Company Registration No. 10437403 (England and Wales)
SMALLWORLD ACCESSORIES LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
SMALLWORLD ACCESSORIES LIMITED
COMPANY INFORMATION
Director
Mr P D Galvin
Company number
10437403
Registered office
Griffin House
135 High Street
Crawley
West Sussex
RH10 1DQ
Auditor
Carpenter Box
Amelia House
Crescent Road
Worthing
West Sussex
BN11 1QR
Business address
New Barn
Brighton Road
Newtimber
Hassocks
West Sussex
BN6 9BS
SMALLWORLD ACCESSORIES LIMITED
CONTENTS
Page
Strategic report
1 - 3
Director's report
4 - 5
Director's responsibilities statement
6
Independent auditor's report
7 - 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 - 27
SMALLWORLD ACCESSORIES LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 1 -

The director presents the strategic report for the year ended 28 February 2023.

Strategy

Smallworld Accessories Limited is an accessories supplier. The company operates concessions with major UK retailers providing fully merchandised end-to-end solutions in adults’ and children’s accessories across jewellery, hair, gifting, bags, cold weather and event categories. It also operates its own direct online sales channels.

The strategy of the business is:

Business review

The business delivered an improved sales and profit performance in the year, with sales of £16.8m up 4.2% against the previous year, and a profit before tax of £0.9m up 19%. The sales performance was underpinned by the continued strength in our customer relationships; the focus of the business on maintaining strong and relevant sustainably-sourced product ranges whilst retailing these at affordable price points for the customer base within the current challenging cost of living environment within the UK; a focus on in store servicing and delivery in order to maximise returns for both the business and its retail partners.

The strong business profits delivered in the year were at an improved margin %, underpinned by the focus on execution and delivery of the colleagues across the business, which enabled the business to improve its product margins, whilst still ensuring that the business was able to have the right product, in the right place, at the right time, available to meet the customer demand. The product margin increase was delivered as the business focused on maintaining affordable pricing whilst still sourcing the majority of its range using recycled materials. The business is beginning to see the benefits of increased sourcing of recycled raw materials and improved product allocation to stores.

From a product perspective, the Hair and Jewellery categories across Adults and Kids remain a core strength of the business and continue to be key sales drivers, whilst Gifting, Licence and Events product categories showed strong year-on-year growth as the customer started to move back towards more value-add products during the year.

The business continues to focus on driving sales from sustainably-sourced raw materials whilst continuing to offer great value for money. This is the area where the business can have the most immediate positive impact. During the year 70% of total products were manufactured using recycled materials. This included using 456 KM of recycled grosgrain fabric, 13 KM of recycled faux fur, 2,300 KG of recycled zinc and 21,300 KG of recycled ABS plastic.

The business has continued to develop its broader sustainable sourcing program, and is working with its suppliers to focus on reducing it carbon footprint across its end-to-end supply chain. This process includes working with the product manufacturers to understand more about the full carbon impact of the production stage, whilst adjusting the business operational processes to reduce the environmental impact across all areas of the business. An example of the type of benefits the business has seen from undertaking this process was a 75% reduction in CO2 emissions on inbound freight compared to the previous year.

During the year, the company has continued to work with customers to increase online presence on their platforms, whilst continuing to grow its direct online sales channels through its own brands, STYCH (Smile ‘til your cheeks hurt) and Small Stuff.

SMALLWORLD ACCESSORIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 2 -
Management KPIs

The following are the financial key performance indicators (‘KPIs’) used by management to assess and regulate the company’s performance:

Market risk

There is continuing market risk as a result of the negative economic headwinds that started to impact the UK during 2022. From a business perspective the risks are that high cost inflationary pressures drive up the cost base of the business and negatively impacts on customer’s disposable income.

In order to mitigate these headwinds, the business continues to focus on the following areas which have ensured that it has sustained a strong profitability in the year:

Foreign exchange risk

The company imports the majority of its products from the Far East, with this largely being paid for in Chinese Rmb, along with a smaller USD currency requirement. The company regularly reviews the current exchange situation, and the potential economic indicators which could cause weakness in the pound, and places forward currency contracts in order to manage and mitigate the potential impact of currency fluctuations on its cost of product.

