Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2022
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BRANDALLEY UK LIMITED
COMPANY INFORMATION
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BRANDALLEY UK LIMITED
CONTENTS
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BRANDALLEY UK LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
Introduction
The directors present their Group Strategic Report for the year ended 31 December 2022. The Group, comprised of BrandAlley UK Limited and BrandAlley France SAS, is a leading online retailer of luxury fashion, homeware, accessories and beauty products made available to only registered members at competitive discounts. The Group runs flash sales of leading brands throughout the year while maintaining permanent designer catalogue in its online outlet store. Business review The Group is the off-price sales partner of first choice for over 500 brands across the premium clothing, footwear, accessories, homeware and beauty product sectors, sourced largely from the UK and mainland Europe. In line with other online retailers, BrandAlley has been impacted by customers returning to pre-pandemic spending habits in 2022 as they return to the high street. This has led to less spending being made on-line. In February 2021 the Office for National Statistics stated that overall, in the UK the share of online sales peaked at 37.5% of total retail sales, but in 2022 this has fallen back to around 25%. This cross-industry trend has impacted sales for BrandAlley when compared to last year, along with significantly less stock packs being made available from brands across 2022 due to many brands pulling back stock production due to fears of an ongoing recession. That said the business had a very successful last quarter with excellent trading through Black Friday and the Christmas gifting and sale period. In November, Black Friday promotional days alongside “Black Friday Steals of the Day” has had amazing traction with customers. Promotional activity continued into December with the beginning of the month being driven by Christmas gifting and the back half from “Boxing Day” sales. Net revenue and EBITDA for quarter four was up on last year, bucking the trend across most UK retailers who saw sales volumes fall in both November and December 2022. BrandAlley can capitalise on this trend seen by other retailers, as many brand partners are going into 2023 with excess stock that they will need to clear. On the cost side, the EBITDA has been impacted by increases in warehousing and distribution costs driven by significant fuel price and hourly labour rate increases. Marketing costs have also increased materially, due to both a significant increase in competition online and both legal and regulatory changes in customer privacy legislation. The Group’s trading margin also continues to be impacted by the increase in import duty introduced following the UK leaving the European Union. The Directors are investing in systems in 2023 to address this rise in underlying costs in the business and to drive efficiencies. This is the third full year of consolidation of BrandAlley France SAS which BrandAlley UK bought out of administration in 2019. Since then, a staggered turnaround plan has been in place in order to comply with French Company Law which should end in 2023. The financial losses in 2022 remained in line with 2021 at a loss after tax of £2.3m, which included £0.4m of exceptional costs in relation to redundancies. In 2023 IT projects which will create a channel for future growth within the international market, coupled with further cost savings will enable the business to move into a profitable position in 2024. As part of the strategy for 2022 the business has undertaken a full review of the current IT systems and has decided to impair some legacy systems ready to transition to new platforms in 2023. This one off cost to the business of £0.8m has been included in administrative expenses.
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BRANDALLEY UK LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
Group sales decreased by 20.0% in 2022 from £102.3m to £81.8m. Gross profit margin decreased from 36.0% to 34.9%. Distribution costs fell by 17.1% with a drop in sales volume offset slightly by the underlying increase in fuel, labour and the cost of marketing. Administrative expenses decreased by 8.7% to £12.9m due to savings made through the restructuring of the French business and the capitalisation of IT staff in relation to inhouse built IT system. Administration costs in 2022 include £2.0m of one-off costs in relation to redundancy costs, prior year accounting adjustments and the impairment of old IT software.
Operating profit has moved from being a profit of £1.3m in 2021 to a £2.0m operating loss in 2022. Without the £2m of one off administration costs listed above the Group would have made an operating profit. The Group’s post-operating exceptional EBITDA was £0.8m (2021: £2.5m) with BrandAlley UK achieving an EBITDA of £2.5m which was partly offset by the loss of £1.7m made in the French business. The Balance Sheet remains in a strong position at December 2022, with cash at bank of £9.2m and net current assets of £3.7m. The Group invested heavily in stock prior to peak trading in 2021 in anticipation of supplier delivery delays due to labour shortages, resulting in closing stock of £12.5m. These issues were not expected or seen in 2022 and therefore stock levels have reduced to a more normal level for the business of £11.1m.
