TIDMBAR

RNS Number : 2159A

Brand Architekts Group PLC

28 September 2020

Brand Architekts Group plc

("Brand Architekts" or the "Group")

Final Results

Brand Architekts Group plc announces its final results for the 52 weeks ended 27 June 2020.

Overview of Results:

 
                                             Group            Continuing Operations 
                                       2020        2019         2020         2019 
                                    ----------  ----------  ------------  ---------- 
  Revenue                            GBP23.7m    GBP77.3m    GBP16.3m      GBP19.7m 
                                    ----------  ----------  ------------  ---------- 
  Underlying operating (loss)        GBP(0.8)m   GBP4.4m     GBP0.1m       GBP2.4m 
   / profit (1) 
                                    ----------  ----------  ------------  ---------- 
  (Loss) / Profit before taxation    GBP2.2m     GBP4.1m     GBP(4.3)m     GBP1.8m 
                                    ----------  ----------  ------------  ---------- 
  EPS                                 12.9p       20.7p 
                                    ----------  ----------  ------------  ---------- 
 Net cash / (debt)                   GBP18.0m    GBP(7.2)m 
                                    ----------  ----------  ------------  ---------- 
 

(1) Underlying operating profit is calculated before exceptional items, share based payments, and amortisation of acquisition-related intangibles

Financial headlines:

-- Revenues for the 52 weeks of GBP16.3m (excluding sales from discontinued operations), a decline of 17% on the prior year.

-- UK sales declined by 16%, driven by low consumer confidence and pressure within the retail environment, and the impact of store closures as a result of the outbreak of COVID-19.

-- International sales declined by 24% following the heavy impact of currency devaluation in Turkey, the effect of increased tariffs on cosmetic goods shipped from China to USA and the impact of COVID-19 across several of our markets.

-- Underlying Gross Profit Margin, excluding exceptional inventory provisions and write offs made at the year end of GBP2.5m, was 35.2%. Gross profit margin including these items declined to 19.6% (2019: 35.6%).

-- Continuing operations made an underlying operating profit of GBP0.1m, while the Group made an underlying operating loss of GBP0.8m (2019: underlying operating profit GBP4.4m).

   --    Group Profit before tax decreased to GBP2.2m (2019: profit before tax GBP4.1m). 
   --    Net cash position at the year ended June 2020 was GBP18.0m (2019: net debt GBP7.2m). 

Operational highlights:

-- Creation of a solely Owned Brands business following the disposal of the Contract Manufacturing Business for GBP35 million.

   --    Operational transition now complete. 
   --    Appointment of new Executive team to build scale and deliver further profitable growth. 
   --    Detailed review of operations undertaken including full review of brand portfolio. 

Quentin Higham, Chief Executive, commented:

"Since joining in May, I have been impressed with the depth of our product portfolio and the professionalism of the team, who have endured the most difficult of trading conditions with great resilience and determination. Following a detailed review of all operations, I believe we now have the right strategy to deliver sustainable, profitable growth over the coming years."

Roger McDowell, incoming Non-Executive Chairman, commented:

"Having already been involved with the business for a number of years as a Senior Independent Director, I am very excited to be working with the new management team. I have no doubt that we have the model and depth of resources to position us for success over the next few years.

I would like to thank Brendan Hynes for his stewardship, as he has overseen the transformation of the Group to a fully focused branded business with a very strong balance sheet.

I look forward to working with the rest of the Board as we seek to deliver growth organically, through transformational investment and focus on DTC (direct to consumer) and through targeted acquisitions."

 
 For further information please contact: 
 Brand Architekts plc 
                        ---------------------------------  --------------- 
 Roger McDowell          Incoming Non-Executive Chairman     via Alma 
  Quentin Higham          Chief Executive 
  Tom Carter              Chief Finance Officer 
                        ---------------------------------  --------------- 
 Shaun Dobson / Jen 
  Boorer                 N+1 Singer (Nomad)                  0207 496 3000 
                        ---------------------------------  --------------- 
 Josh Royston / Sam 
  Modlin                 Alma PR                             07780 901979 
                        ---------------------------------  --------------- 
 

CHAIRMAN'S STATEMENT

This financial year has been one of transformation for the Group, while presenting both opportunities and challenges in equal measure.

