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Registered number:
For the Year Ended
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Cleopatra UK Bidco Limited
Company Information
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Cleopatra UK Bidco Limited
Contents
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Cleopatra UK Bidco Limited
Group Strategic Report
For the Year Ended 31 December 2022
The directors present the Group Strategic Report for the period ended 31 December 2022.
The Group owns a variety of own brand, international retailers of luxury hair solutions, including human hair, styling tools and aftercare products across multiple jurisdictions, including the United Kingdom, Germany, Canada and more recently Australia. The Group trades internationally across multiple channels including direct-to-salon, direct-to-consumer and distributors through the Group’s own web platform, sales representatives and phone orders.
The Group delivered turnover of £88.8m in the year ended 31 December 2022 (2021: £81.1m) representing absolute growth of 9.5% on the prior year. The Group continued to benefit from its robust business model during the year, adapting to the continuing challenges both the Group, and retail as a sector, has faced during recent years, increasing revenue across all channels within the business with an increasing diversity in product mix and international coverage as the business continues to expand and evolve. During this difficult economic climate, the Group has seen continued pressure on the price of raw materials worsened by the strengthening of the US Dollar during the year. Despite this, the Group has maintained a strong level of profitability with gross margin of 44% (2021: 46%). The Group has seen a reduction in the cost pressure faced on inbound freight during the Covid-19 pandemic and continues to focus on maximising efficiencies in the way the Group imports goods from overseas. The operating loss during the year ended 31 December 2022 was £22.3m (2021: profit of £30.4k), primarily due to a significant impairment of goodwill during the period driven by a decline in trading in the Zala brand based in Australia which Management have observed a continuation of performance of into the post year end period with no material signs of improvement at this stage. The Group has continued to invest in people as the business grows, further investing in key senior appointments during 2022 to ensure the Group is well placed to support its ambitious growth plans as part of the Group’s long-term strategy. During the year, the Group has continued to integrate further, implementing group wide operational practices, including processes and controls across all departments within the business. 2023 saw continued investment in the Group and the launch of new products and technologies. This will continue to deliver on the market share which the business holds, whilst allowing the Group to continue targeting new markets. Prior period adjustment During the current financial year, the Group has processed several prior year adjustments to correct errors identified in the previously issued financial statements. These adjustments have been made in accordance with FRS 102 Section 10 Accounting Policies, Estimates and Errors, and the comparatives have been restated accordingly. A summary of the adjustments is provided in note 28 of the accounts. The completion of the financial statements for 2022 has been delayed due to the extended timeline required to meet international statutory reporting obligations. The primary factor contributing to this delay is the ongoing goodwill and impairment review within the Group's German operations. This review is subject to complex regulatory and audit requirements, which have necessitated additional time to ensure full compliance and accuracy.
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Cleopatra UK Bidco Limited
Group Strategic Report (continued)
For the Year Ended 31 December 2022
Operational and compliance risks are constantly being monitored and procedures are being implemented to address issues as they arise. The Group is committed to building organisational resilience with the capability of providing effective responses, as well as identifying risk-based opportunities.
Financial risks relating to currency exposure are closely monitored and mitigated where possible in line with the Group’s FX strategy. Credit risk is constantly monitored and credit limits are under constant review. Reputational and strategic risks have been reduced with the support of the Beauty Industry Group, to which the Company and its trading subsidiary, Ecotrade Europe Limited, belong with emphasis being on increasing the variety of quality products and widening the Group's client base. The rising cost of air freight and materials, coupled with the uncertainty related to consumer sentiment, particularly human hair coupled with the global pandemic and restrictions in place surrounding personal contact have been the principal risks to the Group and will continue into 2023 and beyond. The Group is able to attract and retain high calibre employees and investment is made in the IT systems to ensure that they are able to continue to respond to the needs of the business and do not become obsolete.
