Company Registration No. 07435248 (England and Wales)
BEAUTYCOM UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
BEAUTYCOM UK LIMITED
COMPANY INFORMATION
Director
K Angelides
(Appointed 23 July 2021)
Company number
07435248
Registered office
29/30 Fitzroy Square
London
W1T 6LQ
Auditor
KPMG LLP
Gateway House
Tollgate
Chandler's Ford
Southampton
SO53 3TG
Banker
HSBC Bank Plc
The Helicon
1 South Place
London
EC2M 2UP
BEAUTYCOM UK LIMITED
CONTENTS
Page
Strategic report
1 - 3
Director's report
4 - 6
Statement of Directors' responsibilities in respect of the Directors' report and the financial statements
7
Independent auditor's report to the members of Beautycom UK Limited
8 - 9
Statement of comprehensive income
10
Balance sheet
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 34
BEAUTYCOM UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
- 1 -
The directors present their strategic report, together with the audited financial statements and auditor’s report, for BeautyCom UK Limited (“the company”) for the year ended 31 December 2019. In preparing this strategic report, the directors have complied with s414C of the Companies Act 2006.
Principal activities and review of the business
The company’s principal activity is the sale of cosmetic products and beauty subscriptions online. The company is a private company limited by shares and is incorporated in the United Kingdom and registered in England and Wales.
The results for the year and the financial position of the company are shown on pages 7 and 8. The results for the company show a loss before tax of £1,417,986 (2018: profit before tax of £1,808,733). The company has net liabilities of £339,080 (2018: £1,591,745) at the year end.
On 16 December 2019 the company acquired the entire issued share capital of BeautyCom Espana SL at fair value in consideration for the company allotting and issuing one ordinary share of £0.01 each in the capital of the company to BeautyCom SAS, with an amount of £1,174,536 being paid up on the new share.
Key performance indicators
The Board of Directors monitors the effectiveness of the company’s operations by considering various key performance indicators. The main performance indicators are revenue, operating profit/loss before tax and gross margin. Revenue for the year was £20,600,572 (2018: £22,074,177) and operating loss before tax was £1,544,758 (2018: operating profit before tax of £1,767,891). As at 31 December 2019 the business has a gross margin of 64% (2018: 68%).
The decline in revenue and operating profit throughout the period is mainly attributed to a reduction in the effectiveness of marketing efforts due to rising competition in the UK market and increased uncertainty around Brexit and its impact on our ability to secure favorable terms to drive operating margins. Additionally, we made incremental investments in the overall box experience via the sample product and packaging. The investment in 2019 slightly reduced our gross margins in efforts to boost retention, drive increased customer lifetime value, and improve unit economics in the longer term
Principal risks and uncertainties
Image and reputation - The Company’s reputation and brand image may be compromised at any time, particularly where the report of an incident is conveyed from consumer to consumer at the speed of the internet. Relationships with our customers are maintained through our Customer Service team.
Third party supply – The company has a number of suppliers from which we source our products. Even with due diligence in acquiring these suppliers there is a risk that these suppliers will fail to deliver quality products on time, impacting our ability to ship boxes to our subscribers on a timely basis. We manage our supplier relationships closely.
Competition - The company is subject to intense competition within the markets it operates. This is healthy and leads to constant innovation in order to maintain and grow our market share. The company expects the highest standards of ethics when dealing in such a competitive market.
Information systems and cyber risk - There is a risk of malfunction or breakdown in our internal systems. The company has strict rules with regard to the backups, data protection, access and security of its hardware and software systems.
Intellectual property – The company has a portfolio of registered trademarks. Trademarks may be infringed by others seeking to benefit illegally from their reputation and goodwill. The company’s legal department is entrusted with the protection of these assets.
Changes in regulations – The company will comply with all local and international regulations with regard to the way in which it operates.
BEAUTYCOM UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 2 -
Principal risks and uncertainties (continued)
Political Risk - On 31 January 2020, the United Kingdom (the “UK”) left the European Union (the “EU”) and entered a transitional period until 31 December 2020. The company developed plans and procedures for trading beyond the transition period and has not suffered any disruption as a result of Brexit. To date, the main impacts remain mostly administrative, for example additional VAT returns, but the Company continues to monitor and address other risks rising as appropriate.
Covid-19 - On 11 March 2020 the World Health Organisation labeled the public health emergency situation caused by the coronavirus (Covid-19) outbreak a global pandemic. The rapid escalation of events, in both the UK and worldwide, resulted in an unprecedented health crisis that has an impact on the macroeconomic environment and business evolution. To tackle the issue, the United Kingdom issued orders to stay at home, closed certain businesses and venues, prohibited public gatherings, and other guidelines.
The company responded to this in a variety of ways to ensure the wellbeing of employees and minimize disruption of business as far as possible. Due to the small number of employees in the UK, the company was able to adapt an effective “work from home” approach. The company also saw an increase in subscribers and revenue throughout the initial lockdown period due to the closure of physical stores. After a period, the company did experience some negative consequences from the pandemic. These were mostly caused by delays in shipping stock to the warehouse as well as a shortage of warehouse labour. The company put in safeguards to reduce the ongoing risks.
