Company registration number 13505796 (England and Wales)
DRAGON MIDCO LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
DRAGON MIDCO LIMITED
COMPANY INFORMATION
Directors
Mr James Vowles
Mr Jonathan Leese
Company number
13505796
Registered office
1st and 2nd floor
205 Stockwell Road
London
United Kingdom
SW9 9SL
Independent auditors
PricewaterhouseCoopers LLP
40 Clarendon Road
Watford
Hertfordshire
United Kingdom
WD17 1JJ
DRAGON MIDCO LIMITED
CONTENTS
Page
Strategic report
1 - 5
Directors' report
6 - 8
Independent Auditors' report
9 - 14
Consolidated statement of comprehensive income
15
Consolidated statement of financial position
16
Company statement of financial position
17
Consolidated statement of changes in equity
18
Company statement of changes in equity
19
Consolidated statement of cash flows
20
Notes to the financial statements
21 - 39
DRAGON MIDCO LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The directors present the group strategic report of Dragon MidCo Limited (the "company") and its subsidiary undertakings (together the "group") for the year ended 31 December 2023.
Business review
The group owns the Tangle Teezer brand and its principal activity is design and distribution of specialist Tangle Teezer hair brushes and associated products.
Full year consolidated turnover for the year to 31 December 2023 were £53,540,000 (2022: £46,167,000), 16% higher than in the year to 31 December 2022. Sales grew strongly in key regions, driven by sales to the US +45%, UK +25% and the Europe +7%. Export sales made up 85% (2022: 86%) of total revenues and grew 14% during the year. The US remains Tangle Teezer’s largest and fastest growing market, with significant growth driven by new retail distribution gains, through organic retail growth and growth in online channels. There remains significant headroom for further growth as brand awareness and retail distribution grows. Tangle Teezer’s most mature UK market grew strongly on the back of new retail distribution gains and growth in all channels, growing to 15% of total sales (2022: 14%). European sales grew 7% driven by growth in Western Europe and Ukraine, but declined as a % of total sales due to the strong growth in other markets, now representing 27% of the total (2022: 28%). Rest of World sales grew by 18% and now represent 58% of total sales (2022: 57%). Established distribution continues in over 75 countries.
2023 saw 22% growth in core detangling categories driven by US growth, the launch of our Plant based brush range and the launch of The Essential Detangler. The Styling category, the new range of Combs and our Detangling Spray range also contributed to the strong growth. Product sales of our established core products continue to be supported by new size variants, new designs and innovation for different hair types. ‘The Ultimate Detangler’ product family continues to drive growth with new distribution gains and supplemented by large and small versions, and variants for fine and fragile and naturally curly hair.
Tangle Teezer products continue to win numerous awards around the world from various influential press publications within the beauty industry. Tangle Teezer products won 14 significant awards during 2023, with seven of these for the Plant Brush launched earlier in the year recognizing the strength of our innovation and commitment to making Tangle Teezer even more sustainable. For Plant Brush these awards included the Allure Best of Beauty Award, the Harper’s Bazaar Beauty Icon award, and In Style Best Beauty Buys. Other Tangle Teezer products also won awards that included New beauty Reader’s Choice Award for The Ultimate Detangler, and the Cosmopolitan Beauty Award for Best round brush for Curly Hair.
Gross profit margin increased during the year to 50% (2022: 49%). Despite inflationary pressures, margins were improved due to a combination of pricing, economies of scale and operational efficiency projects. We expect to be able to improve margins in 2024 driven by the full impact of operational and supply chain efficiency projects together with further economies of scale.
EBITDA increased by 38% to a profit of £10,626,000 (2022: £7,695,000) with EBITDA margin increasing to 20% (2022: 17%). Improvements in operating profit driven by the sales and Gross margin improvements. The business continued to make significant incremental investment in marketing +17% (2022: +38%) to support direct market growth and brand development. Further investments in personnel and infrastructure were also made to support the growth in the overall business.
Loss before taxation for the year to 31 December 2023 decreased to £7,701,000 (2022: £8,537,000). Growth in Operating profits were offset in part by increases in interest payments due to rising interest rates, despite a £5,400,000 repayment of external bank debt and amortisation of Goodwill.
There were a number of staff additions during the year with average staff numbers increasing to 74 (2022: 65).
These additions primarily supported the business expansion in the US and the global operational and supply chain development of the business. We also appointed a Chief Sales Officer in 2023 to support the company growth ambitions and global opportunity.
Net current assets decreased to £14,710,000 (2022: £16,548,000). Trade and other receivables increased by 35% driven by the growth in the business and phasing of retailer receipts. Inventories reduced by 8% as the business continued to optimise stock holding and reduced lead times by further localising production. Creditors increased by 22% due to increases in global production levels.
DRAGON MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Future developments
The business is a market leader in detangling hairbrushes and has leveraged its strong brand equity to expand into other core haircare categories, such as Blow-drying and Styling, catering for different global hair types and
delivering exciting designs. The business has successfully launched into adjacent categories with the launch of
detangling sprays, accessories, scalp care products and combs, as well as the successful Pet Teezer brand. Tangle Teezer has grown to become a truly global brand that enjoys substantial and increasing brand awareness, and strong customer loyalty; it has continual innovation at its heart, with products designed differently to perform brilliantly. The goal is to continue to grow into a leading haircare brand and to be the world’s most popular hairbrush.
Tangle Teezer will continue its innovative approach to product development, and plans are in place for numerous significant product launches during the next 18 months, meeting evolving customer demands and expanding into adjacent categories. This includes further developing the portfolio of products for different hair types, new designs and collaborations and continued expansion into adjacent product categories. Tangle Teezer will continue to build on its strong brand position, and seek to grow the market with new products, gain further market share and expand geographically.
Environmental, social and governance considerations (ESG)
At Tangle Teezer we care about hair, but we also care about our customers, and we care how we treat the planet. We want to make innovative haircare in the most sustainable way we can, so we can all live life, untangled. We have made positive strides towards sustainability, and we want to continue to reduce our carbon footprint and the amount of waste we produce, so we can keep making waves, not tangles – for our planet and for the future.