Regulatory risk

The company designs, manufactures and tests its products to ensure that they meet all legal requirements for the markets it operates in. The company is a full member of the Ethical Trading Initiative.

SMALLWORLD ACCESSORIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 3 -

On behalf of the board

Mr P D Galvin
Director
25 October 2023
SMALLWORLD ACCESSORIES LIMITED
DIRECTOR'S REPORT
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 4 -

The director presents his annual report and financial statements for the year ended 28 February 2023.

Principal activities

The principal activity is that of a supplier of adults' and children's fashion jewellery, accessories and event merchandise.

Director

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

Mr P D Galvin
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.

Financial instruments
Liquidity risk

The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business. The ultimate controlling entity has provided finance to assist cash flow and liquidity management.

Credit risk

All customers who wish to trade on credit terms are subject to credit verification procedures. The concession stands are operated from the premises of large supermarket chains and some high street stores and sales are reported by the stores themselves based upon the goods passing through the tills. Due to the customer mix the company has not experienced debtor recovery issues but trade debtors are monitored on an ongoing basis and provision will be made for doubtful debts where necessary.

Disabled persons

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the company continues and that the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Employee involvement

The company's policy is to consult and discuss with employees, through staff councils and at meetings, matters likely to affect employees' interests.

 

Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the company's performance.

Auditor

The auditor, Carpenter Box, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Strategic report

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments and foreign exchange risk.

SMALLWORLD ACCESSORIES LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 5 -
Statement of disclosure to auditor

So far as the sole director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the director has taken all the necessary steps that he ought to have taken as a director in order to make himself aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

On behalf of the board
Mr P D Galvin
Director
25 October 2023
SMALLWORLD ACCESSORIES LIMITED
DIRECTOR'S RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 6 -

The director is responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is 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 director is required to:

 

 

The director is 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. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

SMALLWORLD ACCESSORIES LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SMALLWORLD ACCESSORIES LIMITED
- 7 -
Opinion

We have audited the financial statements of Smallworld Accessories Limited (the 'company') for the year ended 28 February 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's 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 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 director with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The director is 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.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

SMALLWORLD ACCESSORIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SMALLWORLD ACCESSORIES LIMITED
- 8 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the director's report.

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

Responsibilities of director

As explained more fully in the director's responsibilities statement, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the director is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:

 

 

As a result of these procedures, we considered the opportunities and incentives that may exist within the company for fraud. We are also required to perform specific procedures to respond to the risk of management override. As a result of performing the above, we identified the following areas as those most likely to have an impact on the financial statements: health & safety, employment law and compliance with the UK Companies Act.

SMALLWORLD ACCESSORIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SMALLWORLD ACCESSORIES LIMITED
- 9 -

In addition to the above, our procedures to respond to risks identified included the following:

 

 

Due to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to him 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.

Kristina Perry FCCA (Senior Statutory Auditor)
For and on behalf of Carpenter Box
25 October 2023
Chartered Accountants
Statutory Auditor
Worthing
Carpenter Box is a trading name of Carpenter Box Limited
SMALLWORLD ACCESSORIES LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 10 -
Year
Year
ended
ended
28 February
28 February
2023
2022
Notes
£
£
Turnover
3
16,807,812
16,134,857
Cost of sales
(11,612,182)
(11,442,243)
Gross profit
5,195,630
4,692,614
Administrative expenses
(4,234,837)
(3,917,666)
Other operating income
6,968
37,998
Operating profit
4
967,761
812,946
Interest receivable and similar income
843
424
Interest payable and similar expenses
7
(93,553)
(78,123)
Profit before taxation
875,051
735,247
Tax on profit
8
(31,137)
(150,100)
Profit for the financial year
843,914
585,147
Other comprehensive income
Fair value gains / (losses) on foreign exchange contracts
(117,230)
104,790
Tax relating to other comprehensive income
30,332
(19,910)
Total comprehensive income for the year
757,016
670,027

The Statement of Comprehensive Income has been prepared on the basis that all operations are continuing operations.

