Virgin_Strauss_Water_UK_L - Accounts

The directors present their annual report and financial statements for the year ended 31 December 2019. They are reported in accordance with International Financial Reporting Standards (IFRS). The company has taken advantage of the exemption available to small companies, under the Companies Act, not to prepare a strategic report.

The principal activity of the company during the year continued to be the rental, sale and distribution of water dispensers.

The results for the year are set out on page 8.

In 2019 the company continued to be funded by its majority shareholder Strauss Water Limited (“Strauss Water”) as it continued to execute on its residential and small business strategy.

The company has focused on operational efficiency and on developing a low cost acquisition stream, with which to grow the install base.

2019 revenues are £4,147,017 (2018: £2,974,253). As a result 2019 gross profit is £1,433,543 (2018: £1,482,522) and operating expenses for the year were £3,056,002 (2018: £2,866,524).

Total loss for the year in 2019 was £2,848,848 (2018: £2,739,919 as restated).

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

No preference dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Going concern

Notwithstanding that as of 31 December 2019 the company has a net current liability position of£11,252,840 (2018: £9,331,411 as restated), net liabilities of £19,720,111 (2018: £16,871,263 as restated), which include £23,526,409 (2018: £17,432,132) due to the parent company, and expects further trading losses in 2020, the accounts have been prepared on a going concern basis for the following reasons:

• The future operating plan has been approved by the Board and Strauss Water Limited has undertaken to continue to support the business and provide funding for growth plans;

• An agreement between the shareholders dated 25 December 2017 provides that there will be no repayment or reclaim of the debts already owing at the balance sheet date until the Company is generating positive free cash flow;

• Management have prepared an in depth analysis of the business situation and cash flow forecast based on current and forecast sales volumes and operating costs under a range of scenarios.  The directors have considered the assumptions made and consider the forecasts and targets reasonable and realistic.  In the event that growth funding is not provided, the directors forecast that the business will generate sufficient cash for it to meet its other liabilities as they become due for a period of at least 12 months from the signing of these financial statements.

On the basis of these projections and agreements, and current trading performance, the directors consider the Company will continue to operate and hence that the use of the going concern basis is appropriate.

The company agrees terms and conditions for its business transactions with its suppliers, and suppliers are made aware of these conditions.  Payment is then made on these terms, subject to terms and conditions being met by the supplier.

Human resources

The company endorses the active application of equal opportunities policies and programmes to provide fair and equitable conditions for all employees.

Political contributions

The company has made no political contributions in the year (2018: nil).

Post balance sheet date event

There were no post balance sheet date events.

In 2019 the company successfully launched and improved its purchase sales model for residential customers. The 2020 budget reflects significant sales growth driven by increased marketing spend, lower customer pricing and continued improvements to sales and marketing efficiency as well as realising operational efficiencies through greater volumes. The company has identified a number of risks and uncertainties that may have a material impact on long term performance and achievement.

External

Regulatory risk: The company performs rigorous internal audits of product quality to ensure very high standards are reached. In the year all installation parts are Water Regulations Advisory Scheme (WRAS) approved and to the highest standards of quality.

Installation personnel are trained to European Drinking Water Cooler Association (EDWCA) standards in hygiene and installation procedures are Portable Appliance Test (PAT) approved and undergo various internal audit and training processes.

Market risk: the company continues to monitor customer trends in the market and conducts surveys of actual and potential customers.

Economic risk: On January 31st, 2020, the UK discontinued its membership of the EU. Until there is further clarity regarding the terms of future trade with the EU, the directors have limited ability to assess the potential regulatory and legal consequences that could impact upon the Company.

On March 11th, 2020 The World Health Organisation declared the increase in COVID-19 cases a pandemic. At this early stage of the pandemic the directors have limited ability to assess scale of the impact.

Funding from Strauss Water Limited is denominated in USD which continues to put volatility into the financial result. Strengthening of the GBP in 2019 versus the USD has resulted in an FX gain of £319,927 being recognised in these financial statements (2018: loss of £559,400). No repayment is planned that would materialise these gains and losses.

Competitive risk: competition in the residential point of use category is quite low but the Company continually monitors consumer needs and the competitive landscape to adjust its value proposition and enhance product development at Strauss Water, the Company’s parent company.

Internal

Liquidity:  The Company has received financial support from Strauss Water that will enable the Company to continue trade for at least the next 12 months.

