleod(b)

N Rodol

S Craig

P Hagon

C Garston

K Sadler

In addition to the above holdings:
(a)  4,250,000 (2019: 4,250,000) shares are held by the wife of S Bazini
(b)  4,250,000 (2018: 4,250,000) shares are held by the wife of E Macleod
(c)  For details of the share option schemes see Note 22 on  pages  75 to  76 .

On 20 January 2021, Keith Sadler sold 10,526 ordinary shares of 25p each in the Company at a price of 90.10p per ordinary Share and 
acquired the same number of ordinary Shares in his ISA for 93.15p per ordinary share. As a result of the transfer, Keith’s holding 
remained unchanged at 31,145 ordinary shares. Save as mentioned above, there were no changes in the shareholdings of the directors 
between 31 December 2020 and the date of this report.

Service Contracts and non-executive directors’ Letters of Appointment
The executive directors have rolling contracts that are terminable on 12 months’ notice, in the case of Sam Bazini and Eoin Macleod 
(the Chief Executive Ofﬁ cer and the Managing Director) and 6 months’ notice, in the case of Neil Rodol (Chief Financial Ofﬁ cer) and 
Sally Craig (General Counsel & Company Secretary). Paul Hagon (executive director), Clive Garston (Chairman) and Keith Sadler, 
(non-executive director) have each entered into a letter of appointment which is terminable on three months’ notice. 

Shareholder Approval of Directors’ Remuneration Report
Shareholders are asked to approve this directors’ Remuneration Report (excluding the directors’ Remuneration Policy) for the year 
ended 31 December 2020 at the forthcoming Annual General Meeting. This resolution is advisory in nature.

Keith Sadler
Remuneration Committee Chairman 
27 April 2021

342

 
Annual  Report 2020

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 2020. The Corporate Governance statements on pages 2 3 to  46  form part of this report.

Going concern
The Company’s going concern statement can be found in the Consolidated Financial Statements on pages  58  to  59 . 

Results and dividends
The directors recommend a ﬁ nal dividend of 3.0 pence per ordinary share to be paid on 5 July 2021 for the year ended 31 December 
2020 which, when added to the interim dividend of 2.8 pence per share gives a total dividend for the year of 5.8 pence per share. In the 
year ended 31 December 2019 the ﬁ nal dividend per ordinary share was nil pence per share and the interim dividend 1.5 pence per 
share, giving a total dividend for the year ended 31 December 2019 of 1.5 pence per share.

Directors
The following directors who held ofﬁ ce during the year and to the date of authorisation of the accounts are as follows:

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Non-executive chairman
C Garston 

Executive directors
S Bazini 
E Macleod
N Rodol 
S Craig 
P Hagon*

Non-executive director
K Sadler

*  During the ﬁ nancial year ended 31 December 2020, Paul Hagon was a non-executive director. He became an executive director with 

effect from 1 January 2021.

In accordance with the Company’s Articles of Association Eoin Macleod and Keith Sadler will retire and stand for re-election at the 
forthcoming Annual General Meeting.

Likely Future developments
Details of the Group’s future developments are contained in the Strategic report set out on pages 3 to 2 1.

Substantial shareholdings
The Group is aware of the following shareholdings of 3% or more in the share capital as at 31 December 2020:

Shareholder 
S Bazini (including connected parties) 
E Macleod (including connected parties) 
Schroders plc 

Number of Shares 
19,445,208 
19,445,208 
10,941,410 

%
25.34
25.34
14.26

Financial instruments
The Group’s ﬁ nancial risk management objectives and policies are discussed in Note 24 to the Consolidated Financial Statements on 
pages  77 to  81.

43

Warpaint London P LC

Directors’ Report (continued)

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.

Indemnity of Directors
The Company has purchased and 
maintained directors’ and ofﬁ cers’ liability 
insurance for the board.

Directors’ Responsibilities
The directors are responsible for 
preparing the annual report and the 
ﬁ nancial statements in accordance with 
applicable law and regulations.
Company law requires the directors 
to prepare ﬁ nancial statements for 
each ﬁ nancial year. Under that law the 
directors have elected to prepare the 
Group ﬁ nancial statements in accordance 
with international accounting standards 
in conformity with the requirements 
of the Companies Act 2006 (IFRSs), 
and the Company ﬁ nancial statements 
in accordance with 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). 
Under company law the directors must not 
approve the 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 Company and of the proﬁ t or loss of 
the Group and Company for that period. 
The directors are also required to prepare 
ﬁ nancial statements in accordance with 
the rules of the London Stock Exchange 
for companies trading securities on AIM.

In preparing these ﬁ nancial statements, 
the directors are required to:

to the ongoing integrity of the ﬁ nancial 
statements contained therein.

• 

• 

• 

• 

 select suitable accounting policies and 
then apply them consistently;
 make judgements and accounting 
estimates that are reasonable and 
prudent;
 state whether they have been 
prepared in accordance with IFRSs or 
United Kingdom Generally Accepted 
Accounting Practice;
 prepare the ﬁ nancial statements on 
the going concern basis unless it is 
inappropriate to presume that the 
Company will continue in business.

The directors are responsible for keeping 
adequate accounting records that are 
sufﬁ cient to show and explain the Group 
and Company’s transactions and disclose 
with reasonable accuracy at any time the 
ﬁ nancial position of the Group and the 
Company and enable them to ensure that 
the ﬁ nancial statements comply with the 
requirements of the Companies Act 2006. 
They are also responsible for safeguarding 
the assets of the Group and the Company 
and hence for taking reasonable steps for 
the prevention and detection of fraud and 
other irregularities.

Website publication
The directors are responsible for 
ensuring the annual report and the 
ﬁ nancial statements are made available 
on a website. Financial statements are 
published on the Company’s website 
in accordance with legislation in the 
United Kingdom governing the preparation 
and dissemination of ﬁ nancial statements, 
which may vary from legislation in other 
jurisdictions. The maintenance and 
integrity of the Company’s website is 
the responsibility of the directors. The 
directors’ responsibility also extends 

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 
employment, efforts are made to provide 
appropriate re-training. 

Engagement with Key Stakeholders
The key stakeholders for the Group 
are customers, distributors, suppliers, 
employees, shareholders and the 
community and environment in which 
we live. Whilst interactions take place 
at all levels of the Group, the directors 
are aware of the importance of the 
relationships with key stakeholders and 
feedback is utilised wherever possible 
to sustain these relationships in order 
to drive the long term success of the 
business. Business relationships with 
the following stakeholders are described 
below. Face to face communications 
were largely curtailed in 2020 due to 
Covid-19, and many interactions with our 
stakeholders have taken place virtually. 
This has not only maintained, but in many 
instances enhanced our relationships 
with several of our key stakeholders and 
will be continued for the foreseeable 
future, irrespective of the restoration of 
face to face interaction. The effect of any 
such engagement on key decisions in the 
ﬁ nancial year to 31 December 2020 are set 
out below and detailed on page  3 7.

•  Customers

 Feedback with trade customers is 
initially directed through dedicated 
account managers followed by 

344

 
Annual  Report 2020

engagement with our administration 
teams. For end user customers 
feedback is garnered through the peer 
to peer review site Yotpo, and social 
media platforms such as Facebook, 
Twitter, Instagram and Pinterest. 
The Group’s consumer customers 
frequently contact the Company in 
writing, by email, direct calls to the 
head ofﬁ ce and through the website 
www.w7 makeup.co.uk, where they 
are also able to leave comments. We 
endeavour to respond to all customers 
who contact us in a swift and efﬁ cient 
manner typically by email or direct 
calls with all responses followed 
up to seek to achieve a positive 
outcome. During 2020, it was vital to 
maintain close contact with our trade 
customers and this was primarily 
undertaken remotely. Trends in the 
cosmetics business are dynamic and 
swift reaction to feedback is vital in 
introducing new products and updating 
our product range.

•  Distributors

 We seek to strengthen our 
relationships with our distributors to 
garner feedback and provide support 
with regular meetings, attendance at 
trade shows which, during 2020 have 
been largely virtual, and maintaining 
close contact with them through our 
sales representatives. During 2020, we 
have maintained our relationships with 
our distributors and supported them 
wherever possible. Our Distributors 
provide feedback on product suitability 
including in regions of the world such 
as the Middle East where there may 
be cultural sensitivities in the product 
packaging and branding. Different 
regions may also call for particular 
colour mixes and shades and such 
feedback enables us to optimise and 

tailor products in these regions. The 
aim is to align the interests of the 
distributor with those of the Group. 

•  Suppliers

 Suppliers are visited at least annually 
and regular contact maintained at other 
times through trade shows, meetings 
and other close communications which, 
during 2020 have been largely virtual. 
The Group’s principal suppliers are 
made to feel part of the organisation 
with an open and honest dialogue 
encouraged so that feedback can be 
communicated and a rapid response 
provided. The Group has an ofﬁ ce in 
Hong Kong enabling more frequent 
visits and enhanced supplier contact. 
A strong relationship with the Group’s 
suppliers is vital to the long term 
success of the Company.

•  Employees 

 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. The Group operates 
an open-door policy, everyone 
is known by name to the senior 
managers and executive directors 
with the Chief Executive Ofﬁ cer and 
Managing Director engaging daily 
with employees across the business. 
Communication is encouraged both 
on an informal basis and through 
regular departmental meetings, where 
input from colleagues is welcomed in 
any area. Communication channels 
within the business are key and the 
open-door policy and regular meetings 
aid this. 

 Where practicable, consideration 
is given to ﬂ exible working and this 
was increasingly important during 
2020 to minimise the impact on our 
employees of the Covid-19 pandemic 
and lockdowns. Flexibility was offered 
wherever possible, with help with 
working from home and ﬂ exible 
working where practicable for mothers 
and fathers home schooling. All 
employees received 100% of their 
salaries when furloughed and safe 
working conditions were implemented. 
As always, the well-being of our staff is 
paramount and particularly so during 
this period. 

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•  Shareholders

 The means of engagement with 
shareholders is detailed on pages  34 
and 35. Throughout the ﬁ nancial 
year to 31 December 2020, there 
has been ongoing engagement with 
shareholders by the means described. 

•  Community

 Wherever possible we employ staff 
from the local area and encourage the 
use of car sharing and public transport 
to reduce the impact on local roads. 
We manage the times of our incoming 
and outgoing deliveries in order to 
limit any disturbance to residents in 
the local area. As a rule, we use local 
trade’s people for goods and services 
creating employment and income 
within the area. We often support 
local charities, including South Bucks 
Hospice and provide donations of our 
products for local school fairs and 
fetes, these requests coming via our 
local suppliers. 2020 has reduced the 
number of opportunities to participate 
in such events but contributions to 
local charities have been made in the 
year and this will continue.

45

 
 
 
 
 
 
Warpaint London P LC

Directors’ Report (continued)

•  Environment

 The Group has removed all plastics 
from the outer packaging of its gifting 
and all year-round products, and 
has virtually eliminated the use of 
single use packaging in its products 
completely. The Group’s product 
packaging therefore uses paper and 
cardboard wherever practicable, which 
enables the Group, the wholesaler 
and end user to recycle the waste 
effectively. This means that the 
business consumes considerable 
amounts of paper and cardboard, and 
the Group utilises a regular recycling 
collection service. This programme 
will be extended to utilise sustainable 
or recycled packaging where feasible, 
and the Group aims to be a market 
leader in this area. In terms of the 
Group’s product casings, the use 
of plastic is sometimes practically 
unavoidable but recyclable packaging 
is used wherever possible. 

 All new W7 brand products are being 
manufactured without parabens and 
the Company is reformulating existing 
products where feasible. The Group 
aims to be paraben free for W7 in the 
next 24  to 36 months and Technic/
Badgequo products are already 
paraben free. 

 The Covid-19 pandemic necessarily 
resulted in a reduction of travel 
within the Group, with business 
being conducted with customers and 
others virtually, where practicable. 
This has had a positive impact on 
the Group with business and trading 
relationships improving as a result. 
Hence, travel, and particularly air 
travel, will be restricted in future with 
customer, supplier, management and 
employee meetings being held virtually 
where feasible. This will not detract 

from the need to hold face to face 
meetings where this is conducive to a 
more productive relationship. 

Streamline Energy and Carbon 
Reporting (“SECR”)
The ﬁ nancial year 2020 is the ﬁ rst year 
we are required to report under the SECR 
framework. Our SECR covers the energy 
consumption and Greenhouse Gas (“GHG”) 
emissions for the period 1 January 2020 
to 31 December 2020. The table below 
shows the energy and GHG emissions 
from business activities involving the 
combustion of gas, the purchase of 
electricity, and business mileage in both 
kWh and tCO2e.

Energy Usage 
in kWh 
103,860  
289,748  
68,988 

Financial 
Year 2020 
Scope 1  
Scope 2  
Scope 3  
Total for 2020 
462,596  
Intensity ratio (tCO
e per m2)  
2

GHG
Emissions
in tCO2e
19,097
67,552
15,812

102,461
6.9

We have selected an intensity metric 
based on the energy consumption per 
square metre of area of our sites, this is 
of 6.9kg CO
/m2. We will use this ratio to 
2
monitor our energy efﬁ ciency performance 
over time.

S ECR Methodology
The ﬁ gures quoted include meter readings 
for electricity and gas, and mileage 
expense reimbursement claims for 
business mileage. Conversion factors 
used are taken from the ‘The Carbon 
Trust – Energy and carbon conversions 
2020 update’ to calculate emissions for 
Scope 1,2 and 3. Refunded business 
mileage has been classed as Scope 3 as 
the Group do not own the assets.

S ECR Materiality
The data provided by the Group has been 
determined as accurate and complete 
and covers the Group’s operations in 
the United Kingdom, speciﬁ cally the 
operations of the two UK subsidiaries, 
Warpaint Cosmetics (2014) Limited and 
Badgequo Limited.

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.

The Group has implemented a range of 
energy efﬁ ciency measures at our sites 
in the year. These include an upgrade to 
internal and external LED lighting with 
motion sensors in some areas and a 
reduction in business travel by making 
more use of online meetings.

On behalf of the board

Neil Rodol
Chief Financial Ofﬁ cer
27 April 2021

We continue to consider new technologies 
to improve the environmental performance 
of our sites, to reduce energy consumption 
and improve energy efﬁ ciency.

