The directors present the strategic report for the year ended 31 December 2023.
A number of geopolitical issues continued to adversely impact our business in 2023, however, despite these adverse factors, we were able to grow the turnover in the year by 19% to £45.9m (2022:£38.6m). The costs of the business increased significantly as activity levels increased in all areas of the business and the company embarked on more initiatives to engage with clients and potential clients. Worldwide inflation was high at around 7% which was also a contributory factor in our rising costs. The Group made a profit after taxation of £89,219 following an increase in the provision for slow moving stock of £5,804,288, (2022: profit of £2,702,276).
The Group's operations expose it to a variety of financial risks that include the effects of price risk, credit risk, liquidity risk and economic risk. The board has responsibility for maintaining financial risk management and meet regularly to assess the potential impact of these risks on the Group's trading activities.
Price risk
The Group is exposed to changes in the market prices of its raw materials and in particular fluctuations in diamond and other precious gem prices. Management and the Group's diamond buyers monitor the market regularly and have the necessary skill, care and professional judgment when purchasing high value diamonds to ensure (as far as reasonably possible) that they are of the quality, uniqueness and appeal to maintain their value.
Credit risk
New customers are vetted carefully and appropriate resources and documentation are used or obtained to ensure they are credit worthy.
Liquidity risk
The Group is financed with appropriate long-term and short-term facilities to match the needs of the business. However if the Company and Group cannot meet the amended agreement in respect of the Murabaha loan, then the Company and the Group may not be able to meet their liabilities as they fall due.
Economic risk
The Group's operations are exposed to the downturn in the UK economy, and therefore to manage this exposure the Group has expanded its activities to other jurisdictions around the world.
Foreign exchange risk
The Group is exposed to foreign currency risk on its operations by virtue of entering into transactions in currencies other than the Group's functional currency of sterling. Foreign exchange risk is generally managed by matching trade income and assets with purchases and liabilities.
Director’s duties
In accordance with section 172 of the Companies Act 2006, each of our directors acts in a way that he considers in good faith, would most likely further the success of the business for the benefit of its members as a whole and in doing so has regard (amongst other matters) to:
The likely consequences of any decision in the long term
The interests of the company’s employees
The need to foster the company’s business relationships with suppliers, customer and others
The impact of the company’s operations on the community and environment
The desirability of the company maintaining a reputation for high standards of business conduct
The need to act fairly as between members of the company
Decision making
The company’s flat organisational structure enables management to be flexible and respond quickly to meet the demands of its changing environment. Directors review the performance of the group through monthly management accounts together with sales and margin analysis and the use of various specifically targeted ad hoc reports. The board meets at least twice a year to review business performance and vote on the key business issues or events. In 2022 the board met to discuss the reopening of the Paris store on Rue St Honore, trading performance amongst other topics.
Employee engagement
The company considers its employees to be key to the success of the business. The company aims to be a responsible employer with regards to pay, benefits and working conditions and sees the welfare of our staff as being of paramount importance. The company encourages its employees to take an active role in the development of the business and where possible and appropriate will canvas the ideas of its employees. The Company holds a companywide bi-weekly meeting where all staff members are in attendance and can participate in an open forum on cross functional issues and subjects.
Business relationships
The company is fully committed to fostering good relationships with all stakeholders of the business. Over many years the company has forged strong relationships with its customers and has been very successful at customer retention with many clients making repeat purchases year after year. Relationships with our suppliers and the ateliers we work with are very important to us and we take pride in building and maintaining strong relationships and working closely and cooperatively with them which helps to ensure a smooth and efficient supply chain.
Community and environment
The directors are committed to take all reasonable steps to minimise any negative impact that the company’s operations may have on the environment.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 10.
The profit for the year after taxation amounted to £89,219 (2022: £2,702,276).
Ordinary dividends were paid amounting to £1,000,000. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Going Concern
At the time of approving the financial statements, the directors prepared forecasts that have been sensitised to take into account the impact of the global economy and have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
We have audited the financial statements of David Morris International Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the 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.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent 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 parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the group and parent company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the group and parent company by discussions with directors and by updating our understanding of the sector in which the group and parent company operates.
Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006 and UK Tax legislation.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of group and parent company financial statement disclosures. We reviewed the parent company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. 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.
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 parent company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company's members those matters we are required to state to them in an auditors 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 parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.
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 £1,018,524 (2022 - £584,425 profit).
David Morris International Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is 180 New Bond Street, London, United Kingdom, W1S 4RL.
The group consists of David Morris International Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The 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 for parent company information presented within the consolidated financial statements:
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.
The consolidated group financial statements consist of the financial statements of the parent company David Morris International Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
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 other members of 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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The directors have prepared forecasts that have been sensitised to take into account the impact of the global economy and have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on delivery of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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 group's statement of financial position when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors, 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, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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 group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
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 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 are derecognised when the group's contractual obligations expire or are discharged or cancelled.
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.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. 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 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. Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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.
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.
Impairment of non-financial assets
At each reporting date non-financial assets not carried at fair value are assessed to determine whether there is an indication that the asset (or asset's cash generating unit) may be impaired. If there is such an indication the recoverable amount of the asset (or asset's cash generating unit) is compared to the carrying amount of the asset (or asset's cash generating unit).
