The directors present the strategic report for the year ended 3 February 2024.
Guess U.K. Limited (the "Company" or "GUESS") distributes one of the world's leading lifestyle collections of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The apparel is marketed under numerous trademarks. The lines include full collections of clothing, including jeans, pants, skirts, dresses, shorts, blouses, shirts, jackets, knitwear and intimate apparel. GUESS also selectively distributes a broad range of products that complement the apparel lines, including eyewear, watches, handbags, footwear, kids' and infants' apparel, outerwear, fragrance, jewellery and other fashion accessories.
The products are sold through direct-to-consumer distribution channels. The core customer is a style-conscious consumer primarily between the ages of 20 and 45. These consumers are part of a highly desirable demographic that we believe, historically, has had significant disposable income. We also appeal to customers outside this group through specialty product lines that include MARCIANO, a more sophisticated fashion line targeted to women and men, and GUESS Kids, targeted to boys and girls ages 6 to 12.
The company operates on a 52/53-week fiscal year calendar, which ends on the Saturday nearest to 31 January of each year. This fiscal year started on 29 January 2023 and ended on 03 February 2024.
GUESS has several business strengths that sets it apart from the competition, including:
Brand equity: The GUESS? brand is an integral part of our business, a significant strategic asset and a primary source of sustainable competitive advantage. The GUESS? brand communicates a distinctive image that is fun, fashionable and sexy.
Brand loyalty, name awareness, perceived quality, strong brand images, public relations,
publicity, promotional events and trademarks all contribute to the reputation and integrity of the GUESS? brand.
Multiple store concepts: The Company sells through different store concepts namely GUESS? full-price retail stores, GUESS? factory outlet stores and GUESS? accessories stores. This allows us to target the various demographics in each region through dedicated store concepts that market each brand or concept specifically to the desired customer population.
We continued to show store-by-store growth in the period. Retail sales increased from £20.4 million in FY23 to £20.9 million in FY24. Our net turnover for the period decreased by £1.6 million compared to the previous financial year due to wholesales.
No new store openings and two closures in FY24.
Gross profit margin figures have shown a general stability.
Business rates decreased from £2 million in FY23 to £1.5 million in FY24.
Energy costs have been quite aligned to previous financial year.
Our key financial highlights for the year are Revenue, Gross Profit and Loss before taxations as shown in the Statement of Comprehensive Income on page 10 of the financial statement.
Demand for our merchandise may decrease and the appeal of our brand image may diminish if we fail to identify and rapidly respond to consumers' fashion tastes. - The apparel industry is subject to rapidly evolving fashion trends and shifting consumer demands. Accordingly, our brand image and our profitability are heavily dependent upon both the priority our target customers place on fashion and our ability to anticipate, identify and capitalise upon emerging fashion trends. Current fashion tastes place significant emphasis on a fashionable look. In the past, this emphasis has increased and decreased through fashion cycles. If we fail to anticipate, identify or react appropriately, or in a timely manner, to fashion trends, we could experience reduced consumer acceptance of our products and a diminished brand image. These factors could result in higher wholesale markdowns, lower average unit retail prices, lower product margins and decreased sales volumes for our products, and could have a material adverse effect on our results of operations and financial condition.
The apparel industry is highly competitive, and we may face difficulties competing successfully in the future. - We operate in a highly competitive and fragmented industry with low barriers to entry. We compete with many apparel distributors as well as many well-known designers. Our retail and factory outlet stores compete with many other retailers, including department stores. Our licensed apparel and accessories compete with many well-known brands. We also face significant competition from global and regional branded apparel companies, as well as retailers that market apparel under their own labels. These and other competitors pose significant challenges to our market share and to our ability to successfully develop new markets. Some of our competitors have competitive advantages over us, including greater financial and marketing resources, higher wage rates, lower prices, more desirable store locations, greater online presence and faster speed to market. In addition, our larger competitors may be better equipped than us to adapt to changing conditions that affect the competitive market and newer competitors may be viewed as more desirable by fashion conscious consumers. Any of these competition-related factors could result in reductions in sales or prices of our products and could have a material adverse effect on our results of operations and financial condition.
