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Kandy Works Properties Limited
Registered number: 12913500
Annual report and
financial statements
For the year ended 30 June 2023
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KANDY WORKS PROPERTIES LIMITED
COMPANY INFORMATION
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Chartered Accountants & Statutory Auditor
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KANDY WORKS PROPERTIES LIMITED
CONTENTS
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Independent Auditor's Report
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Consolidated Statement of Comprehensive Income
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Consolidated Statement of Financial Position
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Company Statement of Financial Position
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Consolidated Statement of Changes in Equity
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Company Statement of Changes in Equity
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Consolidated Statement of Cash Flows
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Notes to the Financial Statements
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KANDY WORKS PROPERTIES LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
The directors present their Strategic Report together with the audited financial statements for the year ended 30 June 2023.
The Consolidated Statement of Comprehensive Income is set out on page 12 and shows the business turnover increasing from £47.3m to £48.3m. Sales, year on year, increased by £0.4m in Mail Order, in Wholesale by £0.3m and Retail by £0.3m.
The increase in turnover came from continuing growth among the Group’s marketplace partners. The Group was affected by inflationary pressures, which pushed up the cost of raw materials purchased by the Group. In addition, it flattened retail sales in the Group’s markets by reducing the discretionary spend available to customers. The increased cost of sales saw gross profit fall to £28.3m, £0.6m less than in the prior year, a decrease from 61% to 59%.
Marketing expenditure increased by £1.4m as the Group invested to recruit new customers and keep its existing clients engaged. Some of this increase was due to the rise in the cost of paper needed to print catalogues. The Group believes its marketing strategy was effective during the year, given the challenging economic environment with stagnant overall retail sales in the UK, prompting heavy discounting by competitors. This is a tactic the Group did not copy so as not to devalue the brand or create an expectation amongst its customers about future promotions, which may erode long-term profitability.
Employment costs rose £0.9m during the year as the Group continued to enhance its team, especially in e-commerce and buying. This aimed to improve the consumer’s online experience and enhance the depth and breadth of the range available to them.
Overheads rose by £0.4m. Most of this increase was generated by a rise in rent and rates as the coronavirus concessions negotiated by the Group continued to unwind. Power was also a significant contributor, with prices increasing after Russia invaded Ukraine.
Operating profit reduced by £3.2m in the financial year, and EBITDA decreased by £3.2m.
The Group continued holding healthy cash reserves to exploit marketing opportunities and insure against business shocks.
Business environment
The Group continues to operate in a very competitive market. Many brands provide consumers with clothing, homeware, and accessories through multiple channels. To insulate against market shifts, Joe Browns Limited constantly monitors its competitors and recognises the need to invest carefully in all areas of its business. This is especially important where the Group directly interacts with its consumers as this is where the most difference can be made to the customer experience. Emphasis continues to be placed on product quality, product range, branding, and e-commerce. To this end, the Group upgraded its website and leveraged the ability to personalise marketing through its CRM platform. It also began the move to a new development partner to improve the online shopping experience for customers.
The Group also focused on sustainability, a key concern for its customers and the fashion industry. It has committed to minimising the negative environmental and social impacts associated with manufacturing, transporting, and packaging the goods it sells.
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KANDY WORKS PROPERTIES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
Future developments
The Group will continue to invest in recruiting new customers and retaining existing ones. It believes that increasing the number of shoppers and keeping those already engaged with the brand offers the best opportunity to increase sales and profitability.
The Group plans to open new outlets, with plans underway for stores to open in Leeds and Bristol in the next financial year.
The Group recognises that it should also strive to improve the efficiency of its operations through vigorous cost control and, where possible, cost elimination.
The Group's board has developed a framework for identifying risk and uncertainties that may impact its performance. In particular it recognises and manages the following:
∙Changing consumer spending habits - this is managed by frequent analysis of external trends and closely monitoring its product sales and the behaviour of its competitors.
∙Inflation – the Group recognises that inflation has pushed up the prices of its raw materials, labour and other inputs. Uncertainty about the persistence of inflation and the Bank of England’s response has made it harder to make long-term buying decisions for stock. It also realises that this prolonged period of inflation has impacted consumers’ purchasing habits as real incomes have fallen. It also erodes the value of the Group’s cash balances as interest rates have not kept pace with the inflation rate.
