Company registration number 06671497 (England and Wales)
MAGIC APPARELS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
MAGIC APPARELS LIMITED
COMPANY INFORMATION
Director
P Bawa
Secretary
Praxis Secretaries (UK) Limited
Company number
06671497
Registered office
Unit 4
365a Euston Road
London
NW1 3AR
Auditor
Candour Advisory LLP
48 Warwick Street
London
W1B 5AW
MAGIC APPARELS LIMITED
CONTENTS
Page
Strategic report
1 - 3
Director's report
4
Director's responsibilities statement
5
Independent auditor's report
6 - 8
Profit and loss account
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
MAGIC APPARELS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The director presents the strategic report for the year ended 31 December 2023.
Review of the business
Magic Apparels Ltd's sustainable focused brand, Red Button, made its debut in the European Union (EU) several years ago and has since expanded to twenty-one countries around the world. Despite the formidable challenges posed by the COVID-19 pandemic and a volatile economy, the company demonstrated incredible resilience, growing sales, and has implemented meticulous cost management. As a result, the company achieved remarkable growth over the past few years. The company's leadership anticipates continued growth for the brand in the markets we operate in plus expansion into North America and in its online presence. Sustainability remains core to everything we produce.
Principal risks and uncertainties
Economic uncertainties could potentially impact the cost of sales, encompassing factors such as goods prices, freight fees, and duties. General inflation worldwide is a concern. Potential trade restrictions with China could also be considered a risk. Recognising the volatility that characterises these dynamics, the company has implemented a comprehensive approach to budgeting and forecasting for a span of 5 years keeping these factors in mind and further diversifying the supply base with the aim of maintaining stability.
Given the company's reliance on overseas suppliers, the inherent volatility of foreign exchange markets becomes a pertinent consideration. In response to this challenge, the company has embraced a forward-thinking strategy in the form of forward FX contracts. By engaging in such contracts, the company adeptly hedges its exposure to fluctuations in the foreign exchange market. This proactive step augments the company's resilience by establishing a protective mechanism against potential adversities arising from currency valuation fluctuations, thereby fostering stability in the face of an otherwise unpredictable domain.
One of the cornerstones of Magic Apparels Ltd's success has been its stringent focus on cost monitoring and control. Despite the volatility of the market and the unforeseen hurdles posed by the pandemic and inflation thereafter, the company's commitment to financial discipline enabled it to achieve consistent double-digit growth. This achievement underscores the effectiveness of the company's business model and its ability to adapt to evolving circumstances while maintaining a robust financial performance.
Further Governments around the world are introducing legislation to ensure sustainability and traceability of the products that are being imported into their markets. We strongly encourage this effort. While many clothing importers will struggle with these disclosures thus affecting the industry, we are highly confident, as we already far exceed the guidelines being introduced.
MAGIC APPARELS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Development and performance
With a solid foundation established in the markets we operate in, the director envisions that the brand will continue to garner recognition and prominence among its customers. This outlook is rooted in the brand's consistent delivery of quality, its responsiveness to market dynamics, its alignment with emerging fashion trends, and its absolute commitment to sustainability.
As part of our performance-focused approach, we are steadfast in maintaining our marketing investment. This commitment underscores our dedication to sustaining brand visibility and consumer engagement even in times of uncertainty. Furthermore, we are keenly poised to expand into new markets, leveraging our existing successes as a foundation for growth. By diversifying our market presence, we enhance revenue streams and broaden our consumer base, thus fortifying our performance resilience.
Sustainability is a core value of the brand since inception, and we have partners with the Better Cotton Initiative to achieve our goals. Because we use a lot of cotton in our products, Red Button is a member of the Better Cotton Initiative. This initiative contributes to making global cotton production 'Better' for people who produce it, 'Better' for the environment in which it grows and 'Better' for the future of the sector. By purchasing our cotton products, you support Better Cotton farmers. These farmers use water sparingly, take care of biodiversity and the health of their farmland, reduce the amount of agricultural chemicals and respect the rights and well-being of their employees.
