Company Registration No. 10437403 (England and Wales)
SMALLWORLD ACCESSORIES LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2019
SMALLWORLD ACCESSORIES LIMITED
COMPANY INFORMATION
Director
Mr P D Galvin
Secretary
Rix & Kay Company Secretarial Services Limited
Company number
10437403
Registered office
The Courtyard
River Way
Uckfield
East Sussex
TN22 1SL
Auditor
MHA Carpenter Box
2 Peveril Court
6-8 London Road
Crawley
West Sussex
RH10 8JE
Business address
New Barn
Brighton Road
Newtimber
Hassocks
West Sussex
BN6 9BS
SMALLWORLD ACCESSORIES LIMITED
CONTENTS
Page
Strategic report
1 - 2
Director's report
3 - 4
Director's responsibilities statement
5
Independent auditor's report
6 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 24
SMALLWORLD ACCESSORIES LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 1 -
The director presents the strategic report for the year ended 28 February 2019.
Strategy and business model
Smallworld Accessories Limited is a supplier of fashion accessories. The company operates concessions in 1,260 stores within the UK and Republic of Ireland.
The strategy of the business is
-
To provide accessories ranges to our customers that enhances their brand positioning and clothing offer.
-
To explore additional profitable opportunities to expand the width of our accessories product offer and grow our customer base both in the UK and internationally.
Business review
In the second full year of operation sales for the period of £20,885k were £3,058k lower than for the prior 16 month reported period, £2,136k lower against the prior 12 months. This sales decline is a reflection of the challenging retail conditions in the UK and the impact of reduced stock holding to deliver a higher gross margin. The key focus of management in this period has been to manage the flow of stock to continue to deliver the service and product offering to meet customer requirements, whilst ensuring that we deliver profitability from all contracts. The focus to improve the gross margin, in conjunction with close control of the fixed and administrative costs of the business has meant that despite the decline in headline sales, PBT of £1,029k is similar to the prior 12 month period and at a better % margin of 4.9% against 4.5% in the prior year.
Due to the potential operational uncertainty of Brexit, specifically around imports, management made the decision to bring forward the stock intake into February that would normally be delivered in March and early April.
The company added one new concession customer, in February 2019, and continues to review opportunities to grow the business through development of online sales channels, an increased licensed offering and new category growth.
Given the operating model and the existing contracts the director believes that the business will generate sufficient cash to meet all future loan repayments. The business has generated sufficient cash in the period to pay off £1,250k of the loan in the last 12 months. £750k of these loan repayments were paid earlier than contracted.
Management KPIs
The following are the financial key performance indicators (‘KPIs’) used by management to assess and regulate the company’s performance:
-
Contribution per Customer Contract: These may not be disclosed externally, but are used internally to ensure each contract delivers a sustainable level of contribution to support the ongoing profitability of the business.
-
Gross Profit as a % of Turnover – 28.5% for the period, up 0.5% on the previous years’ accounts.
-
Trade Debtor Days: 20
-
Administrative expenses as a % of Turnover – 23.3%, down 3.7% on the previous years’ accounts.
Principal risks and uncertainties:
Market risk
Within a challenging trading environment effective stock management is key. The stock risk is mitigated by placing small initial order quantities with the ability to repeat orders on a reduced lead time. This stock management process, alongside the continuous focus on store placement of stock and visual merchandising resource, is continuing to deliver profitable contracts in the current retail environment. The company has started to develop online offers with a number of its customers to service the increased demand in this channel, whilst also widening its product offering into new categories.
SMALLWORLD ACCESSORIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 2 -
Foreign exchange risk
The company imports the majority of its products from the Far East and pays for this in US Dollars.
The company has forward US Dollar contracts in place to mitigate the impact of currency fluctuations on it
s
cost of product.
Regulatory risk
The company designs, manufactures and test
s
its products to ensure that they meet all legal requirements for the markets it operates in.
The company is
a member of the Ethical Trading Initiative.