∙Adverse exchange rate fluctuations - the Group is vulnerable to falls in the value of the GBP relative to the USD. To combat this, it purchases USD in advance of the applicable season. Other measures to reduce this risk include sourcing from suppliers who value their invoices in Sterling. However, it recognises that this is a short-term measure and that long-term currency risk and the inherent pressure on prices are best managed by investment in the brand so that consumers’ desire to be associated with its products is as price-inelastic as possible.
∙Supplier failure - this is continually monitored, and any supplier considered at risk of collapse or suffering from issues that may cause severe delays is replaced. The Group maintains close relationships with several manufacturers with short lead times, so it can quickly assign replacement orders in the event of a supplier's failure to deliver.
∙Brand reputation - the Group constantly monitors its brand perception via customer interaction and social and traditional media. It also continually invests in the brand to maximise its resilience.
∙Financial risk - the Group maintains a large cash balance to insulate against significant financial shocks. This also ensures that it is not beholden to any lender for its short- or long-term financing requirements.
∙Environmental and social concerns - the Group has implemented systems to monitor environmental and social risks within its supply chain. It recognises that failing to manage these risks could lead to a customer backlash and damage the brand’s reputation.
∙Cybersecurity - the Group has implemented a comprehensive cybersecurity policy to address critical areas such as data protection, access control, and password management. This is to prevent data breaches, ransomware attacks, and hacking, which could lead to data loss, legal liabilities, and, again, reputational costs.
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KANDY WORKS PROPERTIES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
Financial key performance indicators
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Key performance indicators used by the directors to monitor the Group include the following:
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Gross margin as % of turnover
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Directors' statement of compliance with duty to promote the success of the Group
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The board of directors of Kandy Works Properties Limited consider that both individually and together for the year ended 30 June 2023 they have acted in the way they consider, in good faith, would be the most likely to promote the success of the Group for the benefit of its members as a whole and having regard to the matters set out in s.172 (1) (a) to (f) as below:
a) The likely consequences of any decision in the long term;
b) The interests of the Group’s employees;
c) The need to foster the Group’s business relationships with suppliers, customers and others;
d) The impact of the Group’s operations on the community and the environment;
e) The desirability of the Group maintaining a reputation for high standards of business conduct; and
f) The need to act fairly between members of the Group.
(a) The likely consequences of any decision in the long term:
The directors acknowledge that all decisions should be based on the Group's and its stakeholders' long-term interests. The impact of any decision is discussed, and one of the factors weighed in that discussion is its lasting implications. The Group’s dividend policy reflects this. The effect of the timing and quantum of the dividend is balanced against the interests of the other parties, which are crucial to the sustainability of the business. This ensures that dividends are only paid when they will not detrimentally affect the stakeholders' current or future interests. For example, care is taken to ensure the Group retains enough funds to be able to take advantage of any profitable investments at a later date.
(b) The interests of the Group’s employees:
The directors affirm that the business cannot function without its employees' goodwill, hard work and dedication. It knows that the key to maintaining this relationship is ensuring that the employee’s interests align with the Group’s. The Group regularly seeks the views of its staff. Its team members are formally interviewed on a routine basis, and the Group also conducts anonymous surveys. It hopes this mix of methods encourages an honest and forthright interaction between all employees. It provides weekly email updates detailing the Group’s performance to its employees. In addition, the directors visited the Group’s other locations where possible. This was done regularly to solicit the views of the staff based at its stores.
The Group also conducts frequent benchmarking exercises, measuring itself against other employers to ensure that it continues to be seen as an employer of choice by prospective candidates. These assignments examine the salaries and other benefits competitors offer in the same or similar labour markets. The Group then seeks to ensure that the packages it compensates its staff with retain and, where necessary, attract the best employees.
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KANDY WORKS PROPERTIES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
(c) The need to foster the Group’s business relationships with suppliers, customers and others:
The directors recognise that one of their core responsibilities is to encourage the development of its connections with suppliers and customers. Staff are instructed that part of their duties is to maintain good relationships with their partners outside the organisation and that this is crucial to the success of the Group. All the suppliers are regularly interacted with and visited to strengthen these bonds. The Group’s board knows it cannot successfully exist without engaging with its customers. To this end, they are regularly surveyed online and using focus groups. The business maintains various social media links and employs staff to generate, monitor and respond to posts. It also operates a customer-specific contact centre open 7 days a week. Interactions with this service are aggregated and reported upon so that significant problems are pre-empted. The aim is to create an association that generates a lasting willingness to purchase.
