Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2020
FY2019-20 was a pivotal period for the business as it continued to invest in growth; Chris Wright joined as Finance Director (replacing David Dewhurst) and Dax Callner joined as Strategy Director to increase the capacity and scope of the leadership group. On 1 July 2019 Smyle Creative Limited acquired one hundred percent of specialist communication agency Powered by Humans Ltd with its order book of event work including beauty brand Wella. The revenue-based acquisition model runs for twenty four months to 30 June 2021, with former owner, Jonathan Boyne, joining Smyle as Communication Director. The business continues to focus on being a creative agency delivering memorable live and virtual events for its blue chip client base.
The Statement of Comprehensive Income on page 8 shows turnover of £36,136,335 (2019 restated : £26,863,512) and an operating profit of £2,803,621 comparatively reducing to £1,790,396 (2019 restated : £757,968) after deducting a onerous lease provision of £786,282 and a reorganisation provision of £226,953, for the year ended 31 March 2020. The turnover increase of 34.5% derived from a very high level of organic growth of existing clients, notably Facebook, Samsung and Salesforce along with major new clients including IT giant ServiceNow and Wella. Expansion in gross revenue drove an increase in gross profit of 49% to £10,746,323 (2019 restated : £7,209,010). Delivering higher gross profit with increased operating efficiency is very much at the heart of the management’s strategy and is a strong foundation for growth as the agency continued to invest in additional (fee earning) head count. It should be noted that £15.3M of gross revenue was earned in Quarter Four, from 1 January to 31 March 2020, the dawn of the Covid period. Operational expenses, mainly headcount, increased by £1.2M to drive the delivery of the 49% increase in gross profit.
The directors have identified the following principal risks and uncertainties for the business:
Covid Pandemic The Covid pandemic brings an enormous humanitarian and economic burden, the live event sector has been particularly impacted with multiple bankruptcies and people leaving the industry. Trading in January and February 2020 were little affected, however events in March were nearly all cancelled, from a financial perspective the cancelled events were at one hundred percent cancellation charge meaning that year end performance was little affected from an ordinary trading perspective. Moving at pace the executive team implemented five critical steps to ensure the long term survival of the agency, these all started in March 2020. 1) the Islington property was vacated on 17 March, being of no commercial value for the year ahead, the total future cost of the property to end of lease in 2023 was taken in to FY2019-20; 2) a provision was made in the 2019-20 accounts for restructuring to an inevitably lower headcount; 3) the agency invested rapidly in developing a digital events service with new revenue streams commencing late March 2020; 4) the Board agreed to apply for a significant CBILS loan from banker NatWest; and 5) the agency adopted the government Job Retention (furlough) Scheme from 1 April 2020.
Working Capital Funding
The company improved its working capital position by over £1.6M during the year ended 31 March 2020, this was a result of tight focus on the working capital cycle. The nature of the company’s business is such that activating large events for international clients it will always be subject to large working capital fluctuations.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2020
Client concentration and event timing risk
Although total revenue comes from a large number of individual client events, the company has a number of key international, globally recognisable, clients which between them generated a significant proportion of revenue in the year ended 31 March 2020, particularly in the six months starting 1 October 2019. The company continues to work effectively to diversify the number of clients and the timing of projects to improve resilience and workflow efficiency. Operational Capacity The company continued to invest in people and fee earning resources to deliver its outstanding and innovative client events. In the last financial year this happened with directors (mentioned above), in business development, client service, creative, events, moving image and production talent, the agency is decreasing its dependency on freelance resource in favour of in-house talent to improve gross profit and continuity of business intelligence. In additional there is a considerable inventory of fee earning technical equipment.
The key performance indicators of the business which have been discussed in the business review section include the following:
• The forecasting functionality of the core enterprise Salesforce CRM system
• Actual reconciled gross profit achieved, reviewed monthly in the management accounts against both forecast and budget for each individual project. This moved from a job completion timing view to an endeavour based timing view for the year to better reflect work in progress and resource need which is in line with industry practice. • The business manages short term working capital on a weekly basis with a detailed thirteen week cash flow and over a rolling thirty six month model reviewed monthly by the Board.
This report was approved by the board
and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2020
The directors present their report and the financial statements for the year ended 31 March 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 judgements 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 year, after taxation, amounted to £
1,655,416
(2019:
£
919,460
)
.
