WATTBIKE_(HOLDINGS)_LIMIT - Accounts

The directors present the strategic report for the year ended 30 September 2020.

Principal activities

The principal activities of the Group continue to be that of the design, manufacture and sale of the first and only indoor bike ever endorsed by British Cycling which is now the worldwide test and training and talent identification bike of the UCI World Cycling Centre.

The Wattbike brand is synonymous with accurate and reliable, high quality data which makes it the go-to product for both the cycling community and the general fitness population who wish to train to improve their performance, health, or rehabilitation, whilst training with power. Wattbike connectivity ensures that Wattbike as a company can continue to grow as the market for gamification of training (Zwift, Trainer Road etc.) expands and it also positions Wattbike superbly to benefit from the emergence and growth of e-Sports. The Wattbike is the indoor training tool of choice for World and Olympic Champions such as Jessica Ennis-Hill, Joanna Rowell-Shand, Andy Murray, Adam Peaty and Anthony Joshua as well as the “weekend warrior”.

During the year, Wattbike has successfully developed its leading range of indoor bikes:

• In July 2020, Wattbike launched an updated version of its best-selling smart Atom bike introducing an electromagnetic resistance motor for a smoother and more realistic ride. Flywheel and crank angle sensors read data 1,000 times per second for accuracy of +/- 1% with an increased power range of 0-2500w. With more precise and accurate data than ever before, Wattbike Atom ensures training indoors transfers seamlessly outside to the road. The changes were received favourably with the Independent noting “if you are a serious cyclist looking to improve your performance and track improvements, its got to be the Wattbike Atom”;

• Earlier in the year, Wattbike launched commercially the Atom X which is the World’s most advanced commercial smart bike;

• Wattbike has continued to develop the Pedal Effectiveness Score (PES), which is patented technology that is unique to Wattbike. Elite coaches understand the impact of pedalling efficiency on cycling performance. Determining accurate pedal stroke effectiveness has until now only been possible in the research lab;

• The business has invested in the development of Wattbikes own digital platform, the Wattbike Hub. This allows for unique analysis of the rider’s force profile (technique) via the Polar View and Pedal Effectiveness Score (PES). In addition to this, the Wattbike Hub App delivers world class and researched workouts and plans via our network of sport scientists and coaches.

To support the growth of the business, Wattbike have worked successfully to find a Private Equity partner. In August, the company and Piper PE LLP exchanged on a transaction to invest £11.5m in exchange for 47.8% of the business. Key changes to the business are that:

• Several of the founding directors will leave the business to be replaced by Jax Unsworth, Dan Stern and Gordon Baird;

• Piper’s investment will help the business to find more brand advocates in the UK, and to take on the US and Asia, capitalising on the global rise in connected at home fitness and cycling;

• Piper are experienced brand builders and will support the development of Wattbike as a leading consumer brand.

The financial performance for the year, reflects the continued hard work of the Wattbike team and the also the opportunity presented by COVID as more consumers choose to exercise at home. In FY2020, Sales orders grew by 48% and sales grew by 29%. The slight slowdown in the Gym market due to COVID, was more than made up by the buoyant increase in the home market.

EBITDA is down versus the previous financial year however it is ahead of budget and previous year when the costs of the fund raising are added back. With the investment, enhanced product offer and a strong order book the Wattbike directors are confident that FY2021 will a successful year.

The Group buys and sells (to the non UK market) in US dollars and thus has a natural hedge. However, the continued currency fluctuations and the global economy growth uncertainty could impact the performance in certain overseas markets.

Like all UK businesses Wattbike has experienced potential cash flow risks as the result of COV19. This risk has been mitigated as Wattbike have experienced unprecedented demand for the Wattbike Atom during the UK Government lockdown and have managed to secure CBIL facility. The directors regularly review cash flow and believe that Wattbike is adequately funded at this unique time. As described above, the cash flow of the business has been supported further by the investment of Piper in the business. The directors regularly review cash flow and believe that Wattbike is adequately funded at this unique time to take advantage of the opportunity presented.

The Group considers turnover, gross margin, net profit and cash generation to be its Key Performance Indicators (KPI's) and all are as planned.

On behalf of the board

The directors present their report and financial statements for the year ended 30 September 2020.

These financial statements consolidate the financial statements of Wattbike (Holdings) Limited, Wattbike Limited, Wattbike IP Limited and Wattbike Inc.

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 9.

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

In accordance with the company's articles, a resolution proposing that UHY Hacker Young be reappointed as auditor of the group will be put at a General Meeting.