(d) The impact of the Group’s operations on the community and the environment:
The directors know the business is nested in its local community and relies on civic amenities to function. It also draws many of its staff from the local area, so it needs to maintain good community relations. The Group is investing in sustainability to reduce its environmental impact by incorporating more recycled material into its range and packaging. Furthermore, the Group continues to support local charities through clothing donations.
The Group also ensures that it complies with best practice where possible to minimise its environmental effect in all areas.
(e) The desirability of the Group maintaining a reputation for high standards of business conduct:
The directors of the Group recognise their essential duty to ensure that the Group complies with the laws and regulations in each of the jurisdictions in which it operates. This includes but is not limited to ensuring compliance with rules relating to forced and child labour use and guaranteeing, for example, that its products are safe to use. The directors understand that reputational damage is a significant risk to the Group and strive to ensure that the policies and practices to avoid and mitigate this risk are of the highest standard.
Staff inductions include a meeting with the Managing Director to instill in new employees an understanding of Joe Browns Limited's history and culture.
The Group also takes the need to pay its suppliers on time very seriously to maintain its standing in the industry.
(f) The need to act fairly between members of the Group:
The directors know that the Group needs to consider the interests of its members equally. It also recognises that there will be occasions when members' interests are in conflict and that any contest should be resolved to balance those competing interests. Member views are sought if such a situation arises. Any decision taken is documented and explained in an open and accountable way so that all the members can see what actions were taken to reach a settlement.
This report was approved by the board on 21 March 2024 and signed on its behalf.
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KANDY WORKS PROPERTIES LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2023
The directors present their report and the financial statements for the year ended 30 June 2023.
Directors' responsibilities statement
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The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 the Group 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 for the Group's financial statements 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 Group will continue in business.
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 the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the year, after taxation, amounted to £1,544,341 (2022 - £4,193,512).
Dividends of £2,000,000 (2022: £2,500,000) were paid to ordinary shareholders during the year.
Going concern
The directors consider the use of the going concern assumption appropriate in preparing these financial statements, as they have not identified any factors that may give rise to uncertainty over the company's ability to continue as a going concern.
Gross margins have been maintained, and the Group reported a net profit of £1.6m (2022: £4.2m), EBITDA of £2.4m (2022: £5.6m) as well as a strong net current asset position of £12m (2022: £13.8m) and net asset position of £16.6m (2022: £17.0m). The Group’s healthy cash balance at the year-end gives it strength and flexibility, particularly in buying decisions. This, along with the other factors included within the Business Review and Future Developments section of the Strategic Report, supports the director's assessment that no factors give rise to a material uncertainty over the going concern assumption.
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KANDY WORKS PROPERTIES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
The directors who served during the year were:
Qualifying third party indemnity provisions
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The Group has made qualifying third-party indemnity provisions for the benefit of its Directors which were made during the year and remain in force at the date of this Annual Report.
Greenhouse gas emissions, energy consumption and energy efficiency action
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The Group is required to report its annual greenhouse gas emissions pursuant to the (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 ("Regulations"). The 2018 regulations, known as Streamlined Energy and Carbon Reporting (SECR) came into effect on 1 April 2019 and the Group is required to report the emissions and energy consumption for this year to 30 June 2023 to coincide with the financial reporting period.
Following the location-based methodology, 400,727 kWh (2022: 382,282 kWh) of scope 2 energy and 215,120 kWh (2022: 259,059 kWh) of scope 1 natural gas has been consumed in relation to the Group's UK premises, resulting in 122,332 kgCO2e (2022: 172,935 kgCO2e). In addition, under scope 1, the energy consumption of 38,126 kgCO2e (2022: 42,882 kgCO2) resulted from transport usage. During the year, no specific steps were taken to lower energy consumption.
Emissions per employee have been considered to be an appropriate intensity ratio - average emissions per employee for the year were 877 kgCO2e (2022: 1,088 kgCO2e), and the Group aims to lower this where possible in future.
Matters covered in the Group Strategic Report
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Certain information is not shown in the Directors’ Report is shown in the Strategic Report instead in accordance with Section 414C (11) of the Companies Act 2006. The Strategic Report includes a business review, future developments and information on the Group's key performance indicators.