346

 
 
 
 
 
 
Annual  Report 2020

Independent Auditor’s Report
to the members of Warpaint London P LC

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Opinion on the ﬁ nancial statements
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 2020 
and of the Group’s loss for the year then ended;

Conclusions relating to going concern
In  auditing  the  ﬁ nancial  statements,  we  have  concluded  that  the 
Directors’ use of the going concern basis of accounting in the preparation 
of the ﬁ nancial statements is appropriate. Our evaluation of the Directors’ 
assessment of the Group and the Parent Company’s ability to continue to 
adopt the going concern basis of accounting included:

•   the  Group  ﬁ nancial  statements  have  been  properly  prepared  in 
accordance with international accounting standards in conformity with 
the requirements of the Companies Act 2006;

•   A critical evaluation of the Directors’ assessment of the entity’s ability 
to  continue  as  a  going  concern,  covering  the  period  of  at  least 
12 months from the date of approval of the ﬁ nancial statements by; 

•   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.

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  2020  which  comprise  the  consolidated  statement  of 
comprehensive  income,  the  consolidated  and  company  statements  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 accounting standards in conformity with the requirements 
of  the  Companies  Act  2006.  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).

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 believe 
that the audit evidence we have obtained is sufﬁ cient and appropriate to 
provide a basis for our opinion. 

Independence

We  remain  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. 

  •   Evaluating  the  process  the  Directors  followed  to  make  their 
assessment,  including  conﬁ rming  the  assessment  and  underlying 
projections were prepared by appropriate individuals with sufﬁ cient 
knowledge of the detailed ﬁ gures as well as an understanding of the 
entities markets, strategies and risks. Understanding, challenging 
and corroborating the key assumptions included in their cash ﬂ ow 
forecasts  against  prior  year,  our  knowledge  of  the  business  and 
industry, and other areas of the audit.

  •   We  considered  the  potential  impact  on  the  statement  of  ﬁ nancial 
position,  speciﬁ cally  around  trade  receivables  and  assessed 
Director’s  judgement  around  the  recoverability  of  these  balances. 
This included reviewing post year end, post lockdown sales values 
and cash receipts post year end.

  •   Searching  through  enquiry  with  the  Directors,  review  of  board 
minutes and review of external resources for any key future events 
that may have been omitted from cash ﬂ ow forecasts and assessing 
the impact these could have on future cash ﬂ ows and cash reserves.

  •   Assessing  stress  test  scenarios,  including  those  in  respect  of 
COVID-19 considerations, and challenging whether other reasonably 
possible  scenarios  could  occur  and 
including  these  where 
appropriate.

  •   Considering  the  adequacy  of  the  disclosures  relating  to  going 
concern included within the annual report against the requirements 
of  the  accounting  standards  and  consistency  of  the  disclosures 
against the forecasts and going concern assessment. 

Based  on  the  work  we  have  performed,  we  have  not  identiﬁ ed  any 
material uncertainties relating to events or conditions that, individually or 
collectively, may cast signiﬁ cant doubt on the group and company’s ability 
to continue as a going concern for a period of at least twelve months from 
when the ﬁ nancial statements are authorised for issue. 

Our responsibilities and the responsibilities of the Directors with respect 
to going concern are described in the relevant sections of this report.

The directors’ assessment of going concern involves a number of highly 
subjective judgements, therefore, this was accordingly identiﬁ ed as a Key 
Audit Matter.

47

Warpaint London P LC

Independent Auditor’s Report (continued)
to the members of Warpaint London P LC

Overview

87% (2019: 93%) of Group proﬁ t before tax

Coverage1 

94% (2019: 100%) of Group revenue

98% (2019: 99%) of Group total assets

Key audit 
matters

Impairment of intangible assets and 
goodwill

Carrying value of inventory

Going concern

2020

2019

✔

✔

✔

✓

✓

✓

Materiality

Group ﬁ nancial statements as a whole
£245,000  (2019:  £248,000)  based  on  capped  5%  (2019:  5%) 
of  average  proﬁ t  before  interest,  tax,  amortisation,  and 
exceptional items.

1  These are areas which have been subject to a full scope audit or speciﬁ c 

procedures by the group engagement team

An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group 
and its environment, including the Group’s system of internal control, and 
assessing the risks of material misstatement in the ﬁ nancial statements. 
We also addressed the risk of management override of internal controls, 
including assessing whether there was evidence of bias by the Directors 
that may have represented a risk of material misstatement.

The group consists of three trading subgroups, all of which are run from 
the UK except for Marvin Leeds Marketing Services Inc. which is based 
on  the  United  States  of  America.  In  establishing  the  overall  approach 
to  the  group  audit,  we  completed  full  scope  audits  on  the  underlying 
subgroups  and  the  parent  company  as  signiﬁ cant  components,  except 
for Marvin Leeds Marketing Services Inc, on which we performed speciﬁ c 
audit procedures on certain account balances. Marvin Leeds Marketing 
Services  Inc.  Is  not  deemed  to  be  a  signiﬁ cant  component  and  so  our 
work  was  tailored  to  focus  on  speciﬁ c  risk  areas.  All  audit  work  was 
carried out by BDO LLP. 

Key audit matters

Key audit matters are those matters that, in our professional judgement, 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) that 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.

Aside from the going concern key audit matter identiﬁ ed above, we identiﬁ ed the following areas as the key audit matters relevant to our audit of the 
ﬁ nancial statements.

Key audit matter 

Impairment of 
intangibles assets 
and goodwill

(with reference to notes 
1, 9 and 10) 

The Directors perform annual impairment reviews of goodwill 
for all cash generating units (CGUs).

We assessed management’s allocation of assets for each CGU 
based on our knowledge of the Group and its operations.

How the scope of our audit addressed the key audit matter

This review also covers the carrying value of other intangible 
assets, property plant and equipment, and other assets of the 
CGUs. 

The estimated recoverable amount of these balances 
is subjective due to the inherent uncertainty involved in 
forecasting and discounting future cash ﬂ ows, which form the 
basis of the Group’s value in use calculation and assessment 
of the carrying value of goodwill and intangible asset values. 
Due to the impact of Covid-19 on the Group there is increased 
uncertainty surrounding management’s trading assumptions.

We have determined as part of our risk assessment that the 
value in use calculation used in the assessment of carrying 
value of goodwill and intangible assets has a high degree of 
estimation uncertainty, with a potential range of reasonable 
outcomes greater than our materiality for the ﬁ nancial 
statements as a whole. The ﬁ nancial statements disclose the 
sensitivities estimated by the Group.

We challenged management’s assumptions and assessed the 
achievability of the forecasts included in the impairment model 
using a number of techniques including assessing accuracy of 
historic forecasting, post year-end performance and industry 
trends, including the impact of COVID-19 on each CGU.

We considered whether the revenue, and where relevant 
associated costs, used in the value in use calculations was 
reasonable in light of historic performance and industry 
projections. This included using our own sector experience 
in challenging the key assumptions made and performing 
sensitivity analysis on these assumptions. These areas 
included the projected economic growth and cost inﬂ ation, 
margin and known or probable changes in the business 
environment.

348

Annual  Report 2020

Key audit matter 

Key assumptions include revenue, gross margin, and cash ﬂ ow 
forecast assumptions.

The impairment test is also based on key assumptions in 
respect of the appropriate discount rates and longer-term 
growth rates.

As a result of the review, management did not identify any 
impairments.

Net realisable value 
of inventory

(with reference to notes 
1 and 13)

The Group has signiﬁ cant levels of inventory and estimates are 
made in the valuation of slow moving and obsolete inventories, 
some of which have a limited shelf life. There is also some 
uncertainty over changes in consumer preferences and 
spending patterns, which are primarily driven by wider trends 
in the fashion industry as well as seasonality, which could 
impact the saleability of inventory.

There is a recoverability risk associated with new product 
launches and judgement is required in forecasting demand 
which can lead to obsolete inventory. Given the level of 
judgement and estimation involved by management, the 
carrying value of inventory is considered to be a key audit 
matter.

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How the scope of our audit addressed the key audit matter

We used our own valuation specialists to challenge the value 
in use and the fair value less cost to sell model. We assessed 
the competence, independence and expertise of the third-party 
expert used by management in formulating the value in use 
model. We also challenged management and their third-
party experts regarding the assumptions made in the model 
including the cash ﬂ ow forecast, weighted average cost of 
capital and discount rate used. We benchmarked the key 
assumptions applied against a variety of similar businesses 
and considered whether these fell within our acceptable 
ranges. We assessed whether the selected price index was 
reasonable by comparing this to other data sources, including 
from a number of similar businesses.

Key observations:
Based on the procedures we performed, no issues arose from 
our work that suggested goodwill and intangible assets are 
materially misstated.

Our procedures included assessing the carrying value of 
inventory as being appropriate at the lower of cost of net 
realisable value. This was done through testing a sample of 
items to their unit cost and then to the average sale price 
in the period leading up to and around the year end. Where 
there were indicators of negative margin or zero margin, 
we determined whether these balances were considered 
appropriately in the inventory provision balance. 

In addition, we considered 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. 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 
yearend date. 

Further, we tested the unprovided inventory balance by 
reviewing sales volumes and values after the balance sheet 
date by testing a sample of items.

Key observations:
Based on the procedures we performed, no issues arose from 
our work that suggested net realisable value of inventories are 
materially misstated.

49

Warpaint London P LC

Independent Auditor’s Report (continued)
to the members of Warpaint London P LC

Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality 
to be the magnitude by which misstatements, including omissions, could inﬂ uence the economic decisions of reasonable users that are taken on the 
basis of the ﬁ nancial statements. 

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance 
materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial 
as we also take account of the nature of identiﬁ ed misstatements, and the particular circumstances of their occurrence, when evaluating their effect 
on the ﬁ nancial statements as a whole. 

Based on our professional judgement, we determined materiality for the ﬁ nancial statements as a whole and performance materiality as follows:

Materiality

Group ﬁ nancial statements

Parent company ﬁ nancial statements

2020
£

245,000

2019
£

248,000

2020
£

150,000

2019
£

100,000

Basis for determining 
materiality

5% of adjusted proﬁ t before tax (2020: capped to lower than 
previous year).

1.5% of Total assets capped to address aggregation risk.

We considered total assets to be the most appropriate 
measure for the basis of materiality as the Parent Company 
is primarily an investment holding company.

Rationale for the 
benchmark applied

We considered adjusted proﬁ t before tax (proﬁ t before 
interest, tax, amortisation, and exceptional items) to be 
the most appropriate measure for the basis of materiality 
given it is a key performance indicator of the Group and 
management.

Adjustments are included in the consolidated statement 
of comprehensive income and note 4 to the ﬁ nancial 
statements.

Adjusted measures have been used as a benchmark given 
the importance of underlying trading proﬁ t as a measure 
for users of the ﬁ nancial statements in assessing the 
performance of the Group.

For 2020, the benchmark used is the average 3 years 
adjusted proﬁ t before tax to alleviate the ﬂ uctuations caused 
by Covid-19.

Performance materiality

Basis for determining 
performance materiality

183,750

186,000

112,500

75,000

75% of Group materiality, based on our overall risk 
assessment. In setting the level of performance materiality, 
we considered a number of factors including the control 
environment, our testing strategy, the expected total value of 
known and likely misstatements (based on past experience 
and other factors) and management’s attitude towards 
proposed adjustments.

75% of Company materiality, based on our overall risk 
assessment. In setting the level of performance materiality, 
we considered a number of factors including the control 
environment, our testing strategy, the expected total value of 
known and likely misstatements (based on past experience 
and other factors) and management’s attitude towards 
proposed adjustments.

350

Annual  Report 2020

Component materiality

We  set  materiality  for  each  component  of  the  Group  based  on  a  percentage  of  between  47%  and  90%  (2019:  40%  to  90%)  of  Group  materiality 
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £116,000 to 
£221,000 (2019: £100,000 to £223,000). In the audit of each component, we further applied performance materiality levels of 75% of the component 
materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £12,250 (2019: £12,400). We also agreed 
to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report and Financial 
Statements 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.  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  course  of  the  audit,  or  otherwise  appears  to  be  materially  misstated.  If  we  identify  such  material 
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the ﬁ nancial 
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we 
are required to report that fact.

We have nothing to report in this regard.

Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and 
ISAs (UK) to report on certain opinions and matters as described below. 

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Strategic report and 
Directors’ report 

In our opinion, based on the work undertaken in the course of the audit:

Matters on which we are 
required to report by 
exception

•   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.

In the light of the knowledge and understanding of the Group and 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.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to 
report to you if, in our opinion:

•   adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not 

been received from branches not visited by us; or

•   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, the Directors are responsible for the preparation of the ﬁ nancial statements and 
for being satisﬁ ed that they give a true 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.

51

Warpaint London P LC

Independent Auditor’s Report (continued)
to the members of Warpaint London P LC

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.

Extent to which the audit was capable of detecting irregularities, 
including fraud

Irregularities, including fraud, are instances of non-compliance with laws 
and regulations. We design procedures in line with our responsibilities, 
outlined  above,  to  detect  material  misstatements 
in  respect  of 
irregularities,  including  fraud.  The  extent  to  which  our  procedures  are 
capable of detecting irregularities, including fraud is detailed below:

•   We obtained an understanding of the legal and regulatory frameworks 
that are applicable to the group and the industry in which it operates. 
We determined that the most signiﬁ cant laws and regulations which 
are directly relevant to speciﬁ c assertions in the ﬁ nancial statements 
are those related to the reporting framework, including international 
accounting  standards  in  conformity  with  the  requirements  of  the 
Companies Act 2006, and signiﬁ cant regulations relating to the sector 
in  which  the  group  operates  are  employment  and  taxation  laws  and 
regulations in the jurisdictions in which the Group operates.

•   We  understood  how  the  company  is  complying  with  those  legal  and 
regulatory frameworks, including those under industry regulation, by 
making enquiries of management and those responsible for legal and 
compliance  procedures.  We  corroborated  our  enquiries  through  our 
review of board minutes and reviewing summary of claims, litigations 
and  regulatory  inquiries  that  we  have  obtained  from  the  Group’s 
Compliance Ofﬁ cer.

•   We assessed the susceptibility of the Group’s ﬁ nancial statements to 
material misstatement, including how fraud might occur, by meeting 
with  management  from  across  the  Group  to  understand  where  they 
considered there was a susceptibility to fraud.

•   Our  audit  planning  identiﬁ ed  fraud  risks  in  relation  to  management 
override  and  revenue  recognition.  We  considered  the  processes  and 
controls that the Group has established to address risks identiﬁ ed, or 
that otherwise prevent, deter and detect fraud; and how management 
monitors that processes and controls.

•   We  designed  our  audit  procedures  to  detect  irregularities,  including 
fraud. Our procedures included journal entry testing, with a focus on 
large or unusual transactions based on our knowledge of the business; 
existence of revenue, enquiries with the Compliance Ofﬁ cer, the Group 
management;  and  focussed  testing  as  referred  to  in  the  Key  Audit 
Matters section above. 

