Registered number:
FOR THE YEAR ENDED 31 AUGUST 2023
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FREDDIE'S FLOWERS LIMITED
COMPANY INFORMATION
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FREDDIE'S FLOWERS LIMITED
CONTENTS
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FREDDIE'S FLOWERS LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 AUGUST 2023
The Directors are pleased to present their Strategic Report and audited financial statements for the year ended 31 August 2023. As permitted by the Companies Act 2006, the financial statements have been prepared up to 3 September 2023.
Freddie’s Flowers is a leading subscription-based flower delivery company, offering regular boxes of high quality, fresh-cut flowers curated by expert florists across the UK and Germany. These are carefully styled and feature different varieties of seasonal flowers and foliage, ready to be arranged by our members. The business also offers a selection of floriculture-related products & accessories to complement its core proposition and enhance the customer experience.
Growing our customer base and continuing to spread the joy of Freddie’s Flowers in the UK and internationally remains our core ambition. Following a period of exceptional growth, during which the business benefited from the dynamics surrounding Covid restrictions (increased consumer demand, reduced marketing costs, lower high-street competition), the European macroeconomic climate shifted dramatically with the rising cost of living forcing UK consumer confidence and spending to record lows. Whilst the year to 31 August 2023 saw a reduction in revenue to £38.9m, this still represents significant growth vs. pre-pandemic levels (revenues in the year to 31 August 2020 were £26.4m, a year which partially benefited from Covid-led lockdowns). Furthermore, Gross profit margin improved to 43% (from 35% in 2022) and Adjusted EBITDA losses were materially reduced to £0.5m (2022 EBITDA loss: £17.9m) following an exercise to restructure the cost base, resulting in a more profitable and scalable business model for future growth and success. Consequently, average employee numbers for the group reduced to 271 (2022: 479). We remain proud to pay all our UK employees at or above the London Living Wage. We are pleased to say that the business has now returned to growth, supported by our launch into the broader flower gifting market in March 2023. This has enabled us to offer the unique Freddie’s Flowers proposition to a larger audience in the UK, with Germany to follow early next year. We want to build a successful international business, which our employees, customers and suppliers feel proud to be part of. We recognise that our success is dependent on that of our people and Freddie’s Flowers is committed to creating an inclusive work environment with a diverse workforce, where everyone feels safe and valued. Moreover, we want to be an organisation that changes peoples’ relationship with flowers, in a sustainable and ethical way. Having already been certified Carbon Neutral by the Carbon Trust, we were proud to be awarded B Corp status in April 2023, further recognising the work we do and our commitment towards our social and environmental goals. We are excited for the future as floral changemakers, redefining what it means to be a responsible, modern-day florist. *Adjusted EBITDA is profit before interest, tax, depreciation, amortisation and stock write-offs.
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FREDDIE'S FLOWERS LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
The Directors are aware of a number of risks the Group faces in the markets in which it operates. The Directors, with the support of management, have implemented policies and procedures to eliminate or mitigate these risks.
The most significant risks and uncertainties affecting the Group are considered below. Liquidity and cash flow risk The Group is exposed to liquidity risk in funding its ongoing operations. This is managed by undertaking detailed cash flow forecasting to monitor the Group’s working capital requirements to ensure that sufficient cash resources are available to meet the Group’s obligations as they fall due, including the repayment of the Flower Bond of £4.3m due in December 2024. Interest rate The Group’s borrowings bear interest at a fixed rate and the borrowing is unsecured reducing its exposure to interest rate risk. The Group monitors its liquidity and cash flow as below to meet the capital and interest repayments of its borrowings. Foreign exchange risk A proportion of the Group's purchases are invoiced in Euros. As such, the Group incurs foreign exchange gains and losses on the timing differences between receiving and paying for goods. The cost of foreign exchange exposure is reduced through the Group’s hedging policy, which is reviewed at quarterly intervals. This gives the Group the ability to draw down on these contracts where the current spot rate is unfavourable. Equally where the spot rate is favourable then the Group uses the available rate. The open position of hedges is carefully monitored to ensure forward contracts are utilised prior to their expiry date. Additionally, the Group utilises natural hedging where possible, meeting its supplier debts with Euro revenue from the European business operations. Credit risk Credit risk reflects the risk that the underlying borrowers or other transaction parties will not meet their obligations as they fall due. Due to the short-term nature of trade debtors the Group is not exposed to a significant level of credit risk. Competitive risk The Group faces competition in the market, which is mitigated by continuous investment in marketing and technology to maintain a leading position.