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KANDY WORKS PROPERTIES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
Disclosure of information to auditor
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Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the directors are aware, there is no relevant audit information of which the Company and the Group's auditor is unaware, and
∙the directors have taken all the steps that ought to have been taken as directors in order to be aware of any relevant audit information and to establish that the Company and the Group's auditor is aware of that information.
Post balance sheet events
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In October 2023 the Group entered into a 10 year lease agreement. The lease enables the leasee to exit the contract after a 5 year period has passed. Future commitments pertaining to this lease are not included within operating lease commitments note.
The auditor, Mazars LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board on 21 March 2024 and signed on its behalf.
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KANDY WORKS PROPERTIES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KANDY WORKS PROPERTIES LIMITED
Opinion
We have audited the consolidated financial statements of Kandy Works Properties Limited (the ‘Parent Company') and its subsidiaries (the 'Group') for the year ended 30 June 2023 which comprise the Consolidated Statement of Comprehensive Income, Consolidated and Company Statement of Financial Position, Consolidated and Company Statement of Changes in Equity, Consolidated Statement of Cashflows 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 Parent Company’s affairs as at 30 June 2023 and of the Group's 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.
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 consolidated financial statements section of our report. We are independent of the Group's and Parent Company in accordance with the ethical requirements that are relevant to our audit of the consolidated 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
In auditing the consolidated financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the consolidated financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's nor Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the consolidated financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the consolidated financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the consolidated 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.
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KANDY WORKS PROPERTIES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KANDY WORKS PROPERTIES LIMITED
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the course of 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 this gives rise to a material misstatement in the consolidated financial statements themselves. 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 the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the consolidated financial statements are prepared is consistent with the consolidated financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to which 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.
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KANDY WORKS PROPERTIES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KANDY WORKS PROPERTIES LIMITED
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities Statement set out on page 5, the directors are responsible for the preparation of the consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group's and 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 intend either to liquidate the Group or Parent Company or to cease operations, or have 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 consolidated 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 consolidated financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
Based on our understanding of the Group and its industry, we considered that non-compliance with the following laws and regulations might have a material effect on the consolidated financial statements: employment regulation, health and safety regulation and anti-money laundering regulation.
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:
∙Inquiring of management and, where appropriate, those charged with governance, as to whether the Group is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations;
∙Inspecting correspondence, if any, with relevant licensing or regulatory authorities;
∙Communicating identified laws and regulations to the engagement team and remaining alert to any indications of non-compliance throughout our audit; and
∙Considering the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud.
We also considered those laws and regulations that have a direct effect on the preparation of the consolidated financial statements, such as tax legislation, pension legislation, the Companies Act 2006.
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KANDY WORKS PROPERTIES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KANDY WORKS PROPERTIES LIMITED
In addition, we evaluated the directors' and management’s incentives and opportunities for fraudulent manipulation of the consolidated financial statements, including the risk of override of controls, and determined that the principal risks were related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, revenue recognition (which we pinpointed to the cut off assertion) and significant one-off or unusual transactions.
Our audit procedures in relation to fraud included but were not limited to:
∙Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud;
∙Gaining an understanding of the internal controls established to mitigate risks related to fraud;
∙Discussing amongst the engagement team the risks of fraud; and
∙Addressing the risks of fraud through management override of controls by performing journal entry testing.
There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
A further description of our responsibilities for the audit of the consolidated financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of the audit 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.
Shaun Mullins (Senior Statutory Auditor)
for and on behalf of
Mazars LLP
Chartered Accountants and Statutory Auditor
5th Floor
3 Wellington Place
Leeds
LS1 4AP
21 March 2024
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KANDY WORKS PROPERTIES LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
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Interest receivable and similar income
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Profit for the financial year
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There were no recognised gains and losses for 2023 or 2022 other than those included in the consolidated statement of comprehensive income.
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There was no other comprehensive income for 2023 (2022:£NIL).
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The notes on pages 18 to 35 form part of these financial statements.
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EBITDA for the current year was £2,365,638 (2022: £5,640,500).
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KANDY WORKS PROPERTIES LIMITED
REGISTERED NUMBER: 12913500
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Provisions for liabilities
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The financial statements were approved and authorised for issue by the board and were signed on its behalf on 21 March 2024.