Mr P D Galvin
Director
6 June 2019
SMALLWORLD ACCESSORIES LIMITED
DIRECTOR'S REPORT
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 3 -
The director presents his annual report and financial statements for the year ended 28 February 2019.
Principal activities
The principal activity is that of a supplier of adults' and children's fashion jewellery, accessories and event merchandise.
Director
The director who held office during the year and up to the date of signature of the financial statements was as follows:
Mr P D Galvin
Results and dividends
The results for the year are set out on page 8.
No ordinary dividends were paid. The director does not recommend payment of a final dividend.
Financial instruments
Liquidity risk
The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.
The ultimate controlling entity has provided finance to assist cash flow and liquidity management.
Credit risk
All customers who wish to trade on credit terms are subject to credit verification procedures. The concession stands are operated from the premises of large supermarket chains and some high street stores and sales are reported by the stores themselves based upon the goods passing through the tills. Due to the customer mix the company has not experienced debtor recovery issues but trade debtors are monitored on an ongoing basis and provision will be made for doubtful debts where necessary.
Disabled persons
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the company continues and that the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
Employee involvement
The company's policy is to consult and discuss with employees, through staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the company's performance.
Auditor
The auditor, MHA Carpenter Box, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
SMALLWORLD ACCESSORIES LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 4 -
Strategic report
The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of
future developments and foreign exchange risk
.
Statement of disclosure to auditor
So far as
the sole
director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the director
ha
s
taken all the necessary steps that
he
ought to have taken as
a
director in order to make
himself
aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
Mr P D Galvin
Director
6 June 2019
SMALLWORLD ACCESSORIES LIMITED
DIRECTOR'S RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 5 -
The director is responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is 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 director is required to:
-
select suitable accounting policies and then apply them consistently;
-
make judgements and accounting estimates that are reasonable and prudent;
-
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
-
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The director is 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 enable them to ensure that the financial statements comply with the Companies Act 2006. He is 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.
SMALLWORLD ACCESSORIES LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SMALLWORLD ACCESSORIES LIMITED
- 6 -
Opinion
We have audited the financial statements of Smallworld Accessories Limited (the 'company') for the year ended 28 February 2019 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the 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).
In our opinion the financial statements:
-
give a true and fair view of the state of the company's affairs as at 28 February 2019 and of its profit for the year then ended;
-
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-
have been prepared in accordance with the requirements of the Companies Act 2006.
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 director's use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
-
the director has 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 director is 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 director's r
eport for the financial year for which the financial statements are prepared is consistent with the financial statements
; and
-
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
SMALLWORLD ACCESSORIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SMALLWORLD ACCESSORIES LIMITED
- 7 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identifie
d
material misstatements in the strategic report and the director's
r
eport
.
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, or returns adequate for our audit have not been received from branches not visited by us; or
-
the financial statements are not in agreement with the accounting records and returns; or
-
certain disclosures of director's remuneration specified by law are not made; or
-
we have not received all the information and explanations we require for our audit.
Responsibilities of director
As explained more fully in the director's
r
esponsibilities
s
tatement, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
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.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities
.
This description forms part of our auditor’s report.
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 him 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.
Robert Dowling FCA (Senior Statutory Auditor)
for and on behalf of MHA Carpenter Box
6 June 2019
Chartered Accountants
Statutory Auditor
Crawley
SMALLWORLD ACCESSORIES LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 8 -
Year
Period
ended
ended
28 February
28 February
2019
2018
Notes
£
£
Turnover
3
20,884,533
23,942,691
Cost of sales
(14,925,065)
(17,237,521)
Gross profit
5,959,468
6,705,170
Administrative expenses
(4,865,302)
(6,453,962)
Other operating income
52,469
15,866
Operating profit
4
1,146,635
267,074
Interest receivable and similar income
7
2,339
378
Interest payable and similar expenses
8
(119,615)
(159,617)
Profit before taxation
1,029,359
107,835
Tax on profit
9
(244,514)
(36,037)
Profit for the financial year
784,845
71,798
Other comprehensive income
Fair value losses on foreign exchange contract
(141,191)
-
Tax relating to other comprehensive income
26,826
-
Total comprehensive income for the year
670,480
71,798
The Statement of Comprehensive Income has been prepared on the basis that all operations are continuing operations.