The company continues to operate successfully and at the time of report issuance encounters minimal business issues as a result of the pandemic.
Financial Risk Management and Objectives
The company’s activities expose it to financial risks including liquidity and currency risk.
Liquidity Risk - The company operates a prudent approach to cash flow. In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the company uses intercompany borrowings.
Currency Risk – The company has significant currency risks mainly due to purchasing from Europe and throughout the world.
Future Prospects
In 2021, the company’s parent company Birchbox, Inc agreed the sale of Birchbox, Inc and its subsidiaries, including BeautyCom UK Limited to FemTec Health, Inc. This transaction completed on 23 July 2021.
The company continues to focus on rejuvenating the brand and enhancing the experience of our subscribers.
BEAUTYCOM UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 3 -
Disclaimer of Opinion
The independent auditors have issued a disclaimer of opinion. The audit evidence available to the independent auditor did not allow them to confirm the appropriateness of preparing the financial statements on the going concern basis. In addition, the independent auditors were unable to obtain sufficient appropriate audit evidence regarding the stock, which is currently held at a carrying value of £2.6million.
Additionally, as stated in Note 1 to the financial statements, consolidated financial statements, as required by the Companies Act 2006, have not been prepared.
K Angelides
Director
7 September 2022
BEAUTYCOM UK LIMITED
DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
- 4 -
The director presents his annual report and financial statements for the year ended 31 December 2019.
Principal activities
The principal activity of the company continued to be that of sales of cosmetic products and beauty subscriptions online.
Going Concern
Notwithstanding net current liabilities of £1,570,155 as at 31 December 2019 (2018: £1,676,168), a loss for the year then ended of £1,724,245 (2018: profit of £2,114,992) and operating cash outflows for the year of £1,485,399 (2018: inflow of £167,407) the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
The directors have prepared cash flow forecasts for a period of 18 months from the date of approval of these financial statements which indicate that, taking account of reasonably possible downsides, the company will have sufficient funds, through ongoing funding from its ultimate parent company, Femtec Health Inc., to meet its liabilities as they fall due for that period.
Those forecasts are also dependent on Birchbox Inc. not seeking repayment of the amounts currently due to the group, which at 31 December 2019 amounted to £251,464, as well as Femtec Health Inc. providing additional financial support during that period. Femtec Health Inc. has indicated its intention to continue to make available such funds as are needed by the company, and Birchbox Inc. has confirmed that that it does not intend to seek repayment of the amounts due at the balance sheet date, for the period covered by the forecasts. As with any company placing reliance on other group entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
However, the ability of Femtec Health Inc. to continue to provide this support is dependent on continued cash injection from private investors, which has not been formally confirmed and is based upon verbal agreement only. Furthermore, due to the difficulty in accurately forecasting the future financial performance of Femtec Health Inc., including consideration of any additional cash outflows required to support other entities within the Group, there is inherent uncertainty in predicting the supporting entity’s ability to continue to provide financial support to Beautycom UK Limited.
Based on this although the directors believe that it remains appropriate to prepare the financial statements on a going concern basis, these circumstances represent a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern and, therefore, that the company may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate. Given the unavailability of evidence regarding the ongoing financial support being provided by the company’s ultimate parent company the company’s auditors have been unable to form a view on the applicability of the going concern basis and as a consequence have not issued an opinion on these financial statements.
Brexit
During 2019 and 2020 the company undertook some preparations for the “No Deal” exit that occurred in January 2021 as a result of the UK leaving the European Union.
The strategy was to continuously assess the stock holding purchased outside of the UK to minimise the potential disruption and delays in the supply chain. The company experienced some delays in the supply chain, but it was dealt with in a timely manner. The company also experienced an increase in warehouse cost. This was mostly due the shortage of warehouse labour. However, the delays and shortages were not only caused by Brexit, but also by the global pandemic.
The company obtained the advice of appropriate advisors and consultants to ensure the correct procedures are in place. In terms of recruitment, the company has not changed its approach towards recruitment, including EU nationals.
BEAUTYCOM UK LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 5 -
Director
The director who held office during the year and up to the date of signature of the financial statements was as follows:
K Beauchamp
(Resigned 23 July 2021)
S Scott
(Resigned 28 February 2020)
K Angelides
(Appointed 23 July 2021)
A Munoz
(Appointed 28 February 2020 and resigned 23 June 2021)
Results and dividends
The results for the year are set out on page 10.
No ordinary dividends were paid. The director does not recommend payment of a final dividend.
Post reporting date events
On 23 July 2021 Birchbox Inc. was acquired by FemTec Health Inc, a company incorporated in United States of America and FemTec Health Inc became the ultimate parent company.