After the exceptional, lockdown driven boom in on-line sales in 2020 and 2021 has adjusted, the long-term trend of the growth of on-line retail will be re-established, reconfirming the long-term potential of the BrandAlley business. As suppliers and brands normalised production and inventory levels, partners who have not had excess stock since before the pandemic are now returning to work with BrandAlley.
In terms of the post year-end trading environment, 2023 has started strongly, with suppliers having large amounts of excess stock and an increase in stock pack availability for BrandAlley giving a great brand line up for the start of the year. In April 2023 BrandAlley purchased the intellectual property, the logistics operation and customer service division of the multi-platform online business Internet Fusion Group (IFG) as part of its expansion plans. The move marks a significant strategic opportunity to enhance BrandAlley’s infrastructure and will render BrandAlley operations more cost effective. In addition to IFG’s intellectual property across multiple domains, BrandAlley is acquiring the logistics operation and customer service division out of administration and preserving over 125 jobs. Whilst the directors are confident in the Group strategy for growth they also remain focused on the potential risks ahead due to the current economic climate of rising cost inflation, the cost of living crisis and the conflict in Ukraine. However, through strong engagement with suppliers, on-going system upgrades and investment in customer engagement and satisfaction they believe that 2023 will be a year of strong sales growth for the business.
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BRANDALLEY UK LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
This report sets out how the directors comply with the requirements of Section 172 Companies Act 2006 and how these requirements have impacted BrandAlley Board’s decision making throughout the financial year 2022.
S172a) The likely consequences of any decision in the long term Board and management decisions have consistently been taken with the long-term perspective focused on creating, first, the UK’s, and then one of mainland Europe’s, leading online flash sales retailer of premium fashion, homeware and related product sectors. The Board has continued to deploy a long-term perspective throughout 2022, evidenced in particular by the approach to BrandAlley France. The French business holds key Group intellectual property assets and is the designated platform for the rollout of the BrandAlley business model to the mainland European market, which is many times the size of the UK market. Consequently, the Board has supported the operating losses of the French business and investment in its staff, IT platform and logistics operations whilst implementing a turnaround plan for this business. Furthermore, the Board takes a long-term perspective on colleagues who work for the the Group – they are our most important asset. Decisions about retention, motivation, remuneration and career development of all employees are taken with the long-term in mind. S172b) The interests of the Group’s employees As mentioned above, the Board considers that the employees of the company are its principal asset. The directors recognise that the employees are at the heart of all operations at BrandAlley and the success of the business is dependent on attracting, training and motivating them. Colleagues have regular one-to-ones and annual reviews with an opportunity to build a career within the Group. The senior management team actively promote an open and inclusive culture where colleagues are encouraged to raise concerns they have regarding the business or their own wellbeing. The Group has a heightened focus on employee wellbeing offering support for both physical and mental health with free access to counselling, virtual GP appointments and financial wellbeing support. S172c) The need to foster the Group’s business relationships with suppliers, customers and others The directors delegate the day-to-day responsibility for the company’s business relationships with suppliers, customer and other stakeholders to the executive management of the business. However, this delegation is within the clear long-term orientated framework which requires that all relationships are sustainable and based on the principle of mutual benefit and partnership. Periodically the Board will review key issues and key performance indicators to assess the status and approach being taken. Furthermore, the approach to board level decision making is consistent with this. The Board acknowledges that the long-term success of BrandAlley will depend on sustainable long term business relationships. The critical brand supplier relationships already in place have been built over multi-year periods during which trust and confidence has been established. Core to this is both the excellent customer service levels that the business has put in place and the inter-personal relationships that specific members of the management team have with key suppliers, based on professional competence and a track record of delivering consistently against common goals. Equally important are the relationships with hundreds of thousands of active members and customers. The Board and the executive management are aligned on a vision of long-term customer relationships which means, where necessary, short-term costs are incurred and investments are made to ensure customer retention and satisfaction. This culture has underpinned the growth of the business.