The recoverable amount of the asset (or asset's cash generating unit) is the higher of the fair value less costs to sell and value in use. Value in use is defined as the present value of the future pre-tax and interest cash flows obtainable as a result of the asset's (or asset's cash generating unit) continued use. The pre-tax and interest cash flows are discontinued using a pre-tax discount rate that represents the current market risk-free rate and the risks inherent in the asset.
If the recoverable amount of the asset (or asset's cash generating unit) is estimated to be lower than the carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised in the income statement, unless the asset has been revalued when the amount is recognised in other comprehensive income to the extent of any previously recognised revaluation. Thereafter any excess is recognised in the income statement.
If an impairment loss is subsequently reversed, the carrying amount of the asset (or asset's cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the income statement.
Goodwill is allocated on acquisition to the cash generating unit expected to benefit from the synergies of the combination. Goodwill is included in the carrying value of cash generating units for impairment testing.
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.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
David Morris International Limited exercises 100% control of the entity Royal Gems Jewellery Trading LLC. However, due to historic UAE law David Morris International Limited was prevented from holding 100% of the shares in this entity and holds 49% of the ordinary shares and a 'local' partner holds the remaining 51% of the shares as a nominee on behalf of David Morris International Limited. Therefore Royal Gems Jewellery Trading is consolidated as a 100% subsidiary.
The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on future investments, economic utilisation and the physical condition of the asset. See note 12 for the carrying amount of the tangible assets, and note 1.8 for the useful economic lives for each class of assets.
The Company designs, manufactures and sells jewellery and is subject to changing consumer demands and fashion trends. As a result, it is necessary to consider the recoverability of the cost of stock and the associated provisioning required. When calculating the stock provision, management must provide against it based on the age of when the stock was bought and by considering the current economic and industry conditions. See note 15 for the net carrying amount of the stock and associated provision.
The Company operates from leasehold stores and online. Each store is considered to be a cash generating unit. At each reporting date non-financial assets not carried at fair value are assessed to determine whether there is an indication that the asset’s cash generating unit may be impaired. Management considers the forecast sales and cash generation for each store and applies assumptions with respect to future growth. See note 1.21 for the accounting policy for impairment of non-financial assets.
Key money lease
The Group had recognised a key money lease as an intangible asset which is sensitive to changes in the fair value of the asset. The fair value is re-assessed annually and amended when necessary to reflect current estimates, based on market rate and economic utilisation of the asset.
Recoverability of intercompany balances
Management regularly assess balances due between group entities and whether these are recoverable. Where it is considered that the future cash flows of these debts are less than the carrying amount in the individual company financial statements, appropriate provisions are made against these balances to reflect the recoverability of the asset.
Bad debt provisions for trade debtors
The company's policy on recognising an impairment of the trade receivables balance is based on a review of individual debtor balances, their ageing and management's assessment of realisation. This review and assessment is conducted on a continuing basis and any material change in management's assessment of trade debtor impairment is reflected in the carrying value of the asset.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
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 "Other" intangible assets consists of key money that was paid to obtain the lease for our Paris boutique. The key money is being amortised over 10 years, with 2 years remaining.
Details of the company's subsidiaries at 31 December 2023 are as follows:
*Held indirectly
David Morris International Limited exercises a dominant influence over Royal Gems Jewellery Trading LLC.
Stocks are stated after provisions for impairment of £14,687,058 (2022: £8,882,000).
Stocks recognised as an expense during the year was £19,959,165 (2022: £15,683,575 )
Amount owed by group undertakings are interest free, unsecured and repayable on demand.
Amounts owed to Group undertakings are interest free, unsecured and repayable on demand.
The commodity Murabaha facility with Lesha Bank LLC is an unsecured facility which carries a fixed profit rate of 8% per annum. This loan has been fully repaid post year-end.
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.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
There is a single class of ordinary shares. There are no restrictions on the distribution of capital and the repayment of capital.
The Group and Company's other reserves are as follows:
The share premium reserve contains the premium arising on issue of equity shares.
The profit and loss reserve represents cumulative profits or losses net of dividends paid.
The capital redemption reserve represents the transfers made from retained earnings on the purchase of own shares as part of a buy-back programme.
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:
The Company settled invoices for Jeremy Morris for an aggregate amount of £659,227 (2022: £13,902). The liability on his Director's Current Account at the year end was £658,343, compared with an asset in 2022 of £884.
During 2023 Jeremy Morris deposited no further loan (2022: £827,000) into the business. The loan was partly used to repay the directors loan account in the prior year, with the remaining amount accruing interest at 6%.The amounts owed to the director at the year end was £753,194.
Details of other related party transactions are disclosed in notes 16 and 17.
The immediate controlling party is Waterflow Enterprises Corp, a company incorporated in the British Virgin Islands. The financial statements for this company are not publicly available.
The directors of the company have confirmed that there is no ultimate controlling party.
See note 7 for disclosure of the directors' remuneration and key management compensation.