The notes on pages 18 to 35 form part of these financial statements.
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KANDY WORKS PROPERTIES LIMITED
REGISTERED NUMBER: 12913500
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Profit and loss account carried forward
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|
The Company has taken advantage of the exemption allowed under section 408 of Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The profit after tax of the Company for the year ended 30 June 2023 was £1,994,562 (2022: £9,588).
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 21 March 2024.
The notes on pages 18 to 35 form part of these financial statements.
- 14 -
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|
KANDY WORKS PROPERTIES LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
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Comprehensive income for the year
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|
Total comprehensive income for the year
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|
Contributions by and distributions to owners
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|
Dividends: Equity capital
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Total transactions with owners
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|
Comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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|
Dividends: Equity capital
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|
Total transactions with owners
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- 15 -
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KANDY WORKS PROPERTIES LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
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|
Comprehensive income for the year
|
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|
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|
|
Total comprehensive income for the year
|
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|
Contributions by and distributions to owners
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|
Shares issued during the year
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|
Total transactions with owners
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|
Comprehensive income for the year
|
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|
|
Total comprehensive income for the year
|
|
|
|
Contributions by and distributions to owners
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|
|
Dividends: Equity capital
|
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|
The notes on pages 18 to 35 form part of these financial statements.
|
- 16 -
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|
KANDY WORKS PROPERTIES LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
Cash flows from operating activities
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Profit for the financial year
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Depreciation of tangible assets
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Decrease/(increase) in stocks
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(Decrease)/increase in creditors
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Net cash generated from operating activities
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Cash flows from investing activities
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Purchase of tangible fixed assets
|
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|
Net cash used in investing activities
|
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|
Cash flows from financing activities
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|
Net cash used in financing activities
|
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|
Net decrease in cash and cash equivalents
|
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|
Cash and cash equivalents at beginning of year
|
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|
Cash and cash equivalents at the end of year
|
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|
Cash and cash equivalents at the end of year comprise:
|
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- 17 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
Kandy Works Properties Limited ("the Company") is a privately owned company, limited by shares, and incorporated in England and Wales. The Company's registration number is 12913500. The address of its registered office and principal place of business is Kandy Works, Brown Lane East, Leeds, West Yorkshire LS11 0BT.
The principal activity of the Company is that of a holding company.
The principal activity of the Group is that of the sale of women's clothing, men's clothing, homeware and accessories under the Joe Browns brand via a mail order catalogue, its website and stores. The Group also operates a wholesale division which sells to a variety of other businesses ranging from public limited companies to small owner managed retail stores.
2.Accounting policies
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|
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Basis of preparation of financial statements
|
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 3).
These financial statements have been presented in pound sterling which is the functional currency of the group, and rounded to the nearest £.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The merger accounting acquisition method was used for the acquisition of Joe Browns Limited on 21 April 2022.
- 18 -
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|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
2.Accounting policies (continued)
The directors consider the use of the going concern assumption appropriate in preparing these financial statements, as they have not identified any factors that may give rise to uncertainty over the company's ability to continue as a going concern.
Gross margins have been maintained, and the Group reported a net profit of £1.6m (2022: £4.2m), EBITDA of £2.4m (2022: £5.6m) as well as a strong net current asset position of £12m (2022: £13.8m) and net asset position of £16.6m (2022: £17.0m). The Group’s healthy cash balance at the year-end gives it strength and flexibility, particularly in buying decisions. This, along with the other factors included within the Business Review and Future Developments section of the Strategic Report, supports the director's assessment that no factors give rise to a material uncertainty over the going concern assumption.
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Foreign currency translation
|
Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
- 19 -
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|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
2.Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when all of the following conditions are satisfied:
∙the Group has transferred the significant risks and rewards of ownership to the buyer;
∙the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
∙the amount of revenue can be measured reliably;
∙it is probable that the Group will receive the consideration due under the transaction; and
∙the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Royalty income
Royalty income is recognised on an accruals basis in accordance with the substance of the agreements in place.
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|
|
Operating leases: the Group as lessee
|
Payments under operating leases relate to the leases undertaken in respect of the two retail stores.
Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Interest income is recognised in profit or loss using the effective interest method.
Defined contribution pension plan
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Group in independently administered funds.