SMALLWORLD ACCESSORIES LIMITED
BALANCE SHEET
AS AT 28 FEBRUARY 2023
28 February 2023
- 11 -
2023
2022
Notes
£
£
£
£
Fixed assets
Goodwill
9
297,421
371,776
Tangible assets
10
85,637
98,457
383,058
470,233
Current assets
Stocks
12
2,460,205
2,724,903
Debtors falling due after more than one year
13
951,557
830,412
Debtors falling due within one year
13
776,044
733,024
Cash at bank and in hand
1,172,788
819,919
5,360,594
5,108,258
Creditors: amounts falling due within one year
14
(1,430,852)
(1,960,221)
Net current assets
3,929,742
3,148,037
Total assets less current liabilities
4,312,800
3,618,270
Creditors: amounts falling due after more than one year
15
(2,785,902)
(2,845,088)
Provisions for liabilities
(20,400)
(23,700)
Net assets
1,506,498
749,482
Capital and reserves
Called up share capital
19
1
1
Hedging reserve
20
(100,725)
(13,827)
Profit and loss reserves
1,607,222
763,308
Total equity
1,506,498
749,482
The financial statements were approved and signed by the director and authorised for issue on 25 October 2023
Mr P D Galvin
Director
Company Registration No. 10437403
SMALLWORLD ACCESSORIES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 12 -
Share capital
Hedging reserve
Profit and loss reserves
Total
£
£
£
£
Balance at 1 March 2021
1
(98,707)
178,161
79,455
Period ended 28 February 2022:
Profit for the period
-
-
585,147
585,147
Other comprehensive income:
Fair value losses on foreign exchange contracts
-
104,790
-
104,790
Tax relating to other comprehensive income
-
(19,910)
-
0
(19,910)
Total comprehensive income for the period
-
84,880
585,147
670,027
Balance at 28 February 2022
1
(13,827)
763,308
749,482
Period ended 28 February 2023:
Profit for the period
-
-
843,914
843,914
Other comprehensive income:
Fair value gains on foreign exchange contracts
-
(117,230)
-
(117,230)
Tax relating to other comprehensive income
-
30,332
-
0
30,332
Total comprehensive income for the period
-
(86,898)
843,914
757,016
Balance at 28 February 2023
1
(100,725)
1,607,222
1,506,498
SMALLWORLD ACCESSORIES LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 13 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
24
637,397
(720,566)
Interest paid
(90,756)
(115,134)
Income taxes paid
(15,916)
-
Net cash inflow/(outflow) from operating activities
530,725
(835,700)
Investing activities
Purchase of tangible fixed assets
(36,189)
(34,087)
Interest received
308
424
Net cash used in investing activities
(35,881)
(33,663)
Financing activities
Repayment of bank loans
(150,000)
(37,500)
Net cash used in financing activities
(150,000)
(37,500)
Net increase/(decrease) in cash and cash equivalents
344,844
(906,863)
Cash and cash equivalents at beginning of year
819,919
1,723,490
Effect of foreign exchange rates
8,025
3,292
Cash and cash equivalents at end of year
1,172,788
819,919
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 14 -
1
Accounting policies
Company information

Smallworld Accessories Limited is a private company limited by shares incorporated in England and Wales. The registered office is Griffin House, 135 High Street, Crawley, West Sussex, RH10 1DQ.

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.

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 £1.

The financial statements have been prepared under the historical cost convention adjusted for certain financial instruments measured at fair value. The principal accounting policies adopted are set out below.

1.2
Going concern

At the time of approving the financial statements, the director has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The financial statements have therefore been prepared on the going concern basis. The director has considered relevant information, including the annual budget, forecast future cash flows and the impact of subsequent events in making their assessment. true

 

The business has continued to show strong sales and profit performance in the year, whilst the post Covid-19 pandemic operating environment has now fully stabilised, with the Far East supply chain working effectively, all of the company’s concession sales locations being fully open through the whole year, and the company being on a solid financial footing in order to maximise sales and growth opportunities going forward.

 

There is continuing market risk as a result of the negative economic headwinds that started to impact the UK during 2022. From a business perspective the risks are that high cost inflationary pressures drive up the cost base of the business and negatively impacts on customers' disposable income. As a result of these business pressures, the director has performed a robust analysis of forecast future cash flows, taking into account the potential impact on the business of possible future scenarios arising from the impact of the current economic operating environment. This analysis also considers the effectiveness of available measures to assist in mitigating the impact.

Based on these assessments and having regard to the resources available to the entity, the director has concluded that there is no material uncertainty in relation to the appropriateness of continuing to adopt the going concern basis in preparing the annual report and accounts.