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BRANDALLEY UK LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
S172d) The impact of the Group’s operations on the community and the environment
The directors are committed to supporting local businesses and being environmentally responsible from the packaging used to the way in which goods are transported to customers. The COVID-19 pandemic highlighted the importance of community and BrandAlley has provided donations of products to charities and personal protective equipment to businesses. S172e) The desirability of the Group maintaining a reputation for high standards of business conduct. BrandAlley’s Board of directors is absolutely committed to the highest levels of ethical and compliant business dealings with all stakeholders. The long-term nature of the business relationships that the business is built on with all stakeholders demands and necessitates this and the Board seeks to ensure this is maintained at all times, with the avoidance of any reputational damage an absolute priority. S172f) The need to act fairly between members of the Group BrandAlley operates with regular board meetings in place to ensure members of the Board are updated and communicated to regularly on business performance. Quarterly board meetings take place with clear agendas to ensure no key areas or stakeholders are overlooked. Monthly management accounts are prepared for the board to enable review of key performance metrics of the business. An annual budget is prepared and approved, after which quarterly forecasts are prepared highlighting any movements or significant changes throughout the year.
The principal risks and uncertainties facing the Group are outlined below:
BrandAlley has a £2m revolving Trade Finance facility. The group has no other external debt aside from this.
The Group has a multi-currency banking facility to minimise currency exposure when purchasing stock for resale in other currencies. The Group's principal assets are stock and bank balances. The valuation for stock in the Balance Sheet is presented net of a conservative provision for impairment where required. Credit risk on liquid funds is limited because these are held with a bank with a high credit rating assigned by international credit rating agencies. In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group maintains careful working capital management.
The directors monitor company performance using financial and non-financial indicators including turnover, gross profit, operating profit, new members, new customers, member conversion and number of orders. These indicators are monitored daily, weekly and monthly.
This report was approved by the board on 29 September 2023 and signed on its behalf.
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BRANDALLEY UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their report and the audited financial statements for the year ended 31 December 2022.
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 judgments and accounting estimates that are reasonable and prudent; and
∙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 loss for the year, after taxation, amounted to £1,763,000 (2021 - profit of £560,000).
No interim dividend was paid during the period and the directors do not recommend the payment of a final dividend.
The directors who served during the year were:
B MacInnes (resigned 16 November 2022)
S MacInnes (resigned 16 November 2022) T R Pickles (resigned 27 February 2023) Following the year end, S M Smith was appointed as director on 17 July 2023.
Details relating to future developments are addressed in the Group Strategic Report.
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BRANDALLEY UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
The risks in relation to the use of financial instruments are addressed in the Group Strategic Report.
Engagement with suppliers, customers and others in a business relationship with the Group Details relating to engagement with suppliers, customers and others in a business relationship with the Group are addressed in the Group Strategic Report.
BrandAlley is monitoring its electricity usage and continuously seeks ways to reduce its carbon footprint.
UK Government GHG Conversion Factors for Company Reporting 2022 guidelines and factors have been applied in calculation of Scope 2 consumption and CO2e emission data.
The post balance sheet events are disclosed in the 'Post year end trading update' section of the Strategic Report.
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BRANDALLEY UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
The auditors, Wilder Coe Ltd, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board on
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BRANDALLEY UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BRANDALLEY UK LIMITED
We have audited the financial statements of BrandAlley UK Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2022, which comprise the Group Statement of Comprehensive Income, the Group and Company Balance Sheets, the Group Statement of Cash Flows, the Group and Company Statement of Changes in Equity and the related notes, 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 Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 Auditors' Responsibilities For The Audit Of The Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the 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 or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the 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.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the 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 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.
