Company registration number 08791964 (England and Wales)
FLAVOUR WAREHOUSE LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2023
FLAVOUR WAREHOUSE LIMITED
COMPANY INFORMATION
Directors
Mr P Boyle
Ms S Barker
(Appointed 3 August 2023)
Company number
08791964
Registered office
Global Way
Darwen
Lancashire
BB3 0RW
Auditor
Pierce C A Limited
Mentor House
Ainsworth Street
Blackburn
Lancashire
BB1 6AY
Business address
Global Way
Darwen
Lancashire
BB3 0RW
Bankers
Barclays Bank plc
8-14 Darwen Street
Blackburn
Lancashire
BB2 2BZ
FLAVOUR WAREHOUSE LIMITED
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4 - 5
Independent auditor's report
6 - 8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Notes to the financial statements
12 - 24
FLAVOUR WAREHOUSE LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 1 -
The directors present the strategic report for the year ended 30 November 2023.
Review of the business
The company’s activities continue to be the design, manufacture and distribution of e-liquids, hardware and related reduced-harm products for adult smokers looking to quit or reduce smoking. The company operates internationally through a number of distribution channels as well as across the UK through retail vape shops, distributors, supermarkets, convenience stores and through its own branded retail network and dedicated e-commerce platforms that service consumers directly.
Through a series of strategic acquisitions made, the company has been able to expand its channel breadth and expand its product portfolio. Having fully integrated these acquisitions, and delivering revenue synergy opportunities, the current year has shown exceptional growth in financial performance across the group This is underpinned by the company's high brand recognition and strong long-term relationships which have yielded new opportunities across its core markets, coupled with the continued growth of single use vape products.
Flavour Warehouse remains one of the largest independent businesses in the E-Liquid industry and Its flagship brand, Vampire Vape continues to deliver strong performance and remains one of the top selling brands in the UK. Flavour Warehouse Limited’s long-term strategic objective is to be “the World’s most trusted vaping brand”.
Management has continued to invest in its operations to improve and streamline processes across the organisation. The last financial year benefited from our investment in robotics enabling further improvements across warehousing and fulfilment to expand the customer proposition, improved picking accuracy and further capacity for growth. Additionally, our continued focus and investment in people, knowledge and skills has seen a continued strengthening of our leadership team that delivers the required level of skill and diligence to ensure the company has a good balance between corporate governance and entrepreneurial flair when executing its growth plan. The team has many years of experience in successfully delivering excellence in a fast growth sector, many of whom have been developed and nurtured within Flavour Warehouse Group. As a result, the company is well positioned and confident in its growth prospects and trajectory and has continued to make significant investment in both physical infrastructure, fulfilment, operating technologies and in people, knowledge and skills.
Over the last year, the influence of bodies such as Public Health England, who recognise vaping as a safer alternative to smoking and as a means to stop smoking, has remained positive. However the government carried out a consultation at the end of 2023 with a view to restricting youth access to these products and to minimise the environmental impact of single use products. In January 2024 the government announced its intention to ban the use of single use vapes and plans for further consultation on the regulation of vape flavours, packaging and point of sale. Flavour Warehouse has always been a strong advocate for responsible vaping and is dedicated to preventing underage access to vape products. Having already implemented strict age verification process across its B2C operations, we remain focused on ensuring the highest standards of quality and responsibility in our products and services to ensure that adult smokers continue to have access to the right products as part of the smoking cessation journey.
FLAVOUR WAREHOUSE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 2 -
Principal risks and uncertainties
Governance and control remain at the heart of the company’s management, and the company has monthly meetings attended by the directors of the company and the senior leadership team. At these meetings risks, uncertainties and opportunities are all discussed with plans implemented to mitigate and manage areas of risk and opportunity. .
Whilst competitive and customer risk is always present, the market has seen further consolidation. We continue to invest in our account management teams and our brand Vampire Vape is recognised as one of the leading brands in the product range which plays significantly to our strengths.
The company is exposed to the risk of exchange rate movements and occasionally we use hedging products to reduce some of this risk.
Legislative risks – E-cigarettes are regulated under the UK Tobacco and Related Products Regulations 2016 (TRPR). E-Cigarettes and e-liquids are subject to a notification scheme for which the Medicines and Healthcare products Regulatory Agency (MHRA) is the competent authority in the UK. Management take all necessary steps to ensure that all requirements under these regulations are met and that appropriate processes and controls exist within the business. We have continued to make investments in this area, proactively engaging in positive steps to support positive regulation.
