For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240424:nRSX7606La&default-theme=true
RNS Number : 7606L Warpaint London PLC 24 April 2024
24 April 2024
Warpaint London PLC
("Warpaint", the "Company" or the "Group")
Results for the year ended 31 December 2023
Record sales and profits reflect strong Group performance; positive start to
2024
Warpaint London plc (AIM: W7L), the specialist supplier of colour cosmetics
and owner of the W7 and Technic brands is pleased to announce its audited
results for the year ended 31 December 2023.
Financial Highlights
· Strong growth in sales, margins and profits to reach record levels for the
Group. Significant growth in all geographic regions reflecting the focus on
growing sales of the Group's branded products
· Group sales for 2023 grew by 40% to £89.6 million (2022: £64.1 million)
· EU revenue increased by 60.5% to £45.1 million (2022: 28.1 million)
· UK revenue increased by 17.6% to £32.4 million (2022: £27.6
million)
· US revenue increased by 36.8% to £7.3 million (2022: £5.3 million)
· Gross profit margin increased to 39.9% (2022: 36.4%)
· EBITDA increased 74% to £20.4 million (2022: £11.7 million)
· Profit before tax was up by 136% to £18.1 million (2022: £7.7 million)
· Earnings per share up 123% 18.1p (2022: 8.1p)
· Cash of £9.1 million at 31 December 2023 (31 December 2022: £5.9 million),
with no debt
· Recommended final dividend of 6.0 pence per share (2022: 4.5 pence per share),
bringing the total dividend for the year to 9.0 pence per share (2022: 7.1
pence per share), an increase of 27%
Operational Highlights
· Sales of the Group's branded products increased by 47% to £84.8 million
(2022: £57.7 million) driven by the Group's lead brand W7 increasing by 64%
to £57.4 million (2022: £35.0 million)
· Direct online sales continue to accelerate, with an increase of 121% in Group
e-commerce sales in 2023 to £6.2 million, accounting for 6.9% of Group sales
(2022: £2.8 million, 4.3% of Group sales)
· Successful launch of W7 product in an initial 71 Superdrug stores
· Following a successful trial in 20 New Look stores in 2022, W7 product was
rolled out to a further 200 stores in 2023
· Significant further expansion in Europe, the largest sales region for the
Group, for both the W7 and Technic brands including with Normal, Etos and
Wibra
· W7 launched in 100 Watsons stores in the Philippines in 2023
Post-Period End Highlights
· Continued strong trading in Q1 2024, with unaudited Group sales for
the three months to 31 March 2023 of £23.5 million an increase of 28% on the
same period in 2023 (3 months to 31 March 2023: £18.4 million)
· Margins in Q1 were robust and better than those achieved in the full
year 2023
· Maintaining a strong balance sheet, with no debt. Cash balances as
at 2 April 2024 totalled £7.5 million after investment in a significant
increase in stock to satisfy expected demand later in the year (31 March 2023:
£8.5 million)
· Continuing brand sales momentum being seen in 2024, both
internationally and the UK, including:
o In the US:
o Q1 2024 expansion into CVS in the US already implemented, expanding the W7
range stocked and roll-out to a further 387 stores
o Significant Christmas order received from Walmart in the US, for W7 and
Chit Chat product and in discussions to stock the Group's all year round
product
o Significant expansion planned with Five Below in the US during H1 2024,
including the stocking of an increased range of W7 product in all 1544 of
their stores, with a further 225+ Five Below stores expected to open in the
next 12 months stocking W7 product
o In the UK:
o In March 2024, a full range of Technic products was launched in an initial
202 Morrisons stores in the UK
o Expansion to a further 100 Boots stores during April 2024 with additional
W7 products stocked in existing and newly added stores
o Further rollout with Superdrug planned for July 2024, into a further 63
stores, taking the number of Superdrug stores served to 134, and an increase
in the products stocked across all these stores
o Further range and store expansions planned with other existing customers
including Etos, Normal, Tesco, The Range and Wibra, together with launches
with a number of significant new customers
Commenting, Clive Garston, Chairman, said: "I am very pleased with the Group's
strong performance in 2023 and that this has continued into 2024, with record
first quarter sales. This reflects the delivery of Warpaint's consistent and
focused strategy. The key to our growth has been, and will continue to be,
expanding our presence in large retailers globally, by growing our sales with
existing customers, entering into relationships with new ones and increasing
our online presence. Notwithstanding the continuing volatile economic
environment and challenges facing our customers, I am optimistic that the
strong performance we have seen in 2022, 2023 and now into 2024 will continue
and that we have the right offering and strategy in place to continue to
deliver profitable future growth."
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which is part of UK law by virtue of the European
Union (Withdrawal) Act 2018
Enquiries:
Warpaint London c/o IFC
Sam Bazini - Chief Executive Officer
Eoin Macleod - Managing Director
Neil Rodol - Chief Financial Officer
Shore Capital (Nominated Adviser & Broker) 020 7408 4090
Patrick Castle, Daniel Bush - Corporate Advisory
Fiona Conroy - Corporate Broking
IFC Advisory (Financial PR & IR) 020 3934 6630
Tim Metcalfe, Graham Herring, Florence Chandler
Warpaint London plc
Warpaint sells branded cosmetics under the lead brand names of W7 and Technic.
W7 is sold in the UK primarily to major retailers and internationally to local
distributors or retail chains. The Technic brand is sold in the UK and
continental Europe with a significant focus on the gifting market, principally
for high street retailers and supermarkets. In addition, Warpaint supplies
own brand white label cosmetics produced for several major high street
retailers. The Group also sells cosmetics under its other brand names of
Man'stuff, Body Collection and Chit Chat, each targeting a different
demographic.
HEADLINE RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
Statutory Results Year ended 31 Dec 2023 Year ended 31 Dec 2022
Revenue £89.6m £64.1m
Profit from operations £18.5m £8.0m
Profit margin from operations 20.6% 12.4%
Profit before tax ("PBT") £18.1m £7.7m
Earnings per share ("EPS") 18.1p 8.1p
Cash and cash equivalents £9.1m £5.9m
Adjusted Statutory Results Year ended 31 Dec 2023 Year ended 31 Dec 2022
Revenue £89.6m £64.1m
Adjusted profit from operations £18.8m* £10.3m*
Adjusted profit margin from operations 21.0%* 16.1%*
Adjusted PBT £18.4m* £10.0m*
Adjusted EPS 18.4p* 10.7p*
Cash and cash equivalents £9.1m £5.9m
Adjusted numbers are closer to the underlying cash flow performance of the
business which is regularly monitored and measured by management, the
adjustments made to the statutory numbers are as follows:
Year ended 31 Dec 2023 Year ended 31 Dec 2022
Statutory profit from operations £18.48m £7.97m
Exceptional items - £0.15m
Amortisation £0.19m £2.00m
Share based payments £0.13m £0.19m
*Adjusted profit from operations £18.80m £10.31m
*Adjusted profit margin from operations £18.80m / £89.59m = 21.0% £10.31m / £64.06m = 16.1%
Statutory PBT £18.12m £7.69m
Exceptional items - £0.15m
Amortisation £0.19m £2.00m
Share based payments £0.13m £0.19m
*Adjusted PBT £18.44m £10.03m
Statutory profit attributable to equity holders £13.90m £6.25m
Exceptional items - £0.15m
Amortisation £0.19m £2.00m
Share based payments £0.13m £0.19m
Tax attributable to adjusting items £(0.08)m £(0.41)m
Adjusted profit attributable to equity holders £14.14m £8.18m
Weighted number of ordinary shares 76,983,311 76,752,355
*Adjusted EPS 18.37p 10.66p
CHAIRMAN'S STATEMENT
During 2023 Warpaint has continued to grow in all its main markets and,
notwithstanding a continuing volatile economic environment, the continued
execution of Warpaint's business strategy and model has again enabled the
delivery of a very strong performance. I would like to thank my colleagues
on the board and all of the Warpaint team for their dedication and exceptional
efforts in achieving this performance.
During the year, we continued our strategy to concentrate on increasing our
presence in larger retailers globally, together with growing direct online
sales. This focus on larger customers, doing more business with them and
expanding the number of large retailers stocking the Group's products is
reflected in the Group's results and provides a strong platform for the
future.
Trading has continued to be strong in the first quarter of 2024, with the
Group enjoying record quarterly sales, 28% ahead of the same period in 2023.
We expect demand to remain buoyant and for sales to continue to grow, despite
continuing global uncertainties.
Results
2023 was again a year of significant achievement, with the Group delivering
record sales and profits.
Profit before tax was £18.1 million (2022: £7.7 million) on revenue of
£89.6 million (2022: £64.1 million) with basic earnings per share of 18.1p
(2022: 8.1p).
The Group continues to ensure inventory levels are appropriate to allow
on-time delivery for customers and to service the anticipated growth in
demand, with inventory at 31 December 2023 increasing to £28.0 million (31
December 2022 £18.7 million). The balance sheet remains strong, with cash at
31 December 2023 of £9.1 million (31 December 2022: £5.9 million) and the
Group is debt free.
Dividend
In accordance with the Group's progressive dividend policy, the board is
pleased to recommend an increased final dividend of 6.0 pence per share which,
if approved by shareholders at the annual general meeting ("AGM"), will be
paid on 5 July 2024 to shareholders on the register at 14 June 2024. The
shares will go ex-dividend on 13 June 2024.
During the year, an interim dividend of 3.0 pence per share was paid on 24
November 2023, bringing the total dividend for the year to 9.0 pence per share
(2022: 7.1 pence per share).
Board
On 1 January 2024, we welcomed Sharon Daly and Indira Thambiah to the board as
independent non-executive directors, following a thorough search process.
They both have considerable experience on the boards of public companies in
the consumer sector and they are already adding considerable value. On
appointment they both joined the Company's audit and remuneration committees
and I stepped down from both committees at the same time.
Annual General Meeting
The Company's AGM will be held at the Company's offices at Units B&C,
Orbital Forty Six, The Ridgeway Trading Estate, Iver, Bucks, SL0 9HW on 26
June 2024 at 10.00 a.m. and we look forward to welcoming those shareholders
who are able to attend in person.
Summary and Outlook
I am very pleased with the Group's strong performance in 2023 and that this
has continued into 2024, with the Group having record first quarter sales.
This reflects the delivery of Warpaint's consistent and focused strategy.
This strategy is fully reviewed by the board annually and the board works
closely with the executive directors and management to ensure that it is
implemented. The key to our growth has been, and will continue to be,
expanding our presence in large retailers globally, by growing our sales with
existing customers, entering into relationships with new ones and increasing
our online presence.
Notwithstanding the continuing volatile economic environment and challenges
that face our customers, I am optimistic that the strong performance we have
seen in 2022, 2023 and now into 2024 will continue and that we have the right
offering and strategy in place to continue to deliver profitable future
growth.
Clive Garston
Chairman
23 April 2024
CHIEF EXECUTIVE'S STATEMENT
2023 was a very good year for Warpaint and the positive momentum has continued
into Q1 2024. In 2023, Group sales increased by 40% to £89.6 million,
reaching a new record level for the Group, with significant growth seen in all
geographic regions. These sales were achieved at an increased gross margin
of 39.9% (2022: 36.4%) and resulted in a reported profit before tax of £18.1
million (2022: £7.7 million). Gross margin is being maintained and has
grown in Q1 2024.
Our strategy of producing a wide range of high-quality cosmetics at affordable
prices remains our key focus, with benefits seen from customers transferring
to more value-oriented brands, such as those produced by the Group, and an
increasing recognition of the Group's brands globally. The Group is growing
sales with our existing customers, both through increasing the number of
product lines stocked and the number of outlets served, together with winning
new customers with significant sales footprints. Growing direct online sales
also remains important and these more than doubled from £2.8 million in 2022
to £6.2 million in 2023.
In 2023, the Group continued to concentrate on its core W7, Technic, Body
Collection, Man'stuff and Chit Chat brands and the production of a limited
number of profitable white label products for major high street retailers.
In 2023, sales of the Group's branded products accounted for 95% of revenue
(2022: 90%).
The Group's global market share remains modest, and I believe we are very well
placed with our high-quality focused offering to see significant further
growth.
W7
The Group's lead brand is W7, with sales in 2023 increasing by 64% to £57.4
million, accounting for 64% of total Group revenue (2022: £35.0 million/55%).
In the UK, W7 revenue was up 33% year-on-year, representing 30% of W7 sales in
the year (2022: 37%), as stronger sales growth was generated in regions
outside of the UK. W7 revenue in the UK grew through increased sales into
many of the Group's larger customers, including Tesco and Boots. W7 sales in
the UK also received a further boost with a successful launch in an initial 71
Superdrug stores, with a roll-out into a further 63 stores planned for July
2024. Additionally, following a successful trial in 20 New Look stores in
2022, W7 product was rolled out to a further 200 stores in 2023.
The strongest growth in 2023 was again seen in continental Europe, with sales
increasing by 95% year-on-year, and continental Europe remaining the largest
sales region for W7 branded products in the year, accounting for 53% of W7
sales. The Group's post-Brexit fulfilment strategy is enabling products to
enter the EU without issues, and the growth in 2023 was driven by both the
range of European customers served, including a launch into Etos and the
expansion in the number of outlets for certain larger customers, particularly
with Normal.
In the US, W7 sales grew by 43% in 2023 compared to 2022, and accounted for
11% of overall W7 sales, with the Group benefiting from the increased number
of customers and outlets in the US.
In the rest of the world, W7 sales increased by 65%, but remain a modest
proportion of overall W7 sales at 6%.
We believe that W7 has a compelling brand proposition and will continue to
benefit from consumers wanting a high quality, on trend, but excellent
value-for-money product.
Technic
Sales of branded Technic product in 2023, which includes products sold under
the Technic, Body Collection and Man'stuff brands, increased by 21% to £27.5
million, representing 31% of total Group revenue (2022: £22.7 million/36%).
In 2023, UK revenue was 44% of Technic's total sales, increasing 13%
year-on-year, driven by increased sales of Technic and Body Collection branded
products to the retailer Bodycare and the launch in April 2023 of a range of
158 Technic products into an initial four Asda superstores on a trial basis
before a wider rollout, planned for 2024.
Sales of the Technic brand also grew strongly in continental Europe during the
year, accounting for 49% of Technic's sales, an increase of 20% on 2022,
driven by both increased product being sold in existing customers stores, and
the launch into new customers, including significant expansion with the Dutch
retailer, Wibra.
Sales for the Technic brand outside of the UK and Europe accounted for 7% of
Technic sales (2022: 7%). In the US, sales increased by 23% and by 37% in
the rest of the world, albeit the sales were small in these regions in the
context of the Group as a whole, being approximately 2.4% of total Group
revenues.
Building on the successful sales of W7 branded product through Amazon, a
Technic brand store was launched on Amazon.co.uk in January 2023, a number of
key Technic lines were launched on Amazon.com in Q2 2023 and on continental
European Amazon sites later in Q3 2023.
The Technic business also produces and sells white label cosmetics for several
major high street retailers. Such opportunities are assessed on a
case-by-case, based on the return they can deliver, and accounted for 2.5% of
Group revenue in 2023 (2022: 4%).
Close-out
Close-out sales are no longer a core focus, although the Group will take
advantage of profitable close-out opportunities as they become available.
