Introduction
This strategic report sets out IT Luggage Ltd's performance for the financial year ended 31 March 2023. We will review our business model, key risks and opportunities, and provide an overview of our financial performance during the year. The report is also intended to provide insight into how we have complied with section 172 of the Companies Act 2006 (the "Act").
IT Luggage Ltd takes its duties under section 172 of the Companies Act 2006 seriously. We are committed to promoting the long-term success of the company for the benefit of our shareholders and stakeholders. In fulfilling our duties under the Act, we have taken into account the following factors:
The interests of our shareholders - We have worked hard to create value for our shareholders, delivering a strong financial performance during the year. We have also implemented various initiatives to meet the needs of our shareholders, most of whom are also officers of the company. These initiatives include focusing on promoting profitable product lines, investing our focus into lucrative markets and cutting surplus costs where viable.
Employees engagement - Our employees are central to our success, and we are committed to treating them
fairly and with respect. We have recently invested in various employee engagement initiatives, including creating social and networking opportunities for employees, and encouraging connections. We have also created upskilling opportunities, to offer employees scope for growth.
Customer engagement - Our customers are at the heart of everything we do. We strive to deliver high-quality
products and services that meet their needs and exceed their expectations. During the year, we regularly met with customers to ensure that the right products and services were available to meet their requirements.
Supplier engagement - Our suppliers are important partners in our business. We work closely with them to
ensure that we have a reliable supply chain that meets our needs and delivers value for money. During the year, we regularly engaged with our suppliers to help them better understand our needs as well as build relationships to collaboratively work together over difficult periods.
Environmental impact - We are committed to operating in a responsible and sustainable manner. We have recently incorporated eco products using recycled materials within our range using FSC and recycled cardboard for all packaging. Our work from home initiative has reduced carbon emissions through reduction in travel.
The principal activities of the group during the year continued to be the importation, wholesale and retail of travel goods and luggage. The group's headquarters are based in the United Kingdom, but the group also possesses operations in the USA, Hong Kong and the EU.
The key financial and other performance indicators during the year were as follows:
2023 2022 Change
£ £ %
Turnover 119,971,509 47,767,801 151
Group operating profit 3,951,350 2,385,186 66
Profit after tax 2,169,392 1,355,487 60
Total Equity 34,388,121 32,294,936 6
Current assets as % of current liabilities (Quick ratio) 169% 307% -45
Average number of employees 150 111 35
The primary reason for the material increase of turnover, operating profit and profit after tax was due to the recovery from the covid-19 pandemic on the group's global operations. FY22 saw the group ease back to relatively normal levels of trading while in FY23 all entities within the group have generated trading volumes similar to pre-pandemic levels. During FY22 the business also suffered from freight rates increasing substantially, which significantly impacted profitability and overall performance. Whilst freight rates remain high in FY23, they have normalised from the previous period. In addition, the group continued to grow trading in the German entity once again, having restarted in FY22, which also helped to increase sales across Europe. Increase in operating profit is mainly as a result of increased revenues with focus on managing the Group’s overheads.
Furthermore, the group continues to rely on its strong cashflow position to preserve valuable liquidity within the group, allowing the funding of working capital requirements and transfer loans across the entities when necessary. Although the quick ratio reduced as a result of increase in non-trade related liabilities, cash reserves strengthened from FY22.
The directors regularly monitor certain key performance indicators, including:
Operating cash flows
Like for like sales growth
Purchasing volume discounts
The group's operations are exposed to numerous risks and external factors as described below.
Credit risk
The group's exposure to credit risk is limited to the carrying amount of financial assets recognised at the end of the reporting period. The group continuously monitors defaults of customers and other counterparties to minimise this risk. Additionally, the group insures the majority of its trade debtors.
Political and economic uncertainty
Travel may be at risk during times of political and economic uncertainty. The affected regions may experience reduced travel, which may reduce demand for luggage and travel goods. Given the group's worldwide operations, this uncertainty may affect the performance of certain entity markets within the group. Global uncertainty arose during the covid-19 pandemic, and whilst that was alleviated by FY23, other geopolitical factors arising in the period could cause further macro economic uncertainty.
The overall results for the year were a significant improvement from FY22 and demonstrated a full recovery to the success enjoyed in the years prior to the covid-19 pandemic, as deemed by the directors. The material increase in turnover and demand was a result of global travel restrictions being lifted, combined with new product ranges being introduced by the group.
Pre covid-19 levels of turnover and profitability have largely been achieved, and management are confident that their strong cashflow position and brand will continue to serve them well. This optimism has been substantiated by the fact that the group has continued to enjoy strong success in sales, profitability and cash flow up until the date of signing-off this report. This continued financial improvement, combined with the external environment returning to some normality, provides ongoing confidence that the group will continue as a going concern and the business will remain viable.
Further opportunities exist to grow the business in existing markets, particularly in the USA and Europe.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2023.
The principal activities of the Group are described in the Strategic Report under the "Fair review of the business" paragraph.
The values of the business, which encompasses the relationships that the business has with all major stakeholder groups, are described within the S172 statement of the Strategic Report,
The results for the year are set out in the Strategic Report.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with the company's articles, a resolution proposing that Munir Tatar & Associates be reappointed as auditor of the group will be put at a General Meeting.