In 2023 we made a number of significant developments with respect to sustainability. We launched a revolutionary range of Plant based brushes made from 85% sustainably sourced castor beans and sold over 188,000 Plant based brushes across the year. We continued to focus on our recycling programme and in 2023 we recycled over 1200 brushes, more than doubling the number of brushes recycled in 2022. And we continued the roll out of our new cardboard packaging as a plan to transition all of our products to sustainably-sourced, fully recyclable, FSC and CPI certified, cardboard by 2025.
We also support important social causes. In 2023 we continued to contribute to Choose Love and supported a number of local charities including Woodgreen Pets Charity, Norwood & Brixton foodbank, as well as working with several NHS hospitals and units.
Financial key performance indicators (KPIs)
Continuous revenue growth is planned through deeper market penetration and new product innovation and
diversification. In line with this, costs such as marketing, research & development and staff costs will increase due to the additional resources required to assist in taking the group forward.
The group's key financial KPl's are as follows:
export sales: 2024 target – 85% (2023 actual - 85%);
gross profit margin: 2024 target – 50% (2023 actual - 50%); and
operating EBITDA: 2024 target - 20% (2023 actual - 20%).
DRAGON MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Principal and financial risks
It is the responsibility of the group directors to understand and ensure systems are in place to control risks and
uncertainties that the group faces. The principal risks the business faces are:
Credit Risk
Over the recent years the group's exposure to bad debt has been minimal. The group continues to control this
through rigorous company credit checks prior to offering credit terms, and with bank guarantees where deemed
necessary.
Liquidity and Cashflow Risks
Liquidity and cashflow risk remains low. Sales revenue has remained strong and consistent in recent years due to a balanced sales portfolio, generating strong margins. Operating expenses contain a large discretionary element used to support the brand, which can be flexed should external factors materially impact demand. The business has an unutilised rolling credit facility and the full support of shareholders.
Foreign Exchange Risk
Exposure to foreign exchange risks remain minimal over the years due to Tangle Teezer Limited predominately
invoicing in GBP and Tangle Teezer Inc. solely in USD. As the group has expanded internationally there are now a few customer accounts in foreign currencies. These customer accounts represent a very small proportion of our overall business. Otherwise, exposure to foreign exchange risk is limited to costs incurred in US dollar, Euro and Chinese yuan. The group holds bank accounts in all four currencies and the current and future strategy will continue to focus on creating a natural hedge position to mitigate any foreign exchange exposure.
Commercial Risks and Developments
As with any successful brand, imitation and counterfeit products have been launched by competitors in several
markets. The group has a full time, in-house, Brand Protection Manager who works closely with customs officials, both home and abroad, and a 'zero tolerance' approach is taken with anyone found manufacturing or distributing non-genuine product.
Russia/ Ukraine Considerations
In March 2022, Russia invaded Ukraine with war continuing throughout 2023 and into 2024. The board of directors immediately decided to suspend shipment of products to Russia in response and has continued with this approach in 2023. There is no material impact from the Russia-Ukraine conflict on the group.
The business has continued to perform well during 2023, remains a going concern with a healthy balance sheet and a strong outlook.
DRAGON MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
S172 Statements
Directors are required to explain how they consider the interests of key stakeholders and the broader matters set out in section 172(1) (A) to (F) of the Companies Act 2006 (‘S172’) when performing their duty to promote the success of the company and the group under S172. This includes considering the interest of other stakeholders which will have an impact on the long-term success of the company and the group.
S172 statement explains who the company’s and the group’s stakeholder groups are, their material issues and how the directors of the Dragon Midco Limited group (“Tangle Teezer”) engage with them, and the effect of that regards, including on the principal decisions taken by the company and the group during the financial year. The S172 statement focuses on matters of strategic importance and the level of information disclosed is consistent with the size and the complexity of the business.
When making decisions, each director ensures that they consider, in good faith, would most likely promote the
company’s and the group’s success for the benefit of its members as a whole, and in doing so have regard (among other matters) to:
S172(1) (A) The likely consequences of any decision in the long term:
The directors understand Tangle Teezer’s business and the evolving environment in which it operates. Tangle
Teezer’s 5 Year strategic framework ensures that all board decisions are consistent with the vision of becoming the #1 brand for healthy hair. This strategic framework acts as a guide to ensure decision making
supports the long term sustainable development of the brand, commercially and operationally with continued
product innovation at its core.
The board continues to take account of the challenging global environment in its decision making, whether that be the impact of Covid-19, the war in Ukraine, Brexit, inflation or other potential macroeconomic risks. Decisions have been made to continue the international development of the brand to mitigate these risks, supported by additional localised manufacturing and supply chain developments.
S172(1) (B) The interests of Tangle Teezer’s group's employees:
Tangle Teezer was once again GPTW (Great Place to Work) certified in 2023. Our employees are central to the delivery of the company strategy and ambitions and regular engagement is vital for continuous improvement. The process and results demonstrate our commitment to people, with due consideration to employees part of every decision made by the board. This has included decisions on new office locations in the UK and US to support business and employee growth.
Significant efforts are made to ensure that Tangle Teezer remains a responsible employer from pay and benefits to health, safety and workplace environment. The company continues to benchmark employee pay and conditions to ensure fairness for employees, invests in employee welfare and development and is constantly developing our people strategy and resources. The board and management team communicate regularly with the organisation to ensure alignment of objectives and drive engagement.
S172(1) (C) The need to foster Tangle Teezer’s business relationships with suppliers, customers, shareholders and others:
Strong and mutually beneficial relationships with suppliers, customers and other partners are fundamental pillars for Tangle Teezer’s operational success.
Customers
The board is committed to understanding our customers’ needs, continuing to engage through many different social and customer service platforms, using feedback to support future developments and decision making. This has helped us to establish a focused product portfolio addressing different hair types and different needs.
The group works with distributors in certain markets to deliver the Tangle Teezer brand to the global audience. It is vital that these relationships are mutually beneficial and that key long term strategic partnerships are formed to support the future development of the brand and market growth.
DRAGON MIDCO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
Partners and suppliers
Tendering to ensure equal opportunities for suppliers and best commercial outcome for the business.
Ensuring that new partners and suppliers match our values and we strive to establish long term sustainable relationships.