In August 2019 we concluded the disposal of our manufacturing business, leaving a company solely focused on owned-brands, and with a strong balance sheet. While this deal was transformational, it also required the business to go through a period of significant operational transition. We needed to recruit a fresh management team with the necessary experience and ambition to reflect this change of focus, and who could put in place their own strategic vision for delivering shareholder value.

While the search was underway, we were fortunate to be able to call on the experience of Chris How to act as Interim Chief Executive, and I would like to thank him for providing executive management continuity during this challenging period. Even so, the distractions of managing the sale and realigning our management structure inevitably impacted business performance during the reporting period.

With these issues now behind us, I am pleased to say that in Quentin Higham as CEO and Tom Carter as CFO, I am confident that we have the right team in place to develop and execute an exciting new strategic plan to deliver shareholder value for the business. They have identified and will build the right platform of systems and processes to drive the business forward.

This new executive team joined the business as we were starting to see the effects of the COVID-19 pandemic. This had an immediate effect on the buying habits of both consumers and retailers alike, presenting both risks and opportunities for the Group.

Performance review

The final quarter of the financial year was heavily impacted by COVID-19, with non-essential retailers closed during this period and International business effectively on hold.

As a result net sales for FY20 were GBP16.3m, (excluding sales from discontinued operations), a decline of 17% on the prior year. Sales in the first half were GBP10.6m, a decline of 15% when compared to H1 2019 (GBP12.5m). Sales in the second half of FY20 declined by 21%, to GBP5.7m (H2 2019: GBP7.2m).

Following the heavy impact of currency devaluation in Turkey and the effect of increased tariffs on cosmetic goods shipped from China to USA, international sales declined by 24%. Looking forward, should the tariffs be reversed, the Board believes that the Group is well placed to recover a large proportion of the affected USA business.

UK sales declined by 16%, despite encouraging volume growth across our three 'drive' brands, two of which were re-launched within the period. The decline was largely due to one significant customer, however, overall low consumer confidence and pressure within the retail environment has resulted in a reduction of both category space and the effectiveness of promotional activity.

Gross profit margin declined to 19.6% (2019: 35.6%). Underlying Gross Profit Margin, which excludes Gross Profit of GBP2.5m from exceptional inventory provisions and write offs made at the year end, was 35.2%. As part of the business transformation to focus on Owned Brands with a new management team, a number of decisions were taken to reshape the brand portfolio, triggering adjustments to these brands and related inventory. This includes brands being exited, de-listed, re-launches and clearance of older products which may have historically been sold through discount channels. These costs are one off as part of the business transformation, therefore margins are expected to normalise in FY20/21.

Profit before tax decreased to GBP2.2m (2019: profit before tax GBP4.1m). This included exceptional items of GBP3.5m comprising the profit made on the disposal of the manufacturing business of GBP8.9m offset with exceptional costs of GBP5.4m.

Impact of COVID-19

Clearly, the outbreak of COVID-19 in March presented us with a challenge that no business had experienced before. We took immediate steps to ensure the health and well-being of our employees, clients and suppliers and this still remains the top priority for the Group. I would like to thank all our employees for their tireless work and dedication throughout these challenging times.

Encouragingly, overall sales performance during H2 was stronger than the Board had anticipated. Even so, we weren't immune to the fluctuating demands of customers and end-consumers, and during the last quarter of FY20 the impact of the pandemic had a significant effect on the sales mix.

Our brands' performance within UK grocers showed single digit growth, while our online sales channels, whether through large e-tailers such as Amazon or our own branded websites, have delivered high double digit growth. As a result of the shift to online we stepped up promotional activity to capitalise on this route to market.

These gains did not offset the significant decline in other high street outlets, whose store traffic was impacted during lockdown. Additionally, several key international markets did not place orders during Q4 FY20 due to the closure of most general merchandise and department stores.

Unsurprisingly, sales of handcare products increased significantly and we were able to secure extra supply to support retailer demand. But it was also no surprise that sales of male haircare and shaving products saw a major decline.