Our  audit  procedures  were  designed  to  respond  to  risks  of  material 
misstatement  in  the  ﬁ nancial  statements,  recognising  that  the  risk  of 
not  detecting  a  material  misstatement  due  to  fraud  is  higher  than  the 
risk  of  not  detecting  one  resulting  from  error,  as  fraud  may  involve 
deliberate concealment by, for example, forgery, misrepresentations or 
through collusion. There are inherent limitations in the audit procedures 
performed  and  the  further  removed  non-compliance  with  laws  and 
regulations is from the events and transactions reﬂ ected in the ﬁ nancial 
statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial 
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. 
This description forms part of our auditor’s report.

Use of our report
This report is made solely to the Parent 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  Parent 
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.

Kieran Storan
(Senior Statutory Auditor)
For and on behalf of BDO LLP, 
Statutory Auditor
London, United Kingdom 
27 April 2021

BDO LLP is a limited liability partnership registered in England and 
Wales (with registered number OC305127).

352

Consolidated Statement of Comprehensive Income
for the year ended 31 December 2020

Revenue

Cost of sales

Gross proﬁ t

Administrative expenses

Other operating income

Analysed as:

Adjusted proﬁ t from operations1

Amortisation

Exceptional items

Share based payment

(Loss)/proﬁ t from operations

Finance expense

(Loss)/proﬁ t before tax

Tax expense

(Loss)/proﬁ t for the year attributable to equity holders of the parent company

Other comprehensive income:

Item that will or maybe reclassiﬁ ed to proﬁ t or loss:

Exchange gain/(loss) on translation of foreign subsidiary

Total comprehensive income attributable to equity holders of the parent company

Basic earnings per share (pence)

Diluted earnings per share (pence)

Annual  Report 2020

Year ended 31 December

2020

£’000

40,286

2019

£’000

49,282

(27,742)

(32,780)

12,544

16,502

(13,807)

(14,355)

Note

2

2

4,5

3

361

2,514

4,10

(2,443)

4

22

6

7

27

27

(317)

(656)

(902)

(212)

(1,114)

111

(1,003)

53

(950)

(1.31)

(1.31)

i

F
n
a
n
c
i
a
l

S
t
a
t
e
m
e
n
t
s

5,580

(2,439)

(178)

(816)

2,147

(370)

1,777

(409)

1,368

(12)

1,356

1.78

1.78

Note 1 – Adjusted proﬁ t from operations is calculated as earnings before interest, taxation, amortisation of intangible assets, any impairment costs, 
share based payments and exceptional items.

The notes on pages  58 to  82 form part of these ﬁ nancial statements. 

53

 
Warpaint London P LC

Consolidated Statement of Financial Position
As at 31 December 2020

Non-current assets

Goodwill

Intangibles

Property, plant, and equipment

Right-of-use assets

Deferred tax assets

Total non-current assets

Current assets

Inventories

Trade and other receivables

Cash and cash equivalents

Derivative ﬁ nancial instruments

Total current assets

Total assets

Current liabilities

Trade and other payables

Borrowings and lease liabilities

Derivative ﬁ nancial instruments

Corporation tax liability

Total current liabilities

Non-current liabilities

Borrowings and lease liabilities

Deferred tax liability

Total non-current liabilities

Total liabilities

NET ASSETS

The notes on pages  58 to  82 form part of these ﬁ nancial statements.

354

Note

9

10

11

12

18

13

14

15

24

16

17

24

17

18

As at 31 December

2020

£’000

7,274

4,651

1,149

3,799

581

2019

£’000

7,274

7,082

684

4,685

374

17,454

20,099

14,413

9,187

4,875

40

28,515

45,969

(3,121)

(914)

(400)

(119)

(4,554)

(3,045)

(1,000)

(4,093)

(8,599)

16,194

12,624

2,731

39

31,588

51,687

(3,933)

(2,206)

–

(548)

(6,687)

(3,863)

(1,324)

(5,187)

(11,874)

37,370

39,813

Consolidated Statement of Financial Position
As at 31 December 2020

Equities

Share capital

Share premium

Merger reserve

Foreign exchange reserve

Share option reserves

Retained earnings

TOTAL EQUITY

Annual  Report 2020

Note

20

21

As at 31 December

2020

£’000

19,187

19,359

2019

£’000

19,187

19,359

(16,100)

(16,100)

89

1,633

13,202

37,370

36

977

16,354

39,813

The ﬁ nancial statements of Warpaint London PLC were approved and authorised for issue by the Board of Directors and were signed on its behalf by:

Neil Rodol
Chief Financial Ofﬁ cer

 27 April 2021

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55

 
Warpaint London P LC

Consolidated Statement of Changes in Equity
for the year ended 31 December 2020

Share Capital

Share Premium

Merger Reserve exchange reserve

option reserve

£’000

19,187

£’000

19,359

£’000

(16,100)

£’000

48

£’000

161

Foreign

Share 

Retained

Earnings

£’000

18,363

Total Equity

£’000

41,018

At 1 January 2019

Comprehensive Income for the year

On translation of foreign subsidiary 

Proﬁ t for the year

Total comprehensive income for the 
year

Transactions with owners 

Share based payment charge

Dividends paid

Total transactions with owners

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

As at 31 December 2019

19,187

19,359

(16,100)

Comprehensive Income for the year

On translation of foreign subsidiary

Loss for the year

Total comprehensive income for the year

Transactions with owners

Share based payment charge

Dividends paid

Total transactions with owners

–

–

–

–

–

–

–

–

–

–

–

–

(12)

–

(12)

–

–

–

36

53

–

53

–

–

–

–

–

816

–

816

977

–

–

656

–

656

–

(12)

1,368

1,368

1,368

1,356

–

816

(3,377)

(3,377)

(3,377)

(2,561)

16,354

39,813

–

53

(1,003)

(1,003)

(1,003)

(950)

–

656

(2,149)

(2,149)

(2,149)

(1,493)

As at 31 December 2020

19,187

19,359

(16,100)

89

1,633

13,202

37,370

The notes on pages  58 to  82 form part of these ﬁ nancial statements.

356

Annual  Report 2020

Year ended 31 December

Note

6

10

11/12

22

13

10

11

17

6

19

15

15

2020

£’000

(1,114)

212

2,443

1,252

2

656

3,437

1,781

(812)

399

53

8,309

(853)

7,456

(12)

(869)

21

(860)

(90)

(810)

(1,191)

(212)

(2,149)

(4,452)

2,144

2,731

4,875

4,875

4,875

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£’000

1,777

370

2,439

1,194

39

816

(327)

(832)

444

(39)

(13)

5,868

(1,499)

4,369

(35)

(284)

–

(319)

(83)

(811)

(719)

(370)

(3,377)

(5,360)

(1,310)

4,041

2,731

2,731

2,731

Consolidated Statement of Cash Flows
for the year ended 31 December 2020

Operating activities

(Loss)/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

Fair value loss/(gain) on derivative ﬁ nancial instruments

Foreign exchange translation differences

Cash generated from operations

Tax paid

Net cash ﬂ ows from operating activities

Investing activities

Purchase of intangible assets

Purchase of property, plant, and equipment

Sale of property, plant, and equipment proceeds

Net cash used in by investing activities

Financing activities

Repayment of borrowings

Lease payments

Decrease in stock and invoice ﬁ nance facilities

Interest paid

Dividends

Net cash used in ﬁ nancing activities

Net increase/(decrease) 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 consist of:

Cash and cash equivalents

The notes on pages  58 to  82 form part of these ﬁ nancial statements.

57

 
 
Warpaint London P LC

Notes to the Consolidated Financial Statements
as at ended 31 December 2020

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  2020  were  authorised  for  issue  by  the  board  of  directors 
27 April 2021.

Warpaint  London  PLC  is  a  public  limited  Company  incorporated  and 
registered  in  England  and  Wales.  Its  registered  ofﬁ ce  is  Units  B&C, 
Orbital Forty-Six, The Ridgeway Trading Estate, Iver, Buckinghamshire, 
SL0 9HW.

The  Group’s  ﬁ nancial  statements  have  been  prepared  in  accordance  in 
accordance  with  international  accounting  standards  and  in  conformity 
with  the  requirements  of  the  Companies  Act.  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 accordance with international 
accounting  standards  in  conformity  with  the  requirements  of  the 
Companies Act 2006 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
Where  the  company  has  control  over  an  investee,  it  is  classiﬁ ed  as  a 
subsidiary. The company controls an investee if all three of the following 
elements  are  present:  power  over  the  investee,  exposure  to  variable 
returns from the investee, and the ability of the investor to use its power 
to  affect  those  variable  returns.  Control  is  reassessed  whenever  facts 
and circumstances indicate that there may be a change in any of these 
elements of control. 

The consolidated ﬁ nancial statements present the results of the company 
and  its  subsidiaries  as  if  they  formed  a  single  entity.  Intercompany 
transactions  and  balances  between  group  companies  are  therefore 
eliminated in full. All subsidiaries have a reporting date of December. 

The consolidated ﬁ nancial statements incorporate the results of business 
combinations using the acquisition method. In the statement of ﬁ nancial 
position,  the  acquiree’s  identiﬁ able  assets,  liabilities  and  contingent 
liabilities  are  initially  recognised  at  their  fair  values  at  the  acquisition 
date. The results of acquired operations are included in the consolidated 
statement  of  comprehensive  income  from  the  date  on  which  control  is 
obtained. They are deconsolidated from the date on which control ceases.

On  consolidation,  the  results  of  overseas  operations  are  translated 
into  pounds  sterling  at  rates  approximating  to  those  ruling  when  the 
transactions took place. All assets and liabilities of overseas operations, 
including  goodwill  arising  on  the  acquisition  of  those  operations,  are 

translated at the rate ruling at the reporting date. Exchange differences 
arising  on  translating  the  opening  net  assets  at  opening  rate  and  the 
results  of  overseas  operations  at  actual  rate  are  recognised  in  other 
comprehensive income and accumulated in the foreign exchange reserve. 

Exchange differences recognised proﬁ t or loss in Group entities’ separate 
ﬁ nancial  statements  on  the  translation  of  long-term  monetary  items 
forming  part  of  the  Group’s  net  investment  in  the  overseas  operation 
concerned  are  reclassiﬁ ed  to  other  comprehensive 
income  and 
accumulated in the foreign exchange reserve on consolidation. 

On disposal of a foreign operation, the cumulative exchange differences 
recognised in the foreign exchange reserve relating to that operation up 
to the date of disposal are transferred to the consolidated statement of 
comprehensive income as part of the proﬁ t or loss on disposal.

Going concern 
The  Directors  have  concluded  that  it  is  reasonable  to  adopt  a  going 
concern  basis  in  preparing  the  ﬁ nancial  statements.  This  is  based  on 
a  reasonable  expectation  that  the  Group  has  adequate  resources  to 
continue  in  operational  existence  for  at  least  twelve  months  from  the 
date  of  signing  of  these  accounts.  The  Group  made  a  statutory  loss  of 
£1.0 million in the year to 31 December 2020 (2019: £1.4 million proﬁ t) 
and  had  net  current  assets  of  £24.0  million  at  31  December  2020 
(2019:  £24.9  million).  The  Group  occasionally  makes  use  in  its  Retra 
subsidiary of a £10 million facility that can be used for conﬁ dential invoice 
discounting and stock ﬁ nance, the facility renews each year at the end of 
June, and contains certain covenants, including a minimum EBITDA for 
Retra to be tested on a cumulative quarterly basis. 

The Directors have prepared forecasts covering the period to December 
2022,  built  from  the  detailed  Board  approved  budget  for  2021.  The 
forecasts include a number of assumptions in relation to varying levels 
of  sales  revenue.  Whilst  the  Group’s  trading  and  cash  ﬂ ow  forecasts 
have  been  prepared  using  current  trading  assumptions,  the  operating 
environment  presents  a  number  of  challenges  which  could  negatively 
impact the actual performance achieved. Excluding the potential impact 
of COVID-19, which is considered below, these risks include, but are not 
limited to, achieving forecast levels of sales and order intake, the impact 
on customer conﬁ dence as a result of general economic conditions and 
leaving  the  European  Union,  achieving  forecast  margin  improvements 
and the director’s ability to implement cost saving initiatives in areas of 
discretionary spend where required. 

The  Group’s  cash  ﬂ ow  forecasts  and  projections,  taking  account  of 
reasonable  and  possible  changes  in  trading  performance  excluding 
the  potential  impact  of  COVID-19  (which  is  considered  below),  offset 
by  mitigating  actions  within  the  control  of  management  including 
reductions in areas of discretionary spend, show that the Group will be 
able to operate comfortably through to the end of December 2022, and in 
Retra within the level of its facility and associated covenants.

The  uncertainty  as  to  the  future  impact  on  the  Group  of  the  COVID-19 
outbreak  has  been  separately  considered  as  part  of  the  directors’ 
consideration  of  the  going  concern  basis  of  preparation.  The  Group 
experienced a material impact in trading performance due to COVID-19 
in  2020  and  this  has  to  a  lesser  extent  continued  into  2021  with  many 
but  not  all  customers  closed  at  times  in  the  UK  and  overseas.  In  the 
downside scenario analysis performed, the directors have considered the 
reasonably  plausible  impact  of  the  ongoing  COVID-19  outbreak  on  the 
Group’s trading and cash ﬂ ow forecasts. 

358358
58

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Signiﬁ cant accounting policies (continued)

1. 
In preparing this analysis, a number of scenarios were modelled with the 
beneﬁ t  of  experience  having  come  through  the  three  lockdowns  in  the 
UK in 2020. The scenarios modelled were all based on varying levels of 
sales revenue, including no growth for 2021 and 2022, and more extreme 
falls in revenue of up to 30% in both years as a worst-case scenario. In 
each scenario, mitigating actions within the control of management have 
been  modelled.  Under  each  of  the  scenarios  modelled,  the  Group  has 
sufﬁ cient cash to meet its liabilities as they fall due and consequently, 
the  directors believe that  the Group has sufﬁ cient ﬁ nancial strength to 
withstand the possible disruption to its activities. 

Based  on  the  above  indications  the  directors  believe  that  it  remains 
appropriate to prepare the ﬁ nancial statements on a going concern basis. 

Revenue Recognition 

Performance obligations and timing of revenue recognition
The  Group’s  revenue  is  derived  from  selling  goods  with  revenue 
recognised at a point in time when control of the goods has transferred 
to  the  customer.  This  is  generally  when  the  goods  are  delivered  to  the 
customer.  However,  for  export  sales,  control  might  also  be  transferred 
when  delivered  either  to  the  port  of  departure  or  port  of  arrival, 
depending on the speciﬁ c terms of the contract with a customer. There 
is limited judgement needed in identifying the point control passes: once 
physical  delivery  of  the  products  to  the  agreed  location  has  occurred, 
the group no longer has physical possession, usually will have a present 
right to payment (as a single payment on delivery) and retains none of the 
signiﬁ cant risks and rewards of the goods in question. 