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BRANDALLEY UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BRANDALLEY UK LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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BRANDALLEY UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BRANDALLEY UK LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' 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 Group financial statements.
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. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Discussions with and enquiries of management and those charged with governance were held with a view to identifying those laws and regulations that could be expected to have a material impact on the financial statements. During the engagement team briefing, the outcomes of these discussions and enquiries were shared with the team, as well as consideration as to where and how fraud may occur in the entity. The following laws and regulations were identified as being of significance to the entity:
∙Those laws and regulations considered to have a direct effect on the financial statements include UK financial reporting standards, Company Law, Tax and Pensions legislation and distributable profits legislation.
∙Those laws and regulations for which non-compliance may be fundamental to the operating aspects of the
business and therefore may have a material effect on the financial statements. Audit procedures undertaken in response to the potential risks relating to irregularities (which include fraud and non-compliance with laws and regulations) comprised of: enquiries of management and those charged with governance as to whether the entity complies with such laws and regulations; enquiries with the same concerning any actual or potential litigation or claims; inspection of relevant legal correspondence; review of board minutes; testing the appropriateness of journal entries; and the performance of analytical review to identify unexpected movements in account balances which may be indicative of fraud. No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. As explained above, there is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with ISAs (UK).
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
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BRANDALLEY UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BRANDALLEY UK LIMITED (CONTINUED)
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 Auditors' 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.
for and on behalf of
Chartered Accountants & Statutory Auditors
1st Floor Sackville House
143-149 Fenchurch Street
EC3M 6BL
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BRANDALLEY UK LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
There were no recognised gains or losses for 2022 or 2021 other than those included in the Consolidated Statement of Comprehensive Income.
The notes of pages 20 to 42 form part of these financial statements.
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BRANDALLEY UK LIMITED
REGISTERED NUMBER: 03885013
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
29 September 2023.
The notes on pages 19 to 41 form part of these financial statements.
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BRANDALLEY UK LIMITED
REGISTERED NUMBER: 03885013
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 19 to 41 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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BRANDALLEY UK LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
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BRANDALLEY UK LIMITED
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2022
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
BrandAlley UK Limited ("the Company") (Company number: 03885013), having its registered office and trading address at Telephone House, 69-77 Paul Street, London, EC2A 4NW, is a private limited company incorporated in England and Wales.
The Company and the Group's principal activity is the retail of luxury fashion accessories, homeware and beauty products made available only to registered members at competitive discounts. The Company and the Group run flash sales of leading brands throughout the year while maintaining permanent designer catalogue in their online outlet stores.
2.Accounting policies
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 judgment in applying the Group's accounting policies (see note 3).
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 consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance Sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases. FRS 102 allows a qualifying entity certain disclosure exemptions, subject to conditions. The Company has taken advantage of the following exemptions in its individual financial statements: - from preparing a statement of cash flows, on the basis that it is a qualifying entity and the consolidated statement of cash flows, included in these financial statements, includes the Company's cash flows; and - from the financial instrument disclosures, required under FRS 102 paragraphs 11.41(b), 11.41(c), 11.41(e), 11.41(f), 11.42, 11.45, 11.47, 11.48(a)9iii), 11.48(a)(iv), 11.48(b), 12.26, 12.27, 12.29(a), 12.29(b) and 12.29A, as the information is provided in the consolidated financial statement disclosures. Except where stated, information reported in the notes to the financial statements relate to the Group.
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Turnover is the net amount receivable by the Company and Group in the ordinary course of its business excluding trade discounts, value added tax and other sales related taxes. Turnover is recognised at the point of despatch from the Group's third party stock holder and deferred income relates to the orders that have been placed but not dispatched as at 31 December 2022. Turnover is recognised to the extent that it is probable that the economic benefits will flow to the Group and the turnover can be reliably measured. Turnover 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 turnover is recognised:
Page 20
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Intangible assets comprise software licences, IT systems and goodwill.