SMALLWORLD ACCESSORIES LIMITED
BALANCE SHEET
AS AT
28 FEBRUARY 2019
28 February 2019
- 9 -
2019
2018
Notes
£
£
£
£
Fixed assets
Goodwill
10
609,928
686,169
Tangible assets
11
78,094
67,624
688,022
753,793
Current assets
Stocks
13
1,492,611
1,323,250
Debtors falling due after more than one year
14
862,484
-
Debtors falling due within one year
14
920,680
1,883,763
Cash at bank and in hand
1,068,375
951,298
4,344,150
4,158,311
Creditors: amounts falling due within one year
15
(3,375,002)
(2,572,064)
Net current assets
969,148
1,586,247
Total assets less current liabilities
1,657,170
2,340,040
Creditors: amounts falling due after more than one year
16
(835,658)
(2,192,608)
Provisions for liabilities
18
(15,200)
(11,600)
Net assets
806,312
135,832
Capital and reserves
Called up share capital
21
1
1
Hedging reserve
22
(114,365)
-
Capital contribution reserve
-
64,033
Profit and loss reserves
920,676
71,798
Total equity
806,312
135,832
The financial statements were approved and signed by the director and authorised for issue on 6 June 2019
Mr P D Galvin
Director
Company Registration No. 10437403
SMALLWORLD ACCESSORIES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 10 -
Share capital
Hedging reserve
Capital contribution reserve
Profit and loss reserves
Total
Notes
£
£
£
£
£
Balance at 20 October 2016
-
-
-
-
-
Period ended 28 February 2018:
Profit and total comprehensive income for the period
-
-
-
71,798
71,798
Issue of share capital
21
1
-
-
-
1
Capital contribution arising during the period
-
-
64,033
-
64,033
Balance at 28 February 2018
1
-
64,033
71,798
135,832
Period ended 28 February 2019:
Profit for the period
-
-
-
784,845
784,845
Other comprehensive income:
Fair value losses on foreign exchange contracts
-
(141,191)
-
-
(141,191)
Tax relating to other comprehensive income
-
26,826
-
-
26,826
Total comprehensive income for the period
-
(114,365)
-
784,845
670,480
Transfer between reserves
-
-
(64,033)
64,033
-
Balance at 28 February 2019
1
(114,365)
-
920,676
806,312
SMALLWORLD ACCESSORIES LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 11 -
2019
2018
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
25
1,525,603
(2,185,378)
Interest paid
(119,615)
(159,617)
Income taxes paid
(56,201)
-
Net cash inflow/(outflow) from operating activities
1,349,787
(2,344,995)
Investing activities
Purchase of business
-
(165,926)
Purchase of tangible fixed assets
(39,459)
(76,988)
Proceeds on disposal of tangible fixed assets
-
41,076
Interest received
2,339
378
Net cash used in investing activities
(37,120)
(201,460)
Financing activities
Proceeds from issue of shares
-
1
Proceeds from borrowings
-
6,217,602
Repayment of borrowings
(1,201,824)
(2,719,850)
Net cash (used in)/generated from financing activities
(1,201,824)
3,497,753
Net increase in cash and cash equivalents
110,843
951,298
Cash and cash equivalents at beginning of year
951,298
-
Cash and cash equivalents at end of year
1,062,141
951,298
Relating to:
Cash at bank and in hand
1,068,375
951,298
Bank overdrafts included in creditors payable within one year
(6,234)
-
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 12 -
1
Accounting policies
Company information
Smallworld Accessories Limited is a
private
company
limited by shares
incorporated in England and Wales.
The registered office is
The Courtyard, River Way, Uckfield, East Sussex, TN22 1SL.