UK  sales  are  recognised  and  invoiced  to  the  customer  once  the  goods 
have  been  delivered  to  the  customer.  Overseas  sales  are  recognised 
and  invoiced  to  the  customer  once  the  goods  have  been  delivered  to 
the customer or collected by the customer from the Group’s warehouse 
according to the terms of sale.

Where  the  Group  has  entered  into  distributor  arrangements  the 
satisfaction  of  performance  obligations  and  transfer  of  control  to  the 
distributor is from the date of dispatch from either the Group’s overseas 
supplier  or  from  the  Company’s  UK  warehouse.  Revenue  is  therefore 
recognised on the date of dispatch.

Under IFRS 15, volume rebates and early settlement discounts represent 
variable  consideration  and  is  estimated  and  recognised  as  a  reduction 
to  revenue  as  performance  obligations  are  satisﬁ ed.  Management 
recognises  revenue  based  on  the  amount  of  estimated  rebate  to  the 
extent  that  revenue  is  highly  probably  of  not  reversing.  Management 
monitors this estimate at each reporting date and adjusts it as necessary. 

Determining the transaction price
Most  of  the  group’s  revenue  is  derived  from  ﬁ xed  price  contracts  and 
therefore  the  amount  of  revenue  to  be  earned  from  each  contract  is 
determined by reference to those ﬁ xed prices. Exceptions are as follows: 

•   Some contracts provide customers with a limited right of return. These 
relate  predominantly,  but  not  exclusively,  to  online  sales  direct  to 
consumers  and  retailers.  Historical  experience  enables  the  group  to 
estimate reliably the value of goods that will be returned and restrict 
the amount of revenue that is recognised such that it is highly probable 
that there will not be a reversal of previously recognised revenue when 
goods are returned. 

•   Variable consideration relating to volume rebates has been considered 
in estimating revenue in order that it is highly probable that there will 
not be a future reversal in the amount of revenue recognised when the 
amount of volume rebates has been determined.

Allocating amounts to performance obligations
For most contracts, there is a ﬁ xed unit price for each product sold, with 
reductions  given  for  bulk  orders  placed  at  a  speciﬁ c  time.  Therefore, 
there  is  no  judgement  involved  in  allocating  the  contract  price  to  each 
unit  ordered  in  such  contracts  (it  is  the  total  contract  price  divided  by 
the  number  of  units  ordered).  Where  a  customer  orders  more  than 
one  product  line,  the  Group  is  able  to  determine  the  split  of  the  total 
contract price between each product line by reference to each product’s 
standalone selling prices (all product lines are capable of being, and are, 
sold separately).

Practical Exemptions 
The group has taken advantage of the practical exemptions: 

•   not  to  account  for  signiﬁ cant  ﬁ nancing  components  where  the  time 
difference between receiving consideration and transferring control of 
goods (or services) to its customer is one year or less; and 

•   expense  the  incremental  costs  of  obtaining  a  contract  when  the 
amortisation  period  of  the  asset  otherwise  recognised  would  have 
been one year or less.

Expenditure and provisions
Expenditure is recognised in respect of goods and services received when 
supplied in accordance with contractual terms. Provision is made when 
an obligation exists relating to a past event and where the amount of the 
obligation can be reliably estimated.

Retirement 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 and Alternative performance measures
Exceptional  items  which  have  been  disclosed  separately  on  the  face  of 
the  income  statement  in  order  to  summarise  the  underlying  results. 
Exceptional  items  in  the  current  period  relate  to  restructuring  costs 
and  legal  and  professional  fees.  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 a clearer presentation 
of the underlying ﬁ nancial performance of the Group.

Alternative  performance  measures  (APM’s)  are  used  by  the  Board  to 
assess the Group’s performance and are applied consistently from one 
period to the next. They therefore provide additional useful information 
for  shareholders  on  the  underlying  performance  and  position  of  the 
Group. Additionally, adjusted proﬁ t from operations is used to determine 
adjusted EPS which is used as a key performance indicator for the Long-
Term  Incentive  Plan  (LTIP)  and  the  Company  Share  Option  Scheme 
(CSOP). These measures are not deﬁ ned by IFRS and are not intended 
to  be  a  substitute  for  IFRS  measures.  The  Group  presents  underlying 
operating  proﬁ t,  proﬁ t  before  tax  and  EPS  which  are  calculated  as  the 
statutory  measures  stated  before  non-underlying  items,  including 
exceptional  items,  amortisation  of  intangible  assets  and  share-based 
payments where applicable.

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59

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Signiﬁ cant accounting policies (continued)

1. 
Underlying results are used in the day-to-day management of the Group. 
They  represent  statutory  measures  adjusted  for  items  which  could 
distort  the  understanding  of  performance  and  comparability  year  on 
year. Non-underlying items include the amortisation of intangible assets, 
exceptional  items  and  share-based  payments.  Exceptional  items  are 
those items which the group consider to be signiﬁ cant in nature and not 
in the normal course of business or are consistent with items that were 
treated as exceptional in prior periods. 

Impairment of non-ﬁ nancial assets (excluding inventories and 
deferred tax assets)
Impairment tests on goodwill and other intangible assets with indeﬁ nite 
useful economic lives are undertaken annually at the ﬁ nancial year end. 
Other  non-ﬁ nancial  assets  are  subject  to  impairment  tests  whenever 
events or changes in circumstances indicate that their carrying amount 
may  not  be  recoverable.  Where  the  carrying  value  of  an  asset  exceeds 
its recoverable amount (i.e. the higher of value in use and fair value less 
costs to sell), the asset is written down accordingly. 

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 acquired separately
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.  Amortisation  is  provided  on  Licences  and  Website  costs  so  as 
to write off the carrying value over the expected useful economic life of 
ﬁ ve years.

Intangible assets acquired in a business combination
Intangible  assets  acquired  in  a  business  combination  and  recognised 
separately  from  goodwill  are  initially  recognised  at  their  fair  value  at 
the  acquisition  date  (which  is  regarded  as  their  cost).  Subsequent  to 
initial  recognition,  intangible  assets  acquired  in  a  business  combination 
are  reported  at  cost  less  accumulated  amortisation  and  accumulated 
impairment  losses,  on  the  same  basis  as  intangible  assets  that  are 
acquired separately. Amortisation is provided on customer lists and brands 
so as to write off the carrying value over the expected useful economic life 
of ﬁ ve years. Other details of the acquisition are detailed in note 8.

Goodwill
Goodwill  represents  the  excess  of  the  cost  of  a  business  combination 
over the Group’s interest in the fair value of identiﬁ able assets, liabilities 
and contingent liabilities acquired. 

Cost  comprises  the  fair  value  of  assets  given,  liabilities  assumed,  and 
equity  instruments  issued,  plus  the  amount  of  any  non-controlling 
interests in the acquiree. Contingent consideration is included in cost at 
its acquisition date fair value and, in the case of contingent consideration 
classiﬁ ed as a ﬁ nancial liability, remeasured subsequently through proﬁ t 
or loss. 

Goodwill  is  capitalised  as  an  intangible  asset  with  any  impairment 
in  carrying  value  being  charged  to  the  consolidated  statement  of 
comprehensive  income.  Where  the  fair  value  of  identiﬁ able  assets, 
liabilities and contingent liabilities exceed the fair value of consideration 
paid,  the  excess  is  credited  in  full  to  the  consolidated  statement  of 
comprehensive income on the acquisition date.

Where  it  is  not  possible  to  estimate  the  recoverable  amount  of  an 
individual asset, the impairment test is carried out on the smallest group 
of assets to which it belongs for which there are separately identiﬁ able 
cash  ﬂ ows;  its  cash  generating  units  (‘CGUs’).  Goodwill  is  allocated 
on  initial  recognition  to  each  of  the  Group’s  CGUs  that  are  expected  to 
beneﬁ t from a business combination that gives rise to the goodwill. 

Impairment  charges  are  included  in  proﬁ t  or  loss,  except  to  the  extent 
they reverse gains previously recognised in other comprehensive income. 
An impairment loss recognised for goodwill is not reversed.

Derecognition of intangible assets
An  intangible  asset  is  derecognised  on  disposal,  or  when  no  future 
economic  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:

Plant and machinery 

-   25%  reducing  balance  and  20% 

Fixtures and ﬁ ttings 

-   25%  reducing  balance  and  20% 

straight line

Computer equipment 

-    25%  reducing  balance  and  33.33% 

Motor vehicles 

straight line

-    20% straight line

straight line

Right-of-Use Assets
In  the  previous  period,  the  Group  only  recognised  lease  assets  and  lease 
liabilities in relation to leases that were classiﬁ ed as “ﬁ nance leases” under 
IAS 17 “Leases”. The assets were presented in property, plant and equipment 
and  the  liabilities  as  part  of  the  Group’s  borrowings.  For  adjustments 
recognised on adoption of IFRS 16 on 1 January 2019, please refer to note 12. 

Right-of-use assets are measured at cost, which is made up of the initial 
measurement of the lease liability adjusted for any lease payments made 
at or before the commencement date, plus any initial direct costs incurred 
and an estimate of costs to dismantle and remove the asset at the end of the 
lease, less any lease incentives received. 

The Group depreciates the right-of-use assets on a straight-line basis from 
the lease commencement date to the earlier of the end of the useful life of 
the right-of-use asset or the end of the lease term. 

The Group also assesses the right-of-use asset for impairment when such 
indicators exist.

360

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Signiﬁ cant accounting policies (continued)

1. 
The right-of-use assets are included in a separate line within non-current 
assets on the Consolidated Balance Sheet

Financial liabilities
The  Group  classiﬁ es  its  ﬁ nancial  liabilities  into  one  of  two  categories, 
depending  on  the  purpose  for  which  the  liability  was  acquired.  The 
Group’s accounting policy for each category is as follows:

Financial assets
The Group classiﬁ es its ﬁ nancial assets into one of the categories discussed 
below, depending on the purpose for which the asset was acquired. Other 
than  ﬁ nancial  assets  in  a  qualifying  hedging  relationship,  the  Group’s 
accounting policy for each category is as follows:

Fair value through proﬁ t or loss
This  category  comprises  in-the-money  derivatives  and  out-of-money 
derivatives where the time value offsets the negative intrinsic value (see 
“Financial  liabilities”  section  for  out-of-money  derivatives  classiﬁ ed  as 
liabilities). They are carried in the statement of ﬁ nancial position at fair 
value with changes in fair value recognised in the consolidated statement 
of comprehensive income in the ﬁ nance income or expense line. Other 
than  derivative  ﬁ nancial  instruments  which  are  not  designated  as 
hedging instruments, the Group does not have any assets held for trading 
nor does it voluntarily classify any ﬁ nancial assets as being at fair value 
through proﬁ t or loss.

Amortised cost 
These assets arise principally from the provision of goods and services 
to  customers  (e.g.  trade  receivables),  but  also  incorporate  other  types 
of  ﬁ nancial  assets  where  the  objective  is  to  hold  these  assets  in  order 
to  collect  contractual  cash  ﬂ ows  and  the  contractual  cash  ﬂ ows  are 
solely  payments  of  principal  and  interest.  They  are  initially  recognised 
at fair value plus transaction costs that are directly attributable to their 
acquisition or issue and are subsequently carried at amortised cost using 
the effective interest rate method, less provision for impairment. 

New impairment requirements use an ‘expected credit loss’ (‘ECL’) model 
to recognise an allowance. Impairment is measured using a 12- month 
ECL method unless the credit risk on a ﬁ nancial instrument has increased 
signiﬁ cantly since initial recognition in which case the lifetime ECL method 
is adopted. For receivables, a simpliﬁ ed approach to measuring expected 
credit  losses  using  a  lifetime  expected  loss  allowance  is  available  and 
has  been  adopted  by  the  Group.  During  this  process  the  probability  of 
the non-payment of the trade receivables is assessed. This probability is 
then multiplied by the amount of the expected loss arising from default to 
determine the lifetime expected credit loss for the trade receivables. For 
trade receivables, which are reported net, such provisions are recorded 
in  a  separate  provision  account  with  the  loss  being  recognised  within 
administrative expenses in the consolidated statement of comprehensive 
income. On conﬁ rmation that the trade receivable will not be collectable, 
the gross carrying value of the asset is written off against the associated 
provision.

The Group’s ﬁ nancial assets measured at amortised cost comprise trade 
and other receivables, and cash and cash equivalents in the consolidated 
statement of ﬁ nancial position. 

Cash  and  cash  equivalents  include  cash  in  hand,  deposits  held  at  call 
with  banks,  other  short  term  highly  liquid  investments  with  original 
maturities of three months or less, and – for the purpose of the statement 
of cash ﬂ ows - bank overdrafts. Bank overdrafts are shown within loans 
and  borrowings  in  current  liabilities  on  the  consolidated  statement  of 
ﬁ nancial position. 

Fair value through proﬁ t or loss
This  category  comprises  out-of-the-money  derivatives  where  the  time 
value does not offset the negative intrinsic value (see “Financial assets” 
for  in-the-money  derivatives  and  out-of-money  derivatives  where  the 
time  value  offsets  the  negative  intrinsic  value).  They  are  carried  in  the 
consolidated  statement  of  ﬁ nancial  position  at  fair  value  with  changes 
in fair value recognised in the consolidated statement of comprehensive 
income.  The  Group  does  not  hold  or  issue  derivative  instruments  for 
speculative  purposes,  but  for  hedging  purposes.  Other  than  these 
derivative ﬁ nancial instruments, the Group does not have any liabilities 
held for trading nor has it designated any ﬁ nancial liabilities as being at 
fair value through proﬁ t or loss.

Other ﬁ nancial liabilities 
Other ﬁ nancial liabilities include the following items:

•   Bank  loans  which  are  initially  recognised  at  fair  value  net  of  any 
transaction costs directly attributable to the issue of the instrument. 
Such 
interest-bearing  liabilities  are  subsequently  measured  at 
amortised  cost  ensuring  the  interest  element  of  the  borrowing  is 
expensed over the repayment period at a constant rate. 

•   Trade  payables,  other  borrowings  and  other  short-term  monetary 
liabilities,  which  are 
fair  value  and 
subsequently carried at amortised cost using the effective interest 
method.

initially  recognised  at 

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.