The recent government announcement on the ban of single use vape products and proposed regulation marks a significant shift in our industry. The details and timelines of these new regulations are not fully defined, but we expect implementation towards the end of 2024 or early 2025. Our focus remains on providing high-quality vaping products, for adult smokers looking for safer alternatives and are confident in being able to navigate these changes and continue to support our customers through a range of responsible vaping products.
Key performance indicators
The company monitors its performance by reference to financial key indicators including:
• turnover
• gross profit
• net profit
Turnover decreased by 14.6% during the year to £35.2m. The gross profit margin was 57.8% (2022 – 72.7%) while the net profit margin decreased from 66.4% to 31.9% as the company invested in its workforce and infrastructure.
Flavour Warehouse actively encourages the involvement of all employees through staff meetings and forums. Communication on all matters of importance to employees are made through a dedicated staff portal, newsletters and by encouraging engagement through collaborative events throughout the year. Staff numbers rose in the year to 223, up from 166 in 2022, with marked improvements in both retention and length of service.
FLAVOUR WAREHOUSE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 3 -
Section 172(1) Statement
The directors provide the following statement pursuant to the Companies Act 2006 (as amended by Companies
(Miscellaneous Reporting) Regulations 2018) (the “Act”) to describe how they have acted in accordance with
his duty under s.172 of the Act to promote the success of the Company for the benefit of its member(s) as a
whole, and in so doing, how they have had regard to those factors set out in 172 (1) (a) to (f) of the Act during the
financial year.
Furthermore, in compliance with the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended by the Companies (Miscellaneous Reporting) Regulations 2018), the directors
provide the statement which follows to describe how they have engaged with employees, and how they have had
regard to employee interests and the need to foster the company’s business relationships with suppliers, customers and others, an in each case the effect of that regard, including on the principal decisions taken by the company during the financial year.
Section 172 requires a Director to have regard to the following matters, among others, when discharging their duty:
• the likely consequences of any decision in the long term;
• the interests of the company’s employees;
• the need to foster the company’s business relationships with suppliers, customers and others; the impact
of the company’s operations on the community and the environment;
• the desirability of the company maintaining a reputation for high standards of business conduct; and
• the need to act fairly with members of the company.
The Directors are responsible for managing the affairs of the Company to achieve its long-term prosperity by making important decisions, monitoring the underlying performance of the Company, as well as being a means for establishing ethical standards. Understanding the interests of key stakeholders is an important part of the Company’s strategy and helps inform the directors' decision making throughout the year.
.............................................
Mr P Boyle
Director
Date: .............................................
FLAVOUR WAREHOUSE LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 4 -
The directors present their annual report and financial statements for the year ended 30 November 2023.
Principal activities
The principal activity of the company has continued to be that of the manufacture of e-cigarette fluids and the sale of associated devices and accessories.
Results and dividends
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £8,000,000. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mr P Boyle
Ms S Barker
(Appointed 3 August 2023)
Research and development
The company invests in research and development in order to remain at the forefront of the industry both in terms of flavours offered to the consumer and the design, testing and manufacturing process.
Future developments
Management plan to develop the activities of the company taking into account the general economic conditions that are likely to exist in the coming year recognising that safety, quality, customer experience and service are key to competitiveness.
Energy and carbon report
As the company is a wholly-owned subsidiary of Flavour Warehouse Holdings Ltd, it is not required to report on its emissions, energy consumption or energy efficiency measures. These are included in the disclosures contained within the group director's report of the parent company.
FLAVOUR WAREHOUSE LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 5 -
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company 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 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 hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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 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.
On behalf of the board
Mr P Boyle
Director
28 August 2024
FLAVOUR WAREHOUSE LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF FLAVOUR WAREHOUSE LIMITED
- 6 -
Opinion
We have audited the financial statements of Flavour Warehouse Limited (the 'company') for the year ended 30 November 2023 which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity and notes to the financial statements, 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 30 November 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 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 company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
FLAVOUR WAREHOUSE LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF FLAVOUR WAREHOUSE LIMITED
- 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 directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, 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 directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have 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.
In identifying and assessing risks of material misstatement in respect of irregularities we considered the following:
The nature of the industry and the company’s control environment.
Results of our enquiries of management.
The company’s procedures and controls on compliance with laws and regulations and the risks of fraud.
Discussions among the audit engagement team concerning potential indicators of fraud.
We are also required to perform specific procedures to respond to the risk of management override.
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.
FLAVOUR WAREHOUSE LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF FLAVOUR WAREHOUSE LIMITED
- 8 -
This report is made solely to the company's member in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to the member in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's member, for our audit work, for this report, or for the opinions we have formed.
