The directors present the strategic report for the period ended 26 December 2025.
Fun Brands Group (“the Company”) is the parent of Tootonic Limited, the largest independent retailer of character clothing in the UK. Trading as ‘Character.com’; the Group delivers high quality, great value and fashionable licensed character clothing and related products.
The Group operates primarily as an ecommerce business and, since Autumn 2023, has been developing a physical retail presence.
During the period, the Group generated turnover of £53.9 million, compared with £55.5 million in the prior period. Gross profit was £32.7 million (prior to an exceptional stock write down), representing a gross margin of approximately 61%, compared with 64% in 2024. The year on year reduction was driven by the Group taking action to reduce its stock holding in the final quarter of 2025.
Both revenue and profitability were impacted by continued global economic uncertainty, with profitability further impacted by the Group’s early stage investment in its store portfolio.
A comprehensive review of the Group’s historic stock and underperforming products was undertaken, resulting in an exceptional provision of £4.5m.
Economic and Market Conditions
The Group continues to operate in an environment affected by inflationary pressures, changes in consumer spending and global geo-political and economic uncertainty. These factors may affect both the level of consumer demand and the Group's operating costs.
The Group seeks to mitigate these risks through its diversified routes to market, offering a broad range of products at competitive prices and maintaining a strong focus on customer service. Management continues to monitor consumer demand, pricing and costs closely and regularly reviews expenditure to identify opportunities for efficiencies and cost savings.
Currency Risk
The Group is exposed to foreign exchange risk through its international trading activities and purchases from overseas suppliers.
The Group uses a third-party provider to facilitate foreign currency transactions and continues to monitor foreign exchange markets and its exposure to currency movements.
Throughout the period, the Group focused on maintaining and developing its market position while managing the pressures arising from the wider economic environment.
The Group continued to focus on maintaining healthy margins, managing its Cost of Doing Business (“CODB”) and maintaining effective control over operating costs.
Investment has continued in the Group's retail presence and its ecommerce operations, with the objective of supporting longer-term growth, strengthening the Character.com brand and broadening the Group's routes to market.
The Group also continues to develop its international customer base and product offering, while maintaining a focus on customer experience, product quality and operational efficiency.
The Group's principal financial KPI is gross margin, which was approximately 61% for the period ended 26 December 2025, compared with 64% in the prior period, prior to exceptional stock write down.
Other key indicators considered by management include turnover, gross profit, operating profit and cash generation. Turnover for the period was £53.9 million (2024: £55.5 million), with gross profit of £32.7 million (2024: £35.2 million), prior to exceptional stock write down.
Section 172(1) Statement
In accordance with Section 172 of the Companies Act 2006, the Directors continue to promote the success of the Group for the benefit of its stakeholders. In doing so, the Directors have regard to:
the long-term viability and sustainability of the business when making strategic and operational decisions;
maintaining close and constructive relationships with suppliers and customers;
keeping employees informed of business developments and maintaining effective communication throughout the organisation;
providing a high-quality customer experience across both online and physical retail channels, including a broad product range, competitive pricing and efficient delivery;
regularly reviewing the Company's financial and operational performance to ensure that the business remains appropriately positioned to meet its obligations and achieve its strategic objectives;
maintaining appropriate oversight of the Company's investment and growth plans.
Environmental, Social and Governance (ESG) Report
Character.com
Financial Year Ending December 2025
At Character.com, we are committed to building a more sustainable and responsible future. Our efforts focus on improving product quality, supporting ethical supply chains, and reducing our environmental footprint. Throughout 2025, we made meaningful progress in our ESG journey by advancing key initiatives, launching impactful products, and laying the groundwork for deeper engagement and accountability in 2026.
CLOTHES MADE SMARTER
Ethical Sourcing and Material Use
Sustainable Cotton Sourcing:
Having significantly expanded our use of responsibly sourced cotton in 2024 a large proportion of our cotton products are made using either organic cotton or cotton sourced through more sustainable farming practices. Our long-term target remains: 80% of our cotton products to be sustainably sourced by 2030—supporting better farming practices, improved livelihoods, and reduced environmental impact.