Foreign currencies
Transactions entered into by Group entities in a currency other than the 
currency  of  the  primary  economic  environment  in  which  they  operate 
(their  “functional  currency”)  are  recorded  at  the  rates  ruling  when  the 
transactions occur. Foreign currency monetary assets and liabilities are 
translated at the rates ruling at the reporting date. Exchange differences 
arising on the retranslation of unsettled monetary assets and liabilities 
are recognised immediately in proﬁ t or loss, except for foreign currency 
borrowings  qualifying  as  a  hedge  of  a  net  investment  in  a  foreign 
operation,  in  which  case  exchange  differences  are  recognised  in  other 
comprehensive income and accumulated in the foreign exchange reserve 
along with the exchange differences arising on the retranslation of the 
foreign operation.

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Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

1. 

Signiﬁ cant accounting policies (continued)

Leases
All  leases  are  accounted  for  by  recognising  a  right-of-use  asset  and  a 
lease liability except for: 

•   Leases of low value assets; and 

•   Leases with a duration of 12 months or less. 

Lease  liabilities  are  measured  at  the  present  value  of  the  contractual 
payments due to the lessor over the lease term, with the discount rate 
determined  by  reference  to  the  rate  inherent  in  the  lease  unless  (as  is 
typically  the  case)  this  is  not  readily  determinable,  in  which  case  the 
group’s  incremental  borrowing  rate  on  commencement  of  the  lease  is 
used. Variable lease payments are only included in the measurement of 
the lease liability if they depend on an index or rate. In such cases, the 
initial measurement of the lease liability assumes the variable element 
will remain unchanged throughout the lease term. Other variable lease 
payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes: 

•   amounts expected to be payable under any residual value guarantee; 

•   the exercise price of any purchase option granted in favour of the group 

if it is reasonably certain to assess that option; 

•   any penalties payable for terminating the lease, if the term of the lease 
has been estimated on the basis of termination option being exercised.

Right  of  use  assets  are  initially  measured  at  the  amount  of  the  lease 
liability, reduced for any lease incentives received, and increased for: 

•   lease payments made at or before commencement of the lease; 

•   initial direct costs incurred; and 

•   the amount of any provision recognised where the group is contractually 

required to dismantle, remove or restore the leased asset.

Subsequent to initial measurement lease liabilities increase as a result 
of interest charged at a constant rate on the balance outstanding and are 
reduced  for  lease  payments  made.  Right-of-use  assets  are  amortised 
on a straight-line basis over the remaining term of the lease or over the 
remaining economic life of the asset if, rarely, this is judged to be shorter 
than the lease term.

When the group revises its estimate of the term of any lease (because, 
for  example,  it  re-assesses  the  probability  of  a  lessee  extension  or 
termination  option  being  exercised),  it  adjusts  the  carrying  amount  of 
the lease liability to reﬂ ect the payments to make over the revised term, 
which  are  discounted  at  the  same  discount  rate  that  applied  on  lease 
commencement. The carrying value of lease liabilities is similarly revised 
when the variable element of future lease payments dependent on a rate 
or index is revised. In both cases an equivalent adjustment is made to the 
carrying value of the right-of-use asset, with the revised carrying amount 
being amortised over the remaining (revised) lease term.

When the group renegotiates the contractual terms of a lease with the 
lessor, the accounting depends on the nature of the modiﬁ cation: 

•   if  the  renegotiation  results  in  one  or  more  additional  assets  being 
leased for an amount commensurate with the standalone price for the 
additional rights-of-use obtained, the modiﬁ cation is accounted for as 
a separate lease in accordance with the above policy 

•   in all other cases where the renegotiated increases the scope of the 
lease (whether that is an extension to the lease term, or one or more 
additional assets being leased), the lease liability is remeasured using 
the  discount  rate  applicable  on  the  modiﬁ cation  date,  with  the 
right-of-use asset being adjusted by the same amount 

•   if the renegotiation results in a decrease in the scope of the lease, both 
the  carrying  amount  of  the  lease  liability  and  right-of-use  asset  are 
reduced by the same proportion to reﬂ ect the partial of full termination 
of the lease with any difference recognised in proﬁ t or loss. The lease 
liability is then further adjusted to ensure its carrying amount reﬂ ects 
the amount of the renegotiated payments over the renegotiated term, 
with the modiﬁ ed lease payments discounted at the rate applicable on 
the modiﬁ cation date. The right-of-use asset is adjusted by the same 
amount.

For contracts that both convey a right to the group to use an identiﬁ ed asset 
and require services to be provided to the group by the lessor, the group 
has elected to account for the entire contract as a lease, i.e. it does allocate 
any  amount  of  the  contractual  payments  to,  and  account  separately  for, 
any services provided by the supplier as part of the contract.

Nature of leasing activities (in the capacity as lessee)
The  group  leases  a  number  of  property,  plant  and  equipment  in  the 
jurisdictions  from  which  it  operates  with  a  ﬁ xed  periodic  rent  over  the 
lease term. The group has a total of 6 property leases and 1 plant and 
machinery lease.

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  comprehensive  income  and  other  comprehensive  income 
because of items of income or expense that are taxable or deductible in 
other years and items that are never taxable or deductible.

The  Group’s  current  tax  is  calculated  using  tax  rates  that  have  been 
enacted or substantively enacted by the end of the reporting period.

Deferred taxation
Deferred  tax  assets  and  liabilities  are  recognised  where  the  carrying 
amount  of  an  asset  or  liability  in  the  combined  statement  of  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.

362

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Signiﬁ cant accounting policies (continued)

1. 
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 end of the reporting period 
and are expected to apply when the deferred tax liabilities or assets are 
settled or recovered. Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally 
enforceable  right  to  offset  current  tax  assets  and  liabilities  and  the 
deferred tax assets and liabilities relate to taxes levied by the same tax 
authority on either:

•   the same taxable group company; or

•   different  company  entities  which  intend  either  to  settle  current  tax 
assets and liabilities on a net basis, or to realise the assets and settle 
the liabilities simultaneously, in each future period in which 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. 

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.

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.

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. 

Share Capital
The Group’s ordinary shares are classiﬁ ed as equity instruments.

income  over 

Share-based payments
Where equity settled share options are awarded to employees, the fair 
value of the options at the date of grant is charged to the consolidated 
statement  of  comprehensive 
the  vesting  period. 
Non-market vesting conditions are considered by adjusting the number 
of equity instruments expected to vest at each reporting date so that, 
ultimately,  the  cumulative  amount  recognised  over  the  vesting  period 
is  based  on  the  number  of  options  that  eventually  vest.  Non-vesting 
conditions  and  market  vesting  conditions  are  factored  into  the  fair 
value of the options granted. As long as all other vesting conditions are 
satisﬁ ed, a charge is made irrespective of whether the market vesting 
conditions  are  satisﬁ ed.  The  cumulative  expense  is  not  adjusted  for 
failure  to  achieve  a  market  vesting  condition  or  where  a  non-vesting 
condition is not satisﬁ ed. 

Where the terms and conditions of options are modiﬁ ed before they vest, 
the increase in the fair value of the options, measured immediately before 
and after the modiﬁ cation, is also charged to the consolidated statement 
of comprehensive income over the remaining vesting period.

Where equity instruments are granted to persons other than employees, 
the consolidated statement of comprehensive income is charged with the 
fair value of goods and services received.

Dividends
Dividends are recognised when they become legally payable. In the case 
of interim dividends to equity shareholders, this is when declared by the 
directors.  In  the  case  of  ﬁ nal  dividends,  this  is  when  approved  by  the 
shareholders at the annual general meeting.

Changes in accounting policies
New  standards, 
1 January 2020.

interpretations  and  amendments  effective 

from 

There were no new standards or interpretations impacting the Group that 
will  be  adopted  in  the  annual  ﬁ nancial  statements  for  the  year  ended 
31 December 2020, and which have given rise to changes in the Group’s 
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  and  adopted  by  the  EU  but  are  not  yet 
effective  and  have  not  been  adopted  early  by  the  Group.  Management 
anticipates  that  all  of  the  relevant  pronouncements  will  be  adopted  in 
the  Group’s  accounting  policies  for  the  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. 

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Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

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 makes a 50% provision for perishable items of stock that are 
greater than two years old. Should the Group increase the provision to 
100% of perishable items that are greater than two years old, this would 
decrease  proﬁ t  by  £251,000.  The  Group  does  not  provide  any  provision 
on its non-perishable goods that are greater than two years old on the 
basis that the products have long shelf life. Should the Group increase 
the provision to 100% of non-perishable items that are greater than two 
years old, this would decrease proﬁ t by £137,000.

b) 

Impairment of goodwill

The assessment of the recoverable amount of goodwill allocated to Retra 
Holdings Limited and Leeds Marketing Services, Inc., as detailed in note 
10,  was  based  on  a  value  in  use  calculation  which  involved  judgement 
in  assessing  the  projected  future  cashﬂ ows  arising  from  the  CGU  and 
a  suitable  discount  rate  to  be  used  to  measure  the  future  cash  ﬂ ows 
to  present  value.  A  one  per  cent  increase  in  the  pre-tax  discount  rate 
for  Retra  Holdings  Limited  from  8.03%  to  9.03%  would  reduce  the 
recoverable amount by approximately £1.6 million and will still not result 
in any impairment, while a one percent increase in the pre-tax discount 
rate  for  Leeds  Marketing  Services,  Inc.  from  7.62%  to  8.62%  would 
reduce  the  recoverable  amount  by  approximately  £1.3  million  and  will 
still not result in any impairment.

c)  Deferred tax assets

Deferred tax assets are recognised to the extent that it is probable that 
taxable  proﬁ ts  will  be  available  against  which  deductible  temporary 
differences can be utilised. The carrying amount of deferred tax assets is 
reviewed at each balance sheet date and reduced to the extent that it is 
no longer probable that sufﬁ cient taxable proﬁ ts will be available to allow 
all or part of the assets to be recovered. 

1. 

Signiﬁ cant accounting policies (continued)

 Amendments updating a reference to the 
Conceptual Framework

Effect annual periods 
beginning before or after

1st January 2022

 Amendments regarding replacement 
issues in the context of the IBOR reform

1st January 2021

IFRS 3

IFRS 4, 
7,9,16
IAS 39

IFRS 9 Amendments resulting from the annual 
improvements to IDRS Standards 2018-
2020 (fees in the ’10 per cent’ test for 
derecognition of ﬁ nancial liabilities)

1st January 2022

IFRS 17 Amendments to address concerns and 

1st January 2023

implementation challenges that were 
identiﬁ ed after IFRS 17 was published 

IAS 1

Amendments to defer the effective date 
of January 2020 amendments

1st January 2023

Amendments  regarding  the  disclosure 
of accounting policies

IAS 8

 Amendments regarding the deﬁ nition 
of accounting estimates 

1st January 2023

IAS 16 Amendments prohibiting a company 

1st January 2022

from deducting from the cost of 
property, plant and equipment 
amounts received from selling items 
while the company is preparing the 
asset for its intended use

IAS 37 Amendments regarding the costs to 

1st January 2022

include when assessing whether a 
contract is onerous

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.

Government Grants
Grants  from  the  government  are  recognised  at  their  fair  value  where 
there  is  reasonable  assurance  that  the  grant  will  be  received  and  the 
group will comply with all attached conditions. Government grants which 
are revenue in nature are recognised on a systematic basis within Other 
operating  income  in  the  Statement  of  Comprehensive  income  over  the 
period in which the group recognises as expenses the related costs for 
which the grants are intended to compensate. 

364

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Segmental information

2. 
For management purposes, the Group is organised into two operating segments; Branded and Close-out. The segment ‘Branded’ relates to the sale 
of own branded products whereas ‘close-out’ relates to the purchase of third-party stock which is then repackaged for sale. These segments are the 
basis on which the Group reports internally to the Board. 

Year ended 31 December

Revenue 

Cost of sales

Gross proﬁ t

Administrative expenses

Exceptional items

Other operating income

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

Europe

Spain

Denmark

USA

Australia and New Zealand

Rest of World

Total

2019

Own Brand

2019

Close-out

2020

2020

Own Brand

Close-out

£’000

35,397

(24,375)

11,022

(11,853)

(279)

317

(793)

(793)

(212)

(1,005)

£’000

4,889

(3,367)

1,522

(1,637)

(38)

44

(109)

(109)

–

(109)

2020

Total

£’000

40,286

(27,742)

12,544

(13,490)

(317)

361

(902)

(902)

(212)

(1,114)

£’000

41,619

(27,086)

14,533

(13,110)

(155)

–

1,268

1,268

(370)

898

16,909

4,233

21,142

17,863

5,271

4,555

4,987

1,790

1,206

679

48

72

171

358

–

7

5,319

4,627

5,158

2,148

1,206

686

6,289

7,268

4,580

2,825

1,408

1,386

2019

Total

£’000

49,282

(32,780)

16,502

(14,177)

(178)

–

2,147

2,147

(370)

1,777

22,701

6,969

7,268

4,580

4,956

1,410

1,398

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£’000

7,663

(5,694)

1,969

(1,067)

(23)

–

879

879

–

879

4,838

680

–

–

2,131

2

12

35,397

4,889

40,286

41,619

7,663

49,282

During the year ended 31 December 2020, there was no single material external customer from which revenues were derived exceeding 10% of annual 
sales. During the year ended 31 December 2019, revenues of approximately £5,269,000 were derived from a single external customer based in Spain 
and £3,797,000 were derived from a single external customer based in Denmark.

The Directors are not able to attribute the Group’s assets and liabilities by reportable business segment. 

Analysis of non -current assets by geographical market.

Year ended 31 December

Goodwill

Intangibles

Property, plant and equipment

Right of use assets

2020

UK

£’000

6,720

4,066

1,142

3,684

2020

USA

£’000

554

585

7

115

2020

Total

£’000

7,274

4,651

1,149

3,799

2019

UK

£’000

6,720

6,286

675

4,399

2019

USA

£’000

554

796

9

286

2019

Total

£’000

7,274

7,082

684

4,685

15,612

1,261

16,873

18,080

1,645

19,725

65

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

3. 

Other operating income

Government grants receivable

Year ended 31 December

2020

£’000

361

361

2019

£’000

–

–

The group applied for various government support Programs introduced in response to the global pandemic.

Included within the consolidated statement of comprehensive income is £361,000 of government grants obtained relating to supporting the payroll of 
the Group’s employees. The Group has elected to present this government grant separately, rather than reducing the related expense. The Group had 
to commit to spending the assistance on payroll expenses, and not reduce employee headcount below prescribed levels for a speciﬁ ed period of time. 
The Group does not have any unfulﬁ lled obligations relating to this program.

Operating (loss)/proﬁ t

4. 
Operating (loss)/proﬁ t for the period is stated after charging:

Foreign exchange loss

Depreciation

Amortisation of right of use assets

Amortisation of intangible assets

Write-down inventories at net realisable value

Exceptional costs

The expenditure incurred within the table above falls wholly within Administrative expenses.

