The directors present the strategic report for the period ended 27 March 2021 for the consolidated financial statements for WoolOvers Group Limited ("the Company") and its subsidiaries (together "the Group").
WoolOvers Group Limited is the ultimate holding company of a group of companies, the main trading subsidiary of which is WoolOvers Limited.
WoolOvers Limited is an international direct-to-consumer retailer, supplying over one million customers to date with high quality men’s and women’s classic and contemporary styles manufactured in natural fibre yarns principally via online and mail order channels.
Trading Performance
Overall, the Group reported a profit before tax of £2.935m, a significant improvement on the prior year profit (2020: loss of £1.420m).
Revenues in the period were £45.12m (2020: £19.82m), a 129% increase driven by continued investment in our direct channel markets, which continue to be dominated by UK sales, but have seen significant investment and growth in the US & German markets. In addition the acquisition of Pure Collection has contributed significantly to the revenue growth.
The gross margin % was 38.4% (2020: 35.7%), however gross profit increased by 147% to £17.43m (2020: £7.06m) due to the sales growth. Administrative expenses grew 58% to £10.06m (2020: £6.39m). This reflects investment in the headcount to support the revenue growth.
At the period end, the Group had a net cash balance of £9.0m (2020: £4.6m).
Future Developments
The Group will continue to focus marketing efforts on direct sales channels and continue to invest in product development, customer acquisition and brand amplification. The progress seen through this financial year is expected to lead to continued growth.
The Directors have identified the following key risks faced by the Group. Uncertainties surrounding Covid 19 have been considered separately on page 3 of this strategic report. Other identifies risks & uncertainties are set out below together with the mitigating actions that have been taken to minimise any potential impact on future financial results:
Product supply chain – The Group is reliant on a small number of long-standing South East Asian garment manufacturers to supply its products. The Group has sought to enhance existing supplier relationships and to introduce new suppliers based in Europe and Asia to both broaden the Group’s product range and reduce garment supply lead times.
IT infrastructure and security – The Group’s IT infrastructure is critical to its ability to trade. The introduction of a cloud-based e-commerce platform allows for quick recovery should issues occur, whilst the encryption of data, the use of third-party payment processors and Payment Card Industry compliance ensures customer data is adequately protected.
Physical infrastructure – The Group’s operations are based on a single site in Burgess Hill. A comprehensive Business Continuity Plan has been established that will enable the Group to quickly recommence operations if its principal business location was damaged in an incident.
Credit risk - The Group has credit risk in the form of its trade debtors and has therefore implemented strict credit control procedures.
Liquidity risk – The Group monitors cash flow as part of its day to day control procedures. The Board reviews cash flow projections on a weekly basis and ensures appropriate facilities are in place.
The Group is exposed to foreign currency risk both as a consequence of stock purchases, which are typically denominated in USD and EUR, and sales generated in international markets. In the case of stock purchases, hedging arrangements are entered into with the Group’s banking partners to protect against currency movements; whilst in the case of international sales, the Group actively manages local currency pricing to mitigate currency risk.
The Group has credit risk in the form of its trade debtors and has therefore implemented strict credit control procedures.
The Group has a proactive approach to risk management and regularly reviews its risk register in collaboration with its insurance brokers to ensure appropriate insurance cover is in place and/or steps are taken to mitigate risks that are likely to have a higher possibility of occurrence and/or a greater financial and operational impact on the business.
The Directors continually monitor the effectiveness of the Group's operating performance by considering various key performance indicators. The main indicators are revenue, operating profit and EBITDA. Of the KPIs not already mentioned, EBITDA in the period was £5.23m (2020: £1.49m).
The Group has cash available to fund all day to day activities, with no third party bank debt in place. Cash flow is monitored on a regular basis and financial information, including forward looking information, is regularly reviewed. Please see an analysis of the turnover as part of the trading performance review on page 1.
The Group is exposed to trading risk in a highly competitive retail sector. The Group is susceptible to a possible downturn in consumer spending, influenced by factors such as a reduction in disposable income and increases in interest rates. Despite these risks and having assessed the Group’s financial position, budgets and cashflow forecasts for the period ending 30 September 2022, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for more than one year from the signing of these accounts. These expectations have not been negatively impacted as a result of Covid 19, as explained on page 3.