Traceability and Transparency:
We are committed to maintaining transparency and ethical sourcing standards and continue to improve traceability across our cotton supply chain.
Sustainable Packaging
Packaging Materials:
All new product packaging is a blend of 30% recycled plastic, which has reduced our reliance on virgin materials. We also minimise the use of insert cards across our packaging range to help minimise overall material usage and waste.
FSC-certified Paper Products:
All swing tags and packaging are now made from FSC-certified materials, ensuring that all paper components are responsibly sourced from managed forests or recycled content. This aligns with our broader goal of ensuring sustainable sourcing across all packaging formats.
Product Innovations
Charity Partnerships:
Throughout 2025, Character.com continued to support charities and community organisations through the donation of product samples and clothing, providing practical support to families and communities.
Our charitable giving has supported a range of local and national organisations, including Wales Air Ambulance, Swansea Family Centres and Swansea-based children’s autism organisations. At a national level, we also supported Lightfund Charity through event support and donations, as well as Hospital Pyjamas and Sharewear Charity through product donations.
These initiatives enable us to use our products and resources to support organisations that are making a positive difference to children, families and communities.
GOVERNANCE
Ethical Standards and Compliance
SEDEX Membership:
Character.com remains fully registered with SEDEX, reflecting our commitment to high standards in labour rights, environmental management, and ethical business practices. Regular audits and supplier assessments ensure we meet and uphold these standards.
Supplier Code of Conduct:
All our suppliers are required to adhere to our comprehensive Supplier Code of Conduct, which sets clear expectations around fair labour, environmental responsibility, and ethical business behaviour. We continue to monitor compliance through regular evaluations and third-party audits.
Governance Oversight
Our ESG strategy remains a strategic priority for the Board. While overall responsibility lies with the CEO, day-to-day implementation and operational integration are driven by our directors and senior management team. This leadership structure ensures accountability and continuous improvement across our ESG agenda.
Looking Ahead
In 2026 and beyond, Character.com will continue to innovate and lead with purpose. Building on the solid foundations laid, we aim to deepen our impact in sustainability, inclusivity, and ethical business practices.
On behalf of the board
The directors present their annual report and financial statements for the period ended 26 December 2025.
The results for the period are set out on page 11.
Ordinary dividends were paid amounting to £500,000. The directors do not recommend payment of a further dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
The Group continues to focus on combating economic and inflationary pressures and supply chain disruption, whilst continuing to develop an international footprint and routes to market, including its diversification strategy into bricks and mortar and opening further retail stores.
bk plus Audit Limited were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Streamlined Energy & Carbon Report
The Group in line with the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report Regulations 2018 the energy use and greenhouse gas (GHG) emissions are set out below for the period ending 26 December 2025.
Breakdown of energy consumption (kWh) | 2025 | 2024 |
Gas (scope 1) | 9,519 | 15,330 |
Electricity (scope 2) | 223,266 | 168,067 |
Grey Fleet Vehicles (scope 3) | 8,427 | 6,275 |
Total | 241,212 | 189,672 |
|
|
|
Breakdown of emissions associated with the reported energy use (tCO2e) | 2025 | 2024 |
Scope 1 - Emissions from combustion of natural gas | 2 | 3 |
Scope 2 - Emissions from electricity | 40 | 34 |
Scope 3 – Emissions from employee owned vehicles where company purchases the fuel | 2 | 2 |
Total gross tCO2e | 44 | 39 |
United Kingdom company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have elected to prepare the group and parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company, and of the profit or loss of the group for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and parent company, and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and parent company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of Fun Brands Group Ltd (the 'parent company') and its subsidiaries (the 'group') for the period ended 26 December 2025 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, 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
Conclusions relating to going concern
Other information
Opinions on other matters prescribed by the Companies Act 2006
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 group's and 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 group or parent company or to cease operations, or have no realistic alternative but to do so.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
Results of our enquiries of management about their own identification and assessment of the risks of irregularities;
The nature of the industry and sector, control environment and business performance;
Any matters we identified having obtained and reviewed the company’s policies and procedures relating to:
Identifying, evaluation and complying with laws and regulations and whether they were aware of any instances of noncompliance;
Detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
The internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
The matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in revenue recognition. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act and local tax legislation.