The software licences and IT systems are initially recognised at cost. After initial recognition, under the cost model, these assets are measured at cost less any accumulated amortisation and any accumulated impairment losses. Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer's interest in the fair value of its identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets have not been recognised separately where they do not arise from contractual or other legal rights. Goodwill is considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years. Licenses and IT sytems are amortised straight-line over their expected useful economic lives or anticipated length of use by the Company in order to write off their costs less estimated residual value. These are stated at cost, net of amortisation and any provision for impairment. The principal rates are as follows: Licenses - 33 % on a straight-line basis IT System - 20 % on cost Goodwill - 10 % on a straight-line basis The amortisation of intangible assets is recognised in administrative expenses on the Statement of Comprehensive Income. At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Page 21
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
The Group adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the Group. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to the Consolidated Statement of Comprehensive Income during the period in which they are incurred.
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:
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 the Consolidated Statement of Comprehensive Income.
Stocks are stated at the lower of cost and net realisable value.
The net realisable value is based on an estimated selling price, less further costs expected to be incurred to completion and disposal. A provision is made for obsolete, slow moving or defective items where appropriate.
Page 22
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Business combinations are accounted for by applying the purchase method.
The cost of a business combination is the fair value of the consideration given, liabilities incurred or assumed and of equity instruments issued plus the costs directly attributable to the business combination.
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
Page 24
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Assets that are subject to depreciation or amortisation are assessed at each Balance Sheet date to determine whether there is any indication that the assets are impaired. Where there is any indication that an asset may be impaired, the carrying value of the asset (or cash-generating unit to which the asset has been allocated) is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's (or CGU's) fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). Non-financial assets that have been previously impaired are reviewed at each Balance Sheet date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased.
Page 25
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Provisions are charged as an expense to the Consolidated Statement of Comprehensive Income in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the balance sheet 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 Balance Sheet. The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme). Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period. Where equity instruments are granted to persons other than employees, the Consolidated Statement of Comprehensive Income is charged with fair value of goods and services received.
Page 26
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Stock comprises items subject to changing consumer demands and fashion trends. As a result it is necessary to consider the recoverability of the cost of stock and the associated provisioning required. When calculating the stock provisions, management considers the nature and condition of the stock, as well as applying assumptions around anticipated saleability of goods for resale. See note 16 for the net carrying amount of the stock with associated provision. Useful economic lives of tangible and intangible assets The annual depreciation and amortisation charges for tangible and intangible assets are sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See notes 13 and 14 for the carrying amount of the intangible and tangible assets respectively, and notes 2.4 and 2.5 for the useful economic lives of intangible and tangible assets respectively. Returns Provision The Returns Provision comprises a provision for sales, based on the estimate of the calculated expected returns less the actual returns excluding provisions. These estimates are based on industry and the Company's own historic averages.
The whole of the turnover is attributable to the principal activity of the business, being that of the retail of luxury fashion, accessories, homeware and beauty made available only to registered members at competitive discounts. BrandAlley runs flash sales of leading brands throughout the year and also has a permanent designer catalogue in its online outlet store.
The directors consider that the disclosure of turnover per geographic location is seriously prejudicial to the interests of the Group and the Company and have thus not disclosed this information.
Page 27
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 28
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 29
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
The Company has £5,132,715 (2021: £5,475,705) of trading losses to carry forward and offset against future taxable trading profits.
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 profit after tax of the parent Company for the year was £
Page 30
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 31
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
13.Intangible assets (continued)
Page 32
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 33
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
14.Tangible fixed assets (continued)
Page 34
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 35
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 36
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 37
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 38
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Page 39
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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 £453,000 (2021: £332,000).
Page 40
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BRANDALLEY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Included in Other Debtors at the year-end is a balance of £1,143 (2021: £205,000) due from a former director and shareholder of the Company. The amount is repayable within 12 months of the year-end.
As at 31 December 2022 and 31 December 2021, M Feldmann, a director, held ultimate control over the Company by virtue of his shareholding.
Page 41
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