The Group's key performance indicators are presented below:
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Cleopatra UK Bidco Limited
Group Strategic Report (continued)
For the Year Ended 31 December 2022
The directors are collectively responsible under section 172 of the UK Companies Act to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its shareholders as a whole and to take into account wider stakeholder needs when doing so. In its considerations and decision-making processes the Board therefore has regard to certain key matters including, but not limited to, the long-term impact of the Company’s operations on local communities and the environment and the need to preserve the Company’s reputation for high standards of business conduct.
Our employees are key to the delivery of our services and therefore to the long-term success of the business. It is imperative to keep them actively engaged and motivated. Regular staff communication and engagement occurs through team meetings and training. Our global customer base is served through our B2B and D2C channels across our portfolio of own-brands and retail destinations. Understanding our customers and how they like to purchase, discover new products, and be made aware of new trends and solutions is essential for developing our brands and ensuring they are relevant to the markets they operate in. We aim to enable a simplified customer journey, from product discovery to checkout and delivery, which supports our consistently strong repeat-purchase rates. The Company partners with suppliers to ensure it can continue to address customers and consumers’ evolving demands. The Board is committed to fostering and developing supplier relationships in a way that empowers the brands we own and those which we work with to drive innovative solutions to consumer demands, while balancing the need to tackle societal and environmental issues. The Company is continually reviewing its systems and procedures to reduce energy consumption and ensuring they are Streamlined Energy and Carbon Reporting (SECR) compliant. It is critical that shareholders have confidence in the management and operation of the business, and in its long-term strategic objectives. The main shareholders are respected on the board of directors.
This report was approved by the board and signed on its behalf.
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Cleopatra UK Bidco Limited
Directors' Report
For the Year Ended 31 December 2022
The directors present their report and the financial statements for the year ended 31 December 2022.
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £26,159,179 (2021 - loss £3,589,270).
The directors do not recommend the payment of a final dividend.
The directors who served during the year were:
2025 will continue to see investment in the group across its brands with the launch of new products and technologies to help enable further growth through international and product expansion. The Group expects market share to continue to increase across future periods as the Group continues to integrate with Beauty Industry Group (“BIG”), aligning on group-wide operational practices, including processes and control to enable further growth opportunities and initiatives.
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Cleopatra UK Bidco Limited
Directors' Report (continued)
For the Year Ended 31 December 2022
The Group is defined as a large group in line with the Companies Act 2006, and have consumed more than 40,000 kWh of energy in the reporting period therefore hitting the threshold for Streamlined Energy and Carbon Reporting (SECR).
The company has followed the 2019 HM Government Environmental Reporting Guidelines and have also used the GHG Reporting Protocol – Corporate Standard and have used the 2022 UK Government's Conversion Factors for Company Reporting. UK Greenhouse gas emissions and energy use data for the period 1 January 2022 to 31 December 2022: 2022 Energy consumption used to calculate emission (kWh) 268,548 kWh Total Gross Emissions in metric tonnes CO2e 25.8 tCO2e Intensity Ratio Tonnes CO2e per headcount 0.56 tCO2e Comparative information for 2021 is not available as the Group was not collecting the data to meet these regulations at the time. The prior year audit opinion was qualified in this respect.
In the year the total energy consumption equated to 268,548 kWh across the UK company which was made up of gas, electricity and fuel across the head office site, the company warehouse, and delivery vehicles.
The Group continues to review areas whereby energy efficiency can be improved such as increased video conferencing technology for staff meetings, to reduce the need for travel between sites.
There have been no significant events affecting the Group since the year end.
The auditors, Hurst Accountants Limited, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
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Cleopatra UK Bidco Limited
Directors' Report (continued)
For the Year Ended 31 December 2022
This report was approved by the board and signed on its behalf.
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Cleopatra UK Bidco Limited
Independent Auditors' Report to the Members of Cleopatra UK Bidco Limited
We have audited the financial statements of Cleopatra UK Bidco Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2022, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 Group's or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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Cleopatra UK Bidco Limited
Independent Auditors' Report to the Members of Cleopatra UK Bidco Limited (continued)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group 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 Group 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 its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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Cleopatra UK Bidco Limited
Independent Auditors' Report to the Members of Cleopatra UK Bidco Limited (continued)
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 Group 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:
Identifying and assessing potential risks related to irregularities In identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
∙The nature of the industry and sector in which the company operates; the control environment and business performance including key drivers for directors' remuneration, bonus levels and performance targets.