1.3
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of customer returns, VAT and other sales related taxes. It is shown prior to any commissions paid.

1.4
Intangible fixed assets - goodwill

Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.

 

The goodwill amortisation charge is included within administrative expenses in the Statement of Comprehensive Income.

SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
1
Accounting policies
(Continued)
- 15 -
1.5
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.

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:

Leasehold improvements
Straight line over the term of the lease
Plant and equipment
15% diminishing balance
Fixtures and fittings
Straight line over 5 years
Computers
Straight line over 3 years
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.

1.7
Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell after making allowances for obsolete and slow moving stock.

1.8
Cash and cash equivalents

Cash at bank and in hand are basic financial assets and include deposits held at call with banks and bank overdrafts.

SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
1
Accounting policies
(Continued)
- 16 -
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 are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost.

Other financial assets

Other financial assets 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.

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.

Basic financial liabilities

Basic financial liabilities 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.

SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
1
Accounting policies
(Continued)
- 17 -
Other financial liabilities

Derivatives, including 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.

 

For derivatives that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of the hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Any gain or loss previously recognised in other comprehensive income is reclassified to profit or loss when the hedge relationship ends. This occurs when the hedging instrument expires or no longer meets the hedging criteria, the forecast transaction is no longer highly probable, the hedged debt instrument is derecognised, or the hedging instrument is terminated.

 

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

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.

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.

1.12
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense.

 

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.

1.13
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
1
Accounting policies
(Continued)
- 18 -
1.14
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

1.15
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.

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.

Key sources of estimation uncertainty

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

Stocks

The company monitors stock levels and impairment on an ongoing basis. Units held on concession stands are vulnerable to damage, pilfering and misplacement within the stores and provisions are maintained to reflect this. At the end of a season the company writes off the bulk of the remaining goods as new product lines are introduced. This estimation includes judgement on a number of factors including historical sales patterns, expected sales profiles and potential obsolescence. At the reporting date, the carrying amount of inventory was £2,460,205 (2022 - £2,724,903).

Intangible assets (goodwill)

The director has estimated the useful life of goodwill to be 10 years. The useful life of goodwill may vary depending on a number of factors including timing of future returns and market demands. The director has reviewed the estimated useful life of goodwill and determined that goodwill should continue to be amortised over 10 years from the inception date, with no impairment of goodwill required to be recognised.

Derivative financial instruments

The company uses forward foreign exchange contracts to hedge its currency transaction exposures. The contracts are initially recognised at fair value on the date the derivative contract is entered into, and subsequently re-measured to fair value at each reporting date, by reference to the spot exchange rate of the relevant currency at the relevant date. At the reporting date, the fair value of the financial liability in relation to forward foreign exchange contracts was £134,301 (2022 - £17,071).

SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 19 -
3
Turnover
2023
2022
£
£
Turnover analysed by class of business
Concessions
16,498,264
15,909,997
Wholesale
309,548
224,860
16,807,812
16,134,857

All turnover is derived from the sale of goods.

2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
16,798,929
16,102,812
Republic of Ireland
-
73
United States of America
8,883
21,750
Israel
-
10,222
16,807,812
16,134,857
4
Operating profit
2023
2022
Operating profit for the period is stated after charging/(crediting):
£
£
Government grants
-
(29,462)
Fees payable to the company's auditor for the audit of the company's financial statements
32,750
27,100
Depreciation of owned tangible fixed assets
49,009
49,923
Amortisation of intangible assets
74,355
74,355
Impairment of intangible assets
-
0
11,315
Operating lease charges
128,395
144,411

Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £111,092 (2022 - £225,333).

5
Employees

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

2023
2022
Number
Number
Head office / Distribution / Field management
47
44
Visual merchandisers
200
219
Total
247
263
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
5
Employees
(Continued)
- 20 -

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
2,553,689
2,331,242
Social security costs
217,803
187,879
Pension costs
40,647
36,395
2,812,139
2,555,516
6
Director's remuneration
2023
2022
£
£
Remuneration for qualifying services
215,085
210,439
Remuneration disclosed above includes the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
209,456
206,000

The director is also considered to represent the key management personnel of the company.