Accordingly, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
COVID 19
The Directors continue to monitor events with regards to COVID 19 to minimise any impact on the business. Throughout coping with the crisis, the primary focus has always been the health and well being of our staff and customers. A segregation plan has been set up for those staff who are unable to work from home, and strict social distancing has been maintained to ensure compliance with all government guidelines. We will continue to monitor all further guidance and advice, in order to ensure we can continue to keep trading throughout, and provide the garments our customers love to help put a smile on their face at this difficult time.
On behalf of the board
The directors present their annual report and financial statements for the 52 weeks ended 27 March 2021.
The directors who held office during the 52 weeks and up to the date of signature of the financial statements were as follows:
Dividends of £nil were paid during the period (2020: £nil) |
The Group made no political donations and did not incur any political expenditure during the period.
The auditor, Moore Kingston Smith LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
An indication of likely future developments in the business and particulars of significant events which have occurred since the end of the financial year have been included in the Strategic Report on pages 1 to 3.
We have audited the financial statements of WoolOvers Group Limited (the 'parent company') and its subsidiaries (the 'group') for the 52 weeks ended 27 March 2021 which comprise the Group Statement of Comprehensive Income, the Group Balance Sheet, the Company Balance Sheet, the Group Statement of Changes in Equity, the Company Statement of Changes in Equity, the Group Statement of Cash Flows and notes to the financial statements, 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs(UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included a review and stress test of cash flow forecasts for at least 12 months from the approval of the financial statements and confirming the extension of the external loan notes.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group or parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
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 auditor’s 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our 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 group and the parent company and its environment obtained in the course of the audit, we have not identifie d material misstatements in the Strategic Report and the Directors' Report .
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the Directors' Responsibilities Statement, 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 group's and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
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 auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the group and parent company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, the rules of The International Stock Exchange and UK taxation legislation.
We obtained an understanding of how the group and parent company comply with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s profit for the year was £382k (2020 - £382k).
WoolOvers Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 14 Waterloo Place, London, SW1Y 4AR.
The group consists of WoolOvers Group Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £000s.
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash f low and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The consolidated financial statements incorporate those of WoolOvers Group Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 27 March 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The Group is exposed to trading risk in a highly competitive retail sector. The Group is susceptible to a possible downturn in consumer spending, influenced by factors such as a reduction in disposable income and increases in interest rates. The Directors have assessed and stress tested the group’s financial position, budgets and cash flow forecasts for the period up to 31 July 2022 and have also taken into account the redemption of the Series A loan notes. Whilst the redemption date of 30 June 2021 is within twelve months of the balance sheet date, subsequent to the balance sheet date the redemption date of the loan notes has been extended to 31 December 2022. Consequently, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for more than one year from the date of approval of these financial statements. These expectations have not been negatively impacted as a result of COVID-19, as the directors have been able to take appropriate steps to protect the group’s work force and as an online retailer trading has not been adversely affected. There has also not been any significant disruption to supply lines.
Turnover represents amounts receivable, net of value added tax and trade discounts, in respect of the sale of goods to customers. Turnover is recognised when the goods are despatched to customers.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated .
The Group reviews the amortisation period and method when events and circumstances indicate that the useful life may have changed since the last reporting date.
Goodwill and other intangible assets are tested for impairment in accordance with Section 27 Impairment of assets when there is an indication that goodwill or an intangible asset may be impaired.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity in vest ments are measured at fair value through profit or loss , except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably , which are recognised at cost less impairment until a reliable measure of fair value becomes available.
I n the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest m ethod unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss , are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and loans from fellow group companies are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future paymen ts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end 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 asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is 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.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that is it probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
Interest payable and similar charges include interest payable, finance charges on shares classified as liabilities and finance leases recognised in profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the profit and loss account (see foreign currency accounting policy).
Interest income and interest payable are recognised in profit or loss as they accrue, using the effective interest method. Dividend income is recognised in the profit and loss account on the date the Group's right to receive payments is established. Foreign currency gains and losses are reported on a net basis.