Customer attrition: The Company conducts on-going customer satisfaction surveys and is constantly reviewing and improving the customer experience.

Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and Moore Kingston Smith LLP will therefore continue in office.

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

•     properly select and apply accounting policies;

•     present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

•     provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

•     make an assessment of the company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each director in office at the date of approval of this annual report confirms that:

•     so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware, and

•     the director has taken all the steps that he / she ought to have taken as a director in order to make himself / herself aware of any relevant audit information and to establish that the company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

We have audited the financial statements of Virgin Strauss Water UK Limited (the 'company') for the year ended 31 December 2019 which comprise the Income Statement, the Statement Of Financial Position, 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 International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 December 2019 and of its loss for the year then ended;

•     have been properly prepared in accordance with IFRSs as adopted by the European Union; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

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, which relies upon the continued support from the parent company as set out in note 1.2 to the financial statements, in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

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 Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the Directors' Report has been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the 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, 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 directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit; or

• the directors were not entitled to take advantage of the small companies' exemption from the requirement to prepare a strategic report.

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 company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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’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.

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.

The income statement has been prepared on the basis that all operations are continuing operations.

Virgin Strauss Water UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is 7th Floor New House, 67-68 Hatton Garden, London, England, EC1N 8JY.

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, (except as otherwise stated).

The financial statements have been prepared under the historical cost convention.

Notwithstanding that as of 31 December 2019 the company has a net current liability position of £11,252,840 (2018: £9,331,411 as restated), net liabilities of £19,720,111 (2018: £16,871,263 as restated), which include £23,526,409 (2018: £17,432,132) due to the parent company, and expects further trading losses in 2020, the accounts have been prepared on a going concern basis for the following reasons:true

• •    The future operating plan has been approved by the Board and Strauss Water Limited has undertaken to continue to support the business and provide funding for growth plans;

• •    An agreement between the shareholders dated 25 December 2017 provides that there will be no repayment or reclaim of the debts already owing at the balance sheet date until the Company is generating positive free cash flow;

• •    Management have prepared an in depth analysis of the business situation and cash flow forecast based on current and forecast sales volumes and operating costs under a range of scenarios.  The directors have considered the assumptions made and consider the forecasts and targets reasonable and realistic.  In the event that growth funding is not provided, the directors forecast that the business will generate sufficient cash for it to meet its other liabilities as they become due for a period of at least 12 months from the signing of these financial statements.

On the basis of these projections and agreements, and current trading performance, the directors consider the Company will continue to operate and hence that the use of the going concern basis is appropriate.

The Company adopted IFRS 15, Revenue from Contracts with Customers, for the first time commencing on 1 January 2018. IFRS 15 replaces the current guidance for the recognition of revenue. As expected, the adoption of the new standard has not had a material impact on the statement of comprehensive income and thus does not affect the comparative figures.

The standard presents a new model for the recognition of revenue from contracts with customers, which consists of five steps:

1. Identify the contract with the customer.

2. Identify separate performance obligations in the contract.

3. Determine the transaction price.

4. Allocate the transaction price to separate performance obligations.

5. Recognise revenue when the entity satisfies a performance obligation.

The contracts include multiple deliverables, such as the sale of waterbar and related installation services. However, the installation is simple, does not include an integration service and could be performed by another party. It is therefore accounted for as a separate performance obligation.

Revenue is recognised at the point in time when the relevant performance obligation is satisfied under the contractual agreement. The performance obligation for unit sale or installation is considered to be satisfied when the waterbars have been transferred to the customer and the customer has obtained control of that asset. The revenue for subscription or maintenance is recognised over the life of the contract, with the relevant amounts accrued or deferred where necessary.

Revenue is measured at the transaction price, being the fair value of the consideration received or receivable. The transaction price is reduced for estimated customer returns, rebates and other similar allowances.

The recognition of discounts is aligned to the recognition of the underlying revenue to which discount has been applied. All revenue is earned from UK sources and is generated from principle activities of the business.

The development costs are recorded as an intangible asset and is stated at the cost for application, infrastructure and content development. Customer acquisition costs and computer software are initially recorded at cost, with annual review for impairment. Amortisation is charged as follows:

Plant and equipment is stated at cost, net of accumulated depreciation and impairment.

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:

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 income statement.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

The carrying value of the company’s non-financial assets, are reviewed at each reporting date to determine whether there is any external or internal indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.

Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. The cost includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Net realisable value is the estimated selling price less all estimated selling price in the ordinary course of business.

IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.

Cash and cash equivalents comprise cash balances and deposits and are shown net of bank overdrafts where the company has the right of offset.

The Company adopted IFRS 9, Financial Instruments, for the first time commencing on 1 January 2018.

All recognised financial assets are required to be measured at amortised cost or fair value on the basis of the Company’s business model for managing the financial assets and the contractual cash flow characteristics of the assets.

Amounts receivable which comprise trade and other receivables are carried at amortised cost less impairments and associated impairment losses.

Impairment of financial assets

A loss allowance is recognised on initial recognition of financial assets held at amortised cost, based on expected credit losses, and is remeasured annually with changes appearing in profit or loss. For assets with a maturity of 12 months or less, including trade receivables, the 12-month expected loss allowance is equal to the lifetime expected loss allowance.

Amounts payable which comprise trade and other payables are carried at amortised cost.

Equity instruments issued by the company 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 company.

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is measured at the rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be achieved against which temporary difference can be utilised.

A provision is recognised if the company has a present legal or constructive obligation as a result of past events that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability. The amount recognised as a provision is reviewed at each reporting date.

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 inventories or non-current 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.

The company operates a defined contribution pension scheme. Contributions payable for the year are charged to the income statement.

Rentals payable under operating leases, less 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.

IFRS 16 Leases took effect from 1 January 2019 and has been adopted for the year ended 31 December 2019. The Company has chosen to use the modified retrospective approach, recognising transitional adjustments on the date of initial application (i.e. 1st January 2019) without restatement of the comparative figures. Leases which the Company were party to were previously classified as operating leases or finance leases based on its assessment of whether the lease transferred substantially all the risks and rewards of ownership to the lessee. Under IFRS 16 the Company now recognises right of use assets and lease liabilities for leases other than those for low value assets or for short term leases of 12 months or less.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. The initial direct costs are recognised when the unit had been installed as per 1.3, which is a departure from IAS 17. However the directors believe that the treatment applied provides a true and fair view to the users of the accounts.

Transactions in foreign currencies are translated to the company’s functional currencies 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. Foreign exchange differences arising on translation are recognised in the income statement. 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.

Finance costs

Financing expenses comprise interest payable, bank charges and payment gateway charges, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the income statement (see foreign currency accounting policy).

In the current year, the following new and revised Standards and Interpretations have been adopted by the company and have an effect on the current period or a prior period or may have an effect on future periods:

In the application of the company’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, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.

The directors make a judgement that despite the ongoing losses in the Company there is no need for impairment of fixed assets, as the forecasts forming the basis for going concern review as per 1.2 show improved performance going forward.

The capitalised installation cost of waterbars is calculated using an average picking and shipping cost, people cost (based on an average install time and travel time to reach an installation location) and materials cost. This average cost is applied to the total number of waterbars installed in the period.

The Company estimated the rate of interest on the Virgin Royalty liability to discount it down to the present value in 2017 which has been amended in 2018 given the earlier repayment terms. The rate used is aligned to the rate charged on overdue intercompany balances and in line with indicative pricing received by the Company from external finance providers.

An analysis of the company's revenue is as follows:

Revenue is recognised at a point in time or in the month it is invoiced in accordance with the accounting policy.

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

No remuneration or benefits were paid to the directors during the year (2018: nil).

Key management personnel were compensated a total of £584,971 in remuneration in 2019 (2018: £362,384).

The company pays into a personal pension scheme on behalf of some of its employees. As at 31 December 2019 the Company owed £nil to the fund (2018: £11,922).

Total interest income for financial assets that are not held at fair value through profit or loss is £46 (2018: £2,189).

This represents the foreign exchange gain/(loss) on the retranslation of the amounts due to the parent company at the financial year end.

As a result of the loss position of the company, and also the availability of tax losses, no liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2019 nor for the year ended 31 December 2018.

At the balance sheet date the company had unused tax losses of approximately £25.2m (2018: £22.4m) available for offset against certain future profits. The deferred tax asset has not been recognised in respect of these losses, as recovery of the asset is dependent on the company generating suitable profits.

The charge for the year can be reconciled to the loss per the income statement as follows:

Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the company’s income or the value of its holdings of financial instruments

The principle market risks for the company are exposure to movements in foreign exchange rates and interest rates. The company addresses these risks and defines strategies to limit the economic impact on its performance.