The Group’s key financial performance indicators are revenue (2023: £38.9m, 2022: £55.2m) and adjusted EBITDA (2023: £(0.5)m loss, 2022: £(17.9)m loss). The Directors monitor the Group’s key performance indicators on a regular basis in order to assess the ongoing financial performance.
Management of the Group started monitoring a number of non-financial key performance indicators during the year, including flower quality, delivery quality and customer service performance. These are reported internally on a weekly basis, and reviewed against targets and historical performance.
During the period ended 31st August 2023, our "Rate My Flowers" metric was 4 out of 5 in both our key operational territories (2022: 4 out of 5). Our average contact level from customers was ca.13% (2022: 20%) per order in both markets.
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FREDDIE'S FLOWERS LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
Under Section 172 of the Companies’ Act 2006, the Directors of the Freddie’s Flowers Group have a duty to promote the success of the Group for the benefit of its members as a whole. In doing so, the Directors pay regard to the matters listed in the in Section 172(1) (a-f), as listed below:
(a) The likely consequence of any decisions in the long term; (b) The interest of the Group’s employees; (c) The need to foster the Group’s relationships with suppliers, customers and others; (d) The impact of the Group’s operations on the community and the environment; (e) The desirability of the Group maintaining a reputation for high standards of business conduct; (f) The need to act fairly between members of the Group. In discharging their duties, the Directors have regard for all these matters, taking them into consideration in their decision-making processes. The Directors recognise the importance of stakeholder engagement to the long-term success of the business. The interests of key stakeholders and the Directors’ approach to these are explained below: Customers As a customer-centric business, our customers are at the heart of everything we do. Our aim is to create an enjoyable and seamless experience across the entire Freddie’s Flowers proposition. We support our customers through multiple channels, including our website, FAQs and dedicated customer service function. Through that, we carefully monitor quality and performance, and take account of all feedback, positive and negative, to ensure we are providing the best experience for our customers. Examples are:
∙Customers are asked to ‘Rate My Flowers’, providing ratings and comments
∙Interactions with Customer Service are analysed, summarised and shared internally via a monthly Voice of the Customer Report
∙We undertake surveys of existing, previous and potential customers to gain insights into their attitudes and behaviours
Through the above we ensure that our decision-making and product development is centred around our customers and their needs.
Employees
We strive to maintain a positive working environment for our employees, and to keep employee engagement as strong as possible.
∙We offer a positive and inclusive work environment with various opportunities to learn and develop
∙We offer a number of perks and benefits, which include mental and physical wellbeing support. We also invest in personal development through L&D programmes
∙We keep our employees up to date with what’s happening through regular communication, for example, our weekly all-hands ‘Flower Stall’ meetings
∙We undertake annual company-wide engagement surveys, and also keep up-to-date with progress through regular pulse surveys. eSAT is a key metric that we monitor and report internally
∙Our company values have been developed with deep involvement from our employees, and we base our behaviours on these
∙We actively celebrate our employees’ personal achievements, as well as those in the workplace
Suppliers
Our key suppliers are those who provide our beautiful flowers. We work with them to ensure quality is optimum. We strive to build and foster strong relationships with them and all our suppliers.
∙We have long-standing partnerships with flower growers in the UK and internationally
∙Our relationships with our suppliers are two-way, with regular, open communication, and fair terms and conditions
∙We share long term plans with our supplier partners, and make commitments to support investment and longevity
∙We ask all our suppliers to agree to our Supplier Code of Conduct
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FREDDIE'S FLOWERS LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
Community and environment
Having a positive impact on our community and environment is a foundational principle of Freddie’s Flowers. We look to lead and implement positive change internally and externally in a variety of ways:
∙We limit waste by virtue of being a subscription-based business, thus limiting surplus stock. Waste is a key metric that we monitor, and we have clear reduction targets in place
∙We are Carbon Neutral (certified via Carbon Trust), and are a member of the Flower Sustainability Initiative (FSI).