Exceptional costs

Non-recurring legal and professional fees

Restructuring costs

Auditor’s Remuneration
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

Other assurance

Total non-audit fees

366

Year ended 31 December

2020

£’000

420

385

867

2,443

312

317

2019

£’000

227

326

868

2,439

83

178

Year ended 31 December

2020

£’000

76

241

317

2019

£’000

16

162

178

Year ended 31 December

2020

£’000

60

89

149

26

3

29

2019

£’000

49

102

151

12

3

15

 
 
 
Annual  Report 2020

Year ended 31 December

2020

£’000

4,889

407

83

5,379

2019

£’000

4,576

449

81

5,106

Year ended 31 December

2020

No.

6

27

7

53

8

12

113

2020

£’000

838

545

18

3

1,404

 2020

£’000

480

478

244

61

60

40

40

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2019

No.

7

40

5

45

3

11

111

2019

£’000

740

674

16

2

1,432

2019 

£’000

493

491

253

55

60

40

40

1,403

1,432

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

5. 

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

Directors’ remuneration, included in staff costs

Salaries

Share based payments

Beneﬁ ts

Pension contributions

Remuneration in respect of Directors was as follows:

Executive Directors

S Bazini

E Macleod

N Rodol

S Craig

Non-executive Directors

C Garston

K Sadler

P Hagon

Salary/fees

£’000

Share based

payment

£’000

Pension

Beneﬁ ts

contribution

£’000

£’000

10

8

–

–

–

–

–

18

–

–

1

1

–

–

–

2

230

230

180

58

60

40

40

838

240

240

63

2

–

–

–

545

67

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

5. 

Staff costs (continued)

Number of Share

Number of Share

Number of Share

Number of Share

options

options awarded

options lapsed

options

Earliest Exercise

Exercise Expiry

at January 2020

in the year

in the year

at December 2020

Exercise Price

Date

Date

N Rodol

412,258

S Bazini

E Macleod

S Craig

1,534,986

1,534,986

10,000

–

–

–

10,000

Total share options

3,492,230

10,000

The directors of the Group are the only key management personnel. 

–

–

–

–

–

105,262 
@237.5p 
306,996 
@254.5p

254.5p

254.5p

10,000
@237.5p 10,000
@49.5p

412,258

1,534,986

1,534,986

20,000

3,502,230

29/06/2020

29/06/2027

21/09/2021

21/09/2028

21/09/2021

21/09/2028

21/09/2021

21/09/2028

29/06/2020

29/06/2027

20/05/2023

20/05/2030

6. 

Finance expense

Loan interest

Lease liability interest

Other interest

7. 

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

Year ended 31 December

2020

£’000

18

143

51

212

2019

£’000

26

225

119

370

Year ended 31 December

2020

£’000

429

–

429

(544)

(111)

2019

£’000

1,102

(75)

1,027

(618)

409

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:

(Loss)/Proﬁ t for the period before taxation

Expected tax charge based on corporation tax rate of 19% (2019: 19%)

Expenses not deductible for tax purposes

Other adjustments

Different tax rates applied in overseas jurisdiction

Adjustments in relation to prior year

Adjustment to deferred tax to average rate

Total tax expense

The UK corporation tax at the standard rate for the year is 19.0% (2019: 19.0%).

The Group’s effective tax rate for the year is 19.30% (2019: 25.19%). 

368

Year ended 31 December

2020

£’000

(1,114)

(212)

29

2

(69)

–

139

(111)

2019

£’000

1,777

337

170

5

86

(75)

(114)

409

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Subsidiaries

8. 
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*

Nature of business
Holding company

Wholesaler

Dormant

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

Jinhua Badgequo Cosmetics Trading Co., Ltd

Marvin Leeds Marketing Services, Inc.

Warpaint Cosmetics (ROI) Limited

Wholesaler

Wholesaler

Dormant

People’s Republic of China

U.S.A.

Republic of Ireland

* indicates indirect interest

Percentage owned
100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

All 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 Warpaint Cosmetics Inc. is 445 Northern Boulevard – Great Neck, New York 11021.

The registered ofﬁ ce for Badgequo Deutschland GmbH is Robert-Bosch-Straße 10, Haus 1, 56410 Montabaur, Germany.

The registered ofﬁ ce for Badgequo Hong Kong Limited is 12F, 3 Lockhart Road, Wanchai, Hong Kong.

The registered ofﬁ ce for Jinhua Badgequo Cosmetics Trading Co. Ltd is Room 1401, Gongyuan Building No. 307 South Shuanglong Street, Wucheng 
District, Jinhua, Zhejiang, China 321000.

The registered ofﬁ ce for Marvin Leeds Marketing Services, Inc. is 34W. 33rd St. – Suite 1015, New York NY 10001.

The registered ofﬁ ce for Warpaint Cosmetics (ROI) Limited is 6th Floor, South Bank House, Barrow Street, Dublin 4, D04 TR29.

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9. 

Goodwill

Cost

At 1 January 2020

At 31 December 2020

Impairment

At 31 December 2019

Impairment during the year

At 31 December 2020

Net book value

At 31 December 2020

At 31 December 2019

£’000

8,086

8,086

812

–

812

7,274

7,274

Goodwill represents the excess of consideration over the fair value of the Group’s share of the net identiﬁ able assets of the acquired business/CGU at 
the date of acquisition. The carrying value at 31 December 2020 includes Treasured Scents Limited (Close-out business) of £513,000, Retra Holdings 
Limited £6,207,000 and Marvin Leeds Marketing Services, Inc. £554,000.

Impairment is calculated by comparing the carrying amounts to the recoverable amount being the higher of value in use derived from discounted cash 
ﬂ ow projections or the fair value less costs to sell. A CGU is deemed to be an individual division, and these have been grouped together into similar 
classes for the purpose of formulating operating segments as reported in note 2. 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 10.1% (2019: 15.6%) for Retra 
Holdings Limited and 8.0% (2019: 14.1%) for Marvin Leeds Marketing Services, Inc. Cash ﬂ ows beyond the ﬁ ve-year period are extrapolated using a 
long-term average growth rate of 2.0% (2019: 2.0%). 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. 

69

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Goodwill (continued)

9. 
The fair value less costs to sell was based on a multiple of earnings less estimated costs to sell. Management have performed the annual impairment 
review as required by IAS 36 and have concluded that no impairment is indicated for Treasured Scents Limited, Retra Holdings Limited or Marvin Leeds 
Marketing Services, Inc. as the recoverable amount exceeds the carrying 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 – for LMS this is based on forecasts incorporating growth of 15.6% in revenue over the next ﬁ ve years. For Retra, the growth rate over 
the next year is anticipated to be 9.8% increasing to approximately 10.0% in years 2 to 5. EBITDA percentages for both LMS and Retra are based on 
historical rates achieved.

•   Discount Rate – pre-tax discount rate of 10.1% for Retra Holdings Limited and 8.0% for Marvin Leeds Marketing Services, Inc. reﬂ ects the Directors’ 

estimate of an appropriate rate of return, considering 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 2.0% for LMS and Retra.

Sensitivity to changes in assumptions

The impairment review of the Group is sensitive to changes in the key assumptions, most notably the pre-tax discount rate, the terminal growth rate, 
the projected operating cash ﬂ ows and the multiple applied in the fair value less cost to sell calculation. Reasonable changes to these assumptions 
are considered to be:

•   1.0% increase in the pre-tax discount rate.

•   1.0% reduction in the terminal growth rate.

•   10.0% reduction in projected operating cash ﬂ ows.

•   10.0% reduction in valuation multiple.

Reasonable changes to the assumptions used, considered in isolation, would not result in an impairment of goodwill for LMS or Retra.

10. 

Intangible assets

Cost

At 1 January 2019

Additions

At 31 December 2019

Additions

At 31 December 2020

Accumulated amortisation

At 1 January 2019

Charge for the year

At 31 December 2019

Charge for the year

At 31 December 2020

Net book value

At 31 December 2020

At 31 December 2019

At 1 January 2019

Brands

£’000

3,802

–

3,802

–

3,802

824

761

1,585

765

2,350

1,452

2,217

2,978

Customer lists

£’000

8,240

–

8,240

–

8,240

1,908

1,646

3,554

1,644

5,198

3,042

4,686

6,332

Patents

£’000

Website

£’000

Licences

£’000

217

35

252

12

264

70

22

92

24

116

148

160

147

45

–

45

–

45

19

9

28

9

37

8

17

26

6

–

6

–

6

3

1

4

1

5

1

2

3

Total

£’000

12,310

35

12,345

12

12,357

2,824

2,439
5,263

2,443

7,706

4,651

7,082

9,486

370

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

11. 

Property, plant and equipment

Costs

At 1 January 2019

Reclassiﬁ cation to right-of-use assets

Additions

Disposals

At 31 December 2019

Additions

Disposals

At 31 December 2020

Accumulated depreciation

At 1 January 2019

Reclassiﬁ cation to right-of-use assets

Charge for year

On disposals

At 31 December 2019

Charge for year

On disposals

At 31 December 2020

Net book value

At 31 December 2020

At 31 December 2019

At 1 January 2019

12. 

Right-of-use assets 

Costs

At 1 January 2019

Reclassiﬁ ed from property, plant and equipment

Recognised on adoption of IFRS 16

At 31 December 2019

Additions

Disposals

At 31 December 2020

Accumulated amortisation

At 1 January 2019

Reclassiﬁ ed from property, plant and equipment

Charge for year

At 31 December 2019

Charge for the year

Disposals

At 31 December 2020

Net Book Value

At 31 December 2020

At 31 December 2019

Plant and machinery

Fixtures and ﬁ ttings  Computer equipment

Motor vehicles

£’000

£’000

£’000

771

–

119

(42)

848

825

–

1,673

328

–

205

(5)

528

257

–

785

888

320

443

331

(77)

49

(1)

302

42

–

344

162

(36)

56

(1)

181

70

–

251

93

121

169

£’000

141

–

–

–

141

–

(21)

120

59

–

30

–

89

17

(2)

104

16

52

82

Leasehold property 

Plant and machinery

Computer equipment 

£’000

£’000

£’000

–

–

4,960

4,960

139

(303)

4,796

–

–

729

729

702

(145)

1,286

3,510

4,231

–

760

760

–

–

760

–

208

113

321

150

–

471

289

439

–

77

–

77

–

–

77

–

36

26

62

15

–

77

–

15

897

(760)

116

(3)

250

2

–

252

233

(208)

35

(1)

59

41

–

100

152

191

664

71

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Total

£’000

2,140

(837)

284

(46)

1,541

869

(21)

2,389

782

(244)

326

(7)

857

385

(2)

1,240

1,149

684

1,358

Total

£’000

–

837

4,960

5,797

139

(303)

5,633

–

244

868

1,112

867

(145)

1,834

3,799

4,685

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

13. 

Inventories

Finished goods

Provision

As at 31 December

2020

£’000

14,934

(521)

14,413

2019

£’000

16,387

(193)

16,194

The cost of inventories recognised as an expense and included in ‘cost of sales’ amounted to £24.30 million in the year ended 31 December 2020 
(2019: £29.11 million).

14. 

Trade and other receivables

Trade receivables – gross

Provision for impairment of trade receivables

Trade receivables – net

Other receivables

Prepayments and accrued income

Total

As at 31 December

2020

£’000

7,750

(44)

7,706

600 

881

9,187

2019

£’000

10,310

(44)

10,266

1,237

1,121

12,624

The directors consider that the carrying value of trade and other receivables measured at book value and amortised cost approximates to fair value. 

Trade receivables amounting to £Nil (2019: £506,000) are pledged as collateral against an invoice ﬁ nancing facility. 

The individually impaired receivables relate to the supply of goods to customers. A provision is recognised for amounts not expected to be recovered. 
Movements in the accumulated impairment losses on trade receivables were as follows:

Accumulated impairment losses at 1 January 

Additional impairment losses recognised/(released) during the year, net

Amounts written off during the year as uncollectible

Accumulated impairment losses at 31 December

As at 31 December

2020

£’000

44

256

(256)

44

2019

£’000

114

(10)

(60)

44

The impairment losses recognised during the year of £256,000 (2019: credit of £10,000 relating to the recovery of amounts previously written off as 
uncollectable).

Contract Liabilities

At 1 January

Amounts included in contract liabilities that was recognised as revenue during the period

Amounts settled during the period

At 31 December 

As at 31 December

2020

£’000

321

611

(640)

292

2019

£’000

305

660

(644)

321

Contract liabilities are included within “trade and other receivables” in the face of the statement of ﬁ nancial position being settled net of the trade 
debtor balances. They arise from the group’s own brand segment, which enter into contracts with customers for early settlement discounts, marketing 
contributions and volume rebates, because the invoiced amounts to customers at each balance sheet date do not consider the amount or rebate and 
discounts the customers are entitled to until settlement of the debtor balance at a certain time.

372

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Cash and cash equivalents

15. 
Cash and cash equivalents include the following for the purposes of the cash ﬂ ow statement:

Cash at bank and in hand

16. 

Trade and other payables

Current

Trade payables

Social security and other taxes

Other payables

Accruals and deferred income

Total

Annual  Report 2020

As at 31 December

2019

£’000

2,731

2,731

As at 31 December

2019

£’000

957

546

58

2,372

3,933

2020

£’000

4,875

4,875

2020

£’000

1,439

523

32

1,127

3,121

The directors consider that the carrying value of trade and other payables measured at book value and amortised cost approximates to fair value. 

17. 

Loans and borrowings

Bank loans

Repayable within 1 year

Repayable within 2 – 5 years

Lease liabilities

Repayable within 1 year

Repayable within 2 – 5 years

Repayable in more than 5 years

Total

Repayable within 1 year

Repayable within 2 – 5 years

Repayable in more than 5 years

Lease liabilities

At 1 January 2019

Interest expense

Lease payments

As at 31 December 2019

Lease additions

Lease disposals

Interest expense

Lease payments

As at 31 December 2020

As at 31 December

2020

£’000

48

–

48

866

2,375

670

3,911

914

2,375

670

3,959

Leasehold property

Plant and machinery

Computer equipment

As at 31 December 

£’000
4,960

168

(802)

4,326

139

(158)

97

(745)

3,659

£’000
550

53

(205)

398

–

–

44

(190)

252

£’000
41

4

(29)

16

–

–

2

(18)

–

73

2019

£’000

1,281

48

1,329

925

2,584

1,231

4,740

2,206

2,632

1,231

6,069

Total

£’000
5,551

225

(1,036)

4,740

139

(158)

143

(953)

3,911

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Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

17. 