On 11 March 2020 the World Health Organisation labeled the public health emergency situation caused by the coronavirus (Covid-19) outbreak a global pandemic. The rapid escalation of events, in both the UK and worldwide, resulted in an unprecedented health crisis that has an impact on the macroeconomic environment and business evolution. To tackle the issue, the United Kingdom issued orders to stay at home, closed certain businesses and venues, prohibited public gatherings, and other guidelines.
The company responded to this in a variety of ways to ensure the wellbeing of employees and minimize disruption of business as far as possible. Due to the small number of employees in the UK, the company was able to adapt an effective “work from home” approach. The company also saw an increase in subscribers and revenue throughout the initial lockdown period due to the closure of physical stores. After a period, the company did experience some negative consequences from the pandemic. These were mostly caused by delays in shipping stock to the warehouse as well as a shortage of warehouse labour. The company put in safeguards to reduce the ongoing risks. The company continues to operate successfully and has adapted its plan in light of the pandemic.
During 2019 and 2020 the company undertook some preparations for the “No Deal” exit that occurred in January 2021 as a result of the UK leaving the European Union.
The strategy was to continuously assess the stock holding purchased outside of the UK to minimise the potential disruption and delays in the supply chain. The company experienced some delays in the supply chain, but it was dealt with in a timely manner. The company also experienced an increase in warehouse cost. This was mostly due the shortage of warehouse labour. However, the delays and shortages were not only caused by Brexit, but also by the global pandemic.
The company obtained the advice of appropriate advisors and consultants to ensure the correct procedures are in place. In terms of recruitment, the company has not changed its approach towards recruitment, including EU nationals.
Statement of disclosure to auditor
Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
so far as that director is aware, there is no relevant audit information of which the company's auditor is unaware, and
that director has taken all the steps that ought to have been taken as a director in order to be aware of any information needed by the company's auditor in connection with preparing their report and to establish that the company's auditor is aware of that information.
BEAUTYCOM UK LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 6 -
Other information
This Director's Report has 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.
In the prior year the company applied the disclosure requirements of section 1A of FRS 102.
On behalf of the board
K Angelides
Director
7 September 2022
BEAUTYCOM UK LIMITED
STATEMENT OF DIRECTOR'S RESPONSIBILITIES IN RESPECT
OF THE DIRECTOR'S REPORT AND THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
- 7 -
The directors are responsible for preparing the Directors' 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 they have elected to prepare the financial statements in accordance with applicable law and Section 1A of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (UK Generally Accepted Accounting Practice applicable to Smaller Entities).
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are is required to:
assess the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF BEAUTYCOM UK LIMITED
- 8 -
Disclaimer of opinion
We were engaged to audit the financial statements of Beautycom UK Limited (“the company”) for the year ended 31 December 2019 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Cash Flows, Statement of Changes in Equity and related notes, including the accounting policies in note 1.
We do not express an opinion on the company financial statements. Due to the significance of the matter described in the Basis for disclaimer of opinion section of our report, we have not been able to obtain sufficient, appropriate audit evidence to provide a basis for an audit opinion.
Basis for opinion on group financial statements
As stated in note 1 to the financial statements, consolidated financial statements, as required by the Companies Act 2006, have not been prepared.
Basis for disclaimer of opinion on company financial statements
The audit evidence available to us to confirm the appropriateness of preparing the financial statements on the going concern basis was limited because the directors have not provided evidence to support the assumptions used with respect to the ongoing financial support forecast to be provided by the company’s ultimate parent company and other group entities. As a result, and in the absence of any alternative evidence available to us, we have been unable to form a view as to the applicability of the going concern basis, the circumstances of which, together with the effect on the financial statements should this basis be inappropriate, are set out in note 2 to the financial statements.
In addition with respect to stock the audit evidence available to us was limited as we identified a number of issues when trying to verify the cost and quantity of stock held at year end. We noted ineffective controls over third party stock counts, whereby management were unable to reconcile the year end stock balance. Furthermore additional sampling performed to verify cost at year end was also ineffective due to insufficient records maintained to support the costs recognised, particularly those that were an aggregate of multiple products or overseas purchases. Owing to the nature of the company’s records, we were unable to obtain sufficient appropriate audit evidence regarding the stock, which is currently held at a carrying value of £2.6million by using other audit procedures. Any adjustments would have a consequential effect on the company’s net assets as at the balance sheet date of 31 December 2019 and on its loss for the year then ended.
Strategic report and directors' report
The directors are responsible for the strategic report and the directors’ report. Our opinion on the financial statements does not cover those reports and we do not express an audit opinion thereon.
Our responsibility is to read the strategic report and the directors’ report and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.
Due to the significance of the matters described in the basis for disclaimer of opinion on financial statements paragraph, and the consequential effect on the related disclosures in the Strategic Report and Directors’ Report, although in our opinion the information given in the Strategic Report and the Directors’ Report for the financial year is consistent with the financial statements, we do not express an opinion on the preparation of those reports in accordance with the Companies Act 2006 or whether we have identified material misstatements in those reports.
