FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
COMPANY INFORMATION
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RED PADDLE CO LIMITED
CONTENTS
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RED PADDLE CO LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 31 AUGUST 2020
The 18 months to August 2020 was an interesting period for the company. The company got off to a strong start. Sales growth was hampered going into the second half of the period, firstly by an element of overstock in the market, but this was expected to be resolved and sales were looking like picking up quickly come the spring/summer season. Unfortunately Covid-19 hit just as we entered this period causing mass cancellations of orders for a few months. We feel the company bounced back very quickly from this and we resumed full operations by early summer to finish at the end of August 2020 in a strong position with a very positive outlook for the new financial year.
On a pro-rata basis compared with the previous year, sales decreased 18%, with an EBITDA decrease of 68%. The sales decrease was due to the global overstock seen in late 2019, followed by the cancellation of orders from March 2020 when Covid-19 lockdowns begun. Demand increased dramatically from June 2020, but it was not possible for production to meet that demand in a timely manner. The EBITDA decrease appears more dramatic as we made the decision to not drastically reduce spend over this period as we wanted to maintain investment in the growth to come, rather than making a knee-jerk reaction to a shorter-term sales reduction.
EBITDA was also negatively impacted by investment in our Red Original product range, as budgeted. This investment has shown very positive results towards the end of this 18 month period and since. Covid-19 lockdowns significantly restricted our ability to operate in the usual way, but the whole team reacted positively in adapting the way we work and the way we communicate with trade customers and end users. We continued to strengthen our focus on excellent customer service with the ambition of being considered a Customer Service market leader still high on the agenda. The emphasis on service, quality and innovation remains key. Our Head of Production continues to maintain strong links with our suppliers to ensure our required high quality is maintained. This is obviously a more difficult task to carry our remotely, but we have made it work. The patent for our Compact board received final approval late 2020 which is a real testament to the efforts of our design team. Red Original Since its launch in March 2018 we have seen huge potential in the market for the Red Original products, with our standard focus on quality and performance. This follows a new route to market for us – in addition to selling via our traditional channels of distributor and retailer, it is sold on our own B2C platform. This 18 month period saw strong growth and the start of some of our investment in this brand being proven out. New products were added to the range as the year progressed, and further development and investment continues.
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RED PADDLE CO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 AUGUST 2020
Covid-19 has introduced a new level of uncertainty across all industries. After the initial impact of order cancellations, the risk has reduced, although we continue to monitor the situation and ensure our strategy is agile. The impact on freight container and availability from China has the most significant impact, but this is largely allayed for the UK market by a strengthening of GBP against USD.
Exchange rate fluctuations continue to impact and introduce a degree of uncertainty to the business. Our products are purchased in US dollars and sold in US dollars and Sterling. The cash impact of any exchange risk is hedged to a large degree by our trade in multi currencies, but there is still a potential impact when our earnings are translated back into Sterling. Our strategy of building a stockholding to cope with seasonal demand has introduced a risk of its own for Red Paddle Co. We buy and sell in US dollars, so there is no obvious exchange risk, however the timing of the purchases and sales are mismatched, leading to potential transactional exchange differences which can impact our Sterling gross profit margin. The worldwide SUP market continues to be negatively impacted by the number of cheap, lower quality boards available as the barriers to entry at the bottom end of the market are low. However, our constant push for innovation and product improvement; and sharing that message with consumers who increasingly ask for our brand means we are able to look to the future with confidence.
Despite the decrease in sales for the period, margin was improved from the previous year. Overhead costs remained fairly consistent – the board made the decision not to make large overhead cuts in response to the Covid-19 impact on sales as the desire is to continue to invest in people, systems and marketing for the longer term. This is already proving to have been the right decision.
Red Paddle Co’s marketing continues to evolve to ensure we are targeting the most relevant consumer base and ultimately converting them to purchase. A focus on the analytics and website user journey is driving a constant web development program. Social Media is a key focus and traffic driven to the website from social media pages has increases by over 200% in the past year. Warranty rates on boards continue to fall year on year which relates to our continuing efforts with design; and working closely with our factories.
This report was approved by the board on 29 March 2021
and signed on its behalf.
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RED PADDLE CO LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 AUGUST 2020
The directors present their report and the financial statements for the period ended 31 August 2020.
The directors are responsible for preparing the Strategic report, the Directors' report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year
. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙
select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙
make judgments and accounting estimates that are reasonable and prudent;
∙
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the period, after taxation, amounted to £
679,048
(2019:
£
931,180
)
.
No dividends have been proposed since the year end.
The directors who served during the period were:
The directors believe the future of the Company's business is that of the principal activity.
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RED PADDLE CO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 AUGUST 2020
There have been no significant events affecting the Company since the year end.
The auditors, Bishop Fleming LLP, will be proposed for reappointment in accordance with
section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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RED PADDLE CO LIMITED
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF RED PADDLE CO LIMITED
We have audited the financial statements of Red Paddle Co Limited (the 'Company') for the period ended 31 August 2020, which comprise the Statement of income and retained earnings, the Statement of financial position, the Statement of cash flows, the Statement of changes in equity
and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
∙
the directors
' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
∙
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
The directors are responsible for the other information. The other information comprises the information included in the Annual Report and Financial Statements, other than the financial statements and our Auditors' report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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RED PADDLE CO LIMITED
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF RED PADDLE CO LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙
the information given in the Strategic report and the Directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
∙
the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our Auditors' report.
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RED PADDLE CO LIMITED
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF RED PADDLE CO LIMITED (CONTINUED)
This report is made solely to the Company's shareholders
in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's shareholders those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditors
2nd Floor Stratus House
Emperor Way
Exeter Business Park
EX1 3QS
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RED PADDLE CO LIMITED
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
31 AUGUST 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf by
:
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RED PADDLE CO LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
31 AUGUST 2020
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RED PADDLE CO LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
28 FEBRUARY 2019
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RED PADDLE CO LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
ANALYSIS OF NET DEBT
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
1.
ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in
the UK and the Republic of Ireland and the Companies Act 2006
.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
1.
ACCOUNTING POLICIES (continued)
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'administrative expenses' in the Statement of Income and Retained Earnings. At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
1.
ACCOUNTING POLICIES (continued)
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
1.
ACCOUNTING POLICIES (continued)
Functional and presentation currency
Transactions and balances
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
1.
ACCOUNTING POLICIES (continued)
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the Statement of financial position date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Statement of financial position. If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
The company is limited by shares, incorporated in England within the United Kingdom. The address of the registered office is given in the company information page of these financial statements.
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
Key Accounting Estimates and Assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. Management do not consider there to be estimates or assumptions that pose a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
The whole of the turnover is attributable to the design, production and sale of stand up paddle boards and associated goods.
Analysis of turnover by country of destination:
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
11.
TAXATION (CONTINUED)
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
Profit and loss account
The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £38,768 (2019: £23,739).
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RED PADDLE CO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 AUGUST 2020
The company is controlled by Vian Marketing Limited, which is the only company in which the results of the company are consolidated. Consolidated financial statements are available to the public and may be obtained from the Registrar of Companies, Crown Way, Maindy, Cardiff.
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