1.1
Accounting convention
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 £
1
.
The financial statements have been prepared under the historical cost convention adjusted for certain financial instruments measured at fair value. The principal accounting policies adopted are set out below.
1.2
Going concern
A
t the time of approving the financial statements
,
t
he director has a reasonable expectation that the
company
has adequate resources to continue in operational existence for the foreseeable future. Thus
t
he director continues to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Reporting period
The previous period was 16 months from the start of trade and therefore this year's figures are not directly comparable to those of the prior period.
1.4
Turnover
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
customer returns,
VAT and other sales related taxes
. It is shown prior to any commissions paid.
1.5
Intangible fixed assets - goodwill
Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated
amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.
1.6
Tangible fixed assets
Tangible fixed assets
are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Leasehold improvements
Straight line over the term of the lease
Plant and equipment
15% diminishing balance
Fixtures and fittings
Straight line over 5 years
Computers
Straight line over 3 years
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
1
Accounting policies
(Continued)
- 13 -
1.7
Impairment of fixed assets
At each reporting
period
end date, the
company
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.
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.
1.8
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell
after making allowances for obsolete and slow moving stock.
1.9
Cash at bank and in hand
Cash at bank and in hand
are basic financial assets
and
include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.10
Financial instruments
The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset
, with
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
Basic financial assets
are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost
.
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
1
Accounting policies
(Continued)
- 14 -
Other financial assets
Other financial assets
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.
Impairment of financial assets
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.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when
the company
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.
Basic financial liabilities
Basic financial liabilities
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.
Other financial liabilities
Derivatives, including 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
s
ubsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in
the statement of comprehensive income a
s appropriate
.
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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
1.11
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
1
Accounting policies
(Continued)
- 15 -
1.12
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 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
company’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
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.
1.13
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense
.
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.
1.14
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.15
Leases
Rentals payable under operating leases,
including
any lease incentives received, are charged to
profit or loss
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
s
asset are consumed.
1.16
Foreign exchange
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.
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 16 -
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the director is 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.
Critical judgements
The following judgements (apart from those involving estimates) have had the most significant
effect on amounts recognised in the financial statements.
Stocks
The company monitors stock levels and impairment on an ongoing basis. Units held on concession stands are vulnerable to damage, pilfering and misplacement within the stores and provisions are maintained to reflect this. At the end of a season the company writes off the bulk of the remaining goods as new product lines are introduced. The estimation includes judgement on a number of factors including historical sales patterns, expected sales profiles and potential obsolescence.
At the reporting date, the carrying amount of inventory was
£1,492,611
(2018 -
£1,323,250
)
.
Intangible assets (goodwill)
The director has estimated the useful life of goodwill to be 10 years. The useful life of goodwill may vary depending on a number of factors including timing of future returns and market demands.
3
Turnover and other revenue
2019
2018
£
£
Turnover analysed by class of business
Concessions
20,768,842
23,131,674
Wholesale
115,691
811,017
20,884,533
23,942,691
All turnover is derived from the sale of goods.
2019
2018
£
£
Other significant revenue
Interest income
2,339
378
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
3
Turnover and other revenue
(Continued)
- 17 -
2019
2018
£
£
Turnover analysed by geographical market
United Kingdom
20,813,647
23,877,631
Republic of Ireland
70,886
65,060
20,884,533
23,942,691
4
Operating profit
2019
2018
Operating profit for the period is stated after charging/(crediting):
£
£
Fees payable to the company's auditor for the audit of the company's financial statements
23,100
23,100
Depreciation of owned tangible fixed assets
28,989
51,715
Profit on disposal of tangible fixed assets
-
(23,424)
Amortisation of intangible assets
76,241
76,241
Cost of stocks recognised as an expense
5,329,300
6,164,138
Operating lease charges
125,627
192,907
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 £159,807 (2018 - £98,800).