∙The outcome of enquiries of local management and parent company management, including whether management was aware of any instances of non-compliance with laws and regulations, and whether management had knowledge of any actual, suspected, or alleged fraud.
∙Supporting documentation relating to the Company's policies and procedures for:
- Identifying, evaluating, and complying with laws and regulations
- Detecting and responding to the risks of fraud
∙The internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.
∙The outcome of discussions amongst the engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
∙The legal and regulatory framework in which the Company operates, particularly those laws and regulations which have a direct effect on the financial statements, such as the Companies Act 2006, pensions and tax legislation, or which had a fundamental effect on the operations of the Company, including General Data Protection requirements, and Anti-bribery and Corruption.
Audit response to risks identified Our procedures to respond to the risks identified included the following:
∙Reviewing the financial statements disclosures and testing to supporting documentation to assess compliance with the provisions of those relevant laws and regulations which have a direct effect on the financial statements.
∙Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud.
∙Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and detect irregularities.
∙Enquiring of management about any actual and potential litigation and claims.
Performing analytical procedures to identify any unusual or unexpected relationships which may indicate risks of material misstatement due to fraud.
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Cleopatra UK Bidco Limited
Independent Auditors' Report to the Members of Cleopatra UK Bidco Limited (continued)
We have also considered the risk of fraud through management override of controls by:
∙Testing the appropriateness of journal entries and other adjustments to identify accounting transactions which may pose a heightened risk of material misstatement, whether due to fraud or error.
∙Challenging assumptions made by management in their significant accounting estimates, and assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
∙Evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. There are inherent limitations in the audit procedures described above, and the further removed non-compliance with laws and regulations are from the events and transactions reflected in the financial statements, the less likely we would become aware of them. 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 for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
This report is made solely to the 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 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 Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
3 Stockport Exchange
SK1 3GG
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Cleopatra UK Bidco Limited
Consolidated Statement of Comprehensive Income
For the Year Ended 31 December 2022
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Cleopatra UK Bidco Limited
Registered number: 12361523
Consolidated Balance Sheet
As at
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 18 to 43 form part of these financial statements.
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Cleopatra UK Bidco Limited
Registered number: 12361523
Company Balance Sheet
As at
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 18 to 43 form part of these financial statements.
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Cleopatra UK Bidco Limited
Consolidated Statement of Changes in Equity
For the Year Ended 31 December 2022
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Cleopatra UK Bidco Limited
Company Statement of Changes in Equity
For the Year Ended 31 December 2022
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Cleopatra UK Bidco Limited
Consolidated Statement of Cash Flows
For the Year Ended 31 December 2022
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Cleopatra UK Bidco Limited
Consolidated Statement of Cash Flows (continued)
For the Year Ended 31 December 2022
Consolidated Analysis of Net Debt
For the Year Ended 31 December 2022
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Cleopatra UK Bidco Limited is a Company limited by share capital and incorporated in England and Wales. The address of the registered office and principal place of business is Unit D3 Stanley Green Business Park, Commercial Avenue, Handforth, Cheadle, Cheshire, SK8 6QH.
The nature of the Company's operation and principal activity is that of a holding company. The Consolidated Financial Statements of the Company as at and for the period ended 31 December 2022 comprise the Company its subsidiaries (together referred to as the ''UK Group''). The principal activity of the UK Group is the wholesale and retail of hair-related products.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
Where subsidiaries are acquired by the company, the consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance Sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases. Where subsidiaries are acquired by way of a group reorganisation, from another group company, and the relevant conditions are met; the company uses the Merger Accounting method, for consolidation purposes.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
2.Accounting policies (continued)
The consolidated financial statements have been prepared on a going concern basis.