Audit response to risks identified
Our procedures to respond to risks identified included the following:
Enquiry of management around potential litigation and claims.
Enquiry of entity staff to identify any instances of non-compliance with laws and regulations.
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud.
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness; and assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
Our audit testing typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
We also communicated relevant laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or noncompliance with laws and regulations throughout the 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 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 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 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 profit for the period was £500,000 (2024 - £500,000 profit).
Fun Brands Group Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Unit 5, Celtic Trade Park, Bruce Road, Swansea, SA5 4EP.
The group consists of Fun Brands Group Ltd 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. 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 Fun Brands Group Ltd 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 26 December 2025. 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.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the directors have a reasonable expectation that the group and parent company have 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.
Revenue comprises sales of goods or services provided to customers net of value added tax and other sales taxes, less an appropriate deduction for actual and expected returns and discounts. Revenue is recognised when performance obligations are satisfied and the control of goods or services is transferred to the buyer. Where the performance obligation is satisfied over time, revenue is recognised in accordance with its progress towards complete satisfaction of that performance obligation.
When cash inflows are deferred and represent a financing arrangement, the promised consideration is adjusted for the effects of the time value of money, which is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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 profit and loss account.
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, associates and jointly controlled entities 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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 balance sheet 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 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, 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 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 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 profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The 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 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.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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.
The right-of-use asset is initially measured at cost, which comprises the initial measurement of the lease liability adjusted for lease payments made at or before the commencement date less any lease incentives or grants received, plus initial direct costs and an estimate of the cost of obligations to dismantle, remove or restore the underlying asset and the site on which it is located.
The right-of-use asset is subsequently adjusted for remeasurements of the lease liability and applies the relevant cost model, fair value model or revaluation model as set out within the accounting policies for the applicable asset class. Where the cost model is applied, the asset is depreciated from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term, and is periodically reduced by impairment losses, if any.
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.
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.
Management estimate the useful life of non- current assets based on the period over which the asset is expected to be used and provide for depreciation accordingly. Where an indication of impairment is identified, the estimation of recoverable value requires estimation.
Management exercises critical judgement in determining whether the criteria for recognising an expense has been met prior to receiving the supplier invoice. This involved assessing the point at which goods are delivered or services are substantially performed based on operational data and contract milestones. Judgement is applied at each reporting period to identify these obligations.
The valuation of inventory requires the directors to exercise significant judgement in assessing the recoverability of stock carrying values. The Group holds a diverse range of inventory items and, in determining the appropriate level of provisioning, the directors consider expected future sales demand, anticipated selling prices, stock ageing profiles, historical sales performance and estimated costs to sell.
Significant judgement is required in assessing the net realisable value of slow-moving, excess and obsolete inventory, particularly where future sales are dependent upon promotional activity or discounted selling prices. Changes in these assumptions could have a material impact on the inventory provision recognised and the carrying value of stock included within the financial statements.
Based on the information available at the reporting date, the directors consider the inventory provision recognised to be appropriate and the carrying value of inventory to be recoverable.
In the opinion of the directors, the disclosure of turnover by geographical location would be seriously prejudicial to the interests of the group and therefore this information has not been disclosed.
During the year, the Group undertook a comprehensive review of its inventory valuation methodology and recognised a stock provision of £4.5m in respect of slow-moving, excess and obsolete inventory. The provision reflects management's assessment of the amount by which the carrying value of certain inventory exceeds its estimated net realisable value.