Close-out revenue represented 2.8% of overall Group revenue in 2023 (2022:
5.9%). Whilst not core, this side of the business continues to provide a
profitable source of intelligence in the colour cosmetics market and access to
new market trends.
e-Commerce
In 2023, the Group continued to drive direct online ("D2C") sales, a strategy
that started in 2020. As a proportion of Group revenue, D2C sales increased
to 6.9% in 2023 (2022: 4.3%), having grown from £0.5 million in 2020 to £6.2
million in 2023 (2022: £2.8 million). While growing these online sales, the
focus remains on achieving a similar net margin to the Group's sales through
traditional physical outlets.
Sales volumes continue to grow through the W7 and Technic brand own websites,
as well as through Amazon in the UK, EU (predominantly Germany, Italy and
Spain) and the US. The Group also has official W7 brand stores on Taobao
Mall (Tmall), the most visited B2C online retail platform in China and
Xiaohongshu (Red), one of China's foremost social media, fashion and luxury
shopping platforms, which continue to perform well and enjoyed significantly
increased sales volumes in 2023.
D2C sales continue to perform strongly, up 41% in Q1 2024 compared to the same
period in 2022.
New Product Development
New product development ("NPD") continues to be core to the Group's
proposition to provide new products that are exciting, on trend, fast to
market and that meet the consumers' evolving tastes.
During 2023, the NPD team continued to develop a strong pipeline of
customer-focused new products, working with around 25 manufacturing partners,
in China, elsewhere in the Far East and in Europe, that can provide high
quality products quickly, at very competitive prices, and meet our legal and
ethical compliance requirements, together with ensuring continuity of
delivery. This process is supported by the Group's Hong Kong-based sourcing
office and its mainland China-based subsidiary, with local employees able to
source new factories and oversee quality control and ethical practices.
The Group's cosmetic products are 'cruelty free' and are not tested on animals
irrespective of where the products are being supplied. The Group supports
cruelty free alternatives to animal testing to become compulsory and animal
testing overall to cease globally. Warpaint proudly displays the PETA
company logo on its products and its commitment to the PETA 'Beauty without
Bunnies program' covers all brands within the Group.
Environmental impact
Warpaint is very focused on the environmental impact of its products and is
committed to becoming an industry leader for sustainable products and
packaging. The Group is proud to be associated with Planet Mark, which
provides a clear framework for businesses to measure their carbon reporting
through certification. As a member of Planet Mark, the Company is committed
to implementing carbon reduction strategies, staying ahead of legislation and
risk mitigation, and eliminating greenwashing through effective and
transparent communication. Alongside the ways our team members operate in
the workplace and wider communities, and the efforts of product teams in
ensuring the most recyclable materials and least plastic consuming designs are
put into production, Planet Mark forms a key part of the Group's
sustainability agenda.
The Group has removed all unrecyclable plastics from the outer packaging of
its gifting products and is progressing well on the journey of removing
unrecyclable plastics from all year-round products. The Group's product
packaging therefore uses paper and cardboard wherever practicable, enabling
the Group, the wholesaler and end user to recycle the waste effectively.
All branded products across the Group are being manufactured vegan friendly
and without parabens. No heavy metals such as TBTO (preservative) and other
ingredients of concern are added to products and all raw materials comply with
the strict regulations applicable in the UK, EU, US, Canada and other markets
in which the Group operates.
Marketing and PR
During 2023, the Group's marketing, PR and social media resources were further
expanded to ensure our marketing programmes remain fresh, innovative, focused
on customer loyalty and showcasing our products to new potential consumers.
The Group has a particular emphasis on social media using brand ambassadors,
influencers and make-up artists. As part of an expansion of resources during
2023, we now have individuals dedicated to each of the main social media
platforms to ensure maximum benefit is gained in these areas.
Strategy
On an annual basis the board reviews and appropriately adapts its three-year
strategic plan for the business based on consumer insight, market data,
experience and the Group's aims. This is targeted by year, measured,
monitored and reviewed as part of the board's on-going business throughout the
year. The strategic plan has been updated in January 2024, forming the basis
of the Group's focused activity through to 2026. The plan is developed to
drive shareholder value and has defined targets for sales by the six key
pillars below, EBITDA, earnings per share and cash generation with a
particular emphasis on driving incremental EBITDA growth.
The strategic plan comprises six key pillars:
· Develop and build the Group's brands and provide new product development that
meets changing trend and consumer needs
The Group ensures that everybody within the business has crystal clarity of
the positioning of the Group's portfolio of brands; that there is a clear
hierarchy of core brands; that close-out continues to reduce as a proportion
of sales and the Group delivers quality new product development, which remains
a crucial part of the Group's activity. It is essential to provide great new
product that is on trend, fast to market and meets the consumers' evolving
tastes. A healthy pipeline of new products is the continual focus of our NPD
team who are also developing category extensions where appropriate to the
brand and gifting sets.
· Develop and nurture the current core business
While a major objective of the Group is to continue to develop and grow the
presence of the Warpaint brands beyond their existing customer base, there is
still significant potential to be realised and further distribution gains to
be made in the current customer base, and the Group is committed to ensuring
this potential is maximised. The Group is focused on ensuring there is a
clarity of product offering to each customer segment and to supporting its
customers with relevant new products; by using appropriate marketing and
innovative merchandising solution to draw consumers into customer stores and
by enhancing the customer offer by cross selling the Group's brands and
category extensions for example accessories, body mists, gifting and skin care
where appropriate.
· Grow market share in the UK
The Group continues to focus on increasing the presence of its brands across
channels in which our consumers shop, to increase accessibility and drive
profitable market share growth. As a result of this strategy, the W7 brand
successfully launched into Superdrug in 2023 with more stores being activated
in 2024, continues to grow in Tesco, where distribution gains across all store
formats is successfully being driven, and is gaining greater space and
distribution in Boots. At the same time the Technic brand is launching a
range of product into Morrisons. The Group continues to have active
discussions with other major retailers who are currently in channels that the
Group is yet to materially supply. The expansion of the UK customer base is
a key aim of management, as the business continues to capitalise on consumers
and retailers across all sectors who are increasingly looking to provide
quality products to their customers at affordable prices. For example,
following a successful a trial, W7 rolled out into a further 200 New Look
stores in mid-2023.
· Grow market share in the US and China
The US and China continue to provide a major growth opportunity for the
Group. In the US, the Group has significantly increased its management and
selling capability in 2023. A compelling core product range for the US has
been established with minimum margin requirements. The business is focused
on targeted customer initiatives that have gained both gifting and
all-year-round listings with major retailers across key channels. For
example, following a successful Christmas gift launch in 2022, W7 gained
access for a selection of all-year-round products with CVS into 186 stores in
2023, with distribution gained into a further 387 stores in February 2024.
In China, the Group conducts business locally through its Chinese
subsidiary. We are also continuing to register products for sale in China in
order to grow our total offering and increase sales. This has led to the
sales of W7 products via W7 branded storefronts on on-line marketplaces.
· Develop the online/e-commerce strategy for brand development and profitable
sales
The Group aims to grow and maximise profitable sales across the Group's D2C
channels. As well as continuing to sell on the businesses' own websites and
developing its own consumer community, plans continue to be executed to
develop sales across Amazon platforms. W7 stores have been launched in the
UK, US, Italy, Germany and during 2023 and are fulfilled by Amazon. Further
on-line sales platforms and geographies continue to be evaluated and, where
profitable opportunities are identified, launched over the course of the
three-year plan. The first of these is planned to be France in H1 2024.
The Group continues to develop and build its brands by utilising brand
ambassadors, influencers and make-up artists to engage actively with its
target audience. The Group aims to ensure that consumers are adequately
inspired and educated on how the Group's products can be used to experiment
and achieve different looks. Developing the social media strategy also
directly impacts the Group's online sales strategy.
· Develop and implement appropriate strategies that ensure Warpaint reduces its
impact on the environment
The Group recognises consumers', customers' and our own requirement to reduce
our environmental impact. The business has already identified and
implemented a number of initiatives to reduce our environmental footprint via
reduced shipping and road mileage; removing plastics where possible from
packaging and improving recyclability; removing parabens from ingredients and
ensuring all products are manufactured cruelty free. Further initiatives
have been identified and targeted with the aim of being implemented across the
course of the three-year plan. Further information is contained within the
ESG section of this report.
Customers & Geographies
The largest markets for sales of our Group brands are in continental Europe
and the UK. In 2023, our top ten customers represented 69% of revenues (2022:
60%).
UK
In 2023, revenue from the UK was £32.4 million (2022: £27.6 million), an
increase of 18%. The UK accounted for 36% of Group revenue in 2023 (2022:
43%). Growth in the UK was seen by both our lead W7 brand, which increased
by 33%, and the Technic brand, which increased by 13%.
The top ten UK Group customers accounted for 66% of UK sales (2022: 75%). In
recent years, there has been a move away from selling the Group's products
through discount retailers to more traditional 'full price' retailers.
Particular highlights in 2023 were the successful launch of W7 product in an
initial 71 Superdrug stores, together with an expansion with New Look - after
an initial trial of W7 product in 20 New Look stores in 2022, the Group rolled
out W7 products to a further 200 New Look stores during 2023.
We are further expanding in the UK during 2024, including the launch of a
range of 96 Technic products into an initial 202 Morrisons stores in March;
expanding into a further 100 Boots stores in April, with 82 W7 products
stocked in each store; and a rollout into an additional 63 Superdrug stores
planned for July, together with additional product being stocked.
Europe
In 2023, Group revenue from Europe increased by 61% to £45.1 million (2022:
£28.1 million), accounting for 52% of Group branded sales, and 50% of overall
Group sales in 2023 (2022: 44%). The largest markets for the Group in Europe
are Denmark, France, the Netherlands, Spain and Sweden, with strong growth
being driven by increased sales to certain existing customers that are
expanding strongly, supported by the Group.
US
Revenue from the US, in sterling terms, increased by 38% in 2023 to £7.3
million (2022: £5.3 million) and grew by 44% in US dollar terms. This
equated to 8% of overall 2023 Group sales (2022: 8%). 99% of US revenue was
from the sale of Group brands in 2023 (2022: 97%, 2021 89%) as minimal
close-out activity was undertaken, in line with the Group's strategy to focus
on its own brands.
A good performance continued from the Group's major customers in the USA,
including CVS, Five Below, H-E-B, Macys Backstage, Nordstrom Rack, Sallys and
TJ Maxx.
With the US market being more than 10 times the size of the UK market, the US
remains a key strategic focus for the Group. In 2023, we invested in the
expansion of our US team, which we believe will provide the Group with a good
platform to leverage the opportunity presented in this market. The benefits
of this investment are already being seen. In Q1 2024 the Group expanded the
range of W7 products stocked with CVS and rolled out to a further 387
stores. A significant Christmas order has been received from Walmart for W7
and Chit Chat product and the Group are in discussions to stock the Group's
all year round product in Walmart. Significant expansion is also planned
with Five Below in H1 2024, including the stocking of an increased range of W7
products in all of their stores.
Rest of the World
Revenue from the rest of the world increased by 57% to £4.8 million (2022:
£3.1 million), accounting for 5% of overall Group sales (2022: 5%).
Australia and China remain the focus, and other countries where profitable
sales in appropriate volumes can be made. In 2023 this included W7 being
launched into 100 Watsons stores in the Philippines.
The Group has no suppliers in Russia or Ukraine and has had no significant
historic sales to either country.
Summary and Outlook
I am again delighted with the Group's performance in 2023. We have continued
to significantly grow sales and these sales have been achieved at a record
gross margin. We continue to generate good growth both in the UK and
internationally. Our robust supply chain and distribution network, coupled
with maintaining appropriate levels of stock, ensures that we are able to
supply our retail customers on time with product that their customers are
demanding.
Trading in 2024 has started strongly with a record first quarter, achieving
revenue for the first three months of 2024, 28% ahead of the same period in
2023, with sales increases seen across all of the Group's brands, both in
stores and online, and at an improved gross margin to that achieved for 2023
as a whole.
We will update further on our progress later in the year and with significant
opportunities for further growth, including those already secured with both
existing retailers and new ones, together with ongoing discussions with major
retailers globally, I am confident that the Group will continue to perform
well for the remainder of the year and beyond.
Sam Bazini
Chief Executive Officer
23 April 2024
CHIEF FINANCIAL OFFICER'S REVIEW
2023 was another record year for the Group and significantly ahead of 2022,
with strong growth in revenue, margins and profit before tax. Group revenue
increased in the year by 40% and adjusted profit before tax increased by
84%. Gross margin improved in the year by 3.5% to 39.9%. This is the third
year running that gross margin has improved. The Group continues its
strategy of building the W7 and Technic brands in the UK and internationally,
and we remain focused on margin, generating cash and remaining debt free.
The Group monitors its performance using a number of key performance
indicators which are agreed and monitored by the board.
*Adjusted numbers are closer to the underlying cash flow performance of the
business which is regularly monitored and measured by management, the
adjustments made to the statutory profit before tax are as follows:
£m 2023 2022
Statutory PBT 18.12 7.69
Exceptional Items nil 0.15
Amortisation of acquired intangibles 0.19 2.00
Share based payment 0.13 0.19
*Adjusted PBT 18.44 10.03
Exceptional items include £nil (2022: £0.15 million) for content use and
associated legal fees.
Headline results, shown below, represent the performance comparisons between
the consolidated statements of income for the years ended 31 December 2022 and
31 December 2023.
Revenue
Group revenue for 2023 increased by 39.9% to £89.6 million (2022: £64.1
million).
Company branded sales were £84.8 million (2022: £57.7 million). Our W7
brand had sales in the year of £57.4 million (2022: £35.0 million), while
our Technic brand contributed sales of £27.5 million (2022: £22.7 million).
In 2023, sales of white label cosmetics were £2.3 million (2022: £2.6
million). The white label business is traditionally cost competitive and is
only undertaken based on commercial viability, in particular margin.
Revenue for close-out business was £2.5 million (2022: £3.8 million) with
the reduction of 33.1% being in line with our strategy to reduce the Group's
focus on close-out opportunities.
In the UK, revenue increased by 17.6% to £32.4 million (2022: £27.6
million). International revenue increased by 56.7% to £57.2 million (2022:
£36.5 million). In Europe, sales increased by 60.5% to £45.1 million
(2022: £28.1 million), while in the US sales increased by 36.8% to £7.3
million (2022: £5.3 million). In the rest of the world Group sales
increased by 56.6% to £4.8 million (2022: £3.1 million).
E-commerce sales were up by 121% to £6.2 million, now representing 6.9% of
Group revenue (2022: £2.8 million/4.3%).
Product Gross Margin
Gross margin was 39.9% for the year compared to 36.4% in 2022. This is the
third year in a row that gross margin has improved incrementally. New
product development, sourcing product from new factories and falling freight
rates in the year have all helped achieve a gross margin improvement in 2023,
without the need for an inflationary price increase to customers at the start
of the year.
During the year, 95% of sales (2022: 90%) were of Group brands, which overall
achieve a higher margin than close-out sales and retailer own brand white
label sales. Group brand sales include gifting and all-year-round colour
cosmetics. Gifting is sold at a more competitive margin than all-year-round
colour cosmetics. Gifting sales in 2023 were similar to 2022 whereas
all-year-round colour cosmetics grew significantly in the year, both in
physical retail and through online channels. This change in product mix in
the year also helped to improve gross margin.
We remain focused on improving gross margin where possible in all our
businesses and are working with our Asian business units to execute this.