Poor or uncertain economic conditions, and the resulting negative impact on consumer confidence and spending, have had and could continue to have an adverse effect on the apparel industry and on our operating results. - The apparel industry is cyclical in nature and is particularly affected by adverse trends in the general economy. Purchases of apparel and related merchandise are generally discretionary and therefore tend to decline during periods of economic uncertainty and also may decline at other times. In addition to the factors contributing to the current economic environment, there are a number of other factors that could contribute to reduced levels of consumer spending, such as increases in interest rates, currency fluctuations, inflation, unemployment, consumer debt levels, inclement weather, taxation rates, net worth reductions based on market declines or uncertainty, energy prices and austerity measures. Similarly, natural disasters, labour unrest, actual or potential terrorist acts, geopolitical unrest and other conflicts can also create significant instability and uncertainty in the world, causing consumers to defer purchases and travel, or prevent our suppliers and service providers from providing required services or materials to us. These or other factors could materially and adversely affect our business, prospects, operating results, financial condition and cash flows. The COVID-19 pandemic has had a material impact on the company’s financial performance. Measures taken by the government to contain the virus have affected economic activity. We have taken number of measures to monitor and mitigate the effect of COVID-19, such as safety and health measures for our people, customers and stakeholders. In response to the COVID-19 pandemic, governments in various jurisdictions have implemented relief programs to provide assistance in the form of wage subsidies (related to payroll, income, sales and other taxes). The company is leveraging these relief initiatives where able to help mitigate expenses and provide additional liquidity.
We are satisfied with the company's position at the year end. Strong financial capital management is a fundamental component of the overall strategy of the company and that of the group of which the company is a member. The company maintains a capital structure that is appropriate to the ongoing needs of the business. Liquidity is primarily needed to fund working capital, the expansion and remodelling of retail stores, in-store programs, systems, and other existing operations. During the fiscal year the company relied primarily on trade credit, available cash, internally generated funds, and financing from other group companies to finance its operations. The Company issued notice of a Company Voluntary Arrangement (CVA) taking effect which has been entered into to reduce the significant effect of the cost of real estate. The CVA took effect on the 8 December 2020, with the majority of Landlords voting in favour of the agreement. The CVA allowed the company to reduce the rent costs significantly, starting from the March 2020 until the end of the period in 2023.
We anticipate that the company will be able to satisfy its ongoing cash requirements during the next twelve months for working capital, capital expenditure and operating lease obligations. At the year end the company had net current liabilities of £0.7k (FY 23: £710k). However, a substantial proportion of current liabilities relates to group companies who have offered continued support to the company.
The company's policy is to ensure continuity of trading. To date, bank borrowing has not been necessary as funding has been provided within the group and the group companies have guaranteed support. At the period end the company had cash reserves of £721k (FY23: £805k).
The management continues to review the progress of the Brexit process and measure the effect that the changes have or may have on the business and to monitor price costs increases especially the energy price uplift.
The revised UK Corporate Governance Code (‘2018 Code’) was published in July 2018 and applies to accounting periods beginning on or after January 1, 2019. The Companies (Miscellaneous Reporting) Regulations 2018 (‘2018 MRR’) require Directors to explain how they considered 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 under S172. This S172 statement, which is reported for the first time, focuses on matters of strategic importance to the Company, and the level of information disclosed is consistent with the size and the complexity of the business.