When it comes to sustainability, it starts with making garments that last as long as possible. That's why we test all our fabrics for washability and durability and exclude the use of hazardous substances. Our collection is in line with modern fashion trends but is for the most part timeless. This means you can enjoy wearing our garments for many years to come.
Our efforts go further, however: besides Better Cotton we also use recycled polyester called Repreve. This polyester is made from used plastic bottles. Because we use Repreve instead of conventional polyester, these plastic bottles do not end up in landfills or in the sea.
More than 30 billion plastic bottles have already been recycled into polyester worldwide. Repreve eliminates the need for petroleum, reduces greenhouse gas emissions and saves water and energy. Wish to support this initiative? Look out for our products with the Repreve hangtag.
We would also like to draw attention to the fact that the pocket linings is made from recycled cotton and polyester, all our labels are from recycled paper, and our packaging material is made from recycled cardboard and biodegradable waste.
Finally, to ensure that our suppliers' employees can do their job under the best conditions, we and our suppliers are members of amfori Business Social Compliance Initiative (BSCI). BSCI regularly checks its participants for compliance with human and labour rights as laid down in the BSCI Code of Conduct. This Code of Conduct includes thirteen points, such as fair pay and decent working hours. Occupational health and safety. No child labour and social protection for young workers. No forced employment, protecting the environment and operating ethically.
Key performance indicators
The brand's financial success is underscored by its revenue distribution across various markets. Notably, the Netherlands and Germany have emerged as the primary contributors, accounting for 46% and 19% of the company's revenue, respectively. We have seen growth in every country we operate in. This reflects the effectiveness of the business’ strategies in resonating with these specific markets, as well as the brand's ability to cater to their unique preferences and demands.
Therefore, calculating the percentage change in revenue and cost compared to the previous year, while maintaining a consistent baseline of revenue stability, indicates our ability to weather market fluctuations and sustain growth.
MAGIC APPARELS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
In Conclusion
The dynamic business environment necessitates the adoption of innovative development and performance strategies. Our organization’s commitment to advanced budgeting and pricing, supplier relationship management, and prudent foreign exchange risk mitigation, and most importantly sustainability underscore our dedication to achieving sustained growth and optimal performance. By strategically navigating the intricate realm of market fluctuations, we safeguard our competitive edge and position ourselves as resilient and adaptable players in the industry. We reaffirm our commitment to excellence in the face of unpredictable market dynamics.
P Bawa
Director
30 July 2024
MAGIC APPARELS LIMITED
DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
The director presents his annual report and financial statements for the year ended 31 December 2023.
Principal activities
The principal activity of the company continued to be that of a clothing and accessory wholesaler and a management service provider.
Results and dividends
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £1,192,711. The director does not recommend payment of a final dividend.
Director
The director who held office during the year and up to the date of signature of the financial statements was as follows:
P Bawa
Auditor
Candour Advisory LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
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, Review of the Business, Principle Risks and Uncertainties, Analysis of Development and Performance, Key Performance Indicators.
Statement of disclosure to auditor
So far as each person who was a 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 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 company’s auditor is aware of that information.
Medium-sized companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
On behalf of the board
P Bawa
Director
30 July 2024
MAGIC APPARELS LIMITED
DIRECTOR'S RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
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:
select suitable accounting policies and then apply them consistently;
make judgements 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 company will continue in business.
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.
MAGIC APPARELS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF MAGIC APPARELS LIMITED
- 6 -
Opinion
We have audited the financial statements of Magic Apparels Limited (the 'company') for the year ended 31 December 2023 which comprise the profit and loss account, 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 Financial Reporting Standard 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:
give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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.
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:
the information given in the strategic report and the director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
MAGIC APPARELS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF MAGIC APPARELS LIMITED (CONTINUED)
- 7 -
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 or the director's 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, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business. Also reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
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.