Response to COVID-19

In order to mitigate the impact of COVID-19 on the business, the Group took a number of decisions to reduce operating costs and associated cash requirements. These included:

   --    a number of short-term reductions on our discretionary expenditure 
   --    a short-term suspension of rent payments for our offices in Teddington 
   --    steps to manage staff costs, including a hiring freeze across a number of vacant positions 

-- all Board directors agreeing to a 20% reduction in their respective salaries or fees (April-June).

However, the business took the decision not to participate in the furlough scheme, so that the team could focus on its response to consumer behaviour post COVID-19, and to plan for FY21.

Board changes

Over the period, and following the sale of our manufacturing business, we made a number of changes to the executive team and Board. We now believe that we have the team in place to build scale and deliver further profitable growth.

Quentin Higham became CEO, effective from 4 May 2020. Despite the difficulties of joining the business in the midst of lockdown, his deep industry experience and passion for brands has been evident from the outset. Quentin joined Brand Architekts from Yardley of London Ltd. where he had been Managing Director for 10 years. Previously he had been Marketing Director at Coty and was Head of UK Marketing at global cosmetics company Revlon.

On 22 June 2020 Tom Carter joined the Group as Chief Financial Officer. Tom brings strong financial and operational skills to the business and the Board believes he is the right person to steer Brand Architekts to the next stage in its development. Tom joined from Technetix Group Limited, a market-leading technology company, where he was Group Finance and Operations Director. Previously, he was Regional Business Controller at Alliance Boots, Financial Controller at Sky Media and Finance Manager at Procter & Gamble. Tom trained as a Chartered Accountant with PwC.

As announced on 14 July 2020, Chris How was appointed as a non-executive director with immediate effect. Chris was formerly the CEO of Swallowfield PLC (the previous name of the Group) and recently served as interim CEO of Brand Architekts. Chris brings continuity, detailed knowledge of the business and extensive, relevant sector experience. I have no doubt that he will provide sound counsel to Quentin and Tom.

After seven years in the role, as announced on 14 July 2020, I informed the Group of my intention to step down from the Board following the presentation of these financial results. With the Group now transformed into a strong, fully brands-focused, cash-positive business, and with a new executive team in place, I feel that now is the right time to step aside. I am proud of the work that we have done to transform the business and believe that it has never been better placed to build scale and drive growth.

Roger McDowell, the incumbent Senior Independent Director and Chair of the Remuneration Committee, will succeed me and take on the role of Non-Executive Chairman. Roger is an experienced Chairman and non-executive director, and his extensive knowledge of the business provides for a smooth and seamless transition.

Dividends

Following the sale of the manufacturing business and subsequent reorganisation, the Group has not delivered an operating profit this year. Accordingly, the Board will not be proposing a final dividend. The payment of the interim dividend was cancelled as a result of uncertainty following the coronavirus outbreak. The Group's dividend policy will be kept under review and further updates made as appropriate.

Outlook

As we enter the new financial year the difficult trading conditions remain and the impact on the high street in particular is uncertain. This is evidenced by the caution being shown by retailers for their forthcoming Christmas orders, where agreed volumes are down on last year both domestically and I internationally.

The impact of COVID-19 on our business has been significant, but we have responded well to these challenges. We now have in place a new management team, an experienced and committed workforce and a strong balance sheet with significant positive cash.

We are responding to structural changes in the market, by accelerating our strategy to develop and invest in online sales, further innovative NPD and a stronger focus on distribution in both the UK and internationally. There is still considerable work to be done on relaunching a number of underperforming brands; rationalising ranges & improving productivity. All of these plans are in place but given retailer range review dates, will not come to fruition until H2 this year.

Given the strength of our balance sheet, we also remain alert to further acquisition opportunities which offer the potential to build scale and deliver incremental shareholder value.

Given these uncertain conditions it would be inappropriate to provide guidance on the likely outcome for the year at this time. This will be kept under review and guidance will be provided when there is greater clarity.

Brendan Hynes

Non-Executive Chairman

CEO'S STATEMENT

It is a great pleasure to give you my first impressions of Brand Architekts, having taken up the reins as Chief Executive in May.