Loans and borrowings (continued)

Nature of lease liabilities
The group leases a number of properties in the United Kingdom and United States of America as well as certain items of plant and equipment.

An additional £2,617 has been expensed to the statement of comprehensive income in respect of low value operating leases. Interest payments of 
£4,501 have also been expensed in respect of leases that expired during the period.

The interest rates expected are as follows:

Finance loans

Bank loans

Invoice ﬁ nancing

As at 31 December

2020

%

7.0

8.75

3.25

2019

%

7.0

8.75

3.25

Secured loans
The borrowings of the subsidiary companies, Retra Holdings Limited and Badgequo Limited, are secured by a debenture including a ﬁ xed charge over 
the present leasehold property, a ﬁ rst ﬁ xed charge over book and other debts and a ﬁ rst ﬂ oating charge over all assets of those companies. 

Bank borrowings include stock and invoice ﬁ nancing facilities amounting to £Nil (2019: £1,086,000 invoice ﬁ nancing). The carrying value of assets 
pledged as collateral approximates to £Nil (2019: £1,086,000).

18.  Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using tax rate of 19% - 25%.

The movement on the deferred tax account is as shown below:

Opening balance

Foreign exchange adjustment

Recognised in proﬁ t and loss:
Tax expense

Closing balance

Deferred tax liability

Year ended 31 December

Deferred tax asset

Year ended 31 December

2020

£’000

(1,324)

3

321

 (1,000) 

2019

£’000

(1,796)

–

472

(1,324)

2020

£’000

374

(16)

223

581

2019

£’000

241

(13)

146

374

The deferred tax liability has arisen due to the timing difference on accelerated capital allowances amounting to £42,000 (2019: £37,000) and on the 
intangible assets acquired in a business combination amounting to £1,057,000 (2019: £1,057,000). 

Deferred tax asset has arisen from loss carry forward for LMS amounting to £2,323,000 (2019: £1,497,000) and recognised at a rate of 25%.

19. 

Dividends

Year to December 2020

Final dividend – 2019

Interim dividend – 2020

Year to December 2019

Final dividend – 2018

Interim dividend – 2019 

Paid 
–

Amount per share
–

20 Nov 20

2.8p

Paid 
11 Jul 19

12 Nov 19

Amount per share
2.9p

1.5p

Total

£’000
–

2,149

2,149

Total

£’000
2,226

1,151

3,377

374
74

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

20. 

Called up share capital

Allotted and issued

Ordinary shares of £0.25 each:

At 1 January 2019 and 2020

At 31 December 2019 and 2020

All ordinary shares carry equal rights.

21. 

Reserves

Annual  Report 2020

No of shares

’000

£’000

76,749

76,749

19,187

19,187

Share premium
The share premium reserve contains the premium arising on the issue of equity shares, net of issue expenses incurred by the Company. 

Retained earnings

Retained earnings represent cumulative 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 Scents (2014) Limited on 11 November 2016. The shareholders 
of Treasured Scents (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.

Share option reserves

‘Share option reserves’ have arisen from the share-based payment charge. The shares over which the options were issued are that of the parent 
company. ‘Other reserves’ have also arisen on translation of foreign subsidiaries.

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Share based payments

22. 
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

Period adjustments

Outstanding at the end of the year

Weighted average

Weighted average

exercise price (pence)

Number of options

exercise price (pence)

Number of options

2020

253.45

49.50

83.36

–

233.50

2020

4,088,302

454,686

(14,026)

–

4,528,962

2019

253.52

–

237.50

237.50

253.45

2019

4,070,617

–

(3,368)

21,053

4,088,302

The weighted average remaining contractual life of the options is 3.0 years (2019: 4.0 years).

The following options over ordinary shares have been granted by the Company:

29 June 2017

24 September 2018

20 May 2020

Exercise price

Exercise period 

Pence
237.50

254.50

49.50

(years)
3

Number of options
255,051

5

3

3,837,462

454,686

75

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

Share based payments (continued)

22. 
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 (£)

20 May 2020

24 Sept 18

29 June 17

76%

3

0.01%

2.08%

0.213

78%

2-4

1.61%

1.53%

0.422

64%

3

0.38%

2%

0.963

On 20 May 2020, the Company granted, in aggregate, 454,686 share options with an exercise price of 49.50 pence per Ordinary share under a Company 
Share Option Plan (CSOP). Key persons discharging managerial responsibilities (PDMR’s) were awarded a cumulative 112,106 share options as part 
of  their  annual  remuneration  and  incentivisation  packages.  The  remaining  342,580  options  granted  have  been  awarded  to  other  members  of  the 
company’s workforce. No directors of the company were awarded options in relation to this CSOP. The options are exercisable for a period of seven 
years from 20 May 2023, subject to the same performance conditions dictated by the Enterprise Management Incentive Scheme detailed below. 

On 24 September 2018, share options with an exercise price of 254.50p, equal to the closing mid-market value immediately prior to the date of grant, 
and subject to the achievement of demanding Earnings Per Share (“EPS”) and Total Shareholder Return (“TSR”) performance conditions measured 
over a period of up to 5 years were granted to certain directors.

The share options are exercisable up to 10 years from the date of grant. Vesting is subject to the performance conditions set out below: 

•   50% of the award is subject to an adjusted EPS growth performance condition. One third of this portion of the award will be tested and vest after three, four 
and ﬁ ve years. Vesting is based on adjusted EPS in the years ending Dec 2020, 2021 and 2022. Threshold vesting of 20% of the award is achieved at 
12.5% compound annual EPS growth and full vesting at 22.5% compound annual EPS growth, measured from 31 December 2017.

•   50% of the award is subject to an absolute TSR performance condition tested following the announcement of results for the years ending 31 December 
2020, 2021 and 2022. Threshold vesting of 20% of the award is achieved at 8% compound annual TSR and straight line vesting up to 100% vesting at 
18% compound annual TSR, measured from 31 December 2017.

An additional grant of 460,494 share options with the same terms was made on the same date to three senior management individuals of the Company. 

On 29 June 2017, the Company granted in aggregate over 277,788 ordinary shares of 25 pence each in the Company under the Enterprise Management 
Incentive Scheme to all staff members, including the Company’s Chief Financial 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 £656,000 (2019: £816,000). 

23.  Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. 

Key management personnel are considered to be the directors. Compensation of the directors is disclosed in note 5 with the exception of dividends 
and drawings which are disclosed in note 19. 

During 2020, Warpaint Cosmetics (2014) Limited paid rent in the sum of £120,000 (2019: £120,000) to Direct Supplies (2014) Group Limited, of which 
S Bazini is a director. At the year end the amount due to Direct Supplies (2014) Group Limited was £Nil (2019: £Nil).

During 2020, Warpaint Cosmetics (2014) Limited paid rent in the sum of £120,000 (2019: £120,000) to Trading Scents Group Limited, of which E Macleod 
is a director. At the year end the amount due from Trading Scents Group Limited was £1,000 (2019: £Nil).

During  2020,  Retra  Holdings  Limited  paid  rent  in  the  sum  of  £340,000  (2019:  £340,000)  to  Warpaint  Cosmetics  Limited,  of  which  E  Macleod  and 
S Bazini are directors. 

During 2020, the Group renewed its contract with Ward & Hagon Management Consulting LLP for a further 12 months (“Ward & Hagon”). Ward & 
Hagon, a provider of practical business solutions, were initially appointed in February 2020 to assist the Group in implementing its strategic growth 
plan. The Contract has a total annual value of £210,000, and includes the services of Paul Hagon, an executive director of the Group and Martyn 
Ward, amongst other members of the Ward & Hagon team. During 2020, the Group paid £200,000 in consultancy fees and £7,299 in expenses. At 
the year end the amount due from Ward & Hagon was £Nil. In addition, Ward & Hagon will be paid a commission of 3% on all sales generated from 
their introductions in the 12-month period from the point of ﬁ rst sale, and 4% on all sales generated from their introductions in the 12-month period 
thereafter. Paul Hagon, an executive director of Warpaint London Plc, is a member of Ward & Hagon and therefore the contract renewal constitutes a 
related party transaction under the AIM Rules for Companies.

376

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

24.  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 £32,389,000 as at 31 December 2020 (2019: £35,541,000) 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.

Financial assets

Financial assets at amortised cost:

Trade and other receivables

Financial assets measured at fair value through the proﬁ t and loss:

Cash and cash equivalents 

Derivative ﬁ nancial instruments

Financial liabilities 

Financial liabilities at amortised cost:

Trade and other payables

Loan and borrowings

Financial liabilities measured at fair value through the proﬁ t and loss:

Derivative ﬁ nancial instruments

Net

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Year ended 31 December

2020

£’000

2019

£’000

8,306

11,503

4,875

40

13,221

(2,598)

(3,959)

(400)

(6,957)

6,264

2,731

39
14,279

(3,387)

(6,069)

–

(9,456)

4,823

Financial assets measured at fair value through the proﬁ t and loss comprise cash and cash equivalents and derivative ﬁ nancial instruments.

Financial assets measured at amortised cost comprise trade receivables and other receivables.

Financial liabilities measured at amortised cost comprise trade payables and other payables, and bank loans.

Cash and cash equivalents

This comprises cash and short-term deposits held by the Group. The carrying amount of these assets approximates their fair value.

General risk management principles

The Group’s activities expose it to a variety of risks including market risk (interest rate risk), credit risk and liquidity risk. The Group manages these 
risks through an effective risk management programme and through this programme, the Board seeks to minimise potential adverse effects on 
the Group’s 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.

77

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

24.  Financial instruments (continued)

Interest rate risk
The Group’s interest rate exposure arises mainly from its interest-bearing borrowings. Contractual agreements entered into a ﬂ oating rate 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 
£7,000 (2019: £21,000) 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 Group makes a provision in the ﬁ nancial statements for expected credit 
losses based on an evaluation of historical data and applies percentages based on the ageing of trade receivables.

The  maximum  exposure  to  credit  risk  in  respect  of  the  above  is  the  carrying  value  of  ﬁ nancial  assets  recorded  in  the  ﬁ nancial  statements. 
At 31 December 2020, the Group has trade receivables of £7,706,000 (2019: £10,266,000). 

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.

Current

1 – 30 days

31 – 60 days

61 – 90 days

91 + days

Provision for impairment of trade receivables

Total trade receivables - net

As at 31 December

2020

£’000

4,682

1,801

944

220

103

(44)

2019

£’000

7,416

1,981

456

155

302

(44)

7,706

10,266

The Directors are unaware of any factors affecting the recoverability of outstanding balances at 31 December 2019 and, consequently, no further 
provisions have been made for bad and doubtful debts.

The allowance for bad debts has been calculated using a 12-month lifetime expected credit loss model, as set out below, in accordance with IFRS 9. 

Current

1 – 30 days

31 – 60 days

61 – 90 days

91 + days

As at 31 December

2020

As at 31 December

2019

£’000

4,682

1,801

944

220

103

%

0.135

0.405

1.215

3.645

10.935

£’000

6

7

11

8

12

44

£’000

7,416

1,981

456

155

302

%

0.096

0.288

0.864

2.592

7.776

£’000

7

6

4

4

23

44

378

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

24.  Financial instruments (continued)

Credit quality of ﬁ nancial assets

Trade receivables, gross (note 14):

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

Lifetime expected loss provision:

Less than 30 days overdue

30 – 90 days overdue

Total lifetime expected loss provision (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):

AAA rated

AA rated

A rated

BAA rated

Total cash and cash equivalents

Annual  Report 2020

As at 31 December

2020

£’000

4,270

412

4,682

2019

£’000

6,561

855

7,416

As at 31 December

2020

£’000

1,801

1,223

3,024

–

44

44

(44)

7,706

2019

£’000

1,981

869

2,850

13

31

44

(44)

10,266

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As at 31 December

2020

£’000

10

303

1,115

3,447

4,875

2019

£’000

7

786

–

1,938

2,731

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 (2019: £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.

79

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

24.  Financial instruments (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 2020

Trade payables

Other payables

Accruals

Loans and borrowings

Year ended 31 December 2019

Trade payables

Other payables

Accruals

Loans and borrowings

Less than 6 months

Between 6 months 
and 1 year

Between 1 
and 5 years

Over 5 years

£’000
1,439

32

1,127

491

3,089

£’000
–

–

–

444

444

£’000
–

–

–

2,526

2,526

£’000
–

–

–

686

686

Less than 6 months

Between 6 months 
and 1 year

Between 1 
and 5 years

Over 5 years

£’000
957

58

2,372

1,667

5,054

£’000
–

–

–

477

477

£’000
–

–

–

2,755

2,755

£’000
–

–

–

1,271

1,271

Total

£’000
1,439

32

1,127

4,147

6,745

Total

£’000
957

58

2,372

6,170

9,557

The borrowings of the group are secured by a debenture including a ﬁ xed charge over all present freehold and leasehold property, a ﬁ rst ﬁ xed charge 
over book and other debts and a ﬁ rst ﬂ oating charge over all assets. 

Foreign exchange risk
The Group operates in a number of markets across the world and is exposed to foreign exchange risk arising from various currency exposure in 
respect of cash and cash equivalents, trade receivables and trade payables, in particular with respect to the US dollar. The Group mitigates its foreign 
exchange risk by negotiating contracts with key suppliers that offer a ﬂ exible discount structure to offset any adverse foreign exchange movements 
and through the use of forward currency contracts. At December 2020, there were total sums of £375,000 (2019: £255,000) held in foreign currency.

The Group is also exposed to currency risk as the assets of its subsidiary are denominated in US Dollars. At 31 December 2020, the net foreign liability 
was £0.4m (2019: £0.3m). Differences that arise from the translation of these assets from US dollar to sterling are recognised in other comprehensive 
income in the year and the cumulative effect as a separate component in equity. The Group does not hedge this translation exposure to its equity.

A 5% weakening of sterling would result in a £4,000 increase in reported proﬁ ts and equity, while a 5% strengthening of sterling would result in £3,000 
decrease in proﬁ ts and equity.

Derivatives carried at fair value:

Exchange (loss)/gain on forward foreign currency contracts

2020

£’000

(360)

2019

£’000

39

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 2020, the group has 42 (2019: 33) forward foreign exchange contracts outstanding. Derivative ﬁ nancial instruments are carried at 
fair value. 