- 20 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
2.Accounting policies (continued)
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Current and deferred taxation
|
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company and the Group operate and generate income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the reporting date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
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Long-term leasehold property
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The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Within the reporting period, the Company changed their depreciation policy in relation to freehold property from 5% straight-line to 2.5% straight-line.
- 21 -
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|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
2.Accounting policies (continued)
Investments in subsidiaries are measured at cost less accumulated impairment.
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price. Cost is based on the cost of purchase on a first in, first out basis.
At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in the Statement of Comprehensive Income.
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
|
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
In the Consolidated Statement of Cash Flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Group's cash management.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
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|
Provisions for liabilities
|
Provisions are made where an event has taken place that gives the Group a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the reporting date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
- 22 -
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|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
2.Accounting policies (continued)
The Group only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties and loans to related parties.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or in case of an out-right short-term loan that is not at market rate, the financial asset or liability is measured, initially at the present value of future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost, unless it qualifies as a loan from a director in the case of a small company, or a public benefit entity concessionary loan.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Consolidated Statement of Comprehensive Income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Group would receive for the asset if it were to be sold at the reporting date.
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
- 23 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
|
|
Judgements in applying accounting policies and key sources of estimation uncertainty
|
In applying the Company and the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions in determining the carrying amounts of assets and liabilities. The directors’ judgements, estimates and assumptions are based on the best and most reliable evidence available at the time when the decisions are made, and are based on historical experience and other factors that are considered to be applicable. Due to the inherent subjectively involved in making such judgements, estimates and assumptions, the actual results and outcomes may differ.
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.
Critical judgements in applying the accounting policies
The critical judgements that the directors have made in the process of applying the Company and the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements are discussed below:
i) Stock provision
The Group estimates any required impairment to the carrying value of stock by assessing the amount and value of obsolete and slow-moving stock, using their judgement of the future sales value generated by those stock items. Refer to Note 14 for details of impairment losses recognised in stock.
Other sources of estimation uncertainty
Other sources of estimation uncertainty, that are not considered to give rise to an increased risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
i) Royalty income recognition
The Group received royalty income over a period that is not co-terminus with the reporting date. For these periods the Group estimates whether the Group will achieve their targets that generate the royalties and the amount of income that should be recognised, using their judgement based on historical performance.
ii) Determining residual values and useful economic lives of tangible assets
The Group depreciates tangible assets over their estimated useful lives. The estimation of the useful lives of tangible assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied. Judgement is also applied when determining the residual values for fixed assets. When determining the residual value, the directors have assessed the amount that the Group would currently obtain for the disposal of the asset, if it were already of the condition expected at the end of its useful life. Where possible this is done with reference to external market prices.
- 24 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
|
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|
|
An analysis of turnover by class of business is as follows:
|
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|
Analysis of turnover by country of destination:
|
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|
The operating profit is stated after charging/(crediting):
|
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Depreciation of tangible fixed assets
|
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|
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|
Other operating lease rentals
|
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|
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|
During the year, the Group obtained the following services from the Company's auditor:
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Fees payable to the Company's auditor for the audit of the consolidated and parent Company's financial statements
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|
Fees payable to the Group's auditor in respect of:
|
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|
Other services relating to taxation
|
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|
|
Taxation compliance services
|
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|
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|
|
- 25 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
|
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|
Staff costs, including directors' remuneration, were as follows:
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|
Cost of defined contribution scheme
|
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|
The average monthly number of employees, including the directors, during the year was as follows:
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Selling, distribution and office
|
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The Company has no employees other than the directors, who did not receive any remuneration paid directly by the Parent Company (2022 - £NIL).
|
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Group contributions to defined contribution pension schemes
|
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|
During the year retirement benefits were accruing to 1 directors (2022 - 1) in respect of defined contribution pension schemes.
|
|
|
The highest paid director received remuneration of £155,793 (2022 - £144,618).
|
|
|
The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £NIL (2022 - £NIL).