James King (Senior Statutory Auditor)
For and on behalf of Pierce C A Limited
28 August 2024
Statutory Auditor
Mentor House
Ainsworth Street
Blackburn
Lancashire
BB1 6AY
FLAVOUR WAREHOUSE LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 9 -
2023
2022
Notes
£
£
Turnover
3
35,164,145
41,835,962
Cost of sales
(14,850,010)
(11,427,269)
Gross profit
20,314,135
30,408,693
Administrative expenses
(10,132,990)
(8,708,131)
Other operating income
639,956
536,800
Operating profit
4
10,821,101
22,237,362
Interest receivable and similar income
9
4,458,687
5,557,434
Amounts written off investments
7
(4,060,954)
(21,557)
Profit before taxation
11,218,834
27,773,239
Tax on profit
8
(2,753,703)
(4,056,614)
Profit for the financial year
8,465,131
23,716,625
The profit and loss account has been prepared on the basis that all operations are continuing operations.
FLAVOUR WAREHOUSE LIMITED
BALANCE SHEET
AS AT
30 NOVEMBER 2023
30 November 2023
- 10 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
11
3,182,515
2,987,745
Investments
12
22,073,302
26,279,510
25,255,817
29,267,255
Current assets
Stocks
15
18,038,808
20,746,269
Debtors
16
32,327,821
32,558,026
Cash at bank and in hand
2,977,108
10,640,510
53,343,737
63,944,805
Creditors: amounts falling due within one year
17
(29,936,426)
(45,072,863)
Net current assets
23,407,311
18,871,942
Total assets less current liabilities
48,663,128
48,139,197
Provisions for liabilities
Deferred tax liability
18
689,582
630,782
(689,582)
(630,782)
Net assets
47,973,546
47,508,415
Capital and reserves
Called up share capital
20
150
150
Profit and loss reserves
47,973,396
47,508,265
Total equity
47,973,546
47,508,415
The financial statements were approved by the board of directors and authorised for issue on 28 August 2024 and are signed on its behalf by:
Mr P Boyle
Director
Company registration number 08791964 (England and Wales)
FLAVOUR WAREHOUSE LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 11 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 December 2021
150
23,791,640
23,791,790
Year ended 30 November 2022:
Profit and total comprehensive income
-
23,716,625
23,716,625
Balance at 30 November 2022
150
47,508,265
47,508,415
Year ended 30 November 2023:
Profit and total comprehensive income
-
8,465,131
8,465,131
Dividends
10
-
(8,000,000)
(8,000,000)
Balance at 30 November 2023
150
47,973,396
47,973,546
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 12 -
1
Accounting policies
Company information
Flavour Warehouse Limited is a private company limited by shares incorporated in England and Wales. The registered office is Global Way, Darwen, Lancashire, BB3 0RW.
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.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
The financial statements of the company are consolidated in the financial statements of Flavour Warehouse Holdings Limited. These consolidated financial statements are available from its registered office, Global Way, Darwen, Lancashire, BB3 0RW.
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
1.2
Going concern
The directortrues are not aware of any material uncertainties affecting the company and consider that the company will have sufficient resources to continue trading for the foreseeable future. As a result the directors have continued to adopt the going concern basis in preparing the financial statements.
1.3
Turnover
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
1
Accounting policies
(Continued)
- 13 -
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Plant and machinery
15% reducing balance
Fixtures and fittings
25% reducing balance
Computer equipment
33.33% straight line
Motor vehicles
25% reducing balance
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.
1.5
Fixed asset investments
Interests in subsidiaries 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.
Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
1.6
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 costs that have been incurred in bringing the stocks to their present location and condition.
1.7
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.
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
1
Accounting policies
(Continued)
- 14 -
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.
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.
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 and loans from fellow group companies are initially recognised at transaction price. Financial liabilities classified as payable within one year are not amortised.
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
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.
1.8
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.
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
1
Accounting policies
(Continued)
- 15 -
1.9
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
1.10
Employee benefits
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
1.11
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.12
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease.
1.13
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
1.14
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.
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 16 -
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are 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.
Impairment of investments
Investment in subsidiary undertakings is initially measured at cost and subsequently at cost less any impairment losses. As such, management are required to perform an impairment review on their investment portfolio to ascertain whether any impairment losses have occurred. If any impairment exists, quantifying such an impairment may require judgements to be made.