All stock purchases are in Sterling. The company’s exposure to foreign currency risk is on loans provided by its parent Strauss Water denominated in US Dollars, at 31 December 2019 these were converted at USD 1.32 : GBP 1 (2018: USD 1.28 : GBP 1).

Sensitivity analysis

A 1% percent weakening of the US Dollar against the pound sterling at 31 December 2018 would have decreased the loss for the year by £106,922. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date. This assumes that all other variables, in particular interest rates, remain constant. A 1% percent strengthening of the US Dollar against the pound sterling at 31 December 2019 would have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.

Profile

At the balance sheet date the Company’s only interest-bearing financial instruments were amounts owed to Strauss Water, the Company’s parent. These are variable rate instruments bearing the following rates:

Sensitivity analysis

A change of 10 basis points in interest rates at the balance sheet date would have increased the loss for the year by £5,000. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates, financial instrument at fair value through profit or loss or available for sale with fixed interest rates and the fixed rate element of interest rate swaps.

The company provides credit to customers in the normal course of business and the carrying amount is net of an allowance of £254,273 (2018: £220,148) for doubtful receivables due to age.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset on the balance sheet.

The company effectively manages its credit risk through series of checks as mentioned below:

• Customer on-boarding: the company has instituted a process of preliminary credit check prior to customer on-boarding.

• The company collects the monthly rental through direct-debit mandates.

• Credit monitoring:

  • The management reviews the receivables position on weekly basis, which is then followed up with action on long outstanding amounts.  

  • Review by categories: For large institutional customers, we have nominated a dedicated group for resolving issues and have seen significant success.

• Prudent provisioning: As business we are overtly mindful of the quality of receivables. We have followed this by providing a 15% provision on balances that are less than 120 days, by adopting the new IFRS using ECL, amounting to approximately £50K.

• Debt recovery process:  The company reinitiated the process of debt recovery with Credit Style in October 2018 to hasten the collections (£108k approximately 1/3 of overdue balances).

The trade receivables as at 31 December are aged as follows:

Liquidity risk

The following are the contractual maturities of financial liabilities, including interest payments.

Current

As at 31 December 2019 all the company’s trade and other payables are due within one year. Due to the short term nature of these payables the carrying value equates to the contractual amount due as the impact of discounting is not considered material.

Amounts owed to group undertakings (intercompany) are repayable on demand. Interest is payable on all overdue balances at 5.0% above the Lloyds Bank PLC base rate (currently 0.75%).

Non-current

The intercompany loan is USD denominated. Interest is payable on all balances at 0.5% above the US prime base rate (currently 4.75%). The loan is repayable on demand. Management received a support letter from Strauss Water Limited assuring that the loan would not be called in for the next 12 months or until Virgin Strauss Water UK Limited is in a financial position to repay the loan.

Finance lease obligations are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

Following adoption of IFRS 16, a right to use asset, being the present value of the operating lease payments over the remaining life of the lease, has been recognised within the above note. The right to use assets and corresponding lease liability have been calculated using a discount rate of 4.25%. The depreciation of the assets and interest charge are recognised in the Statement of Comprehensive Income in the year and the maturity analysis of lease liabilities is detailed in note 18.

Lease payments relate to leases of property and motor vehicles. The Group does not have an option to purchase the leased assets at the expiry of the lease period.

Amounts recognised in profit or loss as an expense during the period in respect of operating lease arrangements are as follows:

With the adoption of IFRS 16, the operating lease has now been reclassified as a finance lease. At 31 December 2018 the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

A Long Term Incentive Plan (LTIP) was introduced for key management personnel in 2017 with any award settled in cash. The plan covers the period from 1 January 2017 to 31 December 2019. Awards are pro-rated for new entrants to the scheme during this period and forfeited if an employee leaves the company before 31 December 2019. Any award under the scheme will be based on performance against 3 key growth and financial targets which have been approved by the Board of Directors. At 31 December 2019 a provision has been calculated based on current progress towards those targets.

Preference shares rank above ordinary shares in respect of amounts subscribed by preference shareholders plus accrued dividends.

During the year the company entered into the following transactions with the parent company:

No guarantees have been given or received.

At the balance sheet date, Strauss Water Limited is the immediate parent company and Strauss Group Limited is the ultimate parent company by nature of their majority shareholding. Both companies are incorporated in Israel.

Copies of consolidated financial statements of the ultimate parent company are available from the registered office at 3A Yoni Netanyahu Or Yehunda, Israel, 603761.