Margin is also benefiting from the increased scale of our orders placed with
existing suppliers as the business grows. To counter any currency pressure,
we continue to move production to new factories of equal quality to retain or
improve margin and have a natural hedge from our US dollar revenue which
continues to grow.
At 31 December 2022, forward foreign exchange contracts allowed for the
purchase of US$39 million at an average exchange rate of US$1.1997, this
helped to protect our margin in 2023. During 2023, we purchased forward
foreign exchange contracts to help protect the Group's gross margin in 2024.
At 31 December 2023, forward foreign exchange contracts were in place for
the purchase of US$42 million at an average exchange rate of US$1.2537.
Since the start of 2024, we have purchased more forward foreign exchange
contracts to further help protect our gross margin.
The currency options we have for the current year, new product development,
sourcing, increased selling of the Group brands, and growing sales in the US,
will all help to protect our margin in 2024.
Operating Expenses
Total operating expenses before exceptional items, amortisation costs,
depreciation, foreign exchange movements and share based payments, increased
at a lower rate than the growth in sales, increasing by 28.8% to £14.7
million in the year or 16.4% of revenue (2022: £11.4 million/17.8%).
The absolute increase of £3.3 million in the year was necessary to support
the growth of the business and was made up of increases in wages and salaries,
the spend on PR and marketing as e-commerce sales continue to grow, travel
costs, legal and professional fees, the charge for bad debts, bank charges,
the cost of a larger sales team based in the US and a small increase in office
costs in relation to utility charges.
Warpaint remains a business with most operating expenses relatively fixed and
evenly spread across the whole year. We continue to monitor and examine
significant costs to ensure they are controlled and strive to reduce them.
In addition, the increased scale of the business has given the Group increased
buying power.
Adjusted EBITDA
The board considers Adjusted EBITDA (adjusted for foreign exchange movements,
share-based payments and exceptional items) a key measure of the performance
of the Group and one that is more closely aligned to the underlying
performance of the business. Adjusted EBITDA for the year was £21.0 million
(2022: £11.9 million).
£m 2023 2022
Statutory profit from operations 18.48 7.97
Depreciation 0.66 0.76
Amortisation of right-of-use assets 1.11 0.97
Amortisation of intangible assets 0.19 2.00
EBITDA 20.44 11.70
Foreign exchange loss / gain 0.43 (0.13)
Exceptional items - 0.15
Share based payments 0.13 0.19
Adjusted EBITDA 21.00 11.91
Profit Before Tax
Group profit before tax for the year was £18.1 million (2022: £7.7 million).
The changes in profitability between 2023 and 2022 were due to:
£m Effect on Profit
Sales volume growth 9.3
Margin growth 3.1
Increase in operating expenses (3.0)
FX loss in 2023 £0.43 million (2022: Gain £0.13 million) (0.6)
Decrease in the charge for amortisation costs on acquisition* 1.8
Other items (0.2)
10.4
*Acquisition costs are amortised over five years. The decrease in 2023
reflects the end of the write off periods since the purchases of Retra
Holdings Limited in November 2017 and Marvin Leeds Marketing Services Inc in
August 2018.
Exceptional Items
Exceptional items include £nil (2022: £0.15 million for content use and
associated legal fees).
In 2022, the Group agreed a settlement regarding a dispute with a third party
relating to the historic use of content on the Group's social media platforms
in the period from 2018 through to early 2021. The total settlement
including associated legal costs was £0.52 million, of which £0.37 million
was provided for in the year to 31 December 2021. The payment and the
restriction of content use will not affect the ongoing operations of the
Group's businesses.
Tax
The tax rate for the Group for 2023 was 23.3% compared to the average UK
corporation tax standard rate of 23.5% for 2023. Since the acquisition of LMS,
the Group is exposed to tax in the USA at an effective rate of approximately
25% and in other jurisdictions the Group operates cost centres, but these are
not materially exposed to changes in tax rates.
Earnings Per Share
The statutory basic and diluted earnings per share were 18.05p and 17.98p
respectively in 2023 (2022: 8.14p and 8.11p).
The adjusted basic and diluted earnings per share before exceptional items,
amortisation costs and share based payments were 18.37p and 18.30p
respectively in 2023 (2022: 10.66p and 10.62p).
Dividends
The board is recommending a final dividend for 2023 of 6.0 pence per share,
making a total dividend for the year of 9.0 pence per share of which 3.0 pence
per share was paid on 24 November 2023 (2022: total dividend of 7.1 pence per
share, of which the interim dividend was 2.6 pence per share and the final
dividend was 4.5 pence per share). The dividend for the year is covered 2.0
times by adjusted earnings per share.
Cash Flow and Cash Position
Net cash flow generated from operating activities was £10.4 million (2022:
£8.5 million). The Group's year end cash balance increased by £3.2 million
to £9.1 million (2022: £5.9 million). The cash generated was principally
used to fund working capital and make dividend payments in the year.
We expect the capital expenditure requirements of the Group to remain low,
however, as part of our strategy to grow market share in the UK and US there
will be occasions where investment in store furniture is required to secure
that business.
In 2023, £0.13 million was invested on store furniture for Superdrug, New
Look and other stores (2022: £0.29 million), £0.22 million was spent on
warehouse improvements, new pallet trucks and racking (2022: £0.42 million),
£0.15 million was spent on new computer software and equipment (2022: £0.09
million), and £0.02 million was spent on other general office fixtures and
fittings and plant upgrades (2022: £0.03 million).
As the Group continues to grow, it is both necessary and prudent to have bank
facilities available to help fund day-to-day working capital requirements.
Accordingly, the Group maintains a £9.5 million invoice and stock finance
facility that is used to help fund imports in our gifting business during its
peak season. At the year end, no invoice and stock finance remained
outstanding (2022: £nil). In addition, in February 2023 the Group added a
new "general purpose" facility of £3.0 million, which on renewal in March
2024 was increased to a £5.0 million facility. These facilities, together
with the Group's positive cash generation and the growing cash balance held,
ensure that future growth can be funded.
LTIP, EMI & CSOP Share Options
Date Shares Transaction Scheme Exercise price
6 June 2023 375,633 Exercise CSOP 49.5p
9 October 2023 23,578 Exercise EMI 237.5p
21 November 2023 105,262 Exercise EMI 237.5p
4 December 2023 3,837,462 Lapsed LTIP 254.5p
24 November 2023 641,191 Granted CSOP 325p
24 November 2023 167,309 Granted EMI 325p
On 6 June 2023, 375,633 of the Company's ordinary shares of 25p each that were
granted under the Warpaint London plc Company Share Option Plan were exercised
at an exercise price of 49.5p per share.
On 9 October 2023, 23,578 of the Company's ordinary shares of 25p each that
were granted under the Warpaint London plc Enterprise Management Incentive
Scheme were exercised at an exercise price of 237.5p per share.
On 21 November 2023, 105,262 of the Company's ordinary shares of 25p each that
were granted under the Warpaint London plc Enterprise Management Incentive
Scheme were exercised at an exercise price of 237.5p per share.
On the 4 December 2023, 3,837,462 ordinary shares of 25p each in the Company
under the Warpaint London plc Long Term Incentive Plan lapsed. The shares were
granted in September 2018, with an exercise price of 254.5p per share.
On 24 November 2023 CSOP share options were granted over a total of 641,191
ordinary shares of 25p each in the Company under the Warpaint London plc
Company Share Option Plan. The options provide the right to acquire 641,191
ordinary shares at an exercise price of 325p per ordinary share.
On 24 November 2023 EMI (non-qualifying) share options were granted over a
total of 167,309 ordinary shares of 25p each in the Company under the Warpaint
London plc Enterprise Management Incentive Scheme. The options provide the
right to acquire 167,309 ordinary shares at an exercise price of 325p per
ordinary share.
The exercise of EMI & CSOP share options during the year had an immaterial
dilutive impact on earnings per share in the period. The share-based payment
charge of the EMI and CSOP share options for the year was £0.13 million
(2022: £0.19 million) and has been taken to the share option reserve.
Balance Sheet
Inventory was £9.3 million higher at the year end at £28.0 million (2022:
£18.7 million). The rise in inventory is a function of the growth of the
business and to ensure delivery disruption is avoided for our customers. One
of the Group's unique selling propositions is that it can deliver a full range
of colour cosmetics to our customers, in good time all year round. Having
appropriate inventory levels is vital to providing that service. The
provision for old and slow inventory was £0.38 million, 1.3% at year-end
(2022: £0.37 million, 1.9%). Across the Group we have worked hard in the
year to sell through older stock lines, allowing for our provision for old and
slow inventory to fall 0.6% in percentage terms. Our Group policy is to
provide for 50% of the cost of perishable items that are over two years old.
However, we remain comforted by the fact that many such items in the normal
course of business are eventually sold through our close-out division without
a loss to the Group.
Trade receivables are monitored by management to ensure collection is made to
terms, to reduce the risk of bad debt and to control debtor days, which have
improved on the prior year. At the year end, trade receivables, excluding
other receivables, were £11.0 million (2022: £9.9 million), the increase on
2022 being due to the rise in sales year-on-year. The provision for bad and
doubtful debts carried forward at the year-end was £0.13 million, 1.2% of
gross trade receivables (2022: £0.07 million, 0.7%).
At year end, the Group had no borrowings or lease liabilities outstanding
(2022: £nil), apart from those associated with right-of-use assets as
directed by IFRS 16 (see below). The Group was therefore debt free at the
year end.
Working capital increased by £10.7 million in the year, to £41.0 million.
The main components were an increase in inventory of £9.3 million, an
increase in trade and other receivables of £1.8 million, an increase in cash
at the year-end of £3.2 million, and an increase in trade and other payables
of £3.6 million.
Free cash flow (cash from operating activities less capital expenditure)
remained strong at £9.9 million (2022: £7.7 million).
The Group's balance sheet remains in a very healthy position. Net assets
totalled £46.8 million at 31 December 2023, an increase of £9.0 million from
2022. Most of the balance sheet is made up of liquid assets, inventory,
trade receivables and cash. Included on the balance sheet is £7.3 million of
goodwill (2022: £7.3 million) and £0.1 million of intangible fixed assets
(2022: £0.3 million) arising from acquisition accounting. As at the
year-end, cash totalled £9.1 million (31 December 2022: £5.9 million).
Goodwill represents the excess of consideration over the fair value of the
Group's share of the net identifiable assets of acquired businesses / cash
generating units at the date of acquisition. The carrying value at 31
December 2023 of £7.3 million included Treasured Scents Limited £0.5
million, Retra Holdings Limited £6.2 million and Marvin Leeds Marketing
Services, Inc. £0.6 million. Management has performed the required annual
impairment review at 31 December 2023 and concluded that no impairment is
indicated for Treasured Scents Limited, Retra Holdings Limited or Marvin Leeds
Marketing Services, Inc. as the recoverable amount exceeds the carrying value.
The balance sheet also includes £5.3 million of right-of-use assets, which is
the inclusion of Group leasehold properties, recognised as right-of-use assets
as directed by IFRS 16. An equivalent lease liability is included of £5.4
million at the balance sheet date.
Foreign Exchange
The Group imports most of its finished goods from China, paid for in US
dollars, which are purchased throughout the year at spot as needed, or by
taking forward foreign exchange contracts when rates are deemed favourable,
and with consideration for the budget rate set by the board for the year.
Similarly, forward foreign exchange contracts are taken to sell forward our
expected Euro income in the year to ensure our sales margin is protected.
We started 2023 with forward foreign exchange contracts in place for the
purchase of US$39 million at US$1.1997/£, and the sale of €3.8 million at
€1.1340/£. During 2023 when currency rates were favourable, we purchased
additional US dollar forward foreign exchange contracts and spot rate amounts
to cover our total US dollar requirement for the year.
In addition, during 2023 we purchased forward foreign exchange contracts to
help protect the Group's gross margin in 2024. At 31 December 2023, forward
foreign exchange contracts were in place for the purchase of US$42 million at
an average exchange rate of US$1.2537/£, and the sale of €3.8 million at
€1.1447/£.
The Group has a natural hedge from sales to the US which are entirely in US
dollars, in 2023 these sales were US$9.1 million (2022: US$6.3 million).
Together with sourcing product from new factories where it makes commercial
sense to do so, new product development, and by buying US dollars when rates
are favourable, we are able to mitigate the effect of a strong US dollar
against sterling.
Section 172(1) Statement
The directors are well aware of their duty under section 172 of the Companies
Act 2006 to act in the way which they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of its members as
a whole, and in doing so have regard (amongst other matters) to:
· the likely consequences of any decision in the long term;
· the interests of the Company's employees;
· the need to foster the Company's business relationships with suppliers,
customers and others;
· the impact of the Company's operations on the community and the environment;
· the desirability of the Company maintaining a reputation for high standards of
business conduct, and
· the need to act fairly as between members of the Company
(the "Section 172 (1) Matters").
Induction materials provided on appointment include an explanation of
directors' duties, and the board is regularly reminded of the Section 172(1)
Matters, as a board meeting agenda item.
Further information on how the directors have had regard to the Section 172(1)
Matters can be found in the Stakeholder Engagement and Section 172 Report.
This information forms part of the strategic report and has been approved for
issue by the board on 24 April 2024.
Neil Rodol
Chief Financial Officer
23 April 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
Year ended 31 December
2023 2022
Note £'000 £'000
Revenue 2 89,590 64,058
Cost of sales 2 (53,857) (40,724)
Gross profit 35,733 23,334
Administrative expenses 3,4 (17,252) (15,367)
Analysed as:
Adjusted profit from operations(1) 18,802 10,307
Amortisation 3,9 (187) (1,995)
Exceptional items 3 - (152)
Share based payments 21 (134) (193)
Profit from operations 18,481 7,967
Finance expense 5 (369) (281)
Finance income 5 6 4
Profit before tax 18,118 7,690
Tax expense 6 (4,219) (1,440)
Profit for the year attributable to equity holders of the parent company 13,899 6,250
Other comprehensive income/(loss):
Item that will or may be reclassified to profit or loss:
Exchange gain/(loss) on translation of foreign subsidiary 72 (135)
Total comprehensive income attributable to equity holders of the parent 13,971 6,115
company, net of tax
Basic earnings per share (pence) 26 18.05 8.14
Diluted earnings per share (pence) 26 17.98 8.11
Note 1 - Adjusted profit from operations is calculated as earnings before
interest, taxation, amortisation of intangible assets, share based payments
and exceptional items.