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2023
2022
£
£
Turnover analysed by class of business
Principal activity
35,164,145
41,835,962
2023
2022
£
£
Turnover analysed by geographical market
UK
28,823,642
31,432,953
Europe
6,105,065
9,885,724
Rest of world
235,438
517,285
35,164,145
41,835,962
2023
2022
£
£
Other revenue
Interest income
458,687
57,434
Dividends received
4,000,000
5,500,000
Grants received
5,428
8,608
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 17 -
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Government grants
(5,428)
(8,608)
Depreciation of owned tangible fixed assets
639,738
588,959
Amortisation of intangible assets
-
7,140
Operating lease charges
845,165
803,196
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
32,450
28,500
For other services
All other non-audit services
21,462
3,955
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Directors
1
1
Managerial staff
5
6
Other employees
217
159
Total
223
166
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
4,217,322
3,637,724
Social security costs
501,618
345,262
Pension costs
98,908
65,417
4,817,848
4,048,403
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 18 -
7
Amounts written off investments
fixed asset investments
2023
2022
£
£
Amounts written back to/(written off) financial assets held at cost
3,155
(21,557)
Impairment provision
(4,064,109)
-
(4,060,954)
(21,557)
On 1 December 2023, the trade and assets of a 100% subsidiary company, Premier Retail Limited, were hived up to the company in their entirety. Subsequent to this date, the subsidiary, Premier Retail Limited, will no longer trade. As a result, the company's investment in Premier Retail Limited has been written down to its recoverable amount, being the net assets of the subsidiary as at the date of hive up. This has resulted in an impairment provision of £4,064,109.
8
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
2,538,333
4,150,009
Adjustments in respect of prior periods
156,570
(144,888)
Total current tax
2,694,903
4,005,121
Deferred tax
Origination and reversal of timing differences
58,800
51,493
Total tax charge
2,753,703
4,056,614
In 2021, an increase in the corporation tax rate to 25% with effect from 1 April 2023 was substantively enacted. The 23.01% rate used below reflects 8 months at this new rate and 4 months of the previous rate of 19%. The 25% rate is used to measure UK deferred taxes in 2023 (and in 2022 to the extent the related timing differences were expected to reverse after 1 April 2023).
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
8
Taxation
(Continued)
- 19 -
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
11,218,834
27,773,239
Expected tax charge based on the standard rate of corporation tax in the UK of 23.01% (2022: 19.00%)
2,581,561
5,276,915
Tax effect of expenses that are not deductible in determining taxable profit
939,414
4,514
Tax effect of income not taxable in determining taxable profit
(921,687)
Permanent capital allowances in excess of depreciation
(34,927)
Other permanent differences
(2,155)
Under/(over) provided in prior years
156,570
(144,888)
Dividend income
(1,045,000)
Taxation charge for the year
2,753,703
4,056,614
9
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
318,115
57,434
Other interest income
140,572
Total interest revenue
458,687
57,434
Other interest receivable
Income from shares in group undertakings
4,000,000
5,500,000
Total income
4,458,687
5,557,434
10
Dividends
2023
2022
£
£
Interim paid
8,000,000
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 20 -
11
Tangible fixed assets
Plant and machinery
Fixtures and fittings
Computer equipment
Motor vehicles
Total
£
£
£
£
£
Cost
At 1 December 2022
3,518,426
1,494,350
76,930
40,535
5,130,241
Additions
404,582
362,731
69,167
836,480
Disposals
(5,500)
(5,500)
At 30 November 2023
3,917,508
1,857,081
146,097
40,535
5,961,221
Depreciation and impairment
At 1 December 2022
1,500,470
584,113
40,295
17,618
2,142,496
Depreciation charged in the year
328,143
271,661
34,205
5,729
639,738
Eliminated in respect of disposals
(3,528)
(3,528)
At 30 November 2023
1,825,085
855,774
74,500
23,347
2,778,706
Carrying amount
At 30 November 2023
2,092,423
1,001,307
71,597
17,188
3,182,515
At 30 November 2022
2,017,956
910,237
36,635
22,917
2,987,745
12
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
13
22,070,802
26,277,010
Investments in joint ventures
14
2,500
2,500
22,073,302
26,279,510
Movements in fixed asset investments
Shares in subsidiaries and joint ventures
£
Cost or valuation
At 1 December 2022
26,279,510
Valuation changes
(4,206,208)
At 30 November 2023
22,073,302
Carrying amount
At 30 November 2023
22,073,302
At 30 November 2022
26,279,510
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 21 -
13
Subsidiaries
Details of the company's subsidiaries at 30 November 2023 are as follows:
Name of undertaking
Address
Class of
% Held
shares held