380

Annual  Report 2020

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

24.  Financial instruments (continued)
The following table details the foreign currency contracts outstanding as at the balance sheet date.

a) Contracted exchange rate

3 months or less

3 to 6 months

6 to 12 months

b) Contract value

3 months or less

3 to 6 months

6 to 12 months

c) Foreign currency

3 months or less

3 to 6 months

6 to 12 months

2020

£/$
1.3353

1.3222

1.3265

2020

£/$

2,620

7,008

3,766

13,394

2020

$’000
3,500

9,254

5,000

17,754

2019

£/$

1.2953

1.3280

–

2019

£/$

4,723

6,408

–

11,131

2019

$’000

6,175

8,500

–

14,675

2020

£/€
1.1082

1.1099

1.1024

2020

£/€
947

2,479

1,133

4,559

2020

€’000
1,050

2,750

1,250

5,050

2019

£/€
1.1394

1.1405

–

2019

£/€
904

2,899

–

3,803

2019

€’000
1,030

3,335

–

4,365

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 carrying value approximates 
its fair value with the exception of foreign currency forward contracts and options which are considered Level 2. The Directors consider that there is no 
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.

25.  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 £91,019 (2019: £80,210).

Controlling party

26. 
In the opinion of the directors there is no ultimate controlling party.

 27.  Earnings/(loss) per share
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 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/(loss) per share (pence)

Diluted earnings per/(loss) share (pence)

2020

(1.31)

(1.31)

2019

1.78

1.78

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81

 
Warpaint London P LC

Notes to the Consolidated Financial Statements (continued)
as at ended 31 December 2020

27.  Earnings/(loss) per share (continued)
The calculation of basic and diluted earnings/(loss) per share is based on the following data:

Earnings

Earnings for the purpose of basic earnings per share, being the net (loss)/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

2020

£’000

(1,098)

2019

£’000

1,368

2020

2019

76,749,125

76,749,125

67,040

–

76,816,165

76,749,125

The 4,088,302 share options (2019: 4,088,302) in issue throughout the year have not been included in the computation of diluted earnings per share, as 
per IAS 33, the share options are not dilutive as they are not likely to be exercised given that the exercise price is higher than the average market price.

The additional 454,686 share options granted 20 May 2020 have been included in the computation of diluted earnings per share as the exercise price 
of the options is below the average annual market price of Ordinary shares.

28.  Notes supporting statement of cash ﬂ ows
Non-cash transactions from ﬁ nancing activities are shown in the table below.

At 1 January 2019

Non-cash ﬂ ows:

Amount recognised in respect of lease liabilities on adoption of IFRS 16.

Cash ﬂ ows

Reclassiﬁ cation from Non-current loans and borrowings to current loans and borrowings

At 31 December 2019

Non-cash ﬂ ows: 

Cash ﬂ ows

Reclassiﬁ cation from Non-current loans and borrowings to current loans and borrowings

At 31 December 2020

Non-current

loans and

borrowings

£’000

553

4,271

–

(960)

3,864

–

(819)

3,045

Current

loans and

borrowings

£’000

2,169

688

(1,612)

960

2,205

(19)

(2,091)

819

914

Total

£’000

2,722

4,959

(1,612)

–

6,069

(19)

(2,091)

–

3,959

382

Company Statement of Financial Position
for the year ended 31 December 2020

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

Annual  Report 2020

2020

£’000

35,833

35,833

2019

£’000

35,833

35,833

14,732

11,298

313

74

15,045

11,372

(184)

–

(184)

14,861

50,694

19,187

19,359

1,895

1,633

8,620

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(110)

–

(110)

11,262

47,095

19,187

19,359

1,895

977

5,677

50,694

47,095

Note

3

4

5

6

7

8

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 £5,092,000 
(2019: £1,231,000). 

The ﬁ nancial statements on pages 113 to 119 were approved and authorised for issue by the Board of Directors and signed on its behalf by:

Neil Rodol
Chief Financial Ofﬁ cer

 27 April 2021

 The notes on pages  85 to  87 form part of these ﬁ nancial statements.

83

 
Warpaint London P LC

Company Statement of Changes in Equity
for the year ended 31 December 2020

Share Capital

Share Premium

Merger Reserve

Reserve

Share Option

As at 31 December 2018

Lapsed share option

Share based payment charge

Loss for the year

Dividends paid

£’000

19,187

£’000

19,359

£’000

1,895

–

–

–

–

–

–

–

–

–

–

–

–

As at 31 December 2019

19,187

19,359

1,895

Share based payment charge

Proﬁ t for the year

Dividends paid

–

–

–

–

–

–

–

–

–

£’000

169

(28)

836

–

–

977

656

–

–

Retained

Earnings

£’000

10,257

28

–

Total

Equity

£’000

50,867

–

836

(1,231)

(1,231)

(3,377)

(3,377)

5,677

47,095

–

5,092

656

5,092

(2,149)

(2,149)

As at 31 December 2020

19,187

19,359

1,895

1,633

8,620

50,694

The notes on pages  85 to  87 form part of these ﬁ nancial statements. 

384

Annual  Report 2020

Notes to the Company Financial Statements
for the year ended 31 December 2020

1. 

Signiﬁ cant accounting policies

Basis of preparation
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. 

Where the terms and conditions of options are modiﬁ ed before they vest, the 
increase in the fair value of the options, measured immediately before and 
after the modiﬁ cation, is also charged to proﬁ t or loss over the remaining 
vesting period.

Where equity instruments are granted to persons other than employees, the 
proﬁ t and loss account is charged with the fair value of goods and services 
received. 

The Company’s ﬁ nancial statements are presented in GBP. 

Going Concern 

In  preparing  the  separate  ﬁ nancial  statements  of  the  parent  company, 
advantage  has  been  taken  of  the  following  disclosure  exemptions 
available to qualifying entities: 

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.

•   Only  one  reconciliation  of  the  number  of  shares  outstanding  at  the 
beginning and end of the period has been presented as the reconciliations 
for the group and the parent company would be identical; 

•   No cash ﬂ ow statement or net debt reconciliation has been presented 

for the parent company; 

•   Disclosures  in  respect  of  the  parent  company’s  income,  expense,  net 
gains, and net losses on ﬁ nancial instruments measured at amortised 
cost  have  not  been  presented  as  equivalent  disclosures  have  been 
provided in respect of the group as a whole; 

•   Disclosures  in  respect  of  the  parent  company’s  share-based  payment 
arrangements have not been presented as equivalent disclosures have 
been provided in respect of the group as a whole; and 

•   No disclosure has been given for the aggregate remuneration of the key 
management personnel of the parent company as their remuneration is 
included in the totals for the group as a whole.

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.

Share-based payments

Where share options are awarded to employees, the fair value of the options 
at the date of grant is charged to proﬁ t or loss over the vesting period. Non-
market vesting conditions are considered by adjusting the number of equity 
instruments expected to vest at each balance sheet date so that, ultimately, 
the  cumulative  amount  recognised  over  the  vesting  period  is  based  on 
the  number  of  options  that  eventually  vest.  Market  vesting  conditions  are 
factored into the fair value of the options granted. The cumulative expense is 
not adjusted for failure to achieve a market vesting condition.

The  fair  value  of  the  award  also  considers  non-vesting  conditions.  These 
are either factors beyond the control of either party (such as a target based 
on an index) or factors which are within the control of one or other of the 
parties  (such  as  the  company  keeping  the  scheme  open  or  the  employee 
maintaining any contributions required by the scheme).

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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.

Judgements and accounting estimates and assumptions

Impairment of investments
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 of the subsidiary companies. 

Dividends
Dividends are recognised when they become legally payable. In the case 
of interim dividends to equity shareholders, this is when declared by the 
directors.  In  the  case  of  ﬁ nal  dividends,  this  is  when  approved  by  the 
shareholders at the annual general meeting.

2. 

Staff costs

Wages and salaries

Share based payments

Social security costs

Pension costs

Year ended 31 December

2020

£’000

288

545

18

3

854

2019

£’000

190

674

22

1

887

85

 
Warpaint London P LC

Notes to the Company Financial Statements (continued)
for the year ended 31 December 2020

Staff costs (continued)

2. 
The  average  monthly  number  of  employees  during  the  period  was  as 
follows:

6. 

Called up share capital

Directors

Directors’ remuneration, included in staff costs

Salaries

Share based payments

Year ended 31 December

2020

No.

6

6

2020

£’000

288

544

832

2019

No.

6

6

2019

£’000

190

674

864

Allotted and issued

Ordinary shares of £0.25 each

At 1 January 2019 and 2020

At 31 December 2019 and 2020

All ordinary shares carry equal rights.

7. 

Share premium

Share premium

No of shares

’000

£’000

79,749

76,749

19,187

19,187

2020

£’000

19,359

2019

£’000

19,359

The directors are the only key management personnel.

The share premium reserve contains the premium arising on the issue of 
equity shares, net of issue expenses incurred by the company. 

Other reserves

8. 
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.

The share option represents share-based payment charges on the share 
options that were in issue.

Related party transactions

9. 
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 23 of the Consolidated Financial Statements. 

3. 

Investments

Cost

At January 2020 

Additions

At December 2020

Net book value

At 31 December 2020

At 31 December 2019

4. 

Debtors 

Due from group undertakings

Prepayments and accrued income

2020

£’000

14,634

98

14,732

At 31 December 2020

£’000

35,833

–

35,833

35,833

35,833

2019

£’000

11,237

61

11,298

Amounts  due  from  related  undertakings  are  unsecured,  non-interest 
bearing and payable on demand. 

5. 

Creditors due within one year

Trade payables

Other taxation and social security

Accruals and deferred income

2020

£’000

19

25

140

184

2019

£’000

33

26

51

110

386

Annual  Report 2020

Notes to the Company Financial Statements (continued)
for the year ended 31 December 2020

Share based payments

10. 
Movements in the number of options and their weighted average exercise prices are as follows:

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Weighted average 
exercise price (pence)

Number of options

Weighted average 
exercise price (pence)

Number of options

Outstanding at the beginning of the year

Granted during the year

Expired during the year

Period adjustments

2020
253.45

49.50

–

–

2020
4,088,302

454,686

–

–

Outstanding at the end of the year

233.03

4,542,988

The weighted average remaining contractual life of the options is 3.0 years (2019: 4.0 years).

The following options over ordinary shares have been granted by the Company:

2019
253.52

–

237.50

237.50

253.45

2019
4,070,617

–

(3,368)

21,053

4,088,302

29 June 2017

24 September 2018

20 May 2020

Exercise price

Exercise period 

Number of options

Pence

237.50

254.50

49.50

(years)

3

5

7

255,051

3,837,462

454,686

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 (£)

20 May 20
76%

3

0.01%

2.08%

0.213

24 Sept 18
78%

2-4

1.61%

1.53%

0.422

29 June 17
64%

3

0.38%

2%

0.963

On 20 May 2020, the Company granted, in aggregate, 454,686 share options with an exercise price of 49.50 pence per Ordinary share under a Company 
Share Option Plan (CSOP). Key persons discharging managerial responsibilities (PDMR’s) were awarded a cumulative 112,106 share options as part 
of  their  annual  remuneration  and  incentivisation  packages.  The  remaining  342,580  options  granted  have  been  awarded  to  other  members  of  the 
company’s workforce. No directors of the company were awarded options in relation to this CSOP. The options are exercisable for a period of seven 
years from 20 May 2023, subject to the same performance conditions dictated by the Enterprise Management Incentive Scheme detailed below. 

On 24 September 2018, share options with an exercise price of 254.50p, equal to the closing mid-market value immediately prior to the date of grant, 
and subject to the achievement of demanding Earnings Per Share (“EPS”) and Total Shareholder Return (“TSR”) performance conditions measured 
over a period of up to 5 years were granted to certain directors.

The share options are exercisable up to 10 years from the date of grant. Vesting is subject to the performance conditions set out below:

•   50% of the award is subject to an adjusted EPS growth performance condition. One third of this portion of the award will be tested and vest after three, 
four and ﬁ ve years. Vesting is based on adjusted EPS in the years ending Dec 2020, 2021 and 2022. Threshold vesting of 20% of the award is achieved 
at 12.5% compound annual EPS growth and full vesting at 22.5% compound annual EPS growth, measured from 31 December 2017.

•   50% of the award is subject to an absolute TSR performance condition tested following the announcement of results for the years ending 31 December 
2020, 2021 and 2022. Threshold vesting of 20% of the award is achieved at 8% compound annual TSR and straight line vesting up to 100% vesting at 
18% compound annual TSR, measured from 31 December 2017.

An additional grant of 460,494 share options with the same terms was made on the same date to three senior management individuals of the Company. 

On 29 June 2017, the Company granted in aggregate over 277,788 ordinary shares of 25 pence each in the Company under the Enterprise Management 
Incentive Scheme to all staff members, including the Company’s Chief Financial 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 £544,000 (2019: £674,000).

87

 
 
 
Warpaint London P LC

Officers and Professional Advisers

 Directors 

 Registered  Ofﬁ ce  

C Garston 
S Bazini   
E Macleod 
N Rodol   
S Craig 
P Hagon  
K Sadler  

Chairman
Chief Executive Ofﬁ cer 
Managing Director
Chief Financial Ofﬁ cer
General Counsel & Company Secretary
Executive Director
Non-Executive Director

Units B&C
Orbital Forty Six 
The Ridgeway Trading Estate
Iver
Buckinghamshire
SL0 9HW

 Company  Number 

10261717

 Nominated Adviser & 
 Joint Broker 

 Joint Broker 

 Auditors 

 Solicitors 

 Registrars 

 Financial PR 

Nplus1 Singer Capital Markets Limited
1 Bartholomew Lane
London
EC2N 2AX 

Shore Capital
Cassini House
57 St James’s Street
London
SW1A 1LD

BDO LLP
55 Baker Street
London 
W1U 7EU

DAC Beachcroft LLP
25 Walbrook
London
EC4N 8AF

Neville Registrars Limited 
Neville House 
Steel Park Road
Halesowen 
West Midlands,
B62 8HD

IFC Advisory Limited
Birchin Court,
20 Birchin Lane
London, EC3V 9DU

 Perivan 261093

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Warpaint London PLC

Contents

Strategic Report 
03   Mission Statement   
04   Headline Results 
06   Chairman’s Statement 
08   Chief Executive Statement
14   Financial Review
20   Risk Management

Governance 
23   Board of Directors
25   Corporate Governance Report 
36   Section 172 Statement
38   Audit Committee Report
40   Remuneration Committee Report
43   Directors’ Report 
47   Independent Auditor’s Report 

Financial Statements 
53   Consolidated Statement of Comprehensive Income 
54   Consolidated Statement of Financial Position 
56   Consolidated Statement of Changes in Equity 
57   Consolidated Statement of Cash Flows 
58   Notes to the Consolidated Financial Statements 
83   Company Statement of Financial Position 
84   Company Statement of Changes in Equity 
85   Notes to the Company Financial Statements 

Other Information
88   Officers and Professional Advisers 

2