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER 2023
As at 31 December
2023 2022
Note £'000 £'000
Non-current assets
Goodwill 8 7,274 7,274
Intangibles 9 93 277
Property, plant, and equipment 10 1,245 1,432
Right-of-use assets 11 5,280 5,659
Deferred tax assets 17 592 429
Total non-current assets 14,484 15,071
Current assets
Inventories 12 27,963 18,715
Trade and other receivables 13 13,529 11,693
Cash and cash 14 9,053 5,865
equivalents
Derivative financial instruments 23 - 8
Total current assets 50,545 36,281
Total assets 65,029 51,352
Current liabilities
Trade and other payables 15 (9,576) (5,988)
Lease liabilities 16 (1,259) (1,015)
Corporation tax liability (2,501) (943)
Derivative financial instruments 23 (518) (600)
Total current liabilities (13,854) (8,546)
Non-current liabilities
Lease liabilities 16 (4,190) (4,847)
Deferred tax liabilities 17 (180) (180)
Total non-current liabilities (4,370) (5,027)
Total liabilities (18,224) (13,573)
NET ASSETS 46,805 37,779
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER 2023
2023 2022
£'000 £'000
Equities
Share capital 19 19,314 19,188
Share premium 19,726 19,360
Merger reserve (16,100) (16,100)
Foreign exchange reserve 22 (50)
Share option reserves 21 594 2,003
Retained earnings 23,249 13,378
TOTAL EQUITY 46,805 37,779
The financial 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 Officer
Date: 23 April 2024
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share Capital Share Premium Merger Reserve Foreign exchange reserve Share option reserve Retained Earnings Total Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 19,188 19,360 (16,100) 85 1,810 11,810 36,153
Comprehensive income for the year
Equity shares issued - - - - - - -
On translation of foreign subsidiary - - - (135) - - (135)
Profit for the year - - - - - 6,250 6,250
Total comprehensive income for the year - - - (135) - 6,250 6,115
Transactions with owners
Share based payment charge - - - - 193 - 193
Dividends paid - - - - - (4,682) (4,682)
Total transactions with owners - - - - 193 (4,682) (4,489)
As at 31 December 2022 19,188 19,360 (16,100) (50) 2,003 13,378 37,779
Comprehensive Income for the year
Equity shares issued 126 366 - - - - 492
On translation of foreign subsidiary - - - 72 - - 72
Transfer to the profit or loss reserve exercised share options - - - - (130) 130 -
Transfer to the profit or loss reserve expired and lapsed share options - - - - (1,627) 1,627 -
Corporation tax charge on share-based payments - - - - 214 - 214
Profit for the year - - - - - 13,899 13,899
Total comprehensive income for the year 126 366 - 72 (1,543) 15,656 14,677
Transactions with owners
Share based payment charge - - - - 134 - 134
Dividends paid - - - - - (5,785) (5,785)
Total transactions with owners - - - - 134 (5,785) (5,651)
As at 31 December 2023 19,314 19,726 (16,100) 22 594 23,249 46,805
The notes form part of these financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Year ended 31 December
2023 2022
Note £'000 £'000
Operating activities
Profit before tax 18,118 7,690
Finance expense 5 369 281
Finance income 5 (6) (4)
Amortisation of intangible assets 9 187 1,995
Depreciation of property, plant, and equipment 10 662 761
Depreciation on right of use assets 11 1,111 965
Loss on disposal of property, plant, and equipment 40 1
Share based payments 21 134 193
Increase in trade and other receivables (1,836) (1,370)
Increase in inventories 12 (9,248) (576)
Increase/(decrease) in trade and other payables 3,588 (675)
Movement in deferred tax assets (51) (306)
Fair value (gain)/loss on derivative financial instruments (74) 1,139
Foreign exchange translation differences (7) (26)
Cash generated from operations 12,987 10,068
Tax paid (2,569) (1,546)
Net cash flows from operating activities 10,418 8,522
Investing activities
Purchase of intangible assets 9 (3) (12)
Purchase of property, plant, and equipment 10 (515) (831)
Net cash used in investing activities (518) (843)
Financing activities
Lease payments 16 (1,144) (836)
Proceeds from issued share capital 492 -
Lease liability interest 5 (230) (185)
Interest paid 5 (139) (96)
Interest received 5 6 4
Dividends 18 (5,785) (4,682)
Net cash used in financing activities (6,800) (5,795)
Net increase in cash and cash equivalents 3,100 1,884
Cash and cash equivalents at beginning of period 5,865 4,072
Exchange gain/(loss) on cash and cash equivalents 88 (91)
Cash and cash equivalents at end of period 14 9,053 5,865
Cash and cash equivalents consist of:
Cash and cash equivalents 14 9,053 5,865
9,053 5,865
The notes form part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT ENDED 31 DECEMBER 2023
1. Significant accounting policies
Basis of preparation
The financial statements of Warpaint London PLC (the "Company" or "Warpaint")
and its subsidiaries (together the "Group") for the year ended 31 December
2023 were authorised for issue by the board of directors on 23 April 2024
Warpaint London PLC is a public limited Company incorporated and registered in
England and Wales. Its registered office is Units B&C, Orbital Forty-Six,
The Ridgeway Trading Estate, Iver, Buckinghamshire, SL0 9HW.
The Group's financial statements have been prepared in accordance in
accordance UK adopted international accounting standards and in conformity
with the requirements of the Companies Act. The functional currency of the
parent and its subsidiaries is pounds sterling because that is the currency of
the primary economic environment in which the Group operates. The financial
statements are also presented in pounds sterling. All values are rounded to
the nearest thousand (£'000) except where otherwise indicated.
The annual financial statements have been prepared on the historical cost
basis, except for certain financial assets and liabilities which are carried
at fair value or amortised cost as appropriate.
The preparation of financial statements in accordance with UK adopted
international accounting standards requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Although these estimates are based on management's best
knowledge of current events and actions, actual results ultimately may differ
from those estimates. The principal accounting policies adopted are set out
below.
Basis of consolidation
Where the company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the company and
its subsidiaries as if they formed a single entity. Intercompany transactions
and balances between group companies are therefore eliminated in full. All
subsidiaries have a reporting date of December.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained.
They are deconsolidated from the date on which control ceases.
On consolidation, the results of overseas operations are translated into
pounds sterling at rates approximating to those ruling when the transactions
took place. All assets and liabilities of overseas operations, including
goodwill arising on the acquisition of those operations, are translated at the
rate ruling at the reporting date. Exchange differences arising on translating
the opening net assets at opening rate and the results of overseas operations
at actual rate are recognised in other comprehensive income and accumulated in
the foreign exchange reserve.
Exchange differences recognised profit or loss in Group entities' separate
financial statements on the translation of long-term monetary items forming
part of the Group's net investment in the overseas operation concerned are
reclassified to other comprehensive income and accumulated in the foreign
exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange reserve relating to that operation up to
the date of disposal are transferred to the consolidated statement of
comprehensive income as part of the profit or loss on disposal.
Going concern
The Directors have concluded that it is reasonable to adopt a going concern
basis in preparing the financial statements. This is based on a reasonable
expectation that the Group has adequate resources to continue in operational
existence for at least twelve months from the date of signing of these
accounts. The Group made a statutory profit of £13.9 million in the year to
31 December 2023 (2022: £6.3 million) and had net current assets of £36.7
million at 31 December 2023 (2022: £27.7 million).
The Group occasionally makes use in its Retra Holdings Limited ("Retra")
subsidiary of a £6.0 million bank facility that can be used for confidential
invoice discounting, and a £3.5 million bank facility that can be used for
stock finance, which is used if needed during the peak gift buying season.
These facilities are ongoing without a fixed term. In addition, the Group has
a £5.0 million (2022: £3.0 million) general purpose bank facility in its
Warpaint Cosmetics (2014) Limited ("Warpaint Cosmetics") subsidiary which was
agreed in March 2024. This facility will renew annually and was put in place
to support the continued growth of the business. As at the year end £nil of
the bank facilities were utilised and the Directors expect that in 2024 the
facilities will only be used to modest levels well within the facility limits,
to support the day to day working capital of the business. At the 2 April 2024
the company had cash of £7.5 million (31 March 2023: £8.5 million), no debt
and had used £nil of its bank facilities.(31 March 2022: No debt and £nil
bank facilities were used).
The Directors have prepared forecasts covering the period to December 2025,
built from the detailed Board-approved budget for 2024. The forecasts include
a number of assumptions in relation to varying levels of sales revenue. Whilst
the Group's trading and cash flow forecasts have been prepared using current
trading assumptions, the operating environment presents a number of challenges
which could negatively impact the actual performance achieved. These
challenges include, but are not limited to, achieving forecast levels of sales
and order intake, the impact on customer confidence as a result of general
economic conditions, achieving forecast margin improvements, supply side price
inflation, increases in freight costs, and the director's ability to implement
cost saving initiatives in areas of discretionary spend where required.
The Group's cash flow forecasts and projections, taking account of reasonable
and possible changes in trading performance, offset by mitigating actions
within the control of management including reductions in areas of
discretionary spend, show that the Group will be able to operate comfortably
through to the end of December 2025, and in Retra and Warpaint Cosmetics
within the level of their own bank facility.
In preparing this analysis, a number of scenarios were modelled.. The
scenarios modelled were all based on varying levels of sales revenue,
including one that assumes no growth for 2024 and 2025 as a reasonable
downside scenario, and more extreme falls in revenue of up to 30% in both
years as a worst-case scenario. In each scenario, mitigating actions within
the control of management have been modelled. Under each of the scenarios
modelled, the Group has sufficient cash to meet its liabilities as they fall
due and consequently, the directors believe that the Group has sufficient
financial strength to withstand the possible disruption to its activities.
Based on the above indications the directors believe that it remains
appropriate to prepare the financial statements on a going concern basis.
Revenue Recognition
Performance obligations and timing of revenue recognition
The Group's revenue is derived from selling goods with revenue recognised at a
point in time when control of the goods has transferred to the customer. This
is generally when the goods are delivered to the customer. However, for export
sales, control might also be transferred when delivered either to the port of
departure or port of arrival, depending on the specific terms of the contract
with a customer. There is limited judgement needed in identifying the point
control passes: once physical delivery of the products to the agreed location
has occurred, the group no longer has physical possession, usually will have a
present right to payment (as a single payment on delivery) and retains none of
the significant risks and rewards of the goods in question.
UK sales are recognised and invoiced to the customer once the goods have been
delivered to the customer. Overseas sales are recognised and invoiced to the
customer once the goods have been delivered to the customer or collected by
the customer from the Group's warehouse according to the terms of sale. Online
sales are recognised and invoiced to the customer once the goods have been
delivered to the customer.
Customer loyalty
The Group operates a loyalty reward scheme for 'digital' customers where
points are earned for products purchased online, with 10 points equivalent to
£1. The Group accounts for loyalty points when redeemed as a sales discount
on the sales transaction. A sales discount provision is recognised in the
accounts in relation to points issued but not yet redeemed. When estimating
this provision, the Group considers the likelihood that the customer will
redeem the points. At the year-end there were 9.3 million points yet to be
redeemed, leading to a provision of £18,568 (2022: 6.5 million points leading
to a provision of £32,471).
Under IFRS 15, volume rebates and early settlement discounts represent
variable consideration and is estimated and recognised as a reduction to
revenue as performance obligations are satisfied. Management recognises
revenue based on the amount of estimated rebate to the extent that revenue is
highly probably of not reversing. Management monitors this estimate at each
reporting date and adjusts it as necessary.
Determining the transaction price
Most of the group's revenue is derived from fixed price contracts and
therefore the amount of revenue to be earned from each contract is determined
by reference to those fixed prices. Exceptions are as follows:
· Some contracts provide customers with a limited right of return.
These relate predominantly, but not exclusively, to online sales direct to
consumers and sales made to certain large retailers. Historical experience
enables the group to estimate reliably the value of goods that will be
returned and restrict the amount of revenue that is recognised such that it is
highly probable that there will not be a reversal of previously recognised
revenue when goods are returned.
· Variable consideration relating to volume rebates has been considered
in estimating revenue in order that it is highly probable that there will not
be a future reversal in the amount of revenue recognised when the amount of
volume rebates has been determined.
Allocating amounts to performance obligations
For most contracts, there is a fixed unit price for each product sold, with
reductions given for bulk orders placed at a specific time. Therefore, there
is no judgement involved in allocating the contract price to each unit ordered
in such contracts (it is the total contract price divided by the number of
units ordered). Where a customer orders more than one product line, the Group
is able to determine the split of the total contract price between each
product line by reference to each product's standalone selling prices (all
product lines are capable of being, and are, sold separately).
Practical Exemptions
The group has taken advantage of the practical exemptions:
· not to account for significant financing components where the time
difference between receiving consideration and transferring control of goods
(or services) to its customer is one year or less; and
· expense the incremental costs of obtaining a contract when the
amortisation period of the asset otherwise recognised would have been one year
or less.
Expenditure and provisions
Expenditure is recognised in respect of goods and services received when
supplied in accordance with contractual terms. Provision is made when an
obligation exists relating to a past event and where the amount of the
obligation can be reliably estimated.
Retirement Benefits: Defined contribution schemes
Contributions to defined contribution schemes are charged to the consolidated
statement of comprehensive income in the year to which they relate.
Exceptional items and Alternative Performance Measures
Exceptional items which have been disclosed separately on the face of the
Consolidated Statement of Comprehensive Income in order to summarise the
underlying results. Exceptional items in 2022 relate to a royalty claim and
associated legal fees. Neither 'underlying profit or loss' nor 'exceptional
items' are defined by IFRS however the directors believe that the disclosures
presented in this manner provide a clearer presentation of the underlying
financial performance of the Group.
Alternative performance measures (APM's) are used by the Board to assess the
Group's performance and are applied consistently from one period to the next.
They therefore provide additional useful information for shareholders on the
underlying performance and position of the Group. Additionally, adjusted
profit from operations is used to determine adjusted EPS which is used as a
key performance indicator for the Long-Term Incentive Plan (LTIP) and the
Company Share Option Scheme (CSOP). These measures are not defined by IFRS and
are not intended to be a substitute for IFRS measures. The Group presents
underlying profit from operations, profit before tax and EPS which are
calculated as the statutory measures stated before non-underlying items,
including exceptional items, amortisation of intangible assets and share-based
payments where applicable.
Underlying results are used in the day-to-day management of the Group. They
represent statutory measures adjusted for items which could distort the
understanding of performance and comparability year on year. Non-underlying
items include the amortisation of intangible assets, exceptional items and
share-based payments. Exceptional items are those items which the group
consider to be significant in nature and not in the normal course of business
or are consistent with items that were treated as exceptional in prior
periods.
Intangible assets
Patents
Patents are used by the Group in order to generate future economic value
through normal business operations. Patents are acquired separately and
carried at cost less amortisation and impairment. The underlying assets are
amortised over the period from which the Group expects to benefit, which is
typically between five to ten years.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are
carried at cost less accumulated amortisation and accumulated impairment
losses. Amortisation is recognised on a straight-line basis over their
estimated useful lives. The estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Intangible assets with
indefinite useful lives that are acquired separately are carried at cost less
accumulated impairment losses. Amortisation is provided on Licences and
Website costs so as to write off the carrying value over the expected useful
economic life of five years.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately
from goodwill are initially recognised at their fair value at the acquisition
date (which is regarded as their cost). Subsequent to initial recognition,
intangible assets acquired in a business combination are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately. Amortisation is provided on
customer lists and brands so as to write off the carrying value over the
expected useful economic life of five years. Other details of the acquisition
are detailed in note 9.
Goodwill
Goodwill represents the excess of the cost of a business combination over the
Group's interest in the fair value of identifiable assets, liabilities and
contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed, and equity
instruments issued, plus the amount of any non-controlling interests in the
acquiree. Contingent consideration is included in cost at its acquisition date
fair value and, in the case of contingent consideration classified as a
financial liability, remeasured subsequently through profit or loss.
Goodwill is considered to have an indefinite useful economic life and is
capitalised as an intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive income. Where the fair
value of identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in full to the
consolidated statement of comprehensive income on the acquisition date.