This has been further supported by the introduction of a supplier onboarding portal during 2023, bringing even greater consistency to supplier selection and gathering key ESG information.
The business has made decisions to diversify its manufacturing, adding new suppliers and capacity to support growth, while maintaining strong partnerships with existing suppliers.
S172(1) (D) The impact of Tangle Teezer’s operations on the community and the environment:
Tangle Teezer engages in regular consultations with external consultants to gain valuable perspectives on the ways in which group’s activities could impact the local community or environment.
At Tangle Teezer, we’ve always been a brand that cares, and that is reflected in the decisions we make. We care about our customers, we care about hair and we care how we treat the planet we all live on. Dedicated updates on climate, environmental, social and governance related matters, covering all aspects of the group’s business are reviewed at regular board meetings, and the board reviews progress against any action it considers is required. There are further examples of our dedicated approach to ESG in the ESG section of the strategic report and the board ensures that all decisions made consider the impact on our community and environment.
S172(1) (E) The desirability of Tangle Teezer maintaining a reputation for high standards of business conduct:
The desirability of Tangle Teezer to maintain its reputation for high standards of business conduct, translates to
board of directors’ intention to behave responsibly and ensure that the business operates in a responsible manner within the high standards of business conduct and good governance.
Regular communication amongst the board and employees and effective, formally recorded board meetings ensure such standards are maintained. Where appropriate, independent legal advice is obtained to support the decision-making process.
Tangle Teezer has an established dedicated compliance team that ensures the highest standards of conduct and compliance across all parts of the organisation, with regular board interaction ensuring this is fundamental to decision making.
S172(1) (F) The need to act fairly as between members of the company and the group:
The directors are responsible for choosing the course of actions which enable Tangle Teezer to achieve its long-term strategy, taking into consideration the impact on stakeholders. In doing so, the directors act fairly as between the company’s and the group’s members but are not required to balance the business interest with those of other stakeholders, and this can sometimes mean that certain stakeholder interests may not be fully aligned.
Principal decisions
The principal decisions of the business are disclosed below:
The business made the decision to further diversify its manufacturing during the year. The business has established localised manufacturing and a supply chain in North America and Asia, alongside established manufacturing in the UK. The decision to take a localised approach is leading to reduced logistics costs, shorter lead times and a reduced carbon footprint, while providing extra capacity to support continued growth and insulating the business against any future global challenges.
This report was approved by the board and signed on its behalf by:
Mr James Vowles
Director
24 May 2024
DRAGON MIDCO LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
The directors present their annual report and audited consolidated financial statements for the year ended 31 December 2023.
Principal activities
The principal activity of the group is design and distribution of Tangle Teezer specialist hair brushes and associated products. The majority of products are manufactured in the UK.
Business review, future developments and risks
Included in the strategic report on pages 1 - 5 are business review, future developments and risks.
Results and dividends
The results for the year are set out on page 15.
No dividends were paid during the year (2022: £nil). 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 James Vowles
Mr Jonathan Leese
Qualifying third party indemnity provisions
The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the date of approval of these financial statements.
Independent auditors
The auditors, PricewaterhouseCoopers LLP, are deemed to be reappointed under section 487(2) of the Companies Act 2006.
Statement of disclosure to auditors
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 auditors of the company are 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 auditors of the company are aware of that information.
Statement of stakeholder engagement
Statement of stakeholder engagement is included in the strategic report on pages 1 - 5.
DRAGON MIDCO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
Energy and carbon report
Notes:
Total energy consumption includes all direct energy use across the group's UK operations.
Associated greenhouse gases have been calculated in conjunction with a 3rd party consultant and include all Scope 1 and Scope 2 emissions generated through the business operations. These are then applied to appropriate intensity metrics for the business, number of employees and group turnover.
The business continues to take its energy consumption and emissions seriously, with our environmental footprint factored into all key decision making. Scope 1 and 2 energy consumption has increased in 2023 versus 2022, as we retained responsibility for some energy usage in our distribution centre, but intensity ratios remained in line with prior year due to business growth. Energy consumption remains below 2021 levels.
Office energy consumption in 2023 increased by 5% versus 2022 as employees returned to office working but remains 19% below pre Covid-19 levels (2019).
DRAGON MIDCO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
Going concern
The directors present the business as a going concern. The business remains in a strong position, with continued growth in sales, strong maintainable cash generation with a significant reduction in bank debt.
In recent years the business has continued to perform strongly despite the impact of the Covid-19 pandemic, Brexit, the war in Ukraine, higher levels of inflation and more regionalised issues such as the decline in the livestreaming channel in China. Despite this macroeconomic uncertainty the Tangle Teezer business has continued to see sales grow strongly in key markets, with sustainable improvements to margins and profitability, demonstrating the resilience of the business
The business has further established localised manufacturing and a supply chain in the US and Asia, alongside
established manufacturing in the UK. This localised approach is leading to reduced logistics costs, shorter lead times and a reduced carbon footprint, while providing extra capacity to support continued growth and insulating the business against any future global challenges.
At 31 December 2023 the group had net liabilities of £22,217,000. The business is financed with £13,900,000 bank debt (2022: £19,300,000). Debt reduction of £5,400,000 included an overpayment of the debt facility of £4,000,000 during the year. Sensitivities have been performed which demonstrate that the business operates with significant headroom through the cash generated from the operating subsidiary Tangle Teezer Limited.
The business remains well insulated against potential global macroeconomic risks due to its balanced mix of channels and geographies, strong operating margins, flexible cost base and strong balance sheet, and the outlook for 2024 and beyond remains positive. The directors have reviewed the cashflows and performed sensitivities, including a plausible downside, and believe it is appropriate for the financial statements to be prepared on a going concern basis.
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, comprising FRS 102 "The Financial Reporting Standards applicable in the UK and Republic of Ireland", and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
make judgements and accounting estimates that are reasonable and prudent;
prepare the on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
This report was approved by the board and signed on its behalf by:
Mr James Vowles
Director
24 May 2024
DRAGON MIDCO LIMITED
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF DRAGON MIDCO LIMITED
- 9 -
Report on the audit of the financial statements
Opinion
In our opinion, Dragon Midco Limited’s group financial statements and company financial statements (the “financial statements”):
give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2023 and of the group’s loss and the group’s cash flows for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise: the consolidated statement of financial position and company statement of financial postition as at 31 December 2023; the consolidated statement of comprehensive income, the consolidated statement of changes in equity, company statement of changes in equity and the consolidated statement of cash flows for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Audit scope
Key audit matters
Materiality
Overall group materiality: £1,349,185 (2022: £1,463,300) based on 2% of total assets.