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF BEAUTYCOM UK LIMITED
- 9 -
Matters on which we are required to report by exception
In respect solely of the limitation of our work referred to above:
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:
returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made.
Directors' responsibilities
As explained more fully in their statement set out on page 5, the directors are responsible for: the preparation of the financial statements in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and for being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our responsibility is to conduct an audit of the financial statements in accordance with International Standards on Auditing (UK), and to issue an auditor’s report. However, because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we were not able to obtain sufficient, appropriate audit evidence to provide a basis for an audit opinion on the financial statements.
We have fulfilled our ethical responsibilities under, and are independent of the company in accordance with, UK ethical requirements including the FRC Ethical Standard.
The purpose of our audit work and to whom we owe our responsibilities
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.
William Smith (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Gateway House
Tollgate
Chandler's Ford
Southampton
SO53 3TG
Date
7 September 2022
BEAUTYCOM UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
- 10 -
2019
2018
Notes
£
£
Turnover
3
20,600,572
22,074,177
Cost of sales
(7,691,255)
(7,007,851)
Gross profit
12,909,317
15,066,326
Distribution costs
(4,664,725)
(4,754,156)
Administrative expenses
(9,789,350)
(8,544,279)
Operating (loss)/profit
4
(1,544,758)
1,767,891
Interest receivable and similar income
7
126,772
53,788
Interest payable and similar expenses
8
(12,946)
(Loss)/profit before taxation
(1,417,986)
1,808,733
Tax on (loss)/profit
9
(306,259)
306,259
(Loss)/profit for the financial year
(1,724,245)
2,114,992
The profit and loss account has been prepared on the basis that all operations are continuing operations.
No other comprehensive income was recognised during the year.
The accompanying notes form part of the financial statements.
BEAUTYCOM UK LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2019
31 December 2019
- 11 -
2019
2018
Notes
£
£
£
£
Fixed assets
Tangible assets
11
57,720
86,433
Investments
12
1,174,536
1,232,256
86,433
Current assets
Stocks
14
2,103,247
1,622,764
Debtors falling due after one year
15
286,617
306,259
Debtors falling due within one year
15
826,900
852,016
Cash at bank and in hand
309,192
1,812,128
3,525,956
4,593,167
Creditors: amounts falling due within one year
16
(5,096,111)
(6,269,335)
Net current liabilities
(1,570,155)
(1,676,168)
Total assets less current liabilities
(337,899)
(1,589,735)
Provisions for liabilities
19
(1,181)
(2,010)
Net liabilities
(339,080)
(1,591,745)
Capital and reserves
Called up share capital
21
211
211
Share premium account
22
3,018,600
41,690
Profit and loss reserves
(3,357,891)
(1,633,646)
Shareholders' fund
(339,080)
(1,591,745)
The accompanying notes form part of the financial statements.
These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements were approved by the board of directors and authorised for issue on 7 September 2022 and are signed on its behalf by:
K Angelides
Director
Company Registration No. 07435248
BEAUTYCOM UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
- 12 -
Called up share capital
Share premium account
Profit and loss reserves
Total
£
£
£
£
Balance at 1 January 2018
211
41,690
(3,748,638)
(3,706,737)
Total comprehensive profit for the year
-
-
2,114,992
2,114,992
Balance at 31 December 2018
211
41,690
(1,633,646)
(1,591,745)
Total comprehensive loss for the year
-
-
(1,724,245)
(1,724,245)
Issue of share capital
21
2,976,910
-
2,976,910
Balance at 31 December 2019
211
3,018,600
(3,357,891)
(339,080)
During the year 2 ordinary shares of of nominal value 1p each were issued
The accompanying notes form part of the financial statements.
BEAUTYCOM UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
- 13 -
2019
2018 unaudited
Notes
£
£
£
£
Cash flows from operating activities
Cash (absorbed by)/generated from operations
27
(1,485,399)
180,353
Interest paid
(12,946)
Net cash (outflow)/inflow from operating activities
(1,485,399)
167,407
Investing activities
Purchase of tangible fixed assets
(18,137)
(14,737)
Interest received
600
-
Net cash used in investing activities
(17,537)
(14,737)
Net (decrease)/increase in cash and cash equivalents
(1,502,936)
152,670
Cash and cash equivalents at beginning of year
1,812,128
1,659,458
Cash and cash equivalents at end of year
309,192
1,812,128
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
- 14 -
1
Accounting policies
Company information
Beautycom UK Limited is a private company limited by shares incorporated, domiciled and registered in England and Wales in the United Kingdom. The registered office is 29/30 Fitzroy Square, London, W1T 6LQ.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
In the prior year the financial statements were 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 as applicable to companies subject to the small companies regime. The company applied the disclosure requirements of section 1A of FRS 102. The company took advantage of exemptions in the prior year and did not prepare a Statement of Cash Flows.
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 Pound Sterling.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.
The Company has chosen not to prepare consolidated financial statements, due to the complexity of the disposal accounting in the prior year, the amount of time it would take to prepare consolidated financial statements and the urgent requirement to file the financial statements at Companies House. Accordingly, the auditors have issued a qualified audit opinion as set out on pages 7 and 8.