MAGIC APPARELS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF MAGIC APPARELS LIMITED (CONTINUED)
- 8 -
Stephen Terence Costar FCCA
Senior Statutory Auditor
For and on behalf of Candour Advisory LLP
30 July 2024
Chartered Certified Accountants
Statutory Auditor
48 Warwick Street
London
W1B 5AW
MAGIC APPARELS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 9 -
2023
2022
Notes
£
£
Turnover
3
21,372,517
16,421,284
Cost of sales
(18,077,091)
(14,130,088)
Gross profit
3,295,426
2,291,196
Administrative expenses
(610,188)
(335,249)
Other operating income
7,581
Operating profit
4
2,685,238
1,963,528
Interest receivable and similar income
7
132,503
7,746
Interest payable and similar expenses
8
(30,497)
(283,188)
Profit before taxation
2,787,244
1,688,086
Tax on profit
9
(653,066)
(306,084)
Profit for the financial year
2,134,178
1,382,002
The profit and loss account has been prepared on the basis that all operations are continuing operations.
MAGIC APPARELS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
2023
2022
£
£
Profit for the year
2,134,178
1,382,002
Other comprehensive income
-
-
Total comprehensive income for the year
2,134,178
1,382,002
MAGIC APPARELS LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 11 -
2023
2022
Notes
£
£
£
£
Fixed assets
Intangible assets
11
31,794
37,890
Tangible assets
12
8,240
Investments
13
87
10,434
40,121
48,324
Current assets
Stocks
17
5,432,690
5,323,549
Debtors
16
368,004
685,498
Cash at bank and in hand
6,011,370
4,663,360
11,812,064
10,672,407
Creditors: amounts falling due within one year
18
(6,501,902)
(6,302,702)
Net current assets
5,310,162
4,369,705
Total assets less current liabilities
5,350,283
4,418,029
Provisions for liabilities
Provisions
20
11,273
Deferred tax liability
21
2,060
(2,060)
(11,273)
Net assets
5,348,223
4,406,756
Capital and reserves
Called up share capital
23
1
1
Profit and loss reserves
5,348,222
4,406,755
Total equity
5,348,223
4,406,756
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
The financial statements were approved and signed by the director and authorised for issue on 30 July 2024
P Bawa
Director
Company registration number 06671497 (England and Wales)
MAGIC APPARELS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 January 2022
1
3,274,753
3,274,754
Year ended 31 December 2022:
Profit and total comprehensive income
-
1,382,002
1,382,002
Dividends
10
-
(250,000)
(250,000)
Balance at 31 December 2022
1
4,406,755
4,406,756
Year ended 31 December 2023:
Profit and total comprehensive income
-
2,134,178
2,134,178
Dividends
10
-
(1,192,711)
(1,192,711)
Balance at 31 December 2023
1
5,348,222
5,348,223
The notes on pages 14 to 27 form part of these financial statements.
MAGIC APPARELS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
26
3,473,431
1,297,721
Interest paid
(30,497)
(54,588)
Income taxes paid
(285,885)
(107,001)
Net cash inflow from operating activities
3,157,049
1,136,132
Investing activities
Purchase of tangible fixed assets
(9,245)
Proceeds from disposal of subsidiaries
10,347
(4,293)
Interest received
132,503
7,746
Net cash generated from investing activities
133,605
3,453
Financing activities
Repayment of borrowings
815,780
Repayment of bank loans
(1,337,113)
651,184
Repayment of derivatives
(228,600)
Dividends paid
(1,192,711)
(250,000)
Net cash (used in)/generated from financing activities
(1,942,644)
401,184
Net increase in cash and cash equivalents
1,348,010
1,540,769
Cash and cash equivalents at beginning of year
4,663,360
3,122,591
Cash and cash equivalents at end of year
6,011,370
4,663,360
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
1
Accounting policies
Company information
Magic Apparels Limited is a private company limited by shares incorporated in England and Wales. The registered office is Unit 4, 365a Euston Road, London, NW1 3AR.