Overall company materiality: £674,593 (2022: £712,174) based on 1% of total assets.
Performance materiality: £1,011,889 (2022: £1,097,475) (group) and £505,945 (2022: £534,131) (company).
DRAGON MIDCO LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF DRAGON MIDCO LIMITED
- 10 -
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill (group)
The group has a £42.4million goodwill in Dragon Midco Limited recorded at cost which is significant in the context of the overall balance sheet (see notes 10 for details). The goodwill recorded relates to acquisition of the established Tangle Teezer brand by Mayfair Equity Partners at 30 July 2021. Based on the historical performance of Tangle Teezer trading business and best estimates of future business outlook as well as the actual performance to date, the directors believe that the goodwill carrying value is reasonable and as there has been no impairment trigger no impairment is needed at the year end.
We planned our procedures to critically assess if impairment triggers exists as at the year end. Given the amounts involved, we also performed a high level review of impairment workings prepared by the management, which included reviewing the discounted cash flow forecasts with reference to the approved budgets and assessed if the the budgeted forecasts are reasonable. We also performed sensitivity analysis on the models by varying the inputs used, such as pre-tax discount rates and long-term growth rates, to identify the impact on the available headroom; and no impairment indicators were noted.
Recoverability of intercompany receivables (Company)
The company has an intercompany receivable balance of £66.0m, this is deemed to be material in the context of the overall balance sheet. Therefore, we have performed an assessment over 100% of the intercompany receivable balance to ensure that this is recoverable. This balance solely relates to receivables from Dragon Bidco Limited. Based on our testing we have noted no issues with the recoverability.
We have planned our procedures to assess the financial position of Dragon Bidco Limited. From testing we note that Dragon Bidco Limited is in a current net asset position of £71.2m which is sufficient to cover the payable balance. However, Dragon Bidco Limited's cash balance is only £32k and therefore we have also obtained a letter of support from Tangle Teezer Limited to support the payable position of Dragon Bidco Limited. To test that Tangle Teezer Limited can provide the necessary support, we have reviewed their cashflow forecasts including sensitivities on the forecasts and obtained comfort as to the recoverability of the receivable balance.
DRAGON MIDCO LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF DRAGON MIDCO LIMITED
- 11 -
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate.
We tailored the scope of our audit to have audited all componenet entities to be able to give an opinion on the financial statements as a whole.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the group’s and company’s financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the group’s and company’s financial statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - group
Financial statements - company
Overall materiality
£1,349,185 (2022: £1,463,300).
£674,593 (2022: £712,174).
How we determined it
2% of total assets
1% of total assets
Rationale for benchmark applied
Total assets is the primary measure used by the shareholders in assessing the performance of the Group.
Total assets is the primary measure used by the shareholders in assessing the performance of the Company.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was £427,123 to £1,715,215. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £1,011,889 (2022: £1,097,475) for the group financial statements and £505,945 (2022: £534,131) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount in the middle of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above £67,459 (group audit) (2022: £73,165) and £33,730 (company audit) (2022: £35,609) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
DRAGON MIDCO LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF DRAGON MIDCO LIMITED
- 12 -
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the going concern basis of accounting included:
Testing the mathematical integrity of the cash flow forecasts and the models and reconciled these to Board approved budgets;
We challenged management on the appropriateness of key assumptions and considered their reasonableness in the context of other supporting evidence gained from our audit work;
Reviewing the debt agreements to confirm the terms and conditions, including covenants. The covenants were consistent with those used in management’s going concern assessment;
Agreeing all borrowings as at 31 December 2023 to third-party confirmations and considered the available financing and maturity profile. This supported the directors’ conclusion that sufficient liquidity headroom remained throughout the assessment period;
Testing the mathematical accuracy of the covenant calculations. We concluded that covenant compliance remained throughout the assessment period; and
Assessing the severe but plausible downside scenarios to stress test the model and considering the impact on the liquidity headroom and forecast covenant compliance.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and 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.
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.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's and the company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. 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 based on these responsibilities.
With respect to the Strategic report and Directors' report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.
Strategic report and Directors' reporttrue
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' report for the year ended 31 December 2023 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors' report.
DRAGON MIDCO LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF DRAGON MIDCO LIMITED
- 13 -
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the 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 group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors' 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 auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to UK tax legislation, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to to posting inappropriate journal entries and management bias in accounting estimates. Audit procedures performed by the engagement team included:
Reviewing financial statement disclosures to underlying supporting documentation;
Enquiring of management concerning actual and potential litigation and claims, and instances of non-compliance with laws and regulations;
Identifying and testing journals entries meeting specific fraud criteria; and challenging assumptions made by management in its significant accounting estimates
Challenging assumptions made by management in its significant accounting estimates.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
DRAGON MIDCO LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF DRAGON MIDCO LIMITED
- 14 -
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. In our engagement letter, we also agreed to describe our audit approach, including communicating key audit matters.
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Suzanne Woolfson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
24 May 2024
DRAGON MIDCO LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
2023
2022
Notes
£'000
£'000
Turnover
3
53,540
46,167
Cost of sales
(26,966)
(23,522)
Gross profit
26,574
22,645
Administrative expenses
(25,262)
(23,686)
Operating profit/(loss)
4
1,312
(1,041)
Interest payable and similar expenses
8
(9,013)
(7,496)
Loss before taxation
(7,701)
(8,537)
Tax on loss
9
(1,497)
(327)
Loss for the financial year
(9,198)
(8,864)
Other comprehensive expense
Currency translation differences
33
93
Total comprehensive expense for the year
(9,165)
(8,771)
Loss and total comprehensive expense for the year are all attributable to the owner of the parent company.
The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
The notes on pages 21 to 39 form part of these financial statements.
