The directors present the strategic report for the year ended 30 June 2020.
The principal activity of the group during the year was the marketing and distribution of fair trade chocolate products.
Divine’s turnover of £13.3 million shows an 8% decrease on last year, primarily as a direct result of the coronavirus pandemic.
Over the last year we have continued our work with cocoa farmers in Ghana, the cocoa farmers in Sao Tome who supply our fair trade organic range, and supporting cocoa farmers living in the Gola Rainforest in Sierra Leone. This work is completed through our Producer Support and Development fund where the projects we undertake have included labour rights, sustainable agriculture, empowerment of women, and learning and literacy.
We also continue to support the sugar farmers in Malawi.
Continued uncertainty regarding the opening of businesses as a result of the coronavirus pandemic. This has impacted our food service customers and certain retail customers of the g roup having an impact on revenue. The g roup has attempted to mitigate these risks by utilizing government assistance where required including the government furlough scheme, application to the Bounce Back loan scheme, deferment of VAT payments, and the US subsidiary has taken advantage of the Paycheck Protection Program.
Divine continues to closely monitor both rates of sale in its key customers and customer contribution to overheads.
The business continues to develop new products. Key listings for the organic range are being negotiated in the US.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2020.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
No preference dividends were paid. The directors do not recommend payment of a final dividend.
Moore Kingston Smith were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of Divine Chocolate Limited (the 'parent company') and its subsidiaries (the ‘group’) for the year ended 30 June 2020 which comprise the Profit And Loss Account, the Balance Sheet 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 company 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, 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
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 group or the parent 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.
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 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 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. |
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 and the parent company’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.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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 loss for the year was £171,105 (2019 - £438,266 loss).
Divine Chocolate Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Sustainable Workspaces, Riverside Building County Hall, 3rd Westminster Bridge Road, London, SE1 7PB.
The group consists of Divine Chocolate 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 £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and 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 the 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 Divine Chocolate Limited and all of its subsidiaries (ie entities that the g roup 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 30 June 2020 . 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 g roup.
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.
At the balance sheet date, the group had net assets of £784,355 (2019: £2,184,967) after making a loss after tax for the year of £1,448,855 (2019: £929,026). It also worth noting that the group had net current assets of £1,122,535 (2019: £2,437,958) with cash balance of £743,506 (2019: £167,170) as at the balance sheet date. The directors have considered the impact of coronavirus and the measures taken both in the UK and overseas on the company, which has impacted by reduced demand during lockdowns, particular in the UK during lockdowns.
The group has received confirmation of support from the parent company, which has agreed to provide support by not recalling the loan provided to the group of £491,886 at the year end for at least 12 months from the date of approval of these financial statements. The company has also obtained external borrowing facilities in the UK and US.
As a result, the directors believe that the group and company will be able to continue to meet their liabilities as they fall due for a period of at least 12 months from the date of approval of the financial statements. Therefore, the financial statements have been prepared on a going concern basis.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer , this is at the date of delivery of the goods , the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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.
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.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
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, loans from fellow group companies and preference shares that are classified as debt, 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.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
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.
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.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.
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.
Recoverable value of recognised debtors
The recoverability of trade and other debtors is regularly reviewed in light of available economic information specific to each debtor and provisions are recognised for the balances considered to be doubtful or irrecoverable.
Stock valuation
Stock is valued at the lower of cost and net realisable value. Management identifies obsolete or slow moving stock against which provisions are made.
Goodwill
Goodwill is reviewed by the directors at each year end for impairment. The directors take into consideration forecasts and future probably cash flows likely to arise from the Goodwill in the group and if necessary impair goodwill.
Investments
At each period end the directors review the carrying value of investment for impairment. The directors take into consideration forecasts and future probable cash flows likely to arise form the investment held. Where the net present value of the cash flow does not exceed the investment value an impairment of the investment is made.