In accordance with section 414C(11) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 the Strategic Report preceding the Directors' Report includes information that would have formerly been included in the business review and the principal risks and uncertainties of the Directors' Report.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2020
Each of the persons who are
directors at the time when this Directors' Report is approved has confirmed that:
The auditors, Menzies 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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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SMYLE CREATIVE LIMITED
We have audited the financial statements of Smyle Creative Limited (the 'Company') for the year ended 31 March 2020, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, 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).
In our opinion the financial statements:
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, 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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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SMYLE CREATIVE 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 year 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.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
As explained more fully in the Directors' Responsibilities Statement set out on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
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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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SMYLE CREATIVE LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an 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 members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
Lynton House
7-12 Tavistock Square
London
WC1H 9LT
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2020
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STATEMENT OF FINANCIAL POSITION
AS AT
31 MARCH 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf by
:
The notes on pages 11 to 23 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED
31 MARCH 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Smyle Creative Limited is a private company limited by shares, incorporated in England and Wales under the Companies Act 2006. The address of the registered office is The Lockhouse, Mead Lane, Hertford, SG13 7AX.
2.
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 judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙
the requirements of Section 7 Statement of Cash Flows;
∙
the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙
the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙
the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙
the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Smyle Creative Group Limited as at 31 March 2020 and these financial statements may be obtained from Companies House.
The company is a parent Company that is also a subsidiary included in the consolidated financial statements of its immediate parent undertaking established under the law of an EEA state and is therefore exempt from the requirement to prepare consolidated financial statements under section 400 of the Companies Act 2006.
The coronavirus pandemic is creating significant uncertainty globally and the company is not immune to this. The directors are working to ensure the safety of their employees and maintaining the continuity of their operations as far as they are able, whilst adhering to Government advice. Whilst the pandemic will have a financial impact on the company, at this stage it is not possible to reliably forecast what this may be. However, the directors have taken relevant measures to ensure they are able to safeguard cashflow, jobs, customers and supply chains to put them in the best possible position to be able to pick up on opportunities as they arise once business returns to normal.
In the consideration of the going concern basis the directors have prepared cash flow forecasts for a period of 3 years from the balance sheet date of these financial statements which incorporate the future planned growth as outlined in the Strategic Report. The directors are confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.
Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, on a reducing balance or straight-line basis.
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 in profit or loss.
Investments in subsidiaries are measured at cost less accumulated impairment.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.
Accounting policies (continued)
The Company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income. For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the reporting date.
Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of Comprehensive Income within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
Rentals paid under operating leases are charged to profit or loss on a straight line basis over the lease term.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.
Accounting policies (continued)
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of Financial Position date, except that:
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Amounts recoverable on contracts, which are included within debtors, represent work done in excess of amounts invoiced. Payments on account, included in creditors, represent the excess of payments on account not offset against contracts in progress.
Exceptional items are transactions that fall within the ordinary activities of the Company but are presented separately due to their size or incidence.
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported. These estimates and judgements are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key sources of estimation uncertainity Accounting estimates and assumptions are made concerning the future and, by the nature, will rarely equal the related actual outcome. The directors consider the key source of estimation uncertainty that has a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year is the provision for losses in relation to contracts. In accordance with the accounting policy the management consider the detailed criteria for the revenue recognition from the provision of services, and in particular, whether the income and expenditure for contracts is recognised so that it reflects the partial performance of the contractual obligations and the value of the work performed.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Analysis of turnover based on geographic billing:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
There were no factors that may affect future tax charges.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
19.
Deferred taxation (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Capital redemption reserve
Profit and loss account
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
The company has entered into a guarantee to secure mortgage facilities over the leasehold buildings owned partly
by two of the directors for £1,297,000 (2019: £1,297,000). This guarantee was cancelled on 5 June 2019. Related party transactions are undertaken on an arm's length basis only where those terms can be substantiated. Volumes have improved as the year has progressed with the continued expansion of the digital events service. The Company successfully applied, with the Board’s approval, for a £2.75M Coronavirus Business Interruption Loan Scheme with NatWest to enable the entity to meet its debts as they fall due and ultimately to ensure the operational existence of the Company’s for the foreseeable future.
The largest and smallest group undertaking in which the results of the company are consolidated is that headed by Smyle Creative Group Limited. The consolidated accounts are available to the public and at the registered office: The Lockhouse, Mead Lane, Hertford, England, SG13 7AX.
The ultimate controlling party is Rockpool Investments LLP.
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