DRAGON MIDCO LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
31 December 2023
- 16 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Fixed assets
Goodwill
10
42,392
48,069
Other intangible assets
10
2,595
2,070
Total intangible assets
44,987
50,139
Tangible assets
11
1,569
1,360
46,556
51,499
Current assets
Stocks
14
8,924
9,697
Debtors falling due after more than one year
15
926
938
Debtors falling due within one year
15
9,585
6,921
Cash at bank and in hand
2,602
3,904
22,037
21,460
Creditors: amounts falling due within one year
16
(7,327)
(4,912)
Net current assets
14,710
16,548
Total assets less current liabilities
61,266
68,047
Creditors: amounts falling due after more than one year
17
(83,308)
(80,924)
Provisions for liabilities
Provisions
19
(175)
(175)
(175)
(175)
Net liabilities
(22,217)
(13,052)
Capital and reserves
Called up share capital
22
Profit and loss reserve
(22,217)
(13,052)
Total equity
(22,217)
(13,052)
The notes on pages 21 to 39 form part of these financial statements.
The financial statements on pages 15 to 39 were approved by the board of directors and authorised for issue on
and are signed on its behalf by:
Mr James Vowles
Director
DRAGON MIDCO LIMITED
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
31 December 2023
- 17 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Fixed assets
Investments
12
Current assets
Debtors falling due after more than one year
15
67,411
62,044
Creditors: amounts falling due within one year
16
(1,988)
(947)
Net current assets
65,423
61,097
Creditors: amounts falling due after more than one year
17
(69,568)
(62,419)
Net liabilities
(4,145)
(1,322)
Capital and reserves
Called up share capital
22
Profit and loss reserve
(4,145)
(1,322)
Total equity
(4,145)
(1,322)
The notes on pages 21 to 39 form part of these financial statements.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £2,823,000 (2022: £1,140,000 loss).
The financial statements on pages 15 to 39 were approved by the board of directors and authorised for issue on
and are signed on its behalf by:
Mr James Vowles
Director
Company Registration No. 13505796
DRAGON MIDCO LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
Called up share capital
Profit and loss reserve
Total equity
£'000
£'000
£'000
Balance at 1 January 2022
(4,281)
(4,281)
Year ended 31 December 2022:
Loss for the year
-
(8,864)
(8,864)
Other comprehensive income:
Currency translation differences
-
93
93
Total comprehensive expense for the year
-
(8,771)
(8,771)
Balance at 31 December 2022
(13,052)
(13,052)
Year ended 31 December 2023:
Loss for the year
-
(9,198)
(9,198)
Other comprehensive income:
Currency translation differences
-
33
33
Total comprehensive expense for the year
-
(9,165)
(9,165)
Balance at 31 December 2023
(22,217)
(22,217)
The notes on pages 21 to 39 form part of these financial statements.
DRAGON MIDCO LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
Called up share capital
Profit and loss reserve
Total equity
£'000
£'000
£'000
Balance at 1 January 2022
(182)
(182)
Year ended 31 December 2022:
Loss and total comprehensive expense for the year
-
(1,140)
(1,140)
Balance at 31 December 2022
(1,322)
(1,322)
Year ended 31 December 2023:
Loss and total comprehensive expense for the year
-
(2,823)
(2,823)
Balance at 31 December 2023
(4,145)
(4,145)
The notes on pages 21 to 39 form part of these financial statements.
DRAGON MIDCO LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from operations
24
7,663
2,608
Income taxes paid
(67)
-
Net cash inflow from operating activities
7,596
2,608
Cash flows from investing activities
Purchase of intangible assets
(938)
(795)
Purchase of tangible fixed assets
(837)
(792)
Proceeds on disposal of tangible fixed assets
6
-
Net cash used in investing activities
(1,769)
(1,587)
Cash flows from financing activities
Loans received from group undertakings
91
93
Repayment of bank loans
(5,702)
(700)
Interest paid
(1,518)
(1,261)
Net cash used in financing activities
(7,129)
(1,868)
Net decrease in cash and cash equivalents
(1,302)
(847)
Cash and cash equivalents at beginning of year
3,904
(4,751)
Cash and cash equivalents at end of year
2,602
3,904
The notes on pages 21 to 39 form part of these financial statements.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
1
Accounting policies
General information
Dragon MidCo Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 1st and 2nd floor, 205 Stockwell Road, London, United Kingdom, SW9 9SL.
The group consists of Dragon MidCo Limited and all of its subsidiaries.
1.1
Statement of compliance
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.
1.2
Accounting convention
The financial statements have been prepared on a going concern basis and under the historical cost convention.
The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the year.
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 £'000.
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:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £2,823,000 (2022: £1,140,000 loss).
1.3
Basis of consolidation
The consolidated financial statements incorporate those of Dragon MidCo Limited and all of its subsidiaries (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 22 -
1.4
Going concern
The directors present the business as a going concern. The business remains in a strong position, with continued growth in sales, strong maintainable cash generation with a significant reduction in bank debt.true
In recent years the business has continued to perform strongly despite the impact of the Covid-19 pandemic, Brexit, the war in Ukraine, higher levels of inflation and more regionalised issues such as the decline in the livestreaming channel in China. Despite this macroeconomic uncertainty the Tangle Teezer business has continued to see sales grow strongly in key markets, with sustainable improvements to margins and profitability, demonstrating the resilience of the business
The business has further established localised manufacturing and a supply chain in the US and Asia, alongside
established manufacturing in the UK. This localised approach is leading to reduced logistics costs, shorter lead times and a reduced carbon footprint, while providing extra capacity to support continued growth and insulating the business against any future global challenges.
At 31 December 2023 the group had net liabilities of £22,217,000. The business is financed with £13,900,000 bank debt (2022: £19,300,000). Debt reduction of £5,400,000 included an overpayment of the debt facility of £4,000,000 during the year. Sensitivities have been performed which demonstrate that the business operates with significant headroom through the cash generated from the operating subsidiary Tangle Teezer Limited.
The business remains well insulated against potential global macroeconomic risks due to its balanced mix of channels and geographies, strong operating margins, flexible cost base and strong balance sheet, and the outlook for 2024 and beyond remains positive. The directors have reviewed the cashflows and performed sensitivities, including a plausible downside, and believe it is appropriate for the financial statements to be prepared on a going concern basis.