General confirmation of Directors' Duties
The Company's decision-making process is centralised as part of the European Group and the wider Group under Guess? Inc and the Company's own board of Directors. One of the Company's Directors is regularly party of the European Group discussions and the other oversees the county management. Decisions affecting the Company are still considered by the Directors to ensure it is in the best interest of the Company. When making decisions, the relevant Group board and the Directors (referred to here on as the "Board") ensure that they act in the way they consider, in good faith, would most likely promote the Company'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 Board understands the business and the evolving environment in which we operate. Our purpose to be a leading lifestyle collection of apparel and accessories and the strategy set by the Board is intended to strengthen our position has long term effects with regard to investments in retail space and the marketing of our brand. Along side this we balance our strategic business need with our sustainability plan which is organised into commitments and goals that focus on Our World – the people, operations and suppliers we work with – and Our Brand – the customers and communities we connect with. Our approach is aligned with the Global Reporting Initiative (GRI) Standards to determine topics that are important to both our stakeholders and to the sustainable growth of our business and is broken down into 3 phases being achieved over several years.
S172(1) (B) “The interests of the company’s employees”
The Board recognises that employees are fundamental and core to our business and delivery of our strategic ambitions. The success of our business depends on attracting, retaining and motivating employees. From ensuring that we remain a responsible employer, from pay and benefits to our health, safety and workplace environment, the Directors factor the implications of decisions on employees and the wider workforce, where relevant and feasible. More information on this can be found at https://sustainability.guess.com/empowering-our-people
S172(1) (C) “The need to foster the company’s business relationships with suppliers, customers and others”
Delivering our strategy requires strong mutually beneficial relationships with suppliers, customers, governments, and group partners. We seek the promotion and application of certain general principles in such relationships. The ability to promote these principles effectively is an important factor in the decision to enter into or remain in such relationships. The Board also reviews and approves approach to suppliers. The businesses continuously assess the priorities related to customers and those with whom we do business, and the Board engages with the businesses on these topics.
S172(1) (D) “The impact of the company’s operations on the community and the environment”
This aspect is inherent in our strategic ambitions. As such, the Board receives information on these topics to both provide relevant information for specific decisions and to provide ongoing overviews at the group level. This is supported by the GUESS Sustainability Plan where we aim to integrate sustainable practices into our operations by focusing on product responsibility, being good water stewards and reducing our greenhouse gas emissions. More can be found at https://sustainability.guess.com/protecting-our-environment
S172(1) (E) “The desirability of the company maintaining a reputation for high standards of business conduct”
The Board aims to maintain high standards for merchandise quality and integrity in ways which are
economically, environmentally and socially responsible. The Board periodically reviews and approves clear frameworks, such as our General Business Principles, Code of Conduct, and Ethics & Compliance, to ensure that its high standards are maintained both within the business and the business relationships we maintain. This, complemented by the ways the Board is informed and monitors compliance with relevant governance standards, helps assure its decisions are taken and that the Company acts in ways that promote high standards of business conduct.
S172(1) (F) “The need to act fairly as between members of the company”
After weighing up all relevant factors, the Board considers which course of action best enables delivery of our strategy through the long-term, taking into consideration the impact on stakeholders. In doing so, our Directors act fairly as between the Company’s members but are not required to balance the Company’s interest with those of other stakeholders, and this can sometimes mean that certain stakeholder interests may not be fully aligned.
Employee engagement
We recognise that the development of GUESS is the result of the loyalty and passion of our people. Their efforts are appreciated. Our aim is to ensure that employees are informed about the business locally and with a greater understanding of the Company's aims.
Information of matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting performance.
On behalf of the board
The directors present their annual report and audited financial statements for the year ended 3 February 2024.
The results for the year are set out on page 13.
The results for the year is still slightly impacted by CVA procedure we put in place in order to maintain the continuity of the business (the CVA formally ended on 12 October 2023).
The directors do not recommend payment of an ordinary dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company uses financial instruments, other than derivatives, comprising borrowings, cash and other liquid resources and various other items such as trade debtors and creditors that arise directly from its operations. The main purpose of these is to raise finance for the company's operations and manage interest rate risks arising from the company's activities, bank overdrafts, and intercompany loans. The directors review and agree policies for managing each of these risks and they are summarised below:
The company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest any cash assets safely and profitably. The company policy throughout the year has been to ensure continuity of funding by using cash pooling from the company's immediate parent company. Debt is structured so repayments can be made out of cash generated through operations.