7
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
35,710
13,567
Interest payable to group undertakings
57,843
57,843
93,553
71,410
Other finance costs:
Other interest
-
0
6,713
93,553
78,123
8
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
181,000
148,000
Adjustments in respect of prior periods
(146,563)
-
0
Total current tax
34,437
148,000
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
(Continued)
- 21 -
Deferred tax
Origination and reversal of timing differences
(3,300)
2,100
Total tax charge
31,137
150,100

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

2023
2022
£
£
Profit before taxation
875,051
735,247
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2022: 19.00%)
166,260
139,697
Tax effect of expenses that are not deductible in determining taxable profit
317
3,746
Tax effect of utilisation of tax losses not previously recognised
-
0
(12,370)
Adjustments in respect of prior years
(146,563)
-
0
Permanent capital allowances in excess of depreciation
(2,064)
(1,944)
Depreciation on assets not qualifying for tax allowances
49
49
Amortisation on assets not qualifying for tax allowances
14,127
14,127
Other permanent differences
-
0
1,275
Effect of rounding to the nearest £1,000
(189)
(169)
Effect of change in local deferred tax rate
(800)
5,689
Taxation charge for the period
31,137
150,100

In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:

2023
2022
£
£
Deferred tax arising on:
Fair value adjustments on foreign exchange contracts
(29,308)
19,910
Reclassifications from equity to profit or loss:
Relating to cash flow hedges
(1,024)
-
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 22 -
9
Intangible fixed assets
Goodwill
£
Cost
At 1 March 2022 and 28 February 2023
762,410
Amortisation and impairment
At 1 March 2022
390,634
Amortisation charged for the year
74,355
At 28 February 2023
464,989
Carrying amount
At 28 February 2023
297,421
At 28 February 2022
371,776

 

10
Tangible fixed assets
Leasehold improvements
Plant and equipment
Fixtures and fittings
Computers
Total
£
£
£
£
£
Cost
At 1 March 2022
33,470
566
149,692
112,144
295,872
Additions
-
0
646
7,835
27,708
36,189
At 28 February 2023
33,470
1,212
157,527
139,852
332,061
Depreciation and impairment
At 1 March 2022
31,451
566
82,025
83,373
197,415
Depreciation charged in the year
1,720
97
29,143
18,049
49,009
At 28 February 2023
33,171
663
111,168
101,422
246,424
Carrying amount
At 28 February 2023
299
549
46,359
38,430
85,637
At 28 February 2022
2,019
-
0
67,667
28,771
98,457
11
Financial instruments
2023
2022
£
£
Carrying amount of financial liabilities
Measured at fair value through other comprehensive income
- Other financial liabilities
134,301
17,071
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 23 -
12
Stocks
2023
2022
£
£
Finished goods and goods for resale
2,460,205
2,724,903
13
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
430,776
338,759
Amounts owed by group undertakings
1
1
Other debtors
202,042
214,559
Prepayments and accrued income
143,225
179,705
776,044
733,024
2023
2022
Amounts falling due after more than one year:
£
£
Other debtors
917,982
827,168
Deferred tax asset (note 17)
33,575
3,244
951,557
830,412
Total debtors
1,727,601
1,563,436

Other debtors falling due after more than one year includes a deposit of £917,982 (2022: £827,168) with a key supplier to provide security on orders placed by the company. This is funded by a loan from the ultimate controlling entity of the same amount, which is recorded in creditors: amounts falling due after more than one year within other borrowings.

14
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Bank loans
16
159,366
156,569
Trade creditors
313,983
322,457
Corporation tax
181,000
162,480
Other taxation and social security
431,337
775,476
Derivative financial instruments
134,301
17,071
Other creditors
-
0
69,699
Accruals and deferred income
210,865
456,469
1,430,852
1,960,221
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 24 -
15
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Bank loans and overdrafts
16
412,500
562,500
Other borrowings
16
2,373,402
2,282,588
2,785,902
2,845,088

Other borrowings relates to a loan from the ultimate controlling entity, which has been subordinated to the loan received under the UK Government-backed Coronavirus Business Interruption Loan Scheme ("CBILS") received in 2021.