The independent auditors have issued a disclaimer of opinion. The audit evidence available to the independent auditor did not allow them to confirm the appropriateness of preparing the financial statements on the going concern basis. In addition, the independent auditors were unable to obtain sufficient appropriate audit evidence regarding the stock, which is currently held at a carrying value of £2.6million.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 15 -
1.2
Going concern
Notwithstanding net current liabilities of £1,570,155 as at 31 December 2019 (2018: £1,676,168), a loss for the year then ended of £1,724,245 (2018: profit of £2,114,992) and operating cash outflows for the year of £1,485,399 (2018: inflow of £167,407) the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.true
The directors have prepared cash flow forecasts for a period of 18 months from the date of approval of these financial statements which indicate that, taking account of reasonably possible downsides, the company will have sufficient funds, through ongoing funding from its ultimate parent company, Femtec Health Inc., to meet its liabilities as they fall due for that period.
Those forecasts are also dependent on Birchbox Inc. not seeking repayment of the amounts currently due to the group, which at 31 December 2019 amounted to £251,464, as well as Femtec Health Inc. providing additional financial support during that period. Femtec Health Inc. has indicated its intention to continue to make available such funds as are needed by the company, and Birchbox Inc. has confirmed that that it does not intend to seek repayment of the amounts due at the balance sheet date, for the period covered by the forecasts. As with any company placing reliance on other group entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
However, the ability of Femtec Health Inc. to continue to provide this support is dependent on continued cash injection from private investors, which has not been formally confirmed and is based upon verbal agreement only. Furthermore, due to the difficulty in accurately forecasting the future financial performance of Femtec Health Inc., including consideration of any additional cash outflows required to support other entities within the Group, there is inherent uncertainty in predicting the supporting entity’s ability to continue to provide financial support to Beautycom UK Limited.
Based on this although the directors believe that it remains appropriate to prepare the financial statements on a going concern basis, these circumstances represent a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern and, therefore, that the company may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate. Given the unavailability of evidence regarding the ongoing financial support being provided by the company’s ultimate parent company the company’s auditors have been unable to form a view on the applicability of the going concern basis and as a consequence have not issued an opinion on these financial statements.
1.3
Turnover
Turnover represents amounts receivable for goods and services net of VAT and trade discounts. Revenue is recognised on dispatch of the goods being the point that risk is transferred to the customer as determined by the terms agreed in the contract.
Deferred revenue generally results where payments are received for a service to be provided over a specified length of time, payments received are recognised as deferred revenue and released to the income statement over the period that the service is performed/sale is complete.
Members earn loyalty points when they make purchases, referrals and complete surveys. Members can redeem their points towards purchases. Points expire six months from the date they were first earned.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 16 -
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:
Land and buildings Leasehold
over the life of the lease
Fixtures & fittings
25% straight line
Computer equipment
50% straight line
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 credited or charged to profit or loss.
1.5
Fixed asset investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
1.6
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 17 -
1.7
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is based on the weighted average principle and includes expenditure incurred in acquiring the stocks, production or conversion costs and other costs in bringing them to their existing location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of replacement cost and cost, adjusted where applicable for any loss of service potential.
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.
1.8
Cash at bank and in hand
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.
1.9
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 18 -
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Interest-bearing borrowings classified as basic financial instruments
Interest-bearing borrowings are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 19 -
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.10
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.11
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.12
Provisions
Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation.
Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value the unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises.
The provision in respect of loyalty points issued to customers and members of staff recognises all outstanding loyalty points issued at the end of the year. Points expire 6 months from the date they were first issued. No adjustment is made for unused points until the expiration date is reached. In 2017, management made the decision to move from a customer loyalty point programme to a discount scheme and no new loyalty points were issued to customers from 3 May 2017 however they were still allowed to use the points for purchases until they expired. Staff members still receive points on an annual basis or for performance.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 20 -
1.13
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.14
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.15
Leases
Leases in which the company assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. All other leases are classified as operating leases.
Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
1.16
Foreign exchange
Transactions in foreign currencies are translated to the company’s functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised in the profit and loss account.
1.17
Interest receivable and interest payable
Interest payable and similar expenses include interest payable, finance expenses on shares classified as liabilities and finance leases recognised in profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the profit and loss account (see foreign currency accounting policy).
Other interest receivable and similar income include interest receivable on funds invested and net foreign exchange gains.
Interest income and interest payable are recognised in profit or loss as they accrue, using the effective interest method. Foreign currency gains and losses are reported on a net basis.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 21 -
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The directors have assessed the critical judgements made in the process of applying the company's accounting policies that have а significant effect on the amounts recognised in financial statements. The directors are of the view that there are no judgements that need to be highlighted above the descriptions within the accounting policies in note1 above.
Critical accounting judgements and sources of estimation uncertainty
As described in note 1, at each reporting date, an assessment is made for impairment of stocks. 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. In calculating the impairment losses and reversal of impairment losses management make estimates based on historical experience and other relevant factors.