∙We were proud to be certified as a B-Corp company in April 2023 for the first time, with an overall score of 85.3.
∙We offer our employees CSR days, and we encourage employees to reduce their own carbon footprint by operating a cycle to work scheme
∙We have partnered with charities including Dementia Adventure, and we hold regular fundraising activities. Our customers are invited to make micro-donations via Pennies, by adding a small donation to their subscription payments
Shareholders
Our company is majority-owned by its founders, and they remain actively involved in the business. We ensure our investors are kept informed as follows:
∙Our shareholders are represented by and sit on the Board of Directors.They are included in all key business decisions, and they are kept updated on business performance through monthly board meetings
∙Regular updates and information are also shared with the Board on business strategy, plans and performance
This report was approved by the board and signed on its behalf.
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FREDDIE'S FLOWERS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 AUGUST 2023
The Directors present their report and the financial statements for the year ended 31 August 2023.
The Directors who served during the year were:
The loss for the year, after taxation, amounted to £2,049,907 (2022 - loss £18,637,361).
No dividend has been declared or proposed during the year (2022: £Nil).
The Directors are responsible for preparing the Group strategic report, the Directors' report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We expect the year to be another exciting chapter in the history of Freddie's Flowers, with continued focus on growing our UK and Germany customer bases, as well as the scaling up of our gifting proposition in both markets.
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FREDDIE'S FLOWERS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
Streamlined Energy and Carbon Reporting
In accordance with disclosure requirements for large companies under the Companies Act 2006, the table below shows the Freddie’s Flowers Group’s greenhouse gas emissions during the financial year ended 31 August 2023.
The methodology used to calculate our emissions is based on HM Government Environmental Reporting Guidelines: including streamlined energy and carbon reporting guidance (March 2019) and UK Government GHG Conversion Factors for Company Reporting. Freddie’s Flowers is certified Carbon Neutral by the Carbon Trust, and continues to work to reduce carbon emissions by reducing consumption and exploring alternative solutions. Examples of initiatives we have done or are implementing to reduce our emissions and consumption are:
∙Brought more of our deliveries to customers in-house - as we use electric bikes and vans for in-house deliveries, this has had a positive environmental impact
∙We also work with external couriers who share our target for being carbon neutral, such as DPD and Zedify
∙Our packaging is 100% recyclable, and we collect boxes where possible, so they can be reused in our delivery cycle multiple times
∙We have recently relocated our head office, and our new location is energy efficient in many ways, for example, lighting is movement activated, and heating and air conditioning are centralised
∙We have changed utilities provider to be more sustainable, with electricity and gas now coming from 100% renewable sources
∙We also encourage our employees to limit their own carbon footprint, by offering a cycle to work scheme.
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FREDDIE'S FLOWERS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
The auditor, James Cowper Kreston Audit, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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FREDDIE'S FLOWERS LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FREDDIE'S FLOWERS LIMITED
We have audited the financial statements of Freddie's Flowers Limited (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 August 2023, which comprise the Group Statement of Comprehensive Income, the Group and Company Balance Sheets, the Group Statement of Cash Flows, the Group and Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the Parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
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FREDDIE'S FLOWERS LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FREDDIE'S FLOWERS LIMITED (CONTINUED)
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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Group strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group strategic report or the Directors' report.
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FREDDIE'S FLOWERS LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FREDDIE'S FLOWERS LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor's report.
This report is made solely to the Group'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 Group's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group and the Group's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants and Statutory Auditor
2 Chawley Park
Cumnor Hill
Oxfordshire
OX2 9GG
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FREDDIE'S FLOWERS LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2023
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FREDDIE'S FLOWERS LIMITED
REGISTERED NUMBER: 09192551
CONSOLIDATED BALANCE SHEET
AS AT 31 AUGUST 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 17 to 34 form part of these financial statements.
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FREDDIE'S FLOWERS LIMITED
REGISTERED NUMBER: 09192551
COMPANY BALANCE SHEET
AS AT 31 AUGUST 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 17 to 34 form part of these financial statements.