1.5
Turnover
The group manufactures and sells specialist hair brushes and their associated products. Turnover is recognised to the extent that it is probable that the economic benefits will flow to the group and it can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before turnover is recognised:
Sale of goods
Turnover from the sale of goods is recognised when all of the following conditions are satisfied:
the has transferred the significant risks and rewards of ownership to the buyer;
the retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of can be measured reliably;
it is probable that the will receive the consideration due under the transaction; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 23 -
1.6
Research and development expenditure
Expenditure on pure and applied research is charged to the statement of comprehensive income in the year in which it is incurred.
Development costs are charged to the statement of comprehensive income in the year of expenditure, unless individual projects satisfy all of the following criteria:
the project is clearly defined and related expenditure is separately identifiable;
the project is technically feasible and commercially viable;
current and future costs are expected to be exceeded by future sales; and
adequate resources exist for the project to be completed.
In such circumstances the costs are carried forward and amortised over a period not exceeding ten years, commencing in the year the group starts to benefit from the expenditure.
Patents and licences are stated at cost less amortisation. Amortisation is provided at 10% per annum in order to write off each asset over its estimated useful life.
1.7
Intangible fixed assets - goodwill
Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.
For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
1.8
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 calculated, using the straight-line method, to allocate the depreciable amount of the assets to their residual values over their estimated useful lives, as follows:
Software development
4 years
Development expenditure
10 years
Patents
10 years
Intellectual property
7-11 years
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 24 -
Development expenditure is amortised over the NPD (new product development) life of the project.
Patents are amortised over their useful life.
Intellectual property is not amortised in the year of acquisition.
Consideration of obsolescence, future changes in technology, competition, and other economic factors have been used in determining the estimated useful life of the software development capitalised costs.
1.9
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. Cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
The group adds to the carrying amount of an item of non-current assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the group. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit or loss during the period in which they are incurred.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
Plant and machinery
20%-25%
Fixtures and fittings
25%
Motor vehicles
10%
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the statement of comprehensive income.
1.10
Fixed asset investments
Investments in subsidiaries are measured at cost less accumulated impairment.
1.11
Impairment of fixed assets
At each reporting period end date, the group reviews the carrying amounts of its tangible 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 group 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 or , unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 25 -
Recognised impairment losses are reversed if the reasons for the impairment loss have ceased to apply.
1.12
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.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.13
Cash at bank and in hand
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.
1.14
Financial instruments
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the statement of financial position when the group becomes party to the contractual provisions of the instrument.
Basic financial assets
Basic financial assets, including trade and other debtors, amounts owed by group undertakings and cash and bank balances, are recognised at transaction price.
Impairment of financial assets
The group makes an estimate of the recoverable value of its trade and other debtors. Where necessary an impairment provision is made.
Classification of financial liabilities
Basic financial liabilities, including trade and other creditors, loans and borrowings, and amounts owed by group undertakings are recognised at transaction price.
Derecognition of financial liabilities
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
1.15
Share capital
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs.
Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
1.16
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 26 -
Current tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
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 income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.17
Provisions
Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event, it is probable that the group 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.
1.18
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 group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.19
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.20
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 27 -
1.21
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.
2
Judgements and key sources of estimation uncertainty
In the application of the group’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 tangible and intangible assets and goodwill
Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset and where it is a component of a larger cash generating unit, the viability and expected future performance of that unit.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Judgements and key sources of estimation uncertainty
(Continued)
- 28 -
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Tangible assets
Tangible assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on the number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are considered. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
Provisions
Provision is made for assets retirement obligations and dilapidations. These provisions require management's best estimate of the costs that will be incurred based on legislative and contractual requirements. In addition, the timing of the cash flows and the discount rates used to establish net present value of the obligations require management's judgement.
Leases
Determine whether leases entered into by the group either as a lessor or a lessee are operating or finance leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the lessee on a lease by lease basis.
Stocks provision
When calculating the stocks provision, management considers the nature and condition of the stocks, as well as applying assumptions around anticipated saleability of finished goods and future usage of raw materials. If stocks are deemed to be impaired and not in saleable condition, or the product is obsolete, the carrying value is reduced to zero. If the product line is deemed categorised as discontinued, a provision is taken for all stocks above 6 months of sales, based on current sell through rates. Refer to note note,note31 for the net carrying amount of the stocks.
3
Turnover
2023
2022
£'000
£'000
Turnover analysed by geographical market
United Kingdom
8,002
6,384
Europe
14,565
13,578
Rest of the World
30,973
26,205
53,540
46,167
4
Operating profit/(loss)
2023
2022
£'000
£'000
Operating profit/(loss) for the year is stated after charging/(crediting):
Exchange losses/(gains)
231
(381)
Research and development costs
198
345
Depreciation of owned tangible fixed assets
607
533
Amortisation of intangible assets
6,090
6,047
Operating lease charges
614
1,437
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 29 -
5
Auditors' remuneration
2023
2022
Fees payable to the company's auditors and associates:
£'000
£'000
For audit services
Audit of the financial statements of the group and company
129
119
For other services
Other assurance services
-
7
Taxation compliance services
33
28
All other non-audit services
70
40
103
75
The group audit fees, which include the fee for the audit of the company, have been borne by a fellow group company, Tangle Teezer Limited, in both current and preceding years.
6
Employees
The average monthly number of persons (including directors) employed by the group and company during the year was:
Group
Company
2023
2022
2023
2022
Number
Number
Number
Number
Employees
74
65
2
2
Their aggregate remuneration comprised:
Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Wages and salaries
5,564
4,689
Social security costs
620
495
-
-
Other pension costs
203
147
6,387
5,331
Directors are remunerated for their services to the company via the company's subsidiary Tangle Teezer Limited.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 30 -
7
Directors' remuneration
2023
2022
£'000
£'000
Remuneration for qualifying services
576
556
Company pension contributions to defined contribution schemes
9
9
585
565
Remuneration disclosed above includes the following amounts paid to the highest paid director:
2023
2022
£'000
£'000
Remuneration for qualifying services
346
342
8
Interest payable and similar expenses
2023
2022
£'000
£'000
Interest on bank loans
1,518
1,108
Interest on other loans and borrowings
7,058
5,950
Arrangement fees
437
438
9,013
7,496
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 31 -
9
Tax on loss
2023
2022
£'000
£'000
Current tax
UK corporation tax on profits for the current year
319
128
Foreign current tax on profits for the current year
1,166
Total current tax
1,485
128
Deferred tax
Origination and reversal of timing differences
15
(378)
Changes in tax rates
1
48
Adjustment in respect of prior year
(4)
529
Total deferred tax
12
199
Total tax charge
1,497
327
Factors affecting income tax for the year
With effect from 1 April 2023, the UK corporation tax rate increased from 19.00% to 25.00%. The new blended rate for the year is 23.50% (2022: 19.00%).