Deferred tax assets are assessed based on the current trading performance and expected future taxable profits of the company. The directors have decided to only recognise a deferred tax asset where profits are reasonably expected in the following reporting period.
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2019
2018
£
£
Turnover analysed by class of business
Cosmetic products and online beauty subscriptions
20,600,572
22,074,177
2019
2018
£
£
Turnover analysed by geographical market
United Kingdom
19,845,219
21,309,854
Republic of Ireland
755,353
764,323
20,600,572
22,074,177
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 22 -
4
Operating (loss)/profit
2019
2018
Operating (loss)/profit for the year is stated after charging:
£
£
Exchange losses
9,852
9,079
Fees payable to the company's auditor for the audit of the company's financial statements
37,175
26,000
Depreciation of owned tangible fixed assets
46,850
41,871
(Profit)/loss on disposal of tangible fixed assets
2,677
Cost of stocks recognised as an expense
7,691,255
7,007,851
Operating lease charges
212,465
183,183
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2019
2018
Number
Number
Admin & Distribution
22
12
Brand Partnership
7
8
Marketing & PR
17
16
46
36
Their aggregate remuneration comprised:
2019
2018
£
£
Wages and salaries
2,054,384
1,723,454
Social security costs
214,862
143,333
Pension costs
54,130
29,172
2,323,376
1,895,959
6
Director's remuneration
2019
2018
£
£
Remuneration for qualifying services
203,873
108,077
Company pension contributions to defined contribution schemes
1,442
205,315
108,077
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
6
Director's remuneration
(Continued)
- 23 -
Remuneration disclosed above include the following amounts paid to the highest paid director:
2019
2018
£
£
Remuneration for qualifying services
203,873
108,077
Company pension contributions to defined contribution schemes
1,442
-
The directors are granted with the share options under the Birchbox Inc. 2010 Equity Incentive Plan. During the prior year all existing share options were renounced. The directors did not exercise any share options during prior year.
7
Interest receivable and similar income
2019
2018
£
£
Interest receivable from group undertakings
600
Net foreign exchange gain
126,172
53,788
Total income
126,772
53,788
8
Interest payable and similar expenses
2019
2018
£
£
Interest on financial liabilities measured at amortised cost:
Interest payable to group undertakings
12,946
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 24 -
9
Taxation
2019
2018
£
£
Deferred tax
Origination and reversal of timing differences
(306,259)
Write down or reversal of write down of deferred tax asset
306,259
Total deferred tax
306,259
(306,259)
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) were substantively enacted on 26 October 2015. An increase to 25% (effective from 1 April 2023) was subsequently enacted on 24 May 2021. This will increase the company's future current tax charge accordingly.
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
2019
2018
£
£
(Loss)/profit before taxation
(1,417,986)
1,808,733
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.00% (2018: 19.00%)
(269,417)
343,659
Tax effect of expenses that are not deductible in determining taxable profit
9,470
4,865
Unutilised tax losses carried forward
255,069
Permanent capital allowances in excess of depreciation
4,878
420
Depreciation on assets not qualifying for tax allowances
4,032
Prior year tax losses utilised
(352,976)
Historic unrecognised tax losses now recognised
(306,259)
Historic tax losess now not recognised
306,259
Taxation charge/(credit) for the year
306,259
(306,259)
The company has estimated losses of £2,986,938 (2018: £1,643,867) available for carry forward against future trading profits. Deferred tax is recognised and the financial statements include a deferred tax asset as disclosed in note 18.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 25 -
10
Intangible fixed assets
Development Costs
£
Cost
At 1 January 2019 and 31 December 2019
8,198
Amortisation and impairment
At 1 January 2019 and 31 December 2019
8,198
Carrying amount
At 31 December 2019
At 31 December 2018
11
Tangible assets
Land and buildings Leasehold
Fixtures & fittings
Computer equipment
Total
£
£
£
£
Cost
At 1 January 2019
50,542
65,751
45,120
161,413
Additions
5,389
12,748
18,137
At 31 December 2019
50,542
71,140
57,868
179,550
Depreciation and impairment
At 1 January 2019
14,742
30,709
29,529
74,980
Depreciation charged in the year
12,636
16,253
17,961
46,850
At 31 December 2019
27,378
46,962
47,490
121,830
Carrying amount
At 31 December 2019
23,164
24,178
10,378
57,720
At 31 December 2018
35,800
35,042
15,591
86,433
12
Fixed asset investments
2019
2018
Notes
£
£
Investments in subsidiaries
13
1,174,536
On 16 December 2019 the company acquired the entire issued share capital of Beautycom Espana SL at fair value in consideration for the company allotting and issuing one ordinary share of £0.01 each in the capital of the company to Beautycom SAS, with an amount of £1,174,536 being paid up on the new share. The consideration provided by the company was an issue of shares and no cash was exchanged.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
12
Fixed asset investments
(Continued)
- 26 -
Movements in fixed asset investments
Shares in group undertakings
£
Cost or valuation
At 1 January 2019
-
Additions
1,174,536
At 31 December 2019
1,174,536
Carrying amount
At 31 December 2019
1,174,536
At 31 December 2018
-
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 27 -
13
Subsidiaries
On 16 December 2019 the company acquired the entire issued share capital of Beautycom Espana SL at fair value in consideration for the company allotting and issuing one ordinary share of £0.01 each in the capital of the company to Beautycom SAS, with an amount of £1,174,536.35 being paid up on the new share. As a result the share premium account increased by £1,174,536. At the date of acquisition the company, Beautycom Espana SL and Beautycom SAS were part of the same group.