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 £120,696 (2019: £66,935)
During the year the audit for the entire group was completed by the parent company's auditor.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Investment income includes the following:
The actual charge for the year can be reconciled to the expected charge based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 30 June 2020 are as follows:
The long-term loans are secured by fixed charges over the assets of the company.
The bank loans represent the following:
Divine Chocolate Limited has a Coronavirus Business Interruption Loan totalling £50,000. The loan incurs interest at 3.10% and is secured by a fixed and floating charge over all assets of the company. The loan is repayable in sixty monthly instalments commencing twelve months from the date of drawdown.
Divine Chocolate Limited has a loan with Ludwig Weinrich GmbH & Co KG totalling EUR 540,000. This loan incurs interest at 4.25% and is repay annually over 3 years and is secured by a fixed charge over all assets of the company
Divine Chocolate Inc has a loan with the Small Business Administration totalling $150,000. This loan has interest of 3.75%. This is repayable monthly over 30 years commencing twelve months from the date of drawdown.
Divine Chocolate Inc has a loan with the Small Business Administration totalling $210,000. This loan has interest of 1%. This is repayable monthly over two years commencing six months from the date of drawdown.
Divine Chocolate Inc. also has a Line of Creditor with PNC Bank, National Association during the year. Amounts outstanding bear interest at a rate per annum equal to daily LIBOR rate plus 3%. The amount outstanding at the end of the year is $250,000.
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.
Preference shareholders were entitled to a fixed non-cumulative dividend of 7% per annum subject to approval by the board of directors or if an ordinary dividend is declared. On liquidation preference shareholders are entitled to repayment in priority to any other shareholders. On 29 May 2020, and as part of the transaction with the change in ownership, the board passed a written resolution re-designating the rights of the preference shares to that of deferred shares. These new rights allow the holders of deferred shares to received a distribution on a liquidation or winding up of the company, after the holders of the ordinary shares have received the sum of £1,000,000 per share.
At the year end the group and the company were committed to purchasing a total of EUR 3,070,000 (2019: EUR 2,860,000) under forward rate contracts.
The group has recognised an exchange gain of £139,459 (2019: £66,935) and the company a gain of £219,471 (2019: loss of £43,449) arising on these forward contracts in these financial statements.
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:
During the period the company paid £28,511 (2019: £116,900) to Twin Trading Limited, which was a shareholder of the company in the year until administrators were appointed on 22 October 2019. This was paid in order to develop and secure its supply chain through the ongoing programme of producer support and development.
During the period the company made donations to Trading Visions of £38,000 (2019: £38,000), a charity in which Sophi Tranchell, a Director who resigned during the year ended 30 June 2020, was a Trustee.
During the period the company was invoiced by Amaretti Growth Limited, a company in which James Averdieck, a Director of the company who resigned during the year ended 30 June 2020, is a Director, £12,000 (2019: £8,977) in respect of Director fees.
During the period the company was invoiced by STB Trading Limited, a company in which Samuel Bundy is a Director, £63,193 (2019: £nil) in respect of Director fees. At year end £17 (2019: £nil) was owed by STB Trading Limited.
During the year Divine Chocolate Limited purchased £3,339,312 of materials from Ludwig Weinrich GmbH & Co. KG . At the year end £636,132 was owed to Ludwig Weinrich GmbH & Co. KG . Divine Chocolate Limited also took out a loan for €540,000 during the year which was outstanding at 30 June 2020.
During the year Divine Chocolate Inc purchased $2,556,737 of materials from Ludwig Weinrich GmbH & Co. KG . At the year end a balance of $983,973 was owed to Ludwig Weinrich GmbH & Co. KG .
The company has taken advantage of the exemptions conferred by Financial Reporting Standard 102 not to disclose transactions with group undetakings where 100% of the share capital is held within the group and the consolidated financial statements are publicly available.
The ultimate controlling parent company is Ludwig Weinrich GmbH & Co. KG, a company registered in Germany. The ultimate controlling party is C Budde, a Director of the Company, by virtue of his shareholding in Ludwig Weinrich GmbH & Co. KG.