Direct
Indirect
Total Vapour Limited
1
Ordinary
100.00
-
Premier Retail Limited
2
Ordinary
-
100.00
Premier Retail Holdings Limited
2
Ordinary
100.00
-
Premier Vaping Limited
2
Ordinary
-
100.00
Vapouriz Limited
2
Ordinary
100.00
-
Vapouriz Labs Ltd
2
Ordinary
-
100.00
Vapestore Retail Ltd
2
Ordinary
-
100.00
Vapestars Ltd
2
Ordinary
-
100.00
Trulo GmbH
3
Ordinary
50.00
-
Vampire Vape Limited
2
Ordinary
100.00
-
Vampire Vape eLiquids Limited
2
Ordinary
100.00
-
Registered office addresses (all UK unless otherwise indicated):
1
Number One, Lanyon Quay, Belfast, Antrim, Northern Ireland, BT1 3LG
2
Global Way, Darwen, Lancashire, BB3 0RW
3
Ringbahnstraße 7, 41460 Neuss
14
Joint ventures
Details of the company's joint ventures at 30 November 2023 are as follows:
Name of undertaking
Registered office
Interest
% Held
held
Direct
Indirect
Dot Vape Limited
Unit 8 & 9, Arkwright Court, Commercial Road, Darwen, Lancashire, England, BB3 0FG
Ordinary
50.00
-
Operation Vape GmbH
Friedrichstraße 104, 40217 Düsseldorf
Ordinary
-
50.00
15
Stocks
2023
2022
£
£
Raw materials and consumables
3,566,823
4,333,662
Finished goods and goods for resale
14,471,985
16,412,607
18,038,808
20,746,269
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
- 22 -
16
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
7,349,387
12,982,285
Corporation tax recoverable
1,954,748
Amounts owed by group undertakings
8,259,733
9,730,608
Other debtors
444,383
64,097
Prepayments and accrued income
14,319,570
9,781,036
32,327,821
32,558,026
17
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
2,545,397
5,212,838
Amounts owed to group undertakings
17,154,777
19,993,683
Corporation tax
128,406
Other taxation and social security
1,461,116
3,440,102
Other creditors
5,116,296
12,020,779
Accruals and deferred income
3,658,840
4,277,055
29,936,426
45,072,863
Other creditors includes deferred consideration payable of £4.9m (2022 - £12m) relating to the acquisition of Premier Retail Holdings Limited.
18
Deferred taxation
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Liabilities
Liabilities
2023
2022
Balances:
£
£
Accelerated Capital Allowances
692,090
630,782
Retirement benefit obligations
(2,508)
-
689,582
630,782
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
18
Deferred taxation
(Continued)
- 23 -
2023
Movements in the year:
£
Liability at 1 December 2022
630,782
Charge to profit or loss
58,800
Liability at 30 November 2023
689,582
19
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
98,908
65,417
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.
20
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
150
150
150
150
21
Financial commitments, guarantees and contingent liabilities
During a prior year, the company acquired the entire share capital of Premier Retail Holdings Limited. As part of the transaction structure, the company paid an initial consideration in cash with deferred consideration becoming payable during the 2024 financial reporting period.
The deferred consideration is based upon the future financial performance of the business acquired. A liability of £4.9m has been recognised at the balance sheet date, being the directors' estimate of the amount of deferred consideration which will become payable.
22
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2023
2022
£
£
Within one year
794,690
736,716
Between two and five years
2,811,004
22,313
3,605,694
759,029
FLAVOUR WAREHOUSE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 NOVEMBER 2023
22
Operating lease commitments
(Continued)
- 24 -
The company rents the premises from which it trades from a connected party. A new lease was entered into during the year at commercial rates.
23
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
Sales
Sales
2023
2022
£
£
Entities over which the entity has control, joint control or significant influence
1,937,056
3,115,929
The following amounts were outstanding at the reporting end date:
2023
2022
Amounts due to related parties
£
£
Entities over which the entity has control, joint control or significant influence
1,930,390
-
Other information
The company has taken advantage of the exemption from the requirement to disclose related party transactions between 100% group companies.
24
Events after the reporting date
On 1 December 2023, the trade and assets of Premier Retail Limited, a 100% subsidiary company, were hived up to the company at book value.
25
Directors' transactions
During the year, the company operated a loan account with one of its directors. At the balance sheet date, an amount of £50,000 (2022: £50,000) was due to the company. Interest is charged on the loan at the official rate of interest set by HMRC.
26
Ultimate controlling party
The ultimate controlling party is Mr P Boyle by virtue of his majority shareholding in the ultimate parent company, Flavour Warehouse Holdings Limited.
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