Transactions in foreign currencies are translated to the Group companies' functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognised in the profit and loss account.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements have had the most significant effect on amounts recognised in the financial statements.
The Group makes an estimate of the net realisable value of stock which is based on assessments of future sales projections and prevailing market conditions. These are re-assessed annually and amended where necessary to reflect current estimates. Changes to these estimates could result in changes to the profit and loss for the period and to the carrying value of the stock. See note 15 for the carrying value of stock and changes to any provision made in the period.
Investments in subsidiaries are held as fixed assets a nd shown at cost less provision for impairment. On consolidation the carrying value of investments is eliminated.
The carrying values of fixed asset investments are reviewed for impairment when an event or changes in circumstances indicate the carrying value may not be fully recoverable.
The value of intangibles is shown at cost less amortisation less provision for impairment. The amortisation policy is set at 5 years.
The carrying value of intangibles is reviewed for impairment when an event or changes in circumstances indicate the carrying value may not be fully recoverable.
Goodwill on acquisition of subsidiary undertakings are shown at cost less provision for impairment.
The carrying values of goodwill are reviewed for impairment when an event or changes in circumstances indicate the carrying value may not be fully recoverable.
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to a loss of £828k (2020: gain of £239k).
The average monthly number of persons (including directors) employed by the group and company during the 52 weeks was:
Their aggregate remuneration comprised:
The actual charge for the 52 weeks can be reconciled to the expected charge based on the profit or loss and the standard rate of tax as follows:
Goodwill was impaired by £11.4m during the period ended 2 April 2016. The remaining balance is being amortised on a straight-line basis with the balance due to be fully amortised by 30 June 2020, five years after the acquisition of WoolOvers Limited.
As there was no impairment indicators present in the current period, the Directors did not perform an impairment review of the intangible asset and investment valuations relating to the acquisition of WoolOvers Limited and Pure Collection Cashmere Limited.
Details of the company's subsidiaries at 27 March 2021 are as follows:
As there were no impairment indicators present, the Directors did not perform an impairment review of the investment value relating to the acquisition of WoolOvers Limited and Pure Collection Cashmere Limited.
Changes in finished goods recognised as cost of sales in the period amounted to £ 19.2m (20 20 : £ 7.7 m). The stock provision amounted to £ 801,000 at 27 March 20 21 (20 20 : £ 403 ,000).
Amounts totalling £4.8m (2020: £4.8m) is an interest bearing loan note at 8% (2020: 8%). All intercompany balances are repayable on demand.
A fixed and floating charge is secured over the trade and assets of the business in relation to the banking facilities available.
On 30 June 2015, unsecured transferable loan notes were issued by Olive Debtco Limited, a subsidiary company, as follows:
Series A loan notes with a nominal value of £7,477,640 accruing interest, compounded each year, at a rate of 12%. These are listed on the International Stock Exchange (TISE) with a nominal value as at 30 March 2019 of £7,477,640 (2018: £7,477,640).
Series B loan notes with a nominal value of £2,361,360 accruing interest, compounded each year, at a rate of 12%.
Series C loan notes with a nominal value of £455,000 accruing interest, compounded each year, at a rate of 5%.
Each of the loan notes had a maturity date of June 2025 at the date of issue.
On 14 June 2017, the Group reached a final settlement with the former shareholders of WoolOvers Limited relating to an alleged breach of a number of warranties in the share purchase agreement that resulted in the surrender by the former shareholders of Series B loan notes issued by Olive Debtco Limited of a principal value of £1.86m and all interest accrued to date thereon. This reduced the nominal value of Series B loans notes to £500,000.
On 16 May 2018, the Group changed its capital structure. The impact on the Group was as follows:
the existing Loan Note Instrument was amended in order to (i) remove references to the Series B and Series C Loan Notes; (ii) amend the coupon on the Series A Loan Notes from 12% to 8%; and (iii) amend the redemption date of the Series A Loan Notes from 30 June 2025 to 30 June 2020; and
Series B Loan Notes (£500,000) and Series C Loan Notes (£455,000) were redeemed in full.