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 £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company has taken advantage of the exemption to prepare group accounts under Companies Act 2006 s402 on the grounds that its only subsidiary is immaterial. The financial statements present information about the company as an individual entity and not about its group.
1.2
Going concern
Atruet 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. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods 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.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, 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.
1.4
Intangible fixed assets other than goodwill
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:
Trademarks and Software
Straight line over 10 years
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.
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -
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:
Computers
25% Straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
1.6
Fixed asset investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
1.7
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.
1.8
Stocks
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.
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.
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
1.9
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.10
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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.
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
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.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.11
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.12
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.
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.13
Provisions
Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.
1.14
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.15
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.16
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 in the period are included in profit or loss.
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
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.
Critical judgements
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Useful economic lives of intangible assets
The annual amortisation charge for intangible assets is sensitive to changes in the estimated useful economic lives and residual values of assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investment, economic utilisation and usefulness of the assets.
Impairement of debtors
The company makes an estimate of the recoverable value of trade debtors and other debtors. When assessing the impairment of trade and other debtors, management considers factors including the current credit rating of the debtor, the ageing profile and historical experience.
3
Turnover and other revenue
2023
2022
£
£
Turnover analysed by geographical market
EU
19,153,504
15,143,307
EEA
1,149,000
32,545
United Kingdom
1,070,013
931,783
Others
-
313,649
21,372,517
16,421,284
2023
2022
£
£
Other revenue
Interest income
132,503
7,746
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange gains
(268,404)
(373,676)
Depreciation of owned tangible fixed assets
1,005
102
Amortisation of intangible assets
6,096
6,096
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
13,850
7,000
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Administration
3
2
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
161,090
90,270
Social security costs
6,014
2,776
Pension costs
2,406
506
169,510
93,552
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
132,503
7,746
2023
2022
Investment income includes the following:
£
£
Interest on financial assets not measured at fair value through profit or loss
132,503
7,746
8
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
30,497
54,588
Other finance costs:
Exchange differences on financing transactions
228,600
30,497
283,188
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
9
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
651,006
315,754
Adjustments in respect of prior periods
(7,021)
Total current tax
651,006
308,733
Deferred tax
Origination and reversal of timing differences
2,060
(2,649)
Total tax charge
653,066
306,084
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
2,787,244
1,688,086
Expected tax charge based on the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%)
655,560
320,736
Tax effect of expenses that are not deductible in determining taxable profit
(2,494)
952
Gains not taxable
(5,954)
Change in unrecognised deferred tax assets
(2,649)
Depreciation on assets not qualifying for tax allowances
19
Under/(over) provided in prior years
(7,020)
Taxation charge for the year
653,066
306,084
10
Dividends
2023
2022
£
£
Interim paid
1,192,711
250,000
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
11
Intangible fixed assets
Trademarks and Software
£
Cost
At 1 January 2023 and 31 December 2023
61,005
Amortisation and impairment
At 1 January 2023
23,115
Amortisation charged for the year
6,096
At 31 December 2023
29,211
Carrying amount
At 31 December 2023
31,794
At 31 December 2022
37,890
The company has incurred costs in respect of various Trade marks which have been registered for use in a number of countries at the International Bureau of the World Intellectual Property Organization. The company expects to incur further costs in the future as it acquires registered status in other countries within which it wishes to operate and will recognise each once formal registration is achieved.