Impairment of non-financial assets (excluding inventories and deferred tax
assets)
Impairment tests on goodwill and other intangible assets with indefinite
useful economic lives are undertaken annually at the financial year end. Other
non-financial assets are subject to impairment tests whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable
amount (i.e. the higher of value in use and fair value less costs to sell),
the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual
asset, the impairment test is carried out on the smallest group of assets to
which it belongs for which there are separately identifiable cash flows; its
cash generating units ('CGUs'). Goodwill is allocated on initial recognition
to each of the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the extent they
reverse gains previously recognised in other comprehensive income. An
impairment loss recognised for goodwill is not reversed.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic
benefits are expected from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured as the difference between the
net disposal proceeds and the carrying amount of the asset, are recognised in
profit or loss when the asset is derecognised.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As
well as the purchase price, cost includes directly attributable costs.
Depreciation is provided on all items of property, plant and equipment so as
to write off their carrying value over the expected useful economic lives. It
is provided at the following rates:
Plant and machinery - 25% reducing balance or 20% straight line
Fixtures and fittings - 25% reducing balance or 20% straight line
Computer equipment - 25% reducing balance or 33.33% straight line
Motor vehicles - 20% straight line
Right-of-Use Assets
Right-of-use assets are measured at cost, which is made up of the initial
measurement of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the asset at the end of the lease,
less any lease incentives received.
The Group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term.
The Group also assesses the right-of-use asset for impairment when such
indicators exist.
The right-of-use assets are included in a separate line within non-current
assets on the Consolidated Balance Sheet.
Financial assets
The Group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. Other than
financial assets in a qualifying hedging relationship, the Group's accounting
policy for each category is as follows:
Fair value through profit or loss
This category comprises in-the-money derivatives and out-of-money derivatives
where the time value offsets the negative intrinsic value (see "Financial
liabilities" section for out-of-money derivatives classified as liabilities).
They are carried in the statement of financial position at fair value with
changes in fair value recognised in the consolidated statement of
comprehensive income in the finance income or expense line. Other than
derivative financial instruments which are not designated as hedging
instruments, the Group does not have any assets held for trading nor does it
voluntarily classify any financial assets as being at fair value through
profit or loss.
Amortised cost
These assets arise principally from the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other types of
financial assets where the objective is to hold these assets in order to
collect contractual cash flows and the contractual cash flows are solely
payments of principal and interest. They are initially recognised at fair
value plus transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment requirements use an 'expected credit loss' ('ECL') model to
recognise an allowance. Impairment is measured using a 12- month ECL method
unless the credit risk on a financial instrument has increased significantly
since initial recognition in which case the lifetime ECL method is adopted.
For receivables, a simplified approach to measuring expected credit losses
using a lifetime expected loss allowance is available and has been adopted by
the Group. During this process the probability of the non-payment of the trade
receivables is assessed. This probability is then multiplied by the amount of
the expected loss arising from default to determine the lifetime expected
credit loss for the trade receivables. For trade receivables, which are
reported net, such provisions are recorded in a separate provision account
with the loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
The Group's financial assets measured at amortised cost comprise trade and
other receivables, and cash and cash equivalents in the consolidated statement
of financial position.
Cash and cash equivalents include cash in hand, deposits held at call with
banks, other short term highly liquid investments with original maturities of
three months or less, and - for the purpose of the statement of cash flows -
bank overdrafts. Bank overdrafts are shown within loans and borrowings in
current liabilities on the consolidated statement of financial position.
Financial liabilities
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the liability was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises out-of-the-money derivatives where the time value does
not offset the negative intrinsic value (see "Financial assets" for
in-the-money derivatives and out-of-money derivatives where the time value
offsets the negative intrinsic value). They are carried in the consolidated
statement of financial position at fair value with changes in fair value
recognised in the consolidated statement of comprehensive income. The Group
does not hold or issue derivative instruments for speculative purposes, but
for hedging purposes. Other than these derivative financial instruments, the
Group does not have any liabilities held for trading nor has it designated any
financial liabilities as being at fair value through profit or loss.
Other financial liabilities
Other financial liabilities include the following items:
· Bank loans which are initially recognised at fair value net of any
transaction costs directly attributable to the issue of the instrument. Such
interest-bearing liabilities are subsequently measured at amortised cost
ensuring the interest element of the borrowing is expensed over the repayment
period at a constant rate.
· Trade payables, other borrowings and other short-term monetary
liabilities, which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage
its exposure to foreign exchange rate risk, through the use of foreign
exchange rate forward contracts.
Derivatives are initially recognised at fair value at the date the derivative
contracts are entered into and are subsequently re-measured to their fair
value at the end of each reporting period. The resulting gain or loss is
recognised in profit or loss immediately unless the derivative is designated
and effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship.
Foreign currencies
Transactions entered into by Group entities in a currency other than the
currency of the primary economic environment in which they operate (their
"functional currency") are recorded at the rates ruling when the transactions
occur. Foreign currency monetary assets and liabilities are translated at the
rates ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised
immediately in profit or loss, except for foreign currency borrowings
qualifying as a hedge of a net investment in a foreign operation, in which
case exchange differences are recognised in other comprehensive income and
accumulated in the foreign exchange reserve along with the exchange
differences arising on the retranslation of the foreign operation.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
· leases of low value assets; and
· leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
group's incremental borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
· amounts expected to be payable under any residual value guarantee;
· the exercise price of any purchase option granted in favour of the
group if it is reasonably certain to assess that option; and
· any penalties payable for terminating the lease, if the term of the
lease has been estimated on the basis of termination option being exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease
incentives received, and increased for:
· lease payments made at or before commencement of the lease;
· initial direct costs incurred; and
· the amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if, rarely, this is judged to be shorter than the lease term.
When the group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted at
a revised discount rate. The carrying value of lease liabilities is similarly
revised when the variable element of future lease payments dependent on a rate
or index is revised. In both cases an equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying amount
being amortised over the remaining (revised) lease term.
When the group renegotiates the contractual terms of a lease with the lessor,
the accounting depends
on the nature of the modification:
· if the renegotiation results in one or more additional assets being
leased for an amount commensurate with the standalone price for the additional
rights-of-use obtained, the modification is accounted for as a separate lease
in accordance with the above policy ;
· in all other cases where the renegotiated increases the scope of the
lease (whether that is an extension to the lease term, or one or more
additional assets being leased), the lease liability is remeasured using the
discount rate applicable on the modification date, with the right-of-use asset
being adjusted by the same amount ; and
· if the renegotiation results in a decrease in the scope of the lease,
both the carrying amount of the lease liability and right-of-use asset are
reduced by the same proportion to reflect the partial of full termination of
the lease with any difference recognised in profit or loss. The lease
liability is then further adjusted to ensure its carrying amount reflects the
amount of the renegotiated payments over the renegotiated term, with the
modified lease payments discounted at the rate applicable on the modification
date. The right-of-use asset is adjusted by the same amount.
For contracts that both convey a right to the group to use an identified asset
and require services to be provided to the group by the lessor, the group has
elected to account for the entire contract as a lease, i.e. it does allocate
any amount of the contractual payments to, and account separately for, any
services provided by the supplier as part of the contract.
Nature of leasing activities (in the capacity as lessee)
The group leases a number of properties in the jurisdictions from which it
operates with a fixed periodic rent over the lease term. The group has a total
of 7 property leases.
Taxation
Income tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from 'profit before tax' as reported in the consolidated
statement of comprehensive income and other comprehensive income because of
items of income or expense that are taxable or deductible in other years and
items that are never taxable or deductible.
The Group's current tax is calculated using tax rates that have been enacted
or substantively enacted by the end of the reporting period.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the combined statement of financial position
differs from its tax base, except for differences arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
· investments in subsidiaries and jointly controlled entities where the
Group is able to control the timing of the reversal of the difference and it
is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the end of the reporting period and
are expected to apply when the deferred tax liabilities or assets are settled
or recovered. Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· the same taxable group company; or
· different company entities which intend either to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts
of deferred tax assets and liabilities are expected to be settled or
recovered.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of
the cost and net realisable value. Cost comprises all costs of purchase, costs
of conversion and other costs incurred in bringing the inventories to their
present location and condition.
Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision maker has been identified as the management team including the Chief
Executive Officers, Managing Director and the Chief Financial Officer.
The Board considers that the Group's project activity constitutes the two
operating and two reporting segments presented in Note 2, as defined under
IFRS 8. Management reviews the performance of the Group by reference to total
results against budget.
The total profit measures are operating profit and profit for the year, both
disclosed on the face of the combined income statement. No differences exist
between the basis of preparation of the performance measures used by
management and the figures in the Group financial information.
Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders of the parent by the weighted average number of
ordinary shares outstanding during the year, excluding treasury shares and
shares in employee benefit trusts, determined in accordance with the
provisions of IAS 33 earnings per Share. Diluted earnings per share is
calculated by dividing earnings attributable to ordinary shareholders of the
parent by the weighted average number of ordinary shares outstanding during
the year adjusted for the potentially dilutive ordinary shares.
Share Capital
The Group's ordinary shares are classified as equity instruments.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated statement of
comprehensive income over the vesting period. Non-market vesting conditions
are considered by adjusting the number of equity instruments expected to vest
at each reporting date so that, ultimately, the cumulative amount recognised
over the vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are factored into
the fair value of the options granted. As long as all other vesting conditions
are satisfied, a charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted for failure
to achieve a market vesting condition or where a non-vesting condition is not
satisfied.
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and
after the modification, is also charged to the consolidated statement of
comprehensive income over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the
consolidated statement of comprehensive income is charged with the fair value
of goods and services received.
Dividends
Dividends are recognised when they become legally payable. In the case of
interim dividends to equity shareholders, this is when paid to the
shareholders. In the case of final dividends, this is when approved by the
shareholders at the annual general meeting.
Changes in accounting policies
New standards, interpretations and amendments that are effective for the first
time for the financial year beginning 31 December 2023
IFRS 4 Amendments regarding the expiry date of the deferral approach
IFRS 17 Insurance contracts
IFRS 17 Amendments regarding comparative information for initial application of IFRS
17 and IFRS 9
IAS 1 Amendments regarding disclosure of accounting policies
IAS 8 Amendments regarding the definition of accounting estimates
IAS 12 Amendments resulting from deferred tax assets and liabilities arising from a
simple transaction
New standards, interpretations and amendments effective from 1 January 2024
At the date of authorisation of these financial statements, certain new
standards, amendments and interpretations to existing standards have been
published by the IASB and adopted by the EU but are not yet effective and have
not been adopted early by the Group. Management anticipates that all of the
relevant pronouncements will be adopted in the Group's accounting policies for
the first period beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that are expected
to be relevant to the Group's financial statements is provided below. Certain
other new standards and interpretations have been issued but are not expected
to have a material impact on the Group's financial statements.
Effect annual periods beginning before or after
IFRS 16 Amendments to clarify seller-lessee subsequently measured sale and leaseback 1(st) January 2024
transactions
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial 1(st) January 2024
Information
IFRS S2 Climate-related Disclosures 1(st) January 2024
IFRS 7 Amendments regarding supplier finance arrangements 1(st) January 2024
IAS 1 Amendments regarding to the classification of liabilities with covenants as 1(st) January 2024
either current or non-current
IAS 7 Amendments regarding supplier finance arrangements 1(st) January 2024
Critical accounting judgements and key sources of estimation uncertainty
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including the expectations of future events that
are believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
Key sources of estimation uncertainty
a) Inventories
Inventories are initially recognised at cost, and subsequently at the lower of
the cost and net realisable value. There is judgement involved in assessing
the level of inventory provision required in respect of slow-moving inventory.
Inventory is carried at a value of £27.9 million at the year end.
The Group makes a 50% provision for perishable items of stock that are greater
than two years old. Should the Group increase the provision to 100% of
perishable items that are greater than two years old, this would decrease
profit by £0.27 million. The Group does not provide any provision on its
non-perishable goods that are greater than two years old on the basis that the
products have long shelf life. Should the Group increase the provision to 100%
of non-perishable items that are greater than two years old, this would
decrease profit by £0.04 million.
b) Valuation of goodwill
The assessment of the recoverable amount of goodwill allocated to Retra
Holdings Limited, Marvin Leeds Marketing Services, Inc. and Treasured Scents
Limited, as detailed in note 9, was based on fair value less costs to sell and
value in use calculations which involved judgements over the assumptions
applied. For Retra Holdings Limited, a 5% increase in the discount rate from
7.6% to 12.6% would reduce the value in use by approximately £66 million
leaving headroom of £64 million above the carrying value. For Marvin Leeds
Marketing Services, Inc., a 5% increase in the discount rate from 7.5% to
12.5% would reduce the value in use by approximately £12.6 million leaving
headroom of £11.7 million above the carrying value. For Treasured Scents
Limited, a 5% increase in the discount rate from 7.6% to 12.6% would reduce
the value in use by approximately £5.6 million leaving headroom of £5.9
million above the carrying value. None of these scenarios would therefore
result in any impairment of the goodwill.
Critical accounting judgements
c) Deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. The carrying amount of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all
or part of the assets to be recovered.
2. Segmental information
For management purposes, the Group is organised into two operating segments;
Branded and Close-out. The segment 'Branded' relates to the sale of own
branded products whereas 'Close-out' relates to the purchase of third-party
stock which is then repackaged for sale. These segments are the basis on which
the Group reports internally to the Board. The executive directors Sam Bazini,
Eoin Macleod and Neil Rodol together with members from the Groups senior
management teams are the chief operating decision makers of the whole
business.
Year ended 31 December 2023 2023 2023 2022 2022 2022
Own Brand Close-out Total Own Brand Close-out Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 87,068 2,522 89,590 60,288 3,770 64,058
Cost of sales (52,341) (1,516) (53,857) (38,327) (2,397) (40,724)
Gross profit 34,727 1,006 35,733 21,961 1,373 23,334
Administrative expenses (16,765) (487) (17,252) (14,319) (896) (15,215)
Exceptional items - - - (143) (9) (152)
Segment result 17,962 519 18,481 7,499 468 7,967
Reconciliation of segment result to profit before tax:
Segment result 17,962 519 18,481 7,499 468 7,967
Finance Income 6 - 6 4 - 4
Finance expense (369) - (369) (281) - (281)
Profit before tax 17,599 519 18,118 7, 222 468 7,690
Analysis of total revenue by geographical market:
UK 30,097 2,308 32,405 24,277 3,287 27,564
Europe - Other 8,213 11 8,224 6,942 13 6,955
Europe - Spain 11,223 82 11,305 8,005 194 8,199
Europe - Denmark 25,499 28 25,527 12,822 98 12,920
Rest of World - USA 7,213 93 7,306 5,163 178 5,341
Rest of World - Australia and New Zealand 3,067 - 3,067 1,565 - 1,565
Rest of World - Other 1,756 - 1,756 1,514 - 1,514
Total 87,068 2,522 89,590 60,288 3,770 64,058
During the year ended 31 December 2023, revenues of approximately £23.2
million (2022: £11.2 million) were derived from a single external customer
based in Denmark (25.9%; 2022: 17.5%).
The Directors are not able to attribute the Group's assets and liabilities by
reportable business segment.
Analysis of non-current assets by geographical market.