The company’s principal foreign currency exposures arise from trading with overseas companies. Company policy permits, but does not demand, that these exposures be hedged in order to fix the cost in sterling.
COVID 19 and Going Concern
We have taken several measures to monitor and mitigate the effect of COVID-19, such as safety and health measures for our people, customers and stakeholders.
During FY24 we closed two stores, Liverpool, on March 2023 and London Brent, on May 2023. We have not identified any significant COVID-19 impact on the fair value of assets.
On the 8 December 2020, the Company issued notice of a Company Voluntary Arrangement taking effect which helped significantly to reduce the cost of real estate and its liability to Guess Europe Sagl. The CVA ended on 12 October 2023.
We will continue to follow the various government policies and advice and, in parallel, we will do our utmost to continue our operations in the best and safest way possible without jeopardising the health of our people, customers and stakeholders
We have audited the financial statements of Guess U.K. Limited (the 'company') for the year ended 3 February 2024 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
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.
Other information
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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, and through discussion with management (as required by auditing standards), we identified that the principal risks of non-compliance with laws and regulations related to Companies Act 2006, health and safety, anti-bribery, anti-money laundering, employment law, Data Protection Act, GDPR, the Consumer Rights Act and other relevant legislation.
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 preparation of the financial statements such as Companies Act 2006. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.
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 inappropriate journal entries to increase revenue or reduce expenditure, management bias in accounting estimates and judgmental areas.
Audit procedures performed by the company engagement team included:
Discussions with management and assessment of known or suspected instances of non-compliance with laws and regulations (including GDPR) and fraud; and
Assessment of identified fraud risk factors; and
Challenging assumptions and judgements made by management in its significance accounting estimates: and
Identifying and testing journal entries, in particular journal entries posted to revenue, unusual account combinations, journals posted through suspense account and journals posted by unexpected users;
Performing analytical procedures to identify any unusual or unexpected relationships, including related party transactions, that may indicate risks of material misstatement due to fraud; and
Confirmation of related parties with management, and review of transactions throughout the period to identify any previously undisclosed transaction with related parties outside the normal course of business; and
Using data analytics tools to identify any unusual or unexpected transaction, that may indicate risks of material misstatement due to fraud; and
Review of significant and unusual transactions and evaluation of the underlying financial rationale supporting the transactions; and
Verification of tangible assets susceptible to fraud or irregularity; and
Review of bank statement to identify any indications of window dressing of the bank balances; and
Third party confirmation of bank balances; and
Identifying the accuracy of opening balances.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulations. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risk of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than that resulting from error, as fraud may involve collusion, forgery, intentional omission, misrepresentations or the override of internal control.
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the companys internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events of conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Auditors' Report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Auditors' Report. However, future events or conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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.
Use of our report
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.
The income statement has been prepared on the basis that all operations are continuing operations.
Guess U.K. Limited (the "company" or "GUESS") distributes a leading lifestyle collection of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The products are sold through direct-to-consumer distribution channels in the UK.
The company operates on a 52/53-week fiscal year calendar, which ends on the Saturday nearest to 31 January of each year. All references herein to 2024, 2023 and 2022 represent the 52-week fiscal year ended 3 February 2024, 28 January 2023, or 29 January 2022.
The company is a private company limited by shares and is incorporated and domiciled in England and Wales. The registered office is The Courtyard, River Way, Uckfield, East Sussex, TN22 1SL.
Statement of compliance
The individual financial statements of Guess U.K. Limited have been prepared in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, "The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland" ("FRS 102") and the Companies Act 2006.
Exemptions for qualifying entities under FRS 102
The company has taken advantage of the exemptions, under FRS 102 paragraph 1.12, 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 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
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’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; 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.
(iv) Subsequent additions and major components
Subsequent costs, including major inspections, are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that economic benefit associated with the item will flow to the company and the cost can be measured reliably.