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2019
2018
Number
Number
Head office / Distribution / Field management
71
75
Visual merchandisers
388
493
459
568
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
5
Employees
(Continued)
- 18 -
Their aggregate remuneration comprised:
2019
2018
£
£
Wages and salaries
3,421,648
4,304,115
Social security costs
235,051
290,261
Pension costs
30,552
13,814
3,687,251
4,608,190
6
Director's remuneration
2019
2018
£
£
Remuneration for qualifying services
200,000
266,667
Remuneration disclosed above includes the following amounts paid to the highest paid director:
2019
2018
£
£
Remuneration for qualifying services
200,000
266,667
The director is also considered to represent the key management personnel of the company.
7
Interest receivable and similar income
2019
2018
£
£
Interest income
Interest on bank deposits
2,339
378
Investment income includes the following:
Interest on financial assets not measured at fair value through profit or loss
2,339
378
8
Interest payable and similar expenses
2019
2018
£
£
Interest on financial liabilities measured at amortised cost:
Interest payable to group undertakings
119,615
159,617
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
(Continued)
- 19 -
9
Taxation
2019
2018
£
£
Current tax
UK corporation tax on profits for the current period
209,150
24,437
Adjustments in respect of prior periods
31,764
-
Total current tax
240,914
24,437
Deferred tax
Origination and reversal of timing differences
3,600
11,600
Total tax charge
244,514
36,037
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2019
2018
£
£
Profit before taxation
1,029,359
107,835
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2018: 19.20%)
195,578
20,704
Tax effect of expenses that are not deductible in determining taxable profit
764
727
Amortisation on assets not qualifying for tax allowances
14,487
14,606
Other non-reversing timing differences
1,921
-
Adjustments in respect of prior periods
31,764
-
Taxation charge for the period
244,514
36,037
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
2019
2018
£
£
Deferred tax arising on:
Fair value adjustments on foreign exchange contracts
(26,826)
-
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 20 -
10
Intangible fixed assets
Goodwill
£
Cost
At 1 March 2018 and 28 February 2019
762,410
Amortisation and impairment
At 1 March 2018
76,241
Amortisation charged for the year
76,241
At 28 February 2019
152,482
Carrying amount
At 28 February 2019
609,928
At 28 February 2018
686,169
11
Tangible fixed assets
Leasehold improve-ments
Plant and equipment
Fixtures and fittings
Computers
Total
£
£
£
£
£
Cost
At 1 March 2018
30,547
566
12,070
52,732
95,915
Additions
1,640
-
20,200
17,619
39,459
At 28 February 2019
32,187
566
32,270
70,351
135,374
Depreciation and impairment
At 1 March 2018
4,215
485
1,768
21,823
28,291
Depreciation charged in the year
6,408
69
4,606
17,906
28,989
At 28 February 2019
10,623
554
6,374
39,729
57,280
Carrying amount
At 28 February 2019
21,564
12
25,896
30,622
78,094
At 28 February 2018
26,332
81
10,302
30,909
67,624
12
Financial instruments
2019
2018
£
£
Carrying amount of financial assets
Debt instruments measured at amortised cost
1,681,598
1,806,687
Carrying amount of financial liabilities
Measured at fair value through profit or loss
- Other financial liabilities
141,191
-
Measured at amortised cost
2,738,542
2,098,723
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 21 -
13
Stocks
2019
2018
£
£
Finished goods and goods for resale
1,492,611
1,323,250
14
Debtors
2019
2018
Amounts falling due within one year:
£
£
Trade debtors
488,970
655,642
Amounts owed by group undertakings
1
1
Other debtors
356,969
1,133,075
Prepayments and accrued income
74,740
95,045
920,680
1,883,763
2019
2018
Amounts falling due after more than one year:
£
£
Other debtors
835,658
-
Deferred tax asset (note 19)
26,826
-
862,484
-
Total debtors
1,783,164
1,883,763
Other
d
ebtors falling due
after
more than one
year includes a deposit of £
835,658
with a key supplier to provide security on orders placed by the company. This is funded by a loan from the ultimate controlling entity of the same amount, which is recorded in Creditors: amounts falling due
after more than
one year
within other borrowings.