Year ended 31 December 2023 2023 2023 2022 2022 2022
UK USA Total UK USA Total
£'000 £'000 £'000 £'000 £'000 £'000
Goodwill 6,720 554 7,274 6,720 554 7,274
Customer lists - - - - 160 160
Brand - 3 3 - 3 3
Patents 83 - 83 105 - 105
Website 7 - 7 9 - 9
Property, plant and equipment 1,239 6 1,245 1,427 5 1,432
Right of use assets 5,214 66 5,280 5,624 35 5,659
13,263 629 13,892 13,885 757 14,642
3. Operating profit
Operating profit for the period is stated after charging/(crediting):
Year ended 31 December
2023 2022
£'000 £'000
Foreign exchange loss/(gain) 433 (133)
Depreciation 662 761
Amortisation of right-of-use assets 1,111 965
Amortisation of intangible assets 187 1,995
Exceptional costs - 152
Staff costs (note 4) 8,115 6,942
Write off/(back) of inventories 13 (151)
Inventories recognised as an expense (note 12) 45,900 35,087
The expenditure incurred within the table above falls wholly within
Administrative expenses.
Exceptional costs
Year ended 31 December
2023 2022
£'000 £'000
Royalty claim and associated legal fees - 152
- 152
During the year ended 31 December 2022 the Group agreed a settlement regarding
a dispute with a third party relating to the historic use of content on the
Group's social media platforms in the period from 2018 through to early
2021. The total settlement including associated legal costs was £0.52
million, of which £0.37 million was provided for in the year to 31 December
2021. The payment and the restriction of content use will not affect the
ongoing operations of the Group's businesses.
Auditor's Remuneration
Analysis of auditor's remuneration is as follows:
Year ended 31 December
2023 2022
£'000 £'000
Fees payable to the Company's auditor for the audit of the Group's annual 99 91
accounts
Fees payable to the Company's auditor for the audit of subsidiary companies 142 106
Total audit fees 241 197
Tax advice 16 15
Other assurance - 3
Total non-audit fees 16 18
4. Staff costs
Year ended 31 December
2023 2022
£'000 £'000
Wages and salaries 7,130 6,103
Social security costs 863 738
Pension costs (note 24) 122 101
8,115 6,942
The average monthly number of employees during the period was as follows:
Year ended 31 December
2023 2022
No. No.
Directors 7 7
Administrative 24 24
Finance 12 9
Warehouse 65 58
Sales 14 13
New Product Development and PR 19 14
141 125
2023 2022
Directors' remuneration, included in staff costs £'000 £'000
Salaries 1,273 985
Share based payments (note 21) 75 125
Benefits 27 23
Pension contributions 2 2
1,377 1,135
Remuneration in respect of Directors was as follows:
Salary/ fees and bonus Share based payment Benefits Pension contribution 2023
£'000 £'000 £'000 £'000 £'000
Executive Directors
S Bazini 375 - 15 - 390
E Macleod 375 - 12 - 387
N Rodol 298 50 - 1 349
S Craig 68 1 - 1 70
P Hagon* 42 24 - - 66
Non-executive Directors
C Garston 69 - - - 69
K Sadler 46 - - - 46
J Collier** - - - - -
1,273 75 27 2 1,377
* Shares granted to consultancy company Ward & Hagon Management Consulting
LLP, of which director Paul Hagon is a member.
** Appointed 1 September 2021 and resigned 31 December 2022.
Salary/ fees and bonus Share based payment Benefits Pension contribution 2022
£'000 £'000 £'000 £'000 £'000
Executive Directors
S Bazini 260 27 13 - 300
E Macleod 260 27 10 - 297
N Rodol 212 50 - 1 263
S Craig 63 1 - 1 65
P Hagon* 40 20 - - 60
Non-executive Directors
C Garston 66 - - - 66
K Sadler 44 - - - 44
J Collier** 40 - - - 40
985 125 23 2 1,135
* Shares granted to consultancy company Ward & Hagon Management Consulting
LLP, of which director Paul Hagon is a member.
** Appointed 1 September 2021 and resigned 31 December 2022.
Directors' interests in share options for year ended 31 December 2023
As at 31 December 2023, the following Directors held the following performance
related share awards (Enterprise Management Incentive Scheme Options, or
CSOPs) over ordinary shares of 25p each under the Warpaint London plc
Enterprise Management Incentive Scheme and the Warpaint London plc Company
Share Option Plan. For details of the share option schemes see Note 21 in
the Financial Statements.
Type of Share Award Date of Grant Number of Shares at 31 December 2023 Exercise Price End of Performance Period/First Exercise Date Number of Shares at 31 December 2022 (or date of appointment if later)
S Bazini LTIP 21.09.2018 - 254.5p 31.12.2022 1,534,986
E Macleod LTIP 21.09.2018 - 254.5p 31.12.2022 1,534,986
N Rodol EMI 29.06.2017 - 237.5p 29.06.2020 105,262
LTIP 21.09.2018 - 254.5p 31.12.2022 306,996
EMI (Non-Qualifying) 24.05.2021 225,410 122.0p 24.05.2024 225,410
CSOP 24.05.2021 24,590 122.0p 24.05.2024 24,590
CSOP 24.11.2023 9,230 325.0p 24.11.2026 -
EMI (Non- Qualifying) 24.11.2023 110,770 325.0p 24.11.2026 -
S Craig EMI 29.06.2017 10,000 237.5p 29.06.2020 10,000
CSOP 24.11.2023 10,000 325.0p 24.11.2026 -
CSOP 20.05.2020 10,000 49.5P 20.05.2023 10,000
P Hagon EMI (Non-Qualifying) 01.03.2022 200,000 127.5p 01.03.2025 200,000*
C Garston - - - - - -
K Sadler - - - - - -
J Collier** - - - - - -
* Shares granted to consultancy company Ward & Hagon Management Consulting
LLP, of which director Paul Hagon is a member.
** Appointed 1 September 2021 and resigned 31 December 2022.
The Directors of the Group are the only key management personnel.
5. Finance income and finance expenses
Year ended 31 December
2023 2022
£'000 £'000
Finance income
Interest received 6 4
6 4
Finance expenses
Lease liability interest (note 16) (230) (185)
Other interest relating to trade finance facilities (139) (96)
(369) (281)
6. Income tax
Year ended 31 December
2023 2022
£'000 £'000
Current tax expense
Current tax on profits for the period 4,245 1,817
4,245 1,817
Deferred tax expense
Origination and reversal of temporary differences (26) (377)
Total tax expense 4,219 1,440
The reasons for the difference between the actual tax charge for the year and
the standard rate of corporation tax in the United Kingdom applied to profit
for the year before tax as follows:
Year ended 31 December
2023 2022
£'000 £'000
Profit for the period before taxation 18,118 7,690
Expected tax charge based on UK effective corporation tax rate of 23.5% (2022: 4,258 1,461
19% UK standard rate)
Expenses/(Income)/ not deductible/(allowable) 20 (11)
Other adjustments (74) (41)
Different tax rates applied in overseas jurisdiction 18 31
Differences due to an increase in tax rate 23 -
Movement in deferred tax (26) -
Total tax expense 4,219 1,440
The standard rate of UK corporation tax changed from 19% to 25% on 1 April
2023. (2022: 19.0%).
The Group's effective tax rate for the year is 23.29% (2022: 18.73%).
7. Subsidiaries
At the period end, the Group has the following subsidiaries:
Subsidiary name Nature of business Place of incorporation Percentage owned
Warpaint Cosmetics Group Limited Holding company England and Wales 100%
Warpaint Cosmetics (2014) Limited* Wholesaler England and Wales 100%
Treasured Scents (2014) Limited Holding company England and Wales 100%
Treasured Scents Limited* Dormant England and Wales 100%
Warpaint Cosmetics Inc. Holding company U.S.A. 100%
Retra Holdings Limited Holding company England and Wales 100%
Badgequo Limited* Wholesaler England and Wales 100%
Retra Own Label Limited* Dormant England and Wales 100%
Badgequo Hong Kong Limited* Supply chain management Hong Kong 100%
Jinhua Badgequo Cosmetics Trading Co., Ltd* Wholesaler People's Republic of China 100%
Marvin Leeds Marketing Services, Inc.* Wholesaler U.S.A. 100%
Warpaint Cosmetics (ROI) Limited Wholesaler Republic of Ireland 100%
Beaute Sales EU Limited Dormant England & Wales 100%
* indicates indirect interest
All entities detailed above have been in existence for the whole of the
reporting period, except for Beaute Sales EU Limited which was incorporated on
the 27(th) of January 2023.
The registered office for all UK incorporated subsidiaries is Units B&C,
Orbital Forty-Six, The Ridgeway Trading Estate, Iver, Bucks. SL0 9HW.
The registered office for Warpaint Cosmetics Inc. is 445 Northern Boulevard -
Great Neck, New York 11021.
The registered office for Badgequo Hong Kong Limited is 12F, 3 Lockhart Road,
Wanchai, Hong Kong.
The registered office for Jinhua Badgequo Cosmetics Trading Co. Ltd is Room
1401, Gongyuan Building No. 307 South Shuanglong Street, Wucheng District,
Jinhua, Zhejiang, China 321000.
The registered office for Marvin Leeds Marketing Services, Inc. is 34W. 33(rd)
St. - Suite 301, New York NY 10001.
The registered office for Warpaint Cosmetics (ROI) Limited is 6(th) Floor,
South Bank House, Barrow Street, Dublin 4, D04 TR29.
The registered office for Beaute Sales EU Limited is Units 3 & 4 Zodiac
Business Park, High Road, Cowley, Uxbridge, UB8 2GU.
8. Goodwill
Cost £'000
At 1 January 2022,31 December 2022 and 31 December 2023 8,086
At 31 December 2023 8,086
Impairment
At 1 January 2022,31 December 2022 and 31 December 2023 812
Net book value
At 31 December 2023 7,274
At 31 December 2022 7,274
Goodwill represents the excess of consideration over the fair value of the
Group's share of the net identifiable assets of the acquired business/CGU at
the date of acquisition. The carrying value at 31 December 2023 includes
Treasured Scents (2014) Limited ("TS2014") (the Close-out business) of
£513,000, Retra Holdings Limited £6,207,000 and Marvin Leeds Marketing
Services, Inc. £554,000.
Impairment is calculated by comparing the carrying amounts to the recoverable
amount being the higher of value in use derived from discounted cash flow
projections or the fair value less costs to sell. A CGU is deemed to be an
individual division, and these have been grouped together into similar classes
for the purpose of formulating operating segments as reported in Note 2. The
discount rate for the CGU has been calculated using various assumptions to
arrive at the Weighted Average Cost of Capital ("WACC"). The WACC has been
calculated by weighting the required returns of interest bearing debt and
common equity in line with an estimate split of the capital structure. Value
in use calculations are based on a discounted cash flow model ("DCF") for the
subsidiary, which discounts expected cash flows over a five-year period using
a pre-tax discount rate of 7.6% (2022: 13.3%) for Retra Holdings Limited and
7.5% (2022: 10.4%) for Marvin Leeds Marketing Services, Inc. and 7.6% for
TS2014 (2022: 13.3%). Cash flows beyond the five-year period are extrapolated
using a long-term average growth rate of 2.0% (2022: 2.0%). The average growth
rate beyond the five-year period is lower than current growth rates and is in
line with Management's expectations for the business.
The fair value less costs to sell was based on a multiple of earnings less
estimated costs to sell. Management have performed the annual impairment
review as required by IAS 36 and have concluded that no impairment is
indicated for TS2014, Retra Holdings Limited ("Retra") or Marvin Leeds
Marketing Services, Inc. ("LMS") as the recoverable amounts exceeds the
respective carrying values.
Key assumptions and sensitivity to changes in assumptions
The key assumptions are based upon management's historical experience. The
calculation of VIU is most sensitive to the following assumptions:
· Sales and gross margin - for LMS this is based on forecasts
incorporating a compound annual growth rate of 15% revenue over the next five
years. For Retra, the compound annual growth rate over the next five years is
anticipated to be 9% to 13%. For Treasured Scents the compound annual growth
rate over the next five years is anticipated to be 2.5%. The gross margins for
LMS, Retra and Treasured Scents are based on historical rates achieved.
· Administrative expenses are expected to increase by 10% in LMS, 4% in
Retra and decrease by 5% in Treasured Scents.
· Growth Rate - used to extrapolate beyond the budget period and for
terminal values based on a long-term average growth rate of 2.0%.
Sensitivity to changes in assumptions
The impairment review of the Group is sensitive to changes in the key
assumptions, most notably the pre-tax discount rate, the terminal growth rate,
the projected operating cash flows. Reasonable changes to these assumptions
are considered to be:
· 5.0% increase in the pre-tax discount rate;
· reduction in the terminal growth rate to 1%; and
· 10.0% reduction in projected operating cash flows.
Reasonable changes to the assumptions used, considered in isolation, would not
result in an impairment of goodwill for LMS, Retra or TS2014.
9. Intangible assets
Brands Customer lists Patents Website Licences Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 3,802 8,240 267 45 6 12,360
Additions - 1 3 8 - 12
At 31 December 2022 3,802 8,241 270 53 6 12,372
Additions - - 3 - - 3
Disposals - - (29) (4) - (33)
At 31 December 2023 3,802 8,241 244 49 6 12,342
Accumulated amortisation
At 1 January 2022 3,115 6,798 140 41 6 10,100
Charge for the year 684 1,283 25 3 - 1,995
At 31 December 2022 3,799 8,081 165 44 6 12,095
Charge for the year - 160 25 2 - 187
Amortisation on disposals - - (29) (4) - (33)
At 31 December 2023 3,799 8,241 161 42 6 12,249
Net book value
At 31 December 2023 3 - 83 7 - 93
At 31 December 2022 3 160 105 9 - 277
10. Property, plant and equipment
Plant and machinery Fixtures and fittings Computer equipment Motor vehicles Total
£'000 £'000 £'000 £'000 £'000
Costs
At 1 January 2022 1,027 2,231 367 120 3,745
Additions 301 409 91 30 831
Disposals - (349) (3) (72) (424)
Foreign exchange gain/(loss) (37) - 16 - (21)
At 31 December 2022 1,291 2,291 471 78 4,131
Additions 146 221 148 - 515
Disposals - (749) - - (749)
Foreign exchange loss - (2) (1) - (3)
At 31 December 2023 1,437 1,761 618 78 3,894
Accumulated depreciation
At 1 January 2022 760 1,195 290 115 2,360
Charge for year 181 538 37 5 761
Disposals - (349) (1) (72) (422)
At 31 December 2022 941 1,384 326 48 2,699
Charge for year 108 492 56 6 662
Disposals - (709) - - (709)
Foreign exchange loss - (2) (1) - (3)
At 31 December 2023 1,049 1,165 381 54 2,649
Net book value
At 31 December 2023 388 596 237 24 1,245
At 31 December 2022 350 907 145 30 1,432
11. Right-of-use assets
Leasehold property Computer equipment Total
£'000 £'000 £'000
Costs
At 1 January 2022 5,049 77 5,126
Additions 3,551 - 3,551
At 31 December 2022 8,600 8,677
77
Additions 732 - 732
Disposals (334) - (334)
At 31 December 2023 8,998 77 9,075
Accumulated amortisation
At 1 January 2022 1,976 77 2,053
Charge for the year 965 - 965
At 31 December 2022 2,941 77 3,018
Charge for the year 1,111 - 1,111
Disposals (334) - (334)
At 31 December 2023 3,718 77 3,795
Net Book Value
At 31 December 2023 5,280 - 5,280
At 31 December 2022 5,659 - 5,659
The weighted average incremental borrowing rate applied to measure lease
liabilities is 4.10% (2022: 3.99%) for leasehold property.
12. Inventories
As at 31 December
2023 2022
£'000 £'000
Finished goods 28,341 19,080
Provision for impairment (378) (365)
27,963 18,715
The cost of inventories recognised as an expense and included in 'cost of
sales' amounted to £45.9 million in the year ended 31 December 2023 (2022:
£35.1 million).