Group The Group is robust and has a strong financial position, with consolidated net assets totalling £43,361,114 at 31 December 2022 (2021 restated: £67,753,217) and cash totalling £9,394,681 (2021 restated: £8,852,139). The Group meets its working capital requirements through its cash balances and loans/funding from the wider Beauty Industry Group. Based on the Group's forecasts and projections, the directors believe the Group and Company has sufficient facilities to trade through the next twelve months. The directors believes it is appropriate, therefore, to prepare the consolidated financial statements for the period to 31 December 2022 on a going concern basis and the Group and Company will remain solvent in the twelve months after the date of approval of the financial statements. Company The Company has net current assets totalling £15,208,971 at 31 December 2022 (2021 restated: £15,287,801) and financial support has been confirmed by parent undertakings in the Beauty Industry Group to ensure that the Company is able to meet its liabilities as they fall due. The directors therefore consider it appropriate to prepare the financial statements on a going concern basis.
Functional and presentation currency
Transactions and balances
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
2.Accounting policies (continued)
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
2.Accounting policies (continued)
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
2.Accounting policies (continued)
Goodwill
Other intangible assets
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
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:
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 profit or loss.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
2.Accounting policies (continued)
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
2.Accounting policies (continued)
The Group has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other debtors, cash and bank balances, are initially measured at their transaction price (adjusted for transaction costs except in the initial measurement of financial assets that are subsequently measured at fair value through profit and loss) and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, 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.
Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other debtors due with the operating cycle fall into this category of financial instruments.
Other financial assets
Other financial assets, which includes investments in equity instruments which are not classified as subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the recognised transaction price. Such assets are subsequently measured at fair value with the changes in fair value being recognised in the profit or loss. Where other financial assets are not publicly traded, hence their fair value cannot be measured reliably, they are measured at cost less impairment.
Impairment of financial assets
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. 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.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
2.Accounting policies (continued)
If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after the deduction of all its liabilities.
Basic financial liabilities, which include trade and other creditors, bank loans, other loans and loans due to fellow group companies are initially measured at their transaction price (adjusting for transaction costs except in the initial measurement of financial liabilities that are subsequently measured at fair value through profit and loss). When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future payments discounted at a market rate of interest, discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade creditors are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade creditors are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade creditors are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Other financial instruments
Derivatives, including forward exchange contracts, futures contracts and interest rate swaps, are not classified as basic financial instruments. These are initially recognised at fair value on the date the derivative contract is entered into, with costs being charged to the profit or loss. They are subsequently measured at fair value with changes in the profit or loss.
Debt instruments that do not meet the conditions as set out in FRS 102 paragraph 11.9 are subsequently measured at fair value through the profit or loss. This recognition and measurement would also apply to financial instruments where the performance is evaluated on a fair value basis as with a documented risk management or investment strategy.
Derecognition of financial assets
Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Group transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Group will continue to recognise the value of the portion of the risks and rewards retained.
Derecognition of financial liabilities
Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Key sources of estimation uncertainty Provision for impairment loss on trade debtors Management exercises judgement in providing for impairment losses on trade debtors. Provisions are made for items when management do not consider them to be recoverable. At the year-end, trade debtors totalled £4,929,290 (2021 restated: £4,540,414). Provision for obsolete and slow moving stocks Management reviews the Group's stocks to assess loss on account of obsolescence on a regular basis. In determining whether provision for obsolescence should be recorded in profit or loss, the Group makes judgement as to whether there is any observable data indicating that there is any future saleability of the product and the estimated net realisable value for such product. Accordingly, provision for impairment is made where the net realisable value is less than the cost based on best estimates by management. Any provision for slow-moving stock is based on the ageing and historical sales pattern. At the reporting date, stocks held by the Group totalled £30,297,242 (2021 restated: £25,424,270). Goodwill Goodwill acquired on business combinations is capitalised on the consolidated balance sheet and amortised over its useful economic life or ten years, whichever is shorter. As highlighted in note 13, an impairment charge of £21,211,028 has been recognised in respect of goodwill arising on consolidation, following a review of the carrying value of a previously acquired subsidiary. The impairment reflects revised assumptions around future sales growth, cost inflation, and discount rates. The charge is non-cash and has no impact on the Group’s operations or financial covenants. At the year end, the carrying value of goodwill was £27,822,440 (2021: £64,796,052).