15
Creditors: amounts falling due within one year
2019
2018
Notes
£
£
Bank overdrafts
17
6,234
-
Other borrowings
17
1,460,270
1,305,144
Trade creditors
987,182
566,896
Corporation tax
209,150
24,437
Other taxation and social security
286,119
448,904
Derivative financial instruments
141,191
-
Other creditors
298
34,432
Accruals and deferred income
284,558
192,251
3,375,002
2,572,064
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 22 -
16
Creditors: amounts falling due after more than one year
2019
2018
Notes
£
£
Other borrowings
17
835,658
2,192,608
17
Loans and overdrafts
2019
2018
£
£
Bank overdrafts
6,234
-
Loans from group undertakings
2,295,928
3,497,752
2,302,162
3,497,752
Payable within one year
1,466,504
1,305,144
Payable after one year
835,658
2,192,608
As disclosed within note 14, the ultimate controlling entity has provided a deposit with a key supplier to provide a credit facility and security on orders placed by the company. A separate funding loan was also provided attracting interest at a rate of 4% per annum. In accordance with Section 11 of FRS 102 the loan has been discounted to the present value of the future payments, discounted at a market rate of interest.
18
Provisions for liabilities
2019
2018
Notes
£
£
Deferred tax liabilities
19
15,200
11,600
19
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Assets
Assets
2019
2019
2018
Balances:
£
£
£
Accelerated capital allowances
15,200
-
-
Fair value loss on foreign exchange contracts
-
26,826
-
15,200
26,826
-
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
19
Deferred taxation
(Continued)
- 23 -
2019
Movements in the year:
£
Liability at 1 March 2018
11,600
Charge to profit or loss
3,600
Credit to other comprehensive income
(26,826)
Liability/(Asset) at 28 February 2019
(11,626)
The deferred tax
asset
set out above
is expected to reverse
over the useful lives of the related tangible fixed assets
.
20
Retirement benefit schemes
2019
2018
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
30,552
13,814
The company operates a defined contribution pension scheme for all qualifying employees.
The assets of the scheme are held separately from those of the company in an independently administered fund.
21
Share capital
2019
2018
£
£
Ordinary share capital
Issued and fully paid
1 Ordinary shares of £1 each
1
1
Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights.
22
Hedging reserve
2019
2018
£
£
At the beginning of the year
-
-
Gains and losses on cash flow hedges
(141,191)
-
Tax on gains and losses on cash flow hedges
26,826
-
At the end of the year
(114,365)
-
The company entered into forward foreign exchange contracts to mitigate exchange rate risk for foreign currency payments, all contracts mature within 12 months of the reporting date. In the comparative period the gain on cash flow hedges was immaterial.
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2019
- 24 -
23
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2019
2018
£
£
Within one year
123,910
123,910
Between two and five years
130,455
250,683
254,365
374,593
24
Ultimate controlling party
The immediate parent company is Smallworld Accessories Holdings Limited, a company incorporated in England and Wales. Smallworld Accessories Holdings Limited prepares consolidated financial statements, which include the results of the company, copies of which are available from Companies House.
The ultimate controlling entity is Chuan Men Investment Inc, a company incorporated in Taiwan.
25
Cash generated from operations
2019
2018
£
£
Profit for the year after tax
784,845
71,798
Adjustments for:
Taxation charged
244,514
36,037
Finance costs
119,615
159,617
Investment income
(2,339)
(378)
Gain on disposal of tangible fixed assets
-
(23,424)
Amortisation and impairment of intangible assets
76,241
76,241
Depreciation and impairment of tangible fixed assets
28,989
51,715
Movements in working capital:
(Increase) in stocks
(169,361)
(1,323,250)
Decrease/(increase) in debtors
127,425
(1,883,763)
Increase in creditors
315,674
650,029
Cash generated from/(absorbed by) operations
1,525,603
(2,185,378)
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