The cost of inventories recognised as an expense includes a write down of
inventory to net realisable value of £13,000 (2022: £151,000 write back).
13. Trade and other receivables
As at 31 December
2023 2022
£'000 £'000
Trade receivables - gross 10,997 9,935
Provision for impairment of trade receivables (129) (70)
Trade receivables - net 10,868 9,865
Other receivables 397 213
Prepayments and accrued income 2,264 1,615
Total 13,529 11,693
The directors consider that the carrying values of trade and other receivables
measured at book value and amortised cost approximates to their fair value.
The individually impaired receivables relate to the supply of goods to
customers. A provision is recognised for amounts not expected to be recovered.
Movements in the accumulated impairment losses on trade receivables were as
follows:
As at 31 December
2023 2022
£'000 £'000
Accumulated impairment losses at 1 January 70 66
Additional impairment losses recognised during the year, net 101 4
Amounts written off during the year as uncollectible (42) -
Accumulated impairment losses at 31 December 129 70
The impairment losses recognised during the year are net of a credit of £Nil
(2022: £9,000) relating to the recovery of amounts previously written off as
uncollectable.
Contract Liabilities
As at 31 December
2023 2022
£'000 £'000
At 1 January 243 219
Amounts included in contract liabilities that was recognised as revenue during 503 525
the period
Amounts settled during the period (469) (501)
At 31 December 277 243
Contract liabilities are included within "trade and other receivables" in the
face of the statement of financial position being settled net of the trade
debtor balances. They arise from the group's own brand segment, which enter
into contracts with customers for early settlement discounts, marketing
contributions and volume rebates, because the invoiced amounts to customers at
each balance sheet date do not consider the amount or rebate and discounts the
customers are entitled to until settlement of the debtor balance at a certain
time.
14. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the cash
flow statement:
As at 31 December
2023 2022
£'000 £'000
Cash at bank and in hand 9,053 5,865
9,053 5,865
15. Trade and other payables
As at 31 December
2023 2022
£'000 £'000
Current
Trade payables 1,892 1,368
Social security and other taxes 1,355 1,294
Other payables 86 101
Accruals 6,243 3,225
Total 9,576 5,988
The directors consider that the carrying values of trade and other payables
measured at book value and amortised cost approximates to their fair value.
16. Lease liabilities
As at 31 December
2023 2022
£'000 £'000
Lease liabilities
Repayable within 1 year 1,259 1,015
Repayable within 2 - 5 years 3,227 3,498
Repayable in more than 5 years 963 1,349
5,449 5,862
Undiscounted lease payments
As at 31 December
2023 2022
£'000 £'000
Lease liabilities
Repayable within 1 year 1,459 1,200
Repayable within 2 - 5 years 3,673 4,027
Repayable in more than 5 years 1,031 1,465
Total 6,163 6,692
Lease liabilities
As at 31 December
Leasehold property Total
£'000 £'000
At 1 January 2022 3,147 3,147
Lease additions 3,551 3,551
Interest expense 185 185
Lease payments (1,021) (1,021)
Prior period adjustment - -
As at 31 December 2022 5,862 5,862
Lease additions 731 731
Interest expense 230 230
Lease payments (1,374) (1,374)
As at 31 December 2023 5,449 5,449
Nature of lease liabilities
The group leases a number of properties in the United Kingdom and United
States of America.
The interest rates expected are as follows:
As at 31 December
2023 2022
% %
Invoice financing 7.24¹ 5.49¹
Note 1: Base rate + 1.99%
17. Deferred tax
Deferred tax is calculated in full on temporary differences under the
liability method using tax rate of 25%.
The movement on the deferred tax account is as shown below:
Deferred tax liability Deferred tax asset
Year ended 31 December Year ended 31 December
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Opening balance (180) (557) 429 500
Foreign exchange adjustment - - - (71)
Recognised in profit and loss:
Release of deferred tax on intangible assets (115) - - -
Deferred tax on share based payment recognised in the income statement - - 100 -
Deferred tax on share-based payments recognised in the share option reserve - - 214 -
Tax expense 115 377 (74) -
Adjustment in respect of previous periods - - (77) -
Closing balance (180) (180) 592 429
The deferred tax liability has arisen due to the timing difference on
accelerated capital allowances amounting to £115,000 (2022: £65,000) and on
the intangible assets acquired in a business combination amounting to £Nil
(2022: £115,000).
The deferred tax asset has arisen from loss carry forward for LMS amounting to
£1,451,944 (2022: £1,716,000) and recognised at a rate of 21% and from share
options amounting to £314,000, of which £214,000 has been recognised in the
share option reserve, in the Statement of Changes in Equity.
18. Dividends
Year to December 2023 Paid Amount per share Total £'000
Final dividend - 2022 04 July 23 4.5p 3,471
Interim dividend - 2023 24 Nov 23 3p 2,314
5,785
Year to December 2022 Paid Amount per share Total £'000
Final dividend - 2021 05 July 22 3.5p 2,686
Interim dividend - 2022 25 Nov 22 2.6p 1,996
4,682
The Group has proposed a final dividend for the year ended 31 December 2023 of
3p per share.
19. Called up share capital
No. of shares
'000 £'000
Allotted and issued
Ordinary shares of £0.25 each:
At 1 January 2022 and 31 December 2022 76,752 19,188
Issued at 6 June 2023 376 94
Issued at 9 October 2023 24 6
Issued at 21 November 2023 105 26
At 31 December 2023 77,257 19,314
On 6(th) June 2023, the Company issued 375,633 equity shares with par value of
£0.25 per share for £0.495 per share. The entire amount was paid in cash. No
shares were allotted other than for cash.
On 9(th) October 2023, the Company issued 23,578 equity shares with par value
of £0.25 per share for £2.375 per share. The entire amount was paid in cash.
No shares were allotted other than for cash.
On 21(st) November 2023, the Company issued 105,262 equity shares with par
value of £0.25 per share for £2.375 per share. The entire amount was paid in
cash. No shares were allotted other than for cash.
All ordinary shares carry equal rights.
20. Reserves
Share premium
The share premium reserve contains the premium arising on the issue of equity
shares, net of issue expenses incurred by the Company.
Retained earnings
Retained earnings represent cumulative profits or losses, net of dividends and
other adjustments.
Merger reserve
The merger reserve arose due to the group reconstruction in 2016. The effect
of the application of merger accounting principles on the merger reserve is
that the share capital and other distributable reserves that existed in
Warpaint Cosmetics Group Limited (the Company) as at the point Warpaint London
PLC legally acquired Warpaint Cosmetics Group Limited is accounted for as if
it had been in existence as at 31 December 2015 and as at 1 January 2015. The
corresponding entry being the merger reserve so the overall net assets as at
the comparative dates are not affected.
Share option reserves
'Share option reserves' have arisen from the share-based payment charge. The
shares over which the options were issued are that of the parent company.
'Other reserves' have also arisen on translation of foreign subsidiaries.
21. Share based payments
Movements in the number of options and their weighted average exercise prices
are as follows:
Weighted average exercise price (pence) Number of options Weighted average exercise price (pence) Number of options
2023 2023 2022 2022
Outstanding at the beginning of the year 222.20 5,069,514 226.00 4,860,830
Granted during the year 325.00 808,500 127.95 220,000
Exercised 97.80 (501,473) - -
Expired and lapsed during the year 253.31 (3,861,304) 55.40 (26,842)
Other adjustments - - 80.09 15,526
Outstanding at the end of the year 237.94 1,515,237 222.20 5,069,514
The weighted average remaining contractual life of the options is 7.39 years
(2022: 1.34 years).
The following options over ordinary shares have been granted by the Company:
Exercise price Exercise period Number of options
Pence (years)
29 June 2017 237.50 3 96,737
20 May 2020 49.50 3 10,000
25 May 2021 122.00 3 400,000
01 March 2022 127.50 3 200,000
24 November 2023 325.00 3 808,500
At the date of grant, the options were valued using the Black-Scholes option
pricing model. The fair value of options granted and the assumptions used in
the calculations were as follows:
24 Nov 23 01 Mar 22 25 May 21 20 May 20 29 June 17
Expected volatility 40% 54% 78% 76% 64%
Expected life (years) 3 3 3 3 3
Risk-free interest rate 4.35% 0.99% 0.15% 0.01% 0.38%
Expected dividend yield 1.79% 4.94% 1.76% 2.08% 2%
Fair value per option (£) 0.918 0.354 0.552 0.213 0.963
On 29 June 2017, the Company granted in aggregate over 277,788 ordinary shares
of 25 pence each in the Company under the Enterprise Management Incentive
Scheme to all staff members, including the Company's Chief Financial Officer,
Neil Rodol, but excluding all other directors. The Options are exercisable for
a period of seven years from 29 June 2020 (three years after the grant date),
subject to certain performance conditions being met, including that the
compound annual growth rate in the Company's earnings per share must exceed 8
per cent over the three financial years commencing 1 January 2017, subject to
the discretion of the Company's remuneration committee.
On 20 May 2020, the Company granted, in aggregate, 454,686 share options with
an exercise price of 49.50 pence per Ordinary share under a Company Share
Option Plan (CSOP). Key persons discharging managerial responsibilities
(PDMR's) were awarded a cumulative 112,106 share options as part of their
annual remuneration and incentivisation packages. The remaining 342,580
options granted have been awarded to other members of the company's workforce.
No directors of the company were awarded options in relation to this CSOP. The
options are exercisable for a period of seven years from 20 May 2023, subject
to the same performance conditions dictated by the Enterprise Management
Incentive Scheme detailed above.
On 25 May 2021, the Company granted, in aggregate, 400,000 share options with
an exercise price of 122.0 pence per Ordinary share under a Company Share
Option Plan (CSOP). Key persons discharging managerial responsibilities
(PDMR's) were awarded a cumulative 400,000 share options as part of their
annual remuneration and incentivisation packages. The options are exercisable
for a period of seven years from 24 May 2024 and are not subject to the
satisfaction of any performance criteria.
On 1 March 2022, the Company granted in aggregate 200,000 ordinary shares of
25 pence each at an exercise price of 127.5 pence each under an unapproved
scheme. These were granted to a consultancy company Ward & Hagon
Management Consulting LLP ("Ward & Hagon") appointed to assist with the
implementation of the Company's strategic growth plan in recognition of the
success of the arrangements at the time and to incentivise the consultancy
company to align with the long-term interest of shareholders. The options are
exercisable between three and ten years from the date of grant.
On 24 November 2023, the Company granted in aggregate 641,191 ordinary shares
of 25 pence each at an exercise price of 325 pence each under a Company Share
Option Plan (CSOP) scheme. Key persons discharging managerial responsibilities
(PDMR's) were awarded a cumulative 58,691 share options as part of their
annual remuneration and incentivisation packages. The remaining 582,500
options granted have been awarded to other members of the company's workforce.
The options are exercisable between three and ten years from the date of
grant, with the usual first exercise date being the 3rd anniversary of the
date of the grant.
On 24 November 2023, the Company granted in aggregate 167,309 ordinary shares
of 25 pence each at an exercise price of 325 pence each under an unapproved
Enterprise Management Incentive (EMI) scheme. Key persons discharging
managerial responsibilities (PDMR's) were awarded a cumulative 167,309 share
options as part of their annual remuneration and incentivisation packages. The
options are exercisable between three and ten years from the date of grant,
with the usual first exercise date being the 3rd anniversary of the date of
the grant.
The charge in the statement of comprehensive income for the share-based
payments during the year was £134,284 (2022: £192,986).
22. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation.
Key management personnel are considered to be the directors. Compensation of
the directors is disclosed in note 4 with the exception of dividends which are
disclosed in note 18.
The lease between Warpaint Cosmetics (2014) Limited and Direct Supplies (2014)
Group Limited is a 10 year lease which commenced on the 3 August 2016, with
annual rental payments of £138,800.
During 2023, Warpaint Cosmetics (2014) Limited paid rent in the sum of
£138,800 (2022: £138,000) to Direct Supplies (2014) Group Limited, of which
S Bazini is a director. At the year end the amount due to Direct Supplies
(2014) Group Limited was £34,500 (2022: £34,500).
The lease between Warpaint Cosmetics (2014) Limited and Trading Scents Group
Limited is a 10 year lease which commenced on the 3 August 2016, with annual
rental payments of £138,800.
During 2023, Warpaint Cosmetics (2014) Limited paid rent in the sum of
£138,800 (2022: £138,000) to Trading Scents Group Limited, of which E
Macleod is a director. At the year end the amount due to Trading Scents Group
Limited was £34,500 (2022: £34,500).
During the year ended 31 December 2023, Warpaint Cosmetics (2014) Limited
entered into two lease agreements, for two additional units with Warpaint
Cosmetics Limited. The agreements relate to two leases to the 2 August 2026,
with annual rental payments of £138,000 and £110,250 respectively.
During 2023, Warpaint Cosmetics (2014) Limited paid rent in the sum of
£303,966 (2022: £138,000) to Warpaint Cosmetics limited, of which S Bazini
and E Macleod are directors. At the year end the amount due to Warpaint
Cosmetics Limited was £62,063 (2022: £34,500).
Warpaint Cosmetics (2014) Limited also entered into a 10 year lease agreement
with Warpaint Cosmetics Limited on the 3 August 2016, with annual rental
payments of £138,800.
During 2023, Retra Holdings Limited paid rent in the sum of £410,107 (2022:
£404,265) to Warpaint Cosmetics Limited, of which E Macleod and S Bazini are
directors.
The leases between Retra Holdings Limited and Warpaint Cosmetics Limited are
two 10 year leases which commenced on 11(th) March 2018 with annual rental
payments of £225,000, and £185,107 respectively.
Paul Hagon, an executive director of Warpaint London plc ("Warpaint"), is a
member of Ward & Hagon. Ward & Hagon were paid £190,000 fees (2022:
£177,437), £116,763 commission (2022: £169,172) and expenses of £9,346 in
2023 (2022: £7,404) and were issued with 200,000 share options in 2022,
details of which are disclosed in note 21.
23. Financial instruments
Capital risk management
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies. The overall objective of the Board is to
set policies that seek to reduce risk as far as possible without unduly
affecting the Group's competitiveness and flexibility. The Group reports in
Sterling. All funding requirements and financial risks are managed based on
policies and procedures adopted by the Board of Directors.
The Group manages its capital to ensure its ability to continue as a going
concern and to maintain an optimal capital structure to reduce cost of
capital. The capital structure of the Group comprises equity attributable to
equity holders of the Company consisting of invested capital as disclosed in
the Statement of Changes in Equity and cash and cash equivalents.
The Group's invested capital is made up of share capital, share premium and
retained earnings totalling £62,095,000 as at 31 December 2023 (2022:
£51,926,000) as shown in the statement of changes in equity.
The Group maintains or adjusts its capital structure through the payment of
dividends to shareholders and issue of new shares.
Year ended 31 December
2023 2022
£'000 £'000
Financial assets
Financial assets at amortised cost:
Trade and other receivables 11,265 10,078
Financial assets measured at fair value through the profit and loss:
Cash and cash equivalents 9,053 5,865
Derivative financial instruments - 8
20,318 15,951
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables (8,221) (4,694)
Loan and borrowings (5,449) (5,862)
Financial liabilities measured at fair value through the profit and loss:
Derivative financial instruments (518) (600)
(14,188) (11,156)
Net 6,130 4,795
Financial assets measured at fair value through the profit and loss comprise
cash and cash equivalents and derivative financial instruments.