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the UK blended rate of tax as follows:
2023
2022
£'000
£'000
Loss before taxation
(7,701)
(8,537)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
(1,810)
(1,622)
Tax effect of expenses that are not deductible in determining taxable profit
2,445
1,644
Tax effect of utilisation of tax losses not previously recognised
(167)
Effect of change in corporation tax rate
1
48
Double tax relief
(496)
Permanent capital allowances in excess of depreciation
464
(2)
Research and development tax credit
(269)
(136)
Deferred tax adjustment in respect of prior year
(4)
529
Overseas tax
1,166
Other adjustments
33
Taxation charge
1,497
327
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 32 -
10
Intangible assets
Group
Goodwill
Software development
Development expenditure
Patents
Intellectual property
Total
£'000
£'000
£'000
£'000
£'000
£'000
Cost
At 1 January 2023
56,578
422
1,284
750
94
59,128
Additions
120
603
215
938
Disposals
(97)
(52)
(88)
-
(237)
At 31 December 2023
56,578
445
1,835
877
94
59,829
Accumulated amortisation
At 1 January 2023
8,509
173
158
133
16
8,989
Amortisation charged for the year
5,677
128
165
109
11
6,090
Disposals
(97)
(52)
(88)
-
(237)
At 31 December 2023
14,186
204
271
154
27
14,842
Carrying amount
At 31 December 2023
42,392
241
1,564
723
67
44,987
At 31 December 2022
48,069
249
1,126
617
78
50,139
The company had no intangible fixed assets at 31 December 2023 or 31 December 2022.
11
Tangible assets
Group
Plant and machinery
Fixtures and fittings
Motor vehicles
Total
£'000
£'000
£'000
£'000
Cost
At 1 January 2023
2,028
37
5
2,070
Additions
796
41
837
Disposals
(48)
(30)
(5)
(83)
At 31 December 2023
2,776
48
2,824
Accumulated depreciation
At 1 January 2023
691
16
3
710
Depreciation charged in the year
594
11
2
607
Eliminated in respect of disposals
(38)
(19)
(5)
(62)
At 31 December 2023
1,247
8
1,255
Carrying amount
At 31 December 2023
1,529
40
1,569
At 31 December 2022
1,337
21
2
1,360
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
11
Tangible assets
(Continued)
- 33 -
The company had no tangible fixed assets at 31 December 2023 or 31 December 2022.
12
Fixed asset investments
Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Investments in subsidiaries
13
The company holds a 100% investment in Dragon BidCo Limited, a company incorporated in England and Wales. The principal activity of this company is investment holding.
13
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
Indirect
Dragon BidCo Limited
1st and 2nd floor, 205 Stockwell Road, London SW9 9SL United Kingdom
Investment holding
Ordinary
100.00
-
Tangle Teezer Limited
1st and 2nd floor, 205 Stockwell Road, London SW9 9SL United Kingdom
Design and distribution of specialist hair brushes and associated products
Ordinary
-
100.00
Tangle Teezer Inc.
Bold 3PL, 1125 E 4th Ave, Hutchinson, KS 67501 United States
Distribution of specialist hair brushes and their associated products
Ordinary
-
100.00
Pet Teezer Limited
1st and 2nd floor, 205 Stockwell Road, London SW9 9SL United Kingdom
Dormant company
Ordinary
-
100.00
14
Stocks
Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Raw materials and consumables
1,342
1,268
-
-
Finished goods and goods for resale
7,582
8,429
8,924
9,697
-
-
During the year £17,766,000 (2022: £16,927,000) of stocks was recognised as an expense and included within cost of sales in the statement of comprehensive income.
During the year £519,000 (2022: £349,0000) of stocks was written off.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 34 -
15
Debtors
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£'000
£'000
£'000
£'000
Trade debtors
7,802
5,719
Amounts owed by group undertakings
52
31
-
Other debtors
784
423
Prepayments and accrued income
947
748
9,585
6,921
Amounts falling due after more than one year:
Amounts owed by group undertakings
-
-
66,077
61,265
Deferred tax asset (note 20)
926
938
1,334
779
926
938
67,411
62,044
Total debtors
10,511
7,859
67,411
62,044
Current amounts owed by group undertakings to the group
Current amounts owed by group undertakings to the group relate to amounts owed by parent company, Dragon TopCo Limited. They are unsecured, interest free and repayable on demand.
Non-current amounts owed by group undertakings to the parent company
Non-current amounts owed by group undertakings to the parent company include Rollover Loan Notes of £21,306,000 (2022: £19,169,000) which comprise £16,486,000 (2022: £16,486,000) of principal and £4,820,000 (2022: £2,683,000) accrued interest. These are fixed rate loan notes repayable on 31 December 2027. They are unsecured and bear an annual interest at 10% payable half yearly with an option of compounding.
The remaining non-current amounts owed by group undertakings to the parent company bear an annual interest at 10%, are unsecured and repayable together with accrued interest on 31 December 2027 or (if earlier) upon the date of a sale or listing.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 35 -
16
Creditors: amounts falling due within one year
Group
Company
2023
2022
2023
2022
Notes
£'000
£'000
£'000
£'000
Bank loans
18
900
1,400
Trade creditors
2,051
1,291
Amounts owed to group undertakings
1,988
947
Corporation tax payable
1,546
128
Other taxation and social security
119
54
-
Other creditors
62
54
Accruals and deferred income
2,649
1,985
7,327
4,912
1,988
947
Amounts owed by the parent company to group undertakings are unsecured, interest free and repayable on demand.