The charge is considered exceptional due to its materiality and the non-recurring nature of the review that gave rise to the provision. Accordingly, the expense has been separately disclosed as an exceptional item within cost of sales to assist users' understanding of the financial performance for the year.
The provision was determined using historical sales data, inventory ageing information and expected future selling prices, together with any costs required to complete and sell the inventory.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2024 - 2).
The actual (credit)/charge for the period can be reconciled to the expected (credit)/charge for the period based on the profit or loss and the standard rate of tax as follows:
The carrying value of land and buildings comprises:
Included within tangible fixed assets are right-of-use assets, as follows:
Land and
buildings
£
Net carrying value at 27 December 2024 1,339,825
Additions 1,286,233
Depreciation charge (461,611)
Net carrying value at 26 December 2025 2,164,447
Details of the company's subsidiaries at 26 December 2025 are as follows:
Registered office addresses (all UK unless otherwise indicated):
Included within stock is a provision for £4,506,663 (2024: £nil) for obsolescent stock.
During the year, the Group recognised a provision against certain inventory items where the estimated net realisable value was lower than cost. The provision reflects management's assessment of the amounts expected to be recovered through the future sale of inventory, taking into account anticipated selling prices and costs necessary to make the sale.
The recognition of this provision has not been treated as a prior year adjustment. At the previous reporting date, management was not aware of information indicating that certain inventory items would ultimately be sold at values below their carrying amount.
Accordingly, the provision arises from new information and circumstances identified during the current financial year and represents a change in estimates and assumptions used in determining the net realisable value of inventory, rather than the correction of an error in previously issued financial statements. The prior year figures have therefore not been restated.
Management continues to monitor inventory performance and market conditions and will update the provision as necessary to ensure inventories are stated at the lower of cost and estimated selling price less costs to complete and sell.
The HSBC loan is a working capital facility. The loan is secured by by a cross guarantee and debenture between Fun Brands Limited and Harry Bear Limited, a debenture and a limited guarantee. The trade loan account has an approved ceiling of £7,000,000 whereby individual drawdowns carry flexible periods. The current drawdown balance is £6,607,542. Capex bank loans are secured by debenture including fixed charge over all present freehold and leasehold property. Interest rates on the loans vary between 5.5% to 6%.
Finance lease payments represent rentals payable by the group for properties. Leases are on fixed base rents, with variable payments within turnover rent agreements.
The following are the major deferred tax liabilities and assets recognised by the group and company:
The deferred tax liability of £453,038 set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
A deferred tax asset of £1,536,304 has been recognised in respect of trading losses. Management has assessed that it it probable (more likely than not) that sufficient future taxable profits will be generated against which these losses can be utilised. The unused tax losses carry no expiry date.
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.
Subsequent to the year end, the Company completed the formalisation of arrangements relating to historic tax liabilities arising in a subsidiary undertaking in respect of pre-acquisition periods. Under the terms of the share purchase agreement, the former shareholders funded the Group for amounts payable in respect of these liabilities under a tax warranty.
During the period following the balance sheet date, the Company issued deferred equity shares with a value of £627,054 to the former shareholders. This represents the net amount funded by the former shareholders in respect of historic VAT and customs duty liabilities, after taking account of corporation tax recoveries received by the Group. The issue of deferred equity shares settled the corresponding liability previously recognised as unissued share capital.
The directors have assessed this event as a non-adjusting post balance sheet event as it relates to the settlement and legal formalisation of obligations existing at the reporting date. Accordingly, no adjustment has been made to the amounts recognised in these financial statements, other than the disclosure set out above.
Furthermore, following the reporting date, the Group received an investor loan of £1.7 million. The funds provide additional liquidity and support the Group's operational and funding requirements. While the loan was not in place at the reporting date and is therefore treated as a non-adjusting event, the directors have considered its receipt when assessing the Group's future cash flow requirements and financial resilience.