Financial assets measured at amortised cost comprise trade receivables and
other receivables.
Financial liabilities measured at amortised cost comprise trade payables and
other payables, and bank loans.
Cash and cash equivalents
This comprises cash and short-term deposits held by the Group. The carrying
amount of these assets approximates their fair value.
General risk management principles
The Group's activities expose it to a variety of risks including market risk
(interest rate risk), credit risk and liquidity risk. The Group manages these
risks through an effective risk management programme and through this
programme, the Board seeks to minimise potential adverse effects on the
Group's financial performance. The Directors have an overall responsibility
for the establishment of the Group's risk management framework. A formal risk
assessment and management framework for assessing, monitoring and managing the
strategic, operational and financial risks of the Group is in place to ensure
appropriate risk management of its operations.
The following represent the key financial risks that the Group faces:
Market risk
The Group's activities expose it to the financial risk of interest rates.
Interest rate risk
The Group's interest rate exposure arises mainly from its interest-bearing
borrowings. Contractual agreements entered into a floating rate expose the
entity to cash flow risk. Interest rate risk also arises on
the Group's cash and cash equivalents. The Group does not enter into
derivative transactions in order to hedge against its exposure to interest
rate fluctuations. An increase in the rate of interest by 100 basis points
would decrease profits by £4,000 (2022: £12,000) with an increase in profits
by the same amount for a decrease in the rate of interest by 100 basis points.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a
counterparty to a financial instrument fails to meet its contractual
obligations.
The Group's principal financial assets are trade and other receivables and
bank balances and cash. The credit risk on liquid funds is limited because the
counterparties are banks with high credit-ratings assigned by international
credit-rating agencies.
The Group's credit risk is primarily attributable to trade receivables. The
Group has a policy of assessing credit worthiness of potential and existing
customers before entering into transactions. There is ongoing credit
evaluation on the financial condition of accounts receivable using independent
ratings where available or by assessment of the customer's credit quality
based on its financial position, past experience and other factors. The Group
manages the collection of its receivables through its ongoing contact with
customers so as to ensure that any potential issues that could result in
non-payment of the amounts due are addressed as soon as identified. The Group
makes a provision in the financial statements for expected credit losses based
on an evaluation of historical data and applies percentages based on the
ageing of trade receivables.
The maximum exposure to credit risk in respect of the above is the carrying
value of financial assets recorded in the financial statements. At 31 December
2023, the Group has trade receivables of £10,835,000 (2022: £9,865,000).
The following table provides an analysis of trade receivables that were due,
but not impaired, at each financial year end. The Group believes that the
balances are ultimately recoverable based on a review of past impairment
history and the current financial status of customers.
As at 31 December
2023 2022
£'000 £'000
Current 5,680 5,502
1 - 30 days 3,514 2,680
31 - 60 days 980 1,164
61 - 90 days 547 375
91 + days 276 214
Provision for impairment of trade receivables (129) (70)
Total trade receivables - net 10,868 9,865
The Directors are unaware of any factors affecting the recoverability of
outstanding balances at 31 December 2023 and, consequently, no further
provisions have been made for bad and doubtful debts.
The allowance for bad debts has been calculated using a 12-month lifetime
expected credit loss model, as set out below, in accordance with IFRS 9.
As at 31 December As at 31 December
2023 2022
£'000 % £'000 £'000 % £'000
Current 5,680 0.135% 8 5,432 0.135 8
1 - 30 days 3,514 0.405% 14 2,680 0.405 11
31 - 60 days 980 1.215% 12 1,164 1.215 14
61 - 90 days 547 3.645% 20 375 3.645 14
91 + days 276 27.174% 75 214 10.935 23
129 70
Credit quality of financial assets
As at 31 December
2023 2022
Trade receivables, gross (note 13): £'000 £'000
Receivable from large companies (see below for definition) 5,190 5,115
Receivable from small or medium-sized companies 490 386
Total neither past due nor impaired 5,680 5,501
For the purpose of the Group's monitoring of credit quality, large companies
or groups are those that, based on information available to management at the
point of initially contracting with the entity, have annual turnover in excess
of £100,000 (2022: £100,000).
As at 31 December
2023 2022
Past due but not impaired: £'000 £'000
Less than 30 days overdue 3,514 2,680
30 - 90 days overdue 1,674 1,684
Total past due but not impaired 5,188 4,364
Lifetime expected loss provision:
Less than 30 days overdue - -
30 - 90 days overdue 129 70
Total lifetime expected loss provision (gross) 129 70
Less: Impairment provision (129) (70)
Total trade receivables, net of provision for impairment 10,868 9,865
Cash and cash equivalents, neither past due nor impaired (Moody's ratings of
respective counterparties):
As at 31 December
2023 2022
£'000 £'000
AAA rated 3 -
AA rated 3,292 -
A rated - 5,862
BAA rated 5,758 3
Total cash and cash equivalents 9,053 5,865
Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is
the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due. The Group's policy is to ensure that it will
always have sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it closely monitors its access to bank and
other credit facilities in comparison to its outstanding commitments on a
regular basis to ensure that it has sufficient funds to meet the obligations
as they fall due.
The Board receives monthly cash balance updates and weekly sales and margin
reports marked against budget. At the start of each year the Board approve and
adopt a budget and cash flow for the next 24 months, the CFO monitors these
and reports any material divergences to the Board, so that management can
ensure that sufficient funding is in place as it is required. The budget and
cash flow are updated at the end of each year, for the following 24 months.
The tables below summarise the maturity profile of the combined group's
non-derivative financial liabilities at each financial year end based on
contractual undiscounted payments, including estimated interest payments where
applicable:
Year ended 31 December 2023
Less than 6 months Between 6 months and 1 year Between 1 and 5 years Over 5 years Total
£'000 £'000 £'000 £'000 £'000
Trade payables 1,892 - - - 1,892
Other payables 86 - - - 86
Accruals 6,243 - - - 6,243
Lease liabilities 729 730 3,673 1,031 6,163
8,950 730 3,673 1,031 14,384
Year ended 31 December 2022
Less than 6 months Between 6 months and 1 year Between 1 and 5 years Over 5 years Total
£'000 £'000 £'000 £'000 £'000
Trade payables 1,368 - - - 1,368
Other payables 101 - - - 101
Accruals 3,225 - - - 3,225
Lease liabilities 605 595 4,027 1,465 6,692
5,299 595 4,027 1,465 11,386
The borrowings of the subsidiary companies, Retra Holdings Limited and
Badgequo Limited, are secured by a debenture including a fixed charge over the
present leasehold property, a first fixed charge over book and other debts and
a first floating charge over all assets of those companies.
Foreign exchange risk
The Group operates in a number of markets across the world and is exposed to
foreign exchange risk arising from various currency exposure in respect of
cash and cash equivalents, trade receivables and trade payables, in particular
with respect to the US dollar. At December 2023, there were total sums of
£2,384,899 (2022: £1,828,145) held in foreign currency.
The Group is also exposed to currency risk as the assets one of its subsidiary
are denominated in US Dollars. At 31 December 2023, the net foreign liability
was £0.2m (2022: £0.5m). Differences that arise from the translation of
these assets from US dollar to sterling are recognised in other comprehensive
income in the year and the cumulative effect as a separate component in
equity. The Group does not hedge this translation exposure to its equity.
A 5% weakening of sterling would result in a £11,085 increase in reported
profits and equity, while a 5% strengthening of sterling would result in
£10,030 decrease in profits and equity.
Marvin Leeds Marketing Services, Inc.
As at 31 December
2023 2023
USD GBP
$ £
Profit After Tax 268,316 210,626
5% weakening of US dollar 268,316 221,711
Increase profits 11,085
5% strengthening of US dollar 268,316 200,596
Decrease profits (10,030)
Foreign exchange risk
2023 2022
£'000 £'000
Derivatives carried at fair value:
Exchange loss on forward foreign currency contracts (518) (592)
The Group, along with other businesses, will face the risk of inflationary
pressures through commodities cost increases.
Derivatives: Foreign currency forward contracts
The Group enters into forward foreign exchange contracts and options to manage
the risk associated with anticipated sale and purchase transactions which are
denominated in foreign currencies.
Derivatives are recognised initially at their fair value at the date the
derivative contract is entered into and are subsequently remeasured to their
fair value at each reporting date. The resulting gain or loss is recognised
immediately in the profit or loss unless the derivative is designed and
effective as a hedging instrument, in which event the timing and recognition
in the profit or loss depends on the nature of the hedging relationship.
As at 31 December 2023, the group has in total 52 (2022: 34) forward foreign
exchange contracts outstanding, made up of regular forward foreign exchange
contracts.
Regular forward foreign exchange contracts:
At 31 December 2023, there were 52 (2022: 30) regular forward foreign exchange
contracts, to buy US dollars and sell Euros, for an agreed amount of foreign
currency on a specific future date. The purchase or sale is made at a
predetermined exchange rate. The outcome is certain and will deliver a known
fixed amount. The following table details the regular forward foreign exchange
contracts outstanding as at the balance sheet date.
a) Contracted exchange rate 2023 2022 2023 2022
£/$ £/€
3 months or less 1.2660 1.2707 n/a n/a
3 to 6 months 1.2526 1.1447 1.1491 1.1485
6 to 12 months 1.2546 1.1407 1.1435 1.1414
12 months or more n/a n/a n/a 1.1192
b) Contract value 2023 2022 2023 2022
£/$ £/€
£'000 £'000 £'000 £'000
3 months or less 10,310 1,448 - -
3 to 6 months 16,554 699 872 849
6 to 12 months 6,792 438 2,382 1,095
12 months or more - - - 1,385
33,656 2,585 3,254 3,329
c) Foreign currency 2023 2022 2023 2022
$'000 $'000 €'000 €'000
3 months or less 12,943 1,840 - 0
3 to 6 months 20,750 800 1,000 975
6 to 12 months 8,500 500 2,725 1,250
12 months or more - - - 1,550
42,193 3,140 3,725 3,775
Window Barrier Accrual forward foreign exchange contracts:
At 31 December 2023, there were no Window Barrier Accrual forward foreign
exchange contracts to buy US dollars (2022: 3)
Window Barrier Accruals have an agreed US dollar purchase Forward Rate, a
start date known as the Barrier date, an end date known as the Expiration
date, a rate below which the forward foreign exchange contract becomes
worthless known as the Knock Out Rate, and a Notional Amount of currency to
purchase at the Forward Rate depending on the US dollar Spot Rate at the
Expiration Date.
Each Window Barrier Accrual contract has been designed to cover the currency
needs of the business throughout 2023 and includes 12 Barrier and Expiration
dates, one in each calendar month, so that the forward foreign exchange
contract is split evenly across the year.
If from month to month between the Barrier date and the following Expiration
date, the Spot Rate of the US dollar falls below the Knock Out Rate, then
there is no obligation, and no US dollars can be purchased. Otherwise, if on
the Expiration date Spot Rate is below the Forward Rate, then the Notional
Amount of US dollars will be purchased at the Forward Rate, however if on the
Expiration date Spot Rate is above the Forward Rate, then double the Notional
Amount of US dollars will be purchased at the Forward Rate.
Counter TARN forward foreign exchange contracts:
At 31 December 2023, there were no Counter TARN forward foreign exchange
contract to buy US dollars (2022: 1).
Counter TARNs have an agreed US dollar purchase Forward Rate, an end date
known as the Expiration date, a Target which is the agreed number of times the
contract allows the purchase of dollars when the Spot Rate is less than the
Forward rate at the Expiration date, a Fixing Count which increments by 1 each
time the contract allows the purchase of dollars when the Spot Rate is less
than the Forward rate, a Notional Amount of currency to purchase at the
Forward Rate depending on the US dollar Spot Rate at the Expiration Date, and
a Knock Out Event which is when the Fixing Count total has reached the agreed
Target and thereafter the forward foreign exchange contract becomes worthless.
The Counter TARN contract has been designed to cover the currency needs of the
business throughout 2024 and includes 12 Expiration dates, one in each
calendar month, so that the forward foreign exchange contract is split evenly
across the year.
If from month to month on the Expiration dates Spot Rate is below the Forward
Rate, then the Notional Amount of US dollars will be purchased at the Forward
Rate and the Fixing Count will increment by 1, however if on the Expiration
dates Spot Rate is above the Forward Rate, then double the Notional Amount of
US dollars will be purchased at the Forward Rate and the Fixing Count will not
change. If at any time the Fixing Count reaches the Target for the contract,
then this triggers a Knock Out Event which ends the contract and no further US
dollars can be purchased.
Foreign currency forward contract assets and liabilities are presented in the
line 'Derivative financial instruments' (either as asset or as liabilities)
within the Statement of Financial Position.
Fair value of financial assets and liabilities
Financial instruments are measured in accordance with the accounting policy
set out in Note 1. All financial instruments carrying value approximates its
fair value with the exception of foreign currency forward contracts and
options which are considered Level 2. The Directors consider that there is no
significant difference between the book value and fair value of the Group's
financial assets and liabilities and is considered to be immaterial.
24. Pension costs
The Group operates a defined contribution pension scheme. Contributions
payable to the company's pension scheme are charged to the statement of
comprehensive income in the period to which they relate. The amount charged to
profit in each period was £121,682 (2022: £101,003).
25. Controlling party
In the opinion of the directors there is no ultimate controlling party.
26. Earnings per share
Basic earnings per share are calculated by dividing profit or loss
attributable to ordinary equity holders by the weighted average number of
ordinary shares in issue during the period.
2023 2022
Basic earnings per share (pence) 18.05 8.14
Diluted earnings per share (pence) 17.98 8.11
The calculation of basic and diluted earnings per share is based on the
following data:
2023 2022
Earnings £'000 £'000
Earnings for the purpose of basic earnings per share, being the net profit 13,899 6,250
Number of shares 2023 2022
Weighted number of ordinary shares for the purpose of basic earnings per share 76,983,311 76,752,355
Potentially dilutive shares awarded 325,443 296,256
Weighted number of ordinary shares for the purpose of diluted earnings per 77,308,754 77,048,611
share
905,237 share options (2022: 4,063,881) in issue have not been included in the
computation of diluted earnings per share, as per IAS 33, the share options
are not dilutive as they are not likely to be exercised given that the
exercise price is higher than the average market price.
The additional 10,000 share options granted on 20 May 2020, additional 400,000
share options granted 24 May 2021 and 200,000 share options granted 01 March
2022 have been included in the computation of diluted earnings per share as
the exercise prices of the options are below the average annual market price
of Ordinary shares.
27. Notes supporting statement of cash flows
Non-cash transactions from financing activities are shown in the table below.
Non-current loans and borrowings Current loans and borrowings
Total
£'000 £'000 £'000
At 1 January 2022 2,537 610 3,147
Non-cash flows 3,551 - 3,551
Cash flows - (836) (836)
Reclassification from Non-current loans and borrowings to current loans and (1,241) 1,241 -
borrowings
At 31 December 2022 4,847 1,015 5,862
Non-cash flows 731 - 731
Cash flows - (1,144) (1,144)
Reclassification from Non-current loans and borrowings to current loans and (1,388 ) 1,388 -
borrowings
At 31 December 2023 4,190 1,259 5,449
The above relates to payments in respect of the groups right of use assets.
The Group does not have any loans and borrowing.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR QKNBNABKDFQB