The carrying amount of any replacement component is derecognised. Major components are treated as a separate asset where they have significantly different patterns of consumption of economic benefits and are depreciated separately over its useful life.
(v) Assets in the course of construction
Assets in the course of construction are stated at cost. These assets are not depreciated until they are available for use.
(vi) Derecognition
Tangible assets are derecognised on disposal or when no future economic benefits are expected. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in the profit and loss and included in 'Other operating (losses)/gains'.
Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
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, including trade and other payables, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade payables 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 payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
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.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
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.
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.
The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancements, future investments, economic utilisation and the physical condition of the assets. See note 11 for the carrying value of property, plant and equipment and note 1.4 for the useful economic lives for each class of asset.
Inventory is subject to obsolescence, damage, loss, etc. When calculating the inventory provision, management consider the nature and condition of inventory relating to closing inventory which is reviewed annually. The movements in the inventory provision is calculated by reference to the stock losses over sales applied to the gross closing stock. See note 12 for the net carrying amount of the inventory and associated provision.
An analysis of the company's revenue is as follows:
On the 8th December 2020 the company entered into a Company Voluntary Agreement (CVA). A key component of this was to write down amounts due from real estate suppliers and group companies. The above represents the support arising in the period as a result of the CVA. The reversal in the current year is an estimate of dividends due back to the impacted suppliers.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2023 - 1).
The number of directors who are entitled to receive shares under long term incentive schemes during the year was 1 (2023 - 1).
The U.K. Government announced in the 2021 budget that from 1 April 2023, the rate of corporation tax in the United Kingdom would increase from 19% to 25%. Companies with profits of £50,000 or less will continue to be taxed at 19%, which is the new small profits rate. Where taxable profits exceed £250,000 the higher tax rate of 25% will apply. Where taxable profits are between £50,000 and £250,000, a marginal tax rate will apply as profits increase. These tax bands will be reduce dependent upon the number of associated companies form a group for tax purposes.
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:
The carrying value of land and buildings comprises:
Inventories are stated after provision for impairment of £15,694 (2023: £14,996).
Amounts owed by group undertakings are unsecured, have no fixed repayment date and where included within one year are interest free and repayable on demand.
Amounts owed by group undertakings are unsecured, have no fixed repayment date and where included within one year are interest free and repayable on demand.
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:
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.
Ordinary £1 and €1 shares have full and equal rights to participate in voting in all circumstances and in dividends and capital distributions, whether on a winding up or otherwise and are not redeemable.
The company entered into a CVA on 8 December 2020, included in the agreement are clauses on the impact of failure to comply with its obligations. Should the company fail, or the CVA is terminated for another reason, then the terms of the CVA shall be deemed to never to have happened and the Creditors shall have the claims against the company that they would have had if the CVA had never been approved. Should this happen, as at the reporting date, the income included in Exceptional Income would have been reclassified to liabilities as due back to the Creditors and there would be an uplift to minimum obligations under finance leases in 1 year and 2 - 5 years. The CVA ended on 12 October 2023.
The operating leases represent leases of stores and offices to third parties. The leases are negotiated over terms of five to fifteen years and rentals are fixed for three to five years. Most leases include a provision for five-yearly upward rent reviews according to prevailing market conditions. There are no options in place for either party to extend the lease terms.
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:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Guarantees received
The ultimate parent company is a guarantor on premises lease agreements.
Remuneration of key management personnel
The company has taken advantage of the exemption under paragraph 1.12(e) of FRS 102 from the requirement to disclose the total of key management personnel compensation.
Transactions with related parties
The company has taken advantage of the exemption under paragraph 33.1A of FRS 102 not to disclose transactions entered into between two or more members of a group where the subsidiary which is party to the transaction is wholly owned by the other party.
At the period end the balance owed from and to group companies are as detailed above and the group companies concerned are Guess? Inc. and Guess? Europe Sagl.