12
Tangible fixed assets
Computers
£
Cost
At 1 January 2023
2,469
Additions
9,245
At 31 December 2023
11,714
Depreciation and impairment
At 1 January 2023
2,469
Depreciation charged in the year
1,005
At 31 December 2023
3,474
Carrying amount
At 31 December 2023
8,240
At 31 December 2022
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
13
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
14
87
87
Loans to subsidiaries
14
10,347
87
10,434
Movements in fixed asset investments
Shares in subsidiaries
Loans to subsidiaries
Total
£
£
£
Cost or valuation
At 1 January 2023
87
10,347
10,434
Disposals
-
(10,347)
(10,347)
At 31 December 2023
87
-
87
Carrying amount
At 31 December 2023
87
-
87
At 31 December 2022
87
10,347
10,434
14
Subsidiaries
Details of the company's subsidiaries at 31 December 2023 are as follows:
Name of undertaking
Registered office
Nature of business
Class of
% Held
shares held
Direct
Magic Apparels International Ltd
Core B, Block 71, Parkwest, Dublin12, Ireland
Clothing
Ordinary 1 Euro
100.00
The aggregate capital and reserves and the result for the year of the subsidiaries noted above was as follows:
Name of undertaking
Capital and Reserves
Profit/(Loss)
€
€
Magic Apparels International Ltd
7,330
7,230
The company has chosen not to prepare group accounts as the figures for the subsidiary are considered immaterial to the company.
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 24 -
15
Financial instruments
2023
2022
£
£
Carrying amount of financial assets
Debt instruments measured at amortised cost
321,795
536,792
Carrying amount of financial liabilities
Measured at fair value through profit or loss
- Other financial liabilities
-
228,600
Measured at amortised cost
6,061,479
6,002,008
Money Market Funds
Included in cash and bank are short term money market funds entered into on 29 December 2023 for €3.5m and £1.875m which matured on 2 January 2024. These have been recoded at amortised cost at 31 December 2023.
16
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
309,552
524,241
Other debtors
27,410
20,983
Prepayments and accrued income
31,042
137,625
368,004
682,849
Deferred tax asset (note 21)
2,649
368,004
685,498
17
Stocks
2023
2022
£
£
Finished goods and goods in transit
5,432,690
5,323,549
18
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Bank loans
19
1,337,113
Other borrowings
19
815,780
Trade creditors
4,176,461
3,899,637
Corporation tax
432,927
70,455
Other taxation and social security
7,496
1,639
Derivative financial instruments
228,600
Accruals and deferred income
1,069,238
765,258
6,501,902
6,302,702
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
19
Loans and overdrafts
2023
2022
£
£
Bank loans and Credit Facilities
1,337,113
Loans from group undertakings
815,780
815,780
1,337,113
Payable within one year
815,780
1,337,113
HSBC (UK) Bank plc provides short term credit import facilities to the company at an interest rate of 6.125%.
HSBC (UK) Bank plc has a debenture including Fixed Charge over all present freehold and leasehold property; First Fixed Charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and First Floating Charge over all assets and undertaking both present and future dated 12 November 2012
20
Provisions for liabilities
2023
2022
£
£
-
11,273
Provisions comprises an estimate in respect of sales returns by customers after the balance sheet date.
Movements on provisions:
£
At 1 January 2023
11,273
Reversal of provision
(11,273)
At 31 December 2023
-
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 26 -
21
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
2,060
-
-
-
Provisions for stock returns
-
-
-
2,649
2,060
-
-
2,649
2023
Movements in the year:
£
Asset at 1 January 2023
(2,649)
Charge to profit or loss
4,709
Liability at 31 December 2023
2,060
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
22
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
2,406
506
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.
23
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
1
1
1
1
24
Related party transactions
Transactions with related parties
As at 31 December 2023, Divine Investments International Limited owns 100% of the issued share capital of Magic Apparels Limited who in turns owns 100% of the share capital of Magic Apparels International Limited. The company has taken exemption from reporting related party transactions between itself and Divine Investments International Limited and other 100% owned subsidiaries.
Included in the headings below are transactions or balances with Retro Apparels Limited only.