Details of the company's subsidiaries at 31 December 2019 are as follows:
Name of undertaking
Registered office
Nature of business
Class of
% Held
shares held
Direct
Indirect
Beautycom Espana SL
Spain
Cosmetic products and beauty subscriptions
Ordinary
100.00
0
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
13
Subsidiaries
(Continued)
- 28 -
The aggregate capital and reserves and the result for the year of the subsidiaries noted above was as follows:
Name of undertaking
Capital and Reserves
Profit/(Loss)
£
£
Beautycom Espana SL
648,642
266,147
Beautycom Espana SL registered address is Carrer de Balmes 188, 4º 2º, 08006 Barcelona, Spain.
14
Stocks
2019
2018
£
£
Finished goods and goods for resale
2,103,247
1,622,764
Changes in finished goods and goods for resale recognised as cost of sales in the year amounted to £7,691,255 (2018: £7,007,851).
The write-down of stocks to net realisable value amounted to £465,115 (2018: £262,997).
The reversal of write-downs amounted to £nil as discussed below (2018: £174,413).
The write-down and reversal adjustments are included in cost of sales.
The circumstances or events that can lead to the reversal of a write-down include stock take adjustments and management’s estimates and associated assumptions with regards to impairment of stock which are based on historical experience and other relevant factors.
15
Debtors
2019
2018
Amounts falling due within one year:
£
£
Trade debtors
130,389
41,051
Amounts owed by group undertakings
16,876
228,773
Other debtors
130,190
130,190
Prepayments
549,445
452,002
826,900
852,016
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
15
Debtors
(Continued)
- 29 -
2019
2018
Amounts falling due after more than one year:
£
£
Amounts owed by group undertakings
286,617
Deferred tax asset (note 18)
306,259
286,617
306,259
Total debtors
1,113,517
1,158,275
16
Creditors: amounts falling due within one year
2019
2018
£
£
Trade creditors
3,172,294
2,431,541
Amounts due to group undertakings
251,464
1,769,995
Other taxation and social security
241,603
446,209
Other creditors
8,081
63,403
Accruals and deferred income
1,422,669
1,558,187
5,096,111
6,269,335
Included within accruals and deferred income is deferred income of £438,141 (2018: £757,123).
17
Financial instruments
2019
2018
£
£
Carrying amount of financial assets
Debt instruments measured at amortised cost
564,072
400,014
2019
2018
£
£
Carrying amount of financial liabilities
Measured at amortised cost
4,854,508
5,002,600
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 30 -
18
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Assets
Assets
2019
2018
Balances:
£
£
Tax losses
-
306,259
2019
Movements in the year:
£
Asset at 1 January 2019
(306,259)
Charge to profit or loss
306,259
Liability at 31 December 2019
-
The company have not recognised the utilisation of historic tax losses and given the profitability of the business have not recognised a deferred tax asset.
19
Provisions for liabilities
2019
2018
£
£
Provision for loyalty points
1,181
2,010
Movements on provisions:
Provision for loyalty points
£
At 1 January 2019
2,010
Net movement in provision in the year
(829)
At 31 December 2019
1,181
The provision is in respect of loyalty points issued to customers. During the year loyalty points worth £12,411 (2018: £12,733) were created, £2,935 (2018: £3,012) expired (after adjustment of provision of loyalty points expected to expire post year-end) and £10,305 (2018: £9,691) were used.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 31 -
20
Retirement benefit schemes
2019
2018
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
54,130
29,172
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
21
Share capital
2019
2018
£
£
Ordinary share capital
Issued and fully paid
21,054 Ordinary shares of 1p each
211
211
During the year 2 ordinary shares of of nominal value 1p each were issued.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company.
22
Share premium account
2019
2018
£
£
At the beginning of the year
41,690
41,690
Issue of new shares
2,976,910
At the end of the year
3,018,600
41,690
On 16 December 2019 the company acquired the entire issued share capital of Beautycom Espana SL at fair value in consideration for the company allotting and issuing one ordinary share of £0.01 each in the capital of the company to Beautycom SAS, with an amount of £1,174,536 being paid up on the new share. The share premium amount on the issue of this share being £1,174,536.