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Analysis of turnover by country of destination:
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 28
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 29
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 30
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
12.Taxation (continued)
Corporation tax main rates increased to 25% in the tax year commencing 1st April 2023 for companies whose
profits exceed £250k. A tapered rate was introduced for profits above £50k up to the £250k limit.
Management of Cleopatra UK Bidco Limited has determined that the Group is not within the scope of OECD’s Pillar Two Model Rules and the exception to the recognition and disclosure of information about deferred tax assets and liabilities related to Pillar Two income taxes is not applicable to the Group. The Group monitors its impact to the global minimum tax rules for when it comes into effect on a regular basis
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The loss after tax of the parent Company for the year was £
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
15.Intangible assets (continued)
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 34
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 35
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 36
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Net obligations under finance leases and hire purchase contracts are secured on the assets to which they relate.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 38
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Page 39
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
Share premium account
Foreign exchange reserve
Merger Reserve
Profit and loss account
Page 40
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
During the current financial year, the Group has processed several prior year adjustments to correct errors identified in the previously issued financial statements. These adjustments have been made in accordance with FRS 102 Section 10 Accounting Policies, Estimates and Errors, and the comparatives have been restated accordingly. A summary of the adjustments is as follows:
Restatement of Subsidiary Trial Balance It was identified after the finalisation of the prior year financial statements that certain adjustments included in the trial balance of a subsidiary were not appropriate under FRS 102. The impact of correcting these misstatements is as follows:
Administrative expenses were understated by £1,577,037, of which £1,537,013 related to the amortisation of goodwill.
Goodwill was understated by £11,768,106.
Debtors were overstated by £2,392,147.
Creditors were understated by £12,575,625.
Deferred tax liabilities were understated by £141,323.
The foreign exchange reserve movement was understated by £102,017.
Correction of Deferred Tax Liability A deferred tax liability of £1,642,600 was incorrectly recognised in a prior year in respect of an overseas subsidiary. This liability did not meet the recognition criteria under FRS 102 and has therefore been reversed in the restated financial statements. Overstatement of Stock on Acquisition An error was identified in the fair value assessment of stock recognised on the acquisition of a subsidiary in a prior period. The stock had been overstated by £1,190,769. Consequently, goodwill had been understated by the same amount. An additional amortisation charge of £78,694, which was not previously recorded, has also been recognised as part of this correction. Reclassification of Intercompany Receivable A cost of investment amounting to £33,497,450 had been incorrectly recorded as an intercompany receivable in the parent company's accounts. This has now been reclassified appropriately as an investment. This adjustment has no impact on the Group's consolidated profit or net assets. Net Impact of Adjustments The cumulative effect of the above adjustments on the prior year comparatives is:
An decrease of opening reserves as at 1 January 2021 of £176,144.
An increase in the Group loss for the year of £1,655,731.
An increase of the movement on foreign exchange reserve of £102,017.
A decrease in the Group's overall net assets as at the balance sheet date of £1,729,858.
Page 41
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
“During previous periods, Cleopatra UK Bidco Limited granted three charges in favour of Owl Rock Capital Corporation (as Collateral Agent):
∙23 November 2021: A debenture creating fixed and floating charges over all the property or undertaking of the company.
∙7 March 2022: Fixed charges over two registered trademarks:
- “Beauty Works Luxury Hair Extensions & Hair Accessories” (US Registration No. 4633519)
- “Beauty Works” (Canadian Registration No. TMA898554) These charges secure obligations under a group financing arrangement. The total debt allocated under this group financing arrangement is $175.2 million.
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £356,043 (2021: £112,737). Contributions totalling £19,041 (2021: £45,869) were payable to the fund at the balance sheet date and are included in creditors.
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Cleopatra UK Bidco Limited
Notes to the Financial Statements
For the Year Ended 31 December 2022
The Company's immediate parent company is BIG ROW Holdco (Cayman) LLC, a company incorporated in the Cayman Islands. The Company's ultimate parent is L Catterton Funds, a company registered in the United States of America.
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