16
Loans and overdrafts
2023
2022
£
£
Bank loans
571,866
719,069
Loans from group undertakings
2,373,402
2,282,588
2,945,268
3,001,657
Payable within one year
159,366
156,569
Payable after one year
2,785,902
2,845,088

As disclosed within note 13, the ultimate controlling entity has provided a loan to the company to fund a deposit that is held with a key supplier.

 

In 2021, the company obtained a bank loan under the UK Government-backed Coronavirus Business Interruption Loan Scheme ("CBILS"). The loan is subject to interest charges at a rate of 3.8% above the Bank of England base rate per annum, with the Government providing a Business Interruption payment to cover the first 12 months of interest payments. The loan is repayable over 6 years, with a repayment holiday in place for the first 12 months of the loan.

 

The loan is secured by fixed and floating charges over the company's assets and has external guarantees.

17
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Balances:
£
£
£
£
Accelerated capital allowances
20,400
23,700
-
-
Fair value loss on foreign exchange contracts
-
-
33,575
3,244
20,400
23,700
33,575
3,244
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
17
Deferred taxation
(Continued)
- 25 -
2023
Movements in the year:
£
Liability at 1 March 2022
20,456
Credit to profit or loss
(3,300)
Credit to other comprehensive income
(29,308)
Effect of change in tax rate - other comprehensive income
(1,023)
Liability/(Asset) at 28 February 2023
(13,175)

The timing of the expected reversal of the deferred tax asset is expected to be in the next 12 months. The deferred tax liability is expected to reverse over the useful lives of the tangible fixed assets.

18
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
40,647
36,395

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.

19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
1
1
1
1

Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights.

 

 

20
Hedging reserve
2023
2022
£
£
At the beginning of the year
(13,827)
(98,707)
Gains and losses on cash flow hedges
(117,230)
104,790
Deferred tax on gains and losses on cash flow hedges
29,308
(19,910)
Effect of change in deferred tax rate
1,024
-
At the end of the year
(100,725)
(13,827)

The company entered into forward foreign exchange contracts to mitigate exchange rate risk for foreign currency payments, all contracts mature within 12 months of the reporting date.

SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 26 -
21
Operating lease commitments
Lessee

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:

2023
2022
£
£
Within one year
102,059
113,437
Between two and five years
92,855
70,428
194,914
183,865
SMALLWORLD ACCESSORIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
- 27 -
22
Related party transactions

At the reporting date, the company had loans outstanding with the ultimate controlling entity amounting to £2,373,402 (2022: £2,282,588), included within non-current liabilities. The loan interest paid during the year was £57,843 (2022: £57,843) and was charged at a rate of 4% (2022: 4%) on the interest bearing loan.

 

At the reporting date, the company had a year-end trade creditor balance outstanding with an other trading related party of £178,776 (2022: £121,740), and a debtor balance due in more than one year of £917,982 (2022: £827,168). During the year, purchases with that related party amounted to £3,621,439 (2022: £4,544,370).

23
Ultimate controlling party

The immediate parent company is Smallworld Accessories Holdings Limited, a company incorporated in England and Wales. Smallworld Accessories Holdings Limited prepares consolidated financial statements, which include the results of the company, copies of which are available from Companies House.

 

The ultimate controlling entity is Chuan Men Investment Inc, a company incorporated in Taiwan.

24
Cash generated from operations
2023
2022
£
£
Profit for the year after tax
843,914
585,147
Adjustments for:
Taxation charged
31,137
150,100
Finance costs
93,553
78,123
Investment income
(843)
(424)
Amortisation and impairment of intangible assets
74,355
85,670
Depreciation and impairment of tangible fixed assets
49,009
49,923
Unrealised currency translation (gains)/losses on long-term loans
90,814
29,964
Foreign exchange gains on cash equivalents
(8,025)
(3,292)
Movements in working capital:
Decrease/(increase) in stocks
264,698
(1,385,835)
(Increase) in debtors
(133,834)
(168,380)
(Decrease) in creditors
(667,381)
(141,562)
Cash generated from/(absorbed by) operations
637,397
(720,566)
25
Analysis of changes in net debt
1 March 2022
Cash flows
Exchange rate movements
28 February 2023
£
£
£
£
Cash at bank and in hand
819,919
344,844
8,025
1,172,788
Borrowings excluding overdrafts
(3,001,657)
56,389
-
(2,945,268)
(2,181,738)
401,233
8,025
(1,772,480)
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