|
- 26 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
|
|
Other interest receivable
|
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|
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|
Current tax on profits for the year
|
|
|
|
|
Adjustments in respect of previous periods
|
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|
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Origination and reversal of timing differences
|
|
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|
|
Origination and reversal of timing differences
|
|
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|
|
Adjustment to tax charge in respect of previous periods
|
|
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|
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|
|
|
|
|
|
|
|
Taxation on profit on ordinary activities
|
|
|
- 27 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
10.Taxation (continued)
|
|
Factors affecting tax charge for the year
|
|
|
The tax assessed for the year is higher than (2022 -lower than) the standard rate of corporation tax in the UK of 20.5% (2022 - 19%). The differences are explained below:
|
|
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|
|
|
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|
|
Profit on ordinary activities before tax
|
|
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|
|
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.5% (2022 -19%)
|
|
|
|
|
|
|
|
|
|
Expenses not deductible for tax purposes
|
|
|
|
|
|
|
|
|
|
Adjustments to tax charge in respect of prior periods
|
|
|
|
|
Adjustment to tax charge in respect of prior periods - deferred tax
|
|
|
|
|
Remeasurement of deferred tax for changes in tax rates
|
|
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|
|
Movement in deferred tax not recognised
|
|
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|
|
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|
Other differences leading to an increase (decrease) in the tax charge
|
|
|
|
|
|
|
|
|
|
Total tax charge for the year
|
|
|
|
|
Factors that may affect future tax charges
|
From 1 April 2023, the rate of corporation tax in the United Kingdom increased from 19% to 25%. Companies with profits of £50,000 or less will continue to be taxed at 19%, which is a new small profits rate. Where taxable profits are between £50,000 and £250,000, the higher 25% rate will apply but with a marginal relief applying as profits increase.
|
|
Dividends declared on Ordinary shares
|
|
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|
Dividends declared on Ordinary A shares
|
|
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|
|
|
|
- 28 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
- 29 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
12.Tangible fixed assets (continued)
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|
Charge for the year on owned assets
|
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|
- 30 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
|
|
Investments in subsidiary companies
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|
The following was a subsidiary undertaking of the Company:
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|
Kandy Works, Brown Lane East, Leeds, West Yorkshire, LS11 0BT
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|
The difference between purchase price or production cost of stocks and their replacement cost is not material.
|
|
|
During the year, a reversal of impairment of £79,286 (2022: impairment loss of £277,789) was recognised within cost of sales in the Statement of Comprehensive Income.
|
- 31 -
|
|
KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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Prepayments and accrued income
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Cash and cash equivalents
|
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Creditors: Amounts falling due within one year
|
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Amounts owed to group undertakings
|
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Other taxation and social security
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Accruals and deferred income
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Amounts owed to group undertakings are unsecured, interest free and repayable on demand.
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- 32 -
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KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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Charged to profit or loss
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Charged to profit or loss
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Accelerated capital allowances
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Tax losses carried forward
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Allotted, called up and fully paid
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8,511 (2022 - 8,511) Ordinary shares of £1.00 each
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2,719 (2022 - 2,719) Ordinary A shares of £1.00 each
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The A Ordinary shares rank above Ordinary shares for return of capital. All shares have equal voting rights and dividend rights in accordance with the Articles of Association.
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- 33 -
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KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
Merger reserve
The merger reserve represents the cumulative reserve movement arising from business combinations.
Profit and loss account
The profit and loss account represents cumulative profits or losses net of dividends paid and other adjustments.
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During the year, the Company granted 463 B ordinary shares at an exercise price of £408 per share. The options can only be exercised on an exit event.
As at 30 June 2023, the Company had unexercised options over 463 B ordinary shares at a weighted average exercise price of £408 per share.
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The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £100,638 (2022: £80,482). Contributions totalling £19,389 (2022: £16,572) were payable to the fund at the reporting date and are included in creditors.
- 34 -
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KANDY WORKS PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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Commitments under operating leases
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At 30 June 2023 the Group and the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Related party transactions
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The Group has taken advantage of the exemption conferred by FRS 102 Section 33 not to disclose transactions with wholly owned members of the group.
During the year services were provided to the Group by a related party of £16,288 (2022: £12,650). The amount receivable at the year end was £4,350 (2022: £870).
The directors received dividends from the Company in aggregate on the same terms as other shareholders of £338,915 (2022: £Nil).
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Post balance sheet events
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In October 2023 the Group entered into a 10 year lease agreement. The lease enables the leasee to exit the contract after a 5 year period has passed. Future commitments pertaining to this lease are not included within operating lease commitments note.
The ultimate controlling party is S F Brown as a result of his majority shareholding.
- 35 -
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