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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are 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 directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

We have audited the financial statements of Wattbike (Holdings) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 September 2020 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the group's and the parent company's affairs as at 30 September 2020 and of its loss 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.

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's 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 identified 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.

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.

Use of our 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 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 profit and loss account has been prepared on the basis that all operations are continuing operations.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £271,522 (2019 - £236,793 loss).

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

Wattbike (Holdings) Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Unit 13, Nottingham South & Wilford Industrial Estate, Nottingham, NG11 7EP.

The group consists of Wattbike (Holdings) 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 amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £271,522 (2019 - £236,793 loss).

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.

The consolidated financial statements incorporate those of Wattbike (Holdings) Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.

Wattbike Limited, Wattbike IP Limited and Wattbike Inc have been included in the group financial statements using the purchase method of accounting. Accordingly, the group profit and loss account and statement of cash flows include the results and cash flows of these companies for the year. All financial statements are made up to 30 September 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 group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.

At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

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.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch 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.

Research is written off to the profit and loss account in the year in which it is incurred. Development expenditure is written off in the same way unless the directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected to benefit.

Acquired goodwill is written off in equal annual installments over its estimated useful economic life of 20 years.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date if the fair value can be measured reliably.

Amortisation 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:

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:

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.

In 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.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

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.

Cash and cash equivalents 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.

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.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs.

Basic financial liabilities, including creditors, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price.

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 taxation is provided in full in respect of taxation deferred by timing differences between the treatment of certain items for taxation and accounting purposes. The deferred tax balance has not been discounted. A deferred tax asset is provided for in the accounts when, in the short term, profits are available to utilise any tax losses.

Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event, it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

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.

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to the profit and loss account in the period to which they relate.

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 leased 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 in the period are included in profit or loss.

Covid-19

In December 2019, a novel strain of coronavirus was reported in Wuhan, Hubei province, China. In the first several months of 2020, the virus, SARS-CoV-2, and resulting disease COVID-19, spread to the United Kingdom.

The resulting actions in the UK taken by the government to control the pandemic led to management putting contingency planning into place which has meant that the business has continued to operate productively. The directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

Research and development

Research is written off to the profit and loss account in the year in which it is incurred. Development expenditure is written off in the same way unless the directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected to benefit.

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

The warranty provision is calculated by management based on the cost of historical warranty claims made in the previous 24 months.

Turnover wholly relates to the group's principal activities.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2019 - 1).

The directors are also the key management personnel.

The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

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:

Details of the company's subsidiaries at 30 September 2020 are as follows:

Included within debt instruments measured at amortised cost is cash at bank, trade debtors and amounts owed by group undertakings.

Included within financial liabilities measured at amortised cost is bank loans and overdrafts, trade creditors, amounts owed to related parties, accruals and deferred income.

At the balance sheet date, the stock provision amounted to £76,289 (2019 - £66,289).

At the balance sheet date, the bad debt provision amounted to £160,974 (2019 - £40,000).

There are fixed and floating charges over the tangible and intangible assets of Wattbike Limited as a result of the invoice discounting arrangement.

The preference shares do include a right to receive dividends but do not include a right to vote.

The Deferred redeemable shares do include a right to receive dividends but do not include a right to vote.

Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

The Ordinary A shares have full voting, dividend and rights in a capital distribution (including on a winding up) and are not redeemable.

The Ordinary B shares have full voting, dividend and rights in a capital distribution (including on a winding up) and are not redeemable.

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:

On the 16th December 2020, the company finalised a transaction with Piper PE giving Piper a 48.5% stake in the business. As part of the transaction, Piper have redeemed the Tie Clip Loan and Preference shares which have been replaced with Piper Loan Notes. As a result of the investment, Wattbike will benefit from a cash injection to support working capital and planned growth. 

Group

The company is exempt from disclosing transactions with fellow group members under section 33.1A of FRS 102.

During the year, the company has traded with various companies in which the directors are also directors . Sales in the year to these companies amounted to £13,387 (2019 - £8,232), purchases in the year to these companies amounted to £78,980 (2019 - £103,225), administrative charges paid in the year to these companies amounted to £nil (2019 - £35,000) and loan interest charged by these companies amounted to £37,523 (2019 - £36,780). Amounts included in long term creditors amounted to £1,762,551 (2019 - £1,725,027). Amounts included within debtors amounts to £20,022 (2019 - £6,635).

During the year, the company paid rent of £nil (2019 - £12,500) to Mr I J Wilson, director.

The company is controlled by its board of directors who together own more than 50% of the company's share capital.