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FREDDIE'S FLOWERS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2023
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FREDDIE'S FLOWERS LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2023
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FREDDIE'S FLOWERS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2023
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Freddie's Flowers Limited is a company with a liability limited to the share capital and incorporated in England and Wales (registered number 09192551) under the Companies Act. The registered office and principal place of trade of the Company is 23-34 Ingate Place, Nine Elms, London, SW8 3NS.
The principal activity of the business is the sale and distribution of flowers.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of comprehensive income in these financial statements.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance Sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.
The Directors have considered the ability of the company to continue trading for the foreseeable future. This review has included updating financial projections for a period of at least 12 months from the date the financial statements were signed. Based on this review and taken together with existing financing facilities, the Directors believe that the financial statements have been prepared appropriately on the going concern basis.
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
At each reporting date the Group assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Stocks are held at the lower of cost and net realisable value making due allowance for slow-moving or obsolete stock.
Page 20
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
The Group has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
The Group has elected to apply the recognition and measurement provisions of IFRS 9 Financial Instruments (as adopted by the UK Endorsement Board) with the disclosure requirements of Sections 11 and 12 and the other presentation requirements of FRS 102.
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, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, 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.
Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.
Other financial assets
Other financial assets, which includes investments in equity instruments which are not classified as subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the recognised transaction price. Such assets are subsequently measured at fair value with the changes in fair value being recognised in the profit or loss. Where other financial assets are not publicly traded, hence their fair value cannot be measured reliably, they are measured at cost less impairment.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
If there is a favourable change in relation to the events surrounding the impairment loss then the
Page 21
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Group after the deduction of all its liabilities.
Basic financial liabilities, which include trade and other payables, bank loans, other loans and loans due to fellow group companies are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Other financial instruments
Derivatives, including forward exchange contracts, futures contracts and interest rate swaps, are not classified as basic financial instruments. These are initially recognised at fair value on the date the derivative contract is entered into, with costs being charged to the profit or loss. They are subsequently measured at fair value with changes in the profit or loss.
Debt instruments that do not meet the conditions as set out in FRS 102 paragraph 11.9 are subsequently measured at fair value through the profit or loss. This recognition and measurement would also apply to financial instruments where the performance is evaluated on a fair value basis as with a documented risk management or investment strategy.
The Group enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income. The impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate.
Derecognition of financial instruments
Derecognition of financial assets
Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Group transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Group will continue to recognise the value of the portion of the
Page 22
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
risks and rewards retained.
Derecognition of financial liabilities
Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
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 income as appropriate. The company does not apply hedge accounting for foreign exchange derivatives.
Financial liabilities and equity are classified according to the substance of the financial instrument’s contractual obligations, rather than the financial instrument’s legal form. Financial liabilities, excluding derivatives, are initially measured at transaction price (after deducting transaction costs) and subsequently held at amortised cost. Tangible fixed assets Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. Residual value assessments consider issues such as the remaining life of the asset and projected disposal values. Current and deferred taxation The Group establishes provisions based on reasonable estimates. The amount of such provisions is based on various factors, such as experience with previous tax submissions. Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Bad debt provision The Group establishes provisions based on reasonable estimates. The Group makes specific provisions when it is probable that complete recovery of amounts due from trade debtors will not be made. Reviews of provisions held against customer accounts are carried out at least quarterly by management who consider cash inflows, historic recoveries and market information. Recoverability of amounts owed by group undertakings The Group considers amounts owed by group undertakings annually and estimates the provision for bad debts. In determining this, assumptions and estimates are made in relation to the likelihood of monies being recovered based on the plans of the Group.
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 24
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 25
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
There were no factors that may affect future tax charges.
Page 26
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
10.Taxation (continued)
The Group has unrecognised deferred tax losses of £12,717,467 (2022: £9,555,644) which can be carried forward and used to offset future taxable profits. The tax losses have no expiry date.
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
11.Tangible fixed assets (continued)
Page 28
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 29
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 30
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 31
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 32
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
20.Deferred taxation (continued)
Share premium account
Capital redemption reserve
Foreign exchange reserve
Profit and loss account
Page 33
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FREDDIE'S FLOWERS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £192,682 (2022 - £157,241). Contributions totalling £31,825 (2022 - £46,490) were payable to the fund at the balance sheet date and are included in other creditors.
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