On 16 December 2019 the company issued one ordinary share of £0.01 each in the capital of the company to Beautycom SAS, with an amount of £1,802,374 being paid up on the new share. The consideration was used as settlement against a debt owed to the company to Beautycom SAS. The share premium amount on the issue of this share being £1,802,374.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 32 -
23
Operating lease commitments
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2019
2018
£
£
Within one year
229,354
261,901
Between two and five years
183,238
478,598
412,592
740,499
During the year £212,465 was recognised as an expense in the profit and loss account in respect of operating leases (2018: £183,183).
24
Events after the reporting date
On 23 July 2021 Birchbox Inc. was acquired by FemTec Health Inc, a company incorporated in United States of America and FemTec Health Inc became the ultimate parent company.
On 11 March 2020 the World Health Organisation labeled the public health emergency situation caused by the coronavirus (Covid-19) outbreak a global pandemic. The rapid escalation of events, in both the UK and worldwide, resulted in an unprecedented health crisis that has an impact on the macroeconomic environment and business evolution. To tackle the issue, the United Kingdom issued orders to stay at home, closed certain businesses and venues, prohibited public gatherings, and other guidelines.
The company responded to this in a variety of ways to ensure the wellbeing of employees and minimize disruption of business as far as possible. Due to the small number of employees in the UK, the company was able to adapt an effective “work from home” approach. The company also saw an increase in subscribers and revenue throughout the initial lockdown period due to the closure of physical stores. After a period, the company did experience some negative consequences from the pandemic. These were mostly caused by delays in shipping stock to the warehouse as well as a shortage of warehouse labour. The company put in safeguards to reduce the ongoing risks. The company continues to operate successfully and has adapted its plan in light of the pandemic.
During 2019 and 2020 the company undertook some preparations for the “No Deal” exit that occurred in January 2021 as a result of the UK leaving the European Union.
The strategy was to continuously assess the stock holding purchased outside of the UK to minimise the potential disruption and delays in the supply chain. The company experienced some delays in the supply chain, but it was dealt with in a timely manner. The company also experienced an increase in warehouse cost. This was mostly due the shortage of warehouse labour. However, the delays and shortages were not only caused by Brexit, but also by the global pandemic.
The company obtained the advice of appropriate advisors and consultants to ensure the correct procedures are in place. In terms of recruitment, the company has not changed its approach towards recruitment, including EU nationals.
25
Related party transactions
The company has taken advantage of the exemptions in FRS 102 from disclosing transactions with other members of the group.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 33 -
26
Ultimate parent company and parent of a larger group
The company is wholly owned by Beautycom Europe Limited, a company incorporated in England and Wales. Beautycom Europe Limited acquired the company on 17 December 2019. The largest group in which the results of the company are consolidated at 31 December 2019 is that headed by Birchbox, Inc., 16 Madison Square, Floor 4, New York, NY10010, USA. The consolidated accounts of Birchbox Inc are not available to the public. Birchbox Inc's controlling shareholder as of December 31, 2019 was Viking Global Investors. On 20 April, 2020, Birchbox Inc's controlling shareholder became Trinity Capital, Inc.
On 23 July 2021, Birchbox Inc was acquired by FemTec Health, Inc, a company incorporated in United Sates of America. The largest group in which the results of the company are consolidated subsequent to this transaction is that headed by FemTec Health, Inc, 2450 Holcombe Blvd, Suite J Houston, Texas 77021. The consolidated accounts of FemTec Health, Inc are not available to the public.
27
Cash (absorbed by)/generated from operations
2019
2018 unaudited
£
£
(Loss)/profit for the year after tax
(1,724,245)
2,114,992
Adjustments for:
Taxation charged/(credited)
306,259
(306,259)
Finance costs
12,946
Investment income
(600)
-
Loss on disposal of tangible fixed assets
2,677
Depreciation and impairment of tangible fixed assets
46,850
41,871
Net exchange gain
(126,172)
(53,788)
(Decrease)/increase in provisions
(829)
30
Movements in working capital:
Increase in stocks
(480,483)
(27,381)
Increase in debtors
(135,329)
(447,942)
Increase/(decrease) in creditors
629,150
(1,156,793)
Cash (absorbed by)/generated from operations
(1,485,399)
180,353
On 16 December 2019 the company acquired the entire issued share capital of Beautycom Espana SL at fair value in consideration for the company allotting and issuing one ordinary share of £0.01 each in the capital of the company to Beautycom SAS, with an amount of £1,174,536.35 being paid up on the new share. The consideration provided by the company was an issue of shares and no cash was exchanged.
On 16 December 2019 the company issued one ordinary share of £0.01 each in the capital of the company to Beautycom SAS, with an amount of £1,802,374 being paid up on the new share. The consideration was used as settlement against a debt owed to the company to Beautycom SAS. The consideration provided by the company was used as a settlement of a debt and no cash was exchanged.
BEAUTYCOM UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 34 -
28
Analysis of changes in net funds
1 January 2019
Cash flows
31 December 2019
£
£
£
Cash at bank and in hand
1,812,128
(1,502,936)
309,192
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