As the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Each of the persons who are directors at the time when this directors' report is approved has confirmed that:
So far as the Director is aware, there is no relevant audit information of which the auditor of the company is unaware, and
The directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.
Conclusion
IT Luggage Ltd has delivered a strong financial performance during the year relative to the prior year period, and we remain committed to the long-term success of the company and the group. We would like to take this opportunity to thank our shareholders, employees, customers, and suppliers for their continued support.
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of IT Luggage Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity 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 Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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 group and parent 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 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 and 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.
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 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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. Our approach uses a combination of a robust risk assessment, an in-depth understanding of the entity's control environment and financial processes, and tailored substantive procedures to enable comprehensive assurance over financial data to be gathered. This approach demonstrates how our procedures are deemed capable of detecting irregularities, including fraud.
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The directors of the group have elected not to include a copy of the profit and loss account within the financial statements.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,730,997 (2022 - £1,416,950 profit).
IT Luggage Limited (“the company”) is a limited company domiciled and incorporated in England and Wales. The registered office is Luggage House, The Chase, Foxholes Business Park, Hertford, Hertfordshire, UK, SG13 7NN.
The group consists of IT Luggage Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest pound sterling.
The financial statements have been prepared under the historical cost convention.
The principal accounting policies adopted are set out below.
In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.
Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.
The consolidated financial statements incorporate those of IT Luggage Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits) except IT Luggage Australia, which did not trade throughout the year and the non trading transactions with this company considered not material. IT Luggage GmbH started trading again in the period, so has been consolidated into the accounts.
All financial statements are made up to 31 March 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from the sale of services, which mainly comes in the form of commission earned by the subsidiaries and is passed back to the parent, is also recognised in a similar manner to the sale of goods. The revenue is recognised when the significant risks and rewards of ownership of the services have transferred to the recipient, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Goodwill represents the excess of the cost of acquisition of a business 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 20 years.
For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.
Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of accumulated 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 basis:
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Investment properties, which are property held to earn rentals and/or for capital appreciation, are initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently they are measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.
Property rented to a group entity is accounted for at fair value with changes in fair value recognised in the profit and loss.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. 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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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.
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.
The tax expense represents the sum of the tax currently chargeable plus any deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in the profit and loss.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Useful economic life of assets are applied as per the rates stated within Note 1.
Inventories are valued at the lower of cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete stocks. Note 16 states the value determined for this accounting period. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, the promotional, competitive and economic environment and inventory loss trends, alongside any provisions associated with obsolete or damaged stock.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Investment property comprises the freehold building addressed Riverside House, River way, Harlow, CM20 2DW. The fair value of the investment property has been arrived at on the basis of a valuation carried out at 31st March 2023 by an independent valuation agency, who are not connected with the company.
The property value is not deemed to have fluctuated between the two balance sheet dates. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties. The Directors of the company agree with this assessment that the value remains at £3.75m, in line with the previous period end date.
The carrying value of land and buildings comprises:
The investment in subsidiaries balance relates to the initial investment in the IT Luggage (Thailand) Ltd entity which was incorporated in the accounting period, but is not included consolidated in the group accounts on the basis that it is a dormant, immaterial subsidiary.
The in-year movement relates to the initial investment in the IT Luggage (Thailand) Ltd entity which was incorporated in the accounting period, and is a subsidiary majority-owned by IT Luggage Ltd.
The leasehold buildings asset class includes the property 8 The Chase, Unit D, Herford, SG13 7NN, which has been partially sub-let to a third party tenant in return for a commercial rent, since the start of the accounting period. Given that the fair value of the different components - owner-occupied vs investment property - cannot be easily distinguished, and the owner-occupied portion is not insignificant, management have deemed it appropriate to continue classifying the whole property as PPE. The asset continues to be disclosed under tangible fixed assets, rather than investment property.
Freehold buildings was a separate asset class under tangible fixed assets in the prior period, but has been reclassified to investment property due to a change in use, as explained in note 12.
Details of the company's subsidiaries at 31 March 2023 are as follows:
IT Luggage (Thailand) Ltd is a new majority-owned subsidiary incorporated during the accounting period.
The aggregate capital & reserves and the profit /(Loss) for the year of the subsidiaries noted above, that were not included in the consolidated accounts, were as follows together with the reason for non consolidation.
Name undertaking Profit/(Loss) (£) Capital and Reserves (£) Reason
IT Luggage Aus PTY Ltd 0 491 Dormant
IT Luggage (Thailand) Ltd 0 518 Dormant
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Deferred tax assets are recognised on the unused tax losses of £1,315,668, which have not been offset against this year's profits, but rather are being deferred to future years. It is probable that the unused tax losses will be carried forward and offset against profits in a future accounting period, hence the recognition of a deferred tax asset.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:
The auditor's report was unqualified.
The following amounts were outstanding at the reporting end date:
£19,034,161 of the other creditors / accruals and deferred income balance within note 18 relates to liabilities owed to the Directors of the company, which are considered to be related party transactions. The movement in the year relates to a combination of additional amounts accrued and payments made by the company to the Directors of some of the liability.
The prior period related party transactions figure was incorrectly omitted from the submitted financial statements for the year ended 31st March 2022. The amounts due to related parties should have been disclosed in the notes of the accounts. Given the material nature of the balance, an amendment has been made to the comparative figures of the group and the company, to correctly disclose the amounts due to related parties.