MAGIC APPARELS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
24
Related party transactions
(Continued)
- 27 -
Name of related party
Nature of relationship
Other related parties
Company under common control
Description of
Income
Payments
transaction
2023
2022
2023
2022
£
£
£
£
Other related parties
Recharges / Purchases
21,906
732,669
25
Ultimate controlling party
The parent company and ultimate controlling party of Magic Apparels Limited is Divine Investments International Limited, registered office OMC Chambers Wickhams Cay 1, Road Town, Tortola, British Virgin Islands
26
Cash generated from operations
2023
2022
£
£
Profit for the year after tax
2,134,178
1,382,002
Adjustments for:
Taxation charged
653,066
306,084
Finance costs
30,497
283,188
Investment income
(132,503)
(7,746)
Amortisation and impairment of intangible assets
6,096
6,096
Depreciation and impairment of tangible fixed assets
1,005
102
Decrease in provisions
(11,273)
(43,003)
Movements in working capital:
Increase in stocks
(109,141)
(1,249,983)
Decrease/(increase) in debtors
314,845
(300,984)
Increase in creditors
586,661
921,965
Cash generated from operations
3,473,431
1,297,721
27
Analysis of changes in net funds
1 January 2023
Cash flows
31 December 2023
£
£
£
Cash at bank and in hand
4,663,360
1,348,010
6,011,370
Borrowings excluding overdrafts
(1,337,113)
521,333
(815,780)
3,326,247
1,869,343
5,195,590
2023-12-312023-01-01falseCCH SoftwareCCH Accounts Production 2024.100P BawaPraxis Secretaries (UK) Limitedfalsefalse066714972023-01-012023-12-3106671497bus:Director12023-01-012023-12-3106671497bus:CompanySecretary12023-01-012023-12-3106671497bus:RegisteredOffice2023-01-012023-12-31066714972023-12-31066714972022-01-012022-12-3106671497core:RetainedEarningsAccumulatedLosses2022-01-012022-12-3106671497core:RetainedEarningsAccumulatedLosses2023-01-012023-12-3106671497core:OtherResidualIntangibleAssets2023-12-3106671497core:OtherResidualIntangibleAssets2022-12-3106671497core:PatentsTrademarksLicencesConcessionsSimilar2023-12-3106671497core:PatentsTrademarksLicencesConcessionsSimilar2022-12-31066714972022-12-3106671497core:ComputerEquipment2023-12-3106671497core:ComputerEquipment2022-12-3106671497core:CurrentFinancialInstrumentscore:WithinOneYear2023-12-3106671497core:CurrentFinancialInstrumentscore:WithinOneYear2022-12-3106671497core:CurrentFinancialInstruments2023-12-3106671497core:CurrentFinancialInstruments2022-12-3106671497core:ShareCapital2023-12-3106671497core:ShareCapital2022-12-3106671497core:RetainedEarningsAccumulatedLosses2023-12-3106671497core:RetainedEarningsAccumulatedLosses2022-12-3106671497core:ShareCapital2021-12-3106671497core:RetainedEarningsAccumulatedLosses2021-12-310667149712023-01-012023-12-310667149712022-01-012022-12-310667149722023-01-012023-12-310667149722022-01-012022-12-31066714972022-12-31066714972021-12-3106671497core:IntangibleAssetsOtherThanGoodwill2023-01-012023-12-3106671497core:PatentsTrademarksLicencesConcessionsSimilar2023-01-012023-12-3106671497core:ComputerEquipment2023-01-012023-12-3106671497core:UKTax2023-01-012023-12-3106671497core:UKTax2022-01-012022-12-310667149732023-01-012023-12-310667149732022-01-012022-12-3106671497core:PatentsTrademarksLicencesConcessionsSimilar2022-12-3106671497core:ComputerEquipment2022-12-3106671497core:Non-currentFinancialInstruments2023-12-3106671497core:Non-currentFinancialInstruments2022-12-310667149712023-01-012023-12-310667149722023-01-012023-12-3106671497core:ManagementRechargesServices2023-01-012023-12-3106671497core:ManagementRechargesServices2022-01-012022-12-3106671497bus:PrivateLimitedCompanyLtd2023-01-012023-12-3106671497bus:FRS1022023-01-012023-12-3106671497bus:Audited2023-01-012023-12-3106671497bus:FullAccounts2023-01-012023-12-31xbrli:purexbrli:sharesiso4217:GBP