In September 2019, the redemption date of the Series A Loan Notes was changed from 30 June 2020 to 30 June 2021.
Subsequent to the period end, the redemption date of the Series A Loan Notes was changed from 30 June 2021 to 31 December 2022.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax asset set out above is expected to reverse in more than 12 months and relates to the utilisation of tax losses against future expected profits and accelerated capital allowances.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The holders of preferred ordinary shares are entitled to receive dividends as declared from time to time. The voting rights of the preferred ordinary shares are detailed below.
Class Al and A2 Preferred Ordinary shares:
On a written resolution, every shareholder holding one or more equity shares on the date of which the resolution is circulated as required by the Companies Act 2006 shall, subject to sections 289 and 290 and the Articles of Association of WoolOvers Group Limited, have:
In respect of each Al Preferred Ordinary Share held by that shareholder, such number of votes as shall give the holders of Al Preferred Ordinary Shares in issue at such date 7,500,000 votes in aggregate;
In respect of each A2 Preferred Ordinary Share held by that shareholder, such number of votes as shall give the holders of A2 Preferred Ordinary Shares in issue at such date 1,000,000 votes in aggregate.
In respect of each B Ordinary Share, such number of votes as shall give the holders of B Ordinary Shares 5% of the total number of votes in respect of all shares in the Company at that date, but the B Ordinary Shares as a class shall not be entitled to votes in aggregate which are greater than 10% of the total number of votes in respect of Shares in the Company at any one time.
On a resolution to be passed at a general meeting of the company on a show of hands, every qualifying person (as defined in section 318(3) of the Companies Act 2006) present shall, subject to section 323(4) have one vote; and
On a resolution to be passed at a general meeting of the company on a poll, each shareholder who (being an individual) is present in person or by proxy or (being a corporation) is present by a duly authorised representative or by proxy, shall have:
In respect of each Al Preferred Ordinary Share held by that shareholder, such number of votes as shall give the holders of Al Preferred Ordinary Shares in issue at such date 7,500,000 votes in aggregate;
In respect of each A2 Preferred Ordinary Share held by that shareholder, such number of votes as shall give the holders of A2 Preferred Ordinary Shares in issue at such date 1,000,000 votes in aggregate.
In respect of each B Ordinary Share, such number of votes as shall give the holders of B Ordinary Shares 5% of the total number of votes in respect of all shares in the Company at that date, but the B Ordinary Shares as a class shall not be entitled to votes in aggregate which are greater than 10% of the total number of votes in respect of Shares in the Company at any one time
On 30 June 2015, as part of the acquisition of WoolOvers Limited, a capital contribution of £20,000 was made to the Group.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The Group's contractual commitments to purchase tangible fixed assets at the period-end were £nil (20 20 : £ nil).
The Group's contractual commitments to purchase stock on order with suppliers at the period-end were £nil (20 20 : £nil).
Subsequent to the period end, the redemption date of the Series A Loan Notes was changed from 30 June 2021 to 31 December 2022.
Transactions with key management personnel
Key management personnel include directors as identified in the Directors' Report. The compensation paid to key management personnel is set out in note 7 .
Group
Other related party transactions
Administrative Administrative
expenses expenses
20 21 20 20
£'000 £'000
Other related parties 11 6
These charges relate to consultancy services provided by Langholm Capital 2008 LLP to Olive Group companies during the period. No balances were outstanding as at the period end (20 20 : £ nil ).
Company
In accordance with FRS102 section 33 paragraph 33.1A, the company has not disclosed transactions with wholly owned subsidiaries or its parent company within the same group.
Other 100% owned Companies in the Group include WoolOvers Limited, Olive Bidco Limited, Olive Midco Limited, Olive Debtco Limited, Pure Collection Cashmere Limited, Pure Collection HoldCo Limited and All About Cashmere Limited.
The ultimate controlling party is a fund managed by Langholm Capital 2008 LLP, an investment management firm, by virtue of its majority shareholding in WoolOvers Group Limited held through Langholm Capital Nominees Limited. The registered office of Langholm Capital 2008 LLP is 17 Waterloo Place, London, SW1Y 4AR.