17
Creditors: amounts falling due after more than one year
Group
Company
2023
2022
2023
2022
Notes
£'000
£'000
£'000
£'000
Other loans
18
69,584
62,526
68,356
61,298
Bank loans
18
12,512
17,277
Amounts owed to group undertakings
1,212
1,121
1,212
1,121
83,308
80,924
69,568
62,419
Amounts owed to group undertakings bear an annual interest at 10%, are unsecured and repayable together with accrued interest on 31 December 2027 or (if earlier) upon the date of a sale or listing.
18
Loans and overdrafts
Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Other loans
69,584
62,526
68,356
61,298
Bank loans
13,412
18,677
82,996
81,203
68,356
61,298
Payable within one year
900
1,400
Payable within two and five years
82,096
6,300
Payable after five years
73,503
68,356
61,298
82,996
81,203
68,356
61,298
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
18
Loans and overdrafts
(Continued)
- 36 -
Other loans
Other loans include a loan from Mayfair Equity Partners LLP in the amount of £47,655,000 (2022: £44,354,000 and a loan from management in the amount of £21,929,000 (2022: £19,705,000).
The loan from Mayfair Equity Partners LLP is stated net of £1,231,000 (2022: £1,533,000) arrangement fees and comprises £38,500,000 (2022: £38,500,000) principal and £10,386,000 (2022: £5,854,000) accrued interest. It is a fixed rate loan repayable on 31 December 2027. It is unsecured and bears an annual interest at 10% payable half yearly with an option of compounding.
The loans from management comprise loans provided to the company in the amount of £16,240,000 (2022: £16,240,000) principal and £4,461,000 (2022: £2,237,000) accrued interest, and loans provided to the company's subsidiary, Dragon BidCo Limited, in the amount of £1,228,000 (2022: £1,228,000). These are fixed rate loans repayable on 31 December 2027. They are unsecured and bear an annual interest at 10% payable half yearly with an option of compounding.
Bank loans
Bank loans and overdrafts comprise two loan facilities from HSBC being facility A with a principal amount of £900,000 (2022: £6,300,000) and facility B with the principal amount of £13,000,000 (2022: £13,000,000). The loan facilities are stated net of £488,000 (2022: £623,000) arrangement fees.
Facility A bears an annual interest of 4% and is repayable in 6-monthly instalments between June 2022 and June 2026. During the year the company expedited the repayments of this facility reducing the balance to £900,000 at 31 December 2023.
Facility B bears an annual interest of 4.5% and is repayable in June 2027. The loan facilities are secured over the current and non-current assets of Tangle Teezer Limited.
19
Provisions for liabilities
Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Dilapidations provision
175
175
-
-
Movements on provisions:
Dilapidations provision
Group
£'000
At 1 January 2023 and 31 December 2023
175
As part of the company's property leasing arrangements there is an obligation to repair damages which incur during the life of the lease, such as wear and tear. The cost is charged to profit and loss as the obligation arises. The provision is expected to be utilised within the next year as the leases terminate.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 37 -
20
Deferred taxation
The following are the major deferred tax assets recognised by the group and company, and movements thereon:
Assets
Assets
2023
2022
Group
£'000
£'000
Accelerated capital allowances
(408)
134
Tax losses
1,334
804
926
938
Assets
Assets
2023
2022
Company
£'000
£'000
Tax losses
1,334
779
Group
Company
2023
2023
Movements in the year:
£'000
£'000
Asset at 1 January 2023
938
779
(Charge)/credit to profit or loss
(12)
555
Asset at 31 December 2023
926
1,334
Deferred tax assets are recognised for taxable losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.
At 31 December 2023, the group had £5,334,000 (2022: £3,115,000) of unused tax losses carried forward with a tax value, at the standard rate of corporation tax in the UK of 25%, of £1,334,000 (2022: £779,000).
21
Retirement benefit schemes
2023
2022
Defined contribution schemes
£'000
£'000
Charge to profit or loss in respect of defined contribution schemes
203
147
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 38 -
22
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£'000
£'000
Issued and fully paid
Ordinary shares of £1 each
1
1
-
-
23
Operating lease commitments
Lessee
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Group
Company
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Within one year
377
212
-
-
Between two and five years
12
216
-
-
In over five years
2
-
-
389
430
-
-
24
Cash generated from group operations
2023
2022
£'000
£'000
Loss for the year after tax
(9,198)
(8,864)
Adjustments for:
Taxation charged
1,497
327
Finance costs
9,013
7,496
Loss on disposal of tangible fixed assets
15
-
Amortisation of intangible assets
6,090
6,047
Depreciation of tangible fixed assets
607
533
Foreign exchange losses/(gains)
33
95
Increase in provisions
-
175
Movements in working capital:
Decrease/(increase) in stocks
773
(866)
Increase in debtors
(2,664)
(888)
Increase/(decrease) in creditors
1,497
(1,447)
Cash generated from operations
7,663
2,608
DRAGON MIDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 39 -
25
Analysis of changes in net debt - group
1 January 2023
Cash flows
31 December 2023
£'000
£'000
£'000
Cash at bank and in hand
3,904
(1,302)
2,602
Borrowings excluding overdrafts
(81,203)
(1,793)
(82,996)
(77,299)
(3,095)
(80,394)
26
Related party transactions
The group's key management comprises directors and senior management. Their remuneration for the year amounted to £1,332,000 (2022: £1,059,000).
The company has taken advantage of the exemption under section 33.1A of FRS102 from disclosing transactions or balances with wholly owned subsidiaries.
There were no other related party transactions.
27
Ultimate controlling party
The company is wholly owned by Dragon Topco Limited, the company registered and incorporated in Guernsey. It is the largest group for which the consolidated financial statements are prepared. The financial statements of Dragon Topco Limited can be obtained from its office at Ground Floor, Cambridge House, Le Truchot, St Peter Port, Guernsey GY1 1WD.
The company’s ultimate controlling party is Mayfair Equity Partners LLP which is based at 8 Hanover Street, London W1S 1YQ.
28
Events after the reporting date
There were no significant events after the reporting date.
2023-12-312023-01-01falseCCH SoftwareCCH Accounts Production 2023.200Mr James VowlesMr Jonathan 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