I can safely say it has been an induction like no other I've experienced: when I arrived the business had hunkered down due to COVID-19, against a sad backdrop of ghost-town high streets and rapidly changing retail habits. The lockdown also meant that getting together with my new colleagues was necessarily confined to Microsoft Teams.

However, it was instantly clear to me that I was inheriting a team that had become adept at making light work of challenges and changes. With unswerving dedication and passion, they had already embraced significant structural and management changes during this reporting year. They proceeded to address the pandemic, and its considerable business and logistical implications, with the same calm professionalism.

I'm also excited to be working with two fellow new recruits to the management team: Tom Carter (Chief Financial Officer) and Joanna Hutton (Commercial Director). We have already launched ambitious new growth plans, and across our business I'm entirely confident we have the talent, drive and portfolio to deliver them.

Initial findings

Brand Architekts is not in fact entirely new to me. I have worked in the beauty sector for nearly 30 years and was involved with BA brands such as Fish! and Real Shaving Company in previous roles.

One of my first tasks was to review how we are organised. Brand Architekts was only established in its current guise in August 2019 and there were transitional service agreements in place until the end of that calendar year. Much of my initial focus was therefore on making sure that we have the right structures and processes in place to give us the insight we need across all functions of the business.

Of course, one of the businesses key strengths is its portfolio of brands. Understanding the needs of retailers and delivering products to meet those needs has been the foundation of Brand Architekts' success and reflects the strength of relationships we enjoy. This is also a time when the breadth of our portfolio comes into its own: we cover both female beauty and male grooming products, and at different price points ranging from "masstige" to everyday accessible value. This should give us resilience as the true economic impact of the pandemic becomes increasingly felt. We are increasingly focused on productivity and rationalising underperforming SKUs and brands.

As we move into FY21 and beyond, I see immediate priorities in three specific areas:

-- Getting closer to our end-consumers' needs and wants. Just as we have forged strong relationships with customers, we need to do the same with consumers. Consumer habits change at pace and it is only by being hard-wired into those evolving needs that a brand can achieve its full potential. By complementing our team's knowledge of the marketplace with more deep-dive data analysis, we can improve and create more powerful, sustainable brands.

Pleasingly, our portfolio contains brands with considerable untapped potential. Once we have gained consumer insight, we will invest in these specific brands to accelerate market awareness, drive demand and achieve higher ROI. Even where certain brands do not merit extra investment, they can still be profitable and cash generative.

-- Strengthening our DTC channels. As I write, high street outlets are cautiously emerging from lockdown. While this is heartening to see, footfall is, and is expected to remain, depressed for the foreseeable future. COVID-19 has highlighted that we have a pressing need to build a robust direct-to-consumer (DTC) channel. We will invest the resources required and actively get closer to our consumer base.

-- Realise our full potential internationally. Although we already have a presence in 28 countries, there is much more we can do. The love of high quality, efficacious, yet affordable beauty products transcends borders and I will be drawing on my international experience to oversee this personally.

I am pleased to say that the sale of our manufacturing business in 2019 means we have the resources to make these investments happen. We also intend to supplement these organic initiatives with acquisitions which will strengthen our core competences, and/or address areas of weakness. It is always hard to predict a timeline for M&A activity, but we will approach opportunities selectively. The Board will be focused on the right deals - those that complement our strategy and generate good ROI - rather than quick deals.

With this combination of organic and acquisitive initiatives, I'm confident that within five years we will have created a company delivering GBP50m of annualised revenues. To this end we have launched "Project 50" internally, and we are united in believing that while this goal is ambitious, it is also eminently achievable. Project 50 will enable us to achieve scale and increase earnings, resulting in improved shareholder value.

This Project 50 plan allows for the challenging retail conditions we are witnessing now and the uncertainty around when they might improve. In FY21, the year ahead will be one of consolidation for Brand Architekts as we finalise the platform, the products and the routes to market that will drive this business forward.

Quentin Higham

Chief Executive Officer

FINANCIAL REVIEW

Key Performance Indicators

To measure and monitor our progress against our growth strategy, we track our performance against a set of ambitious targets and milestones. The goals we set are closely assessed to ensure we focus our efforts to deliver both in the short term and long term. A summary of the financial measures used are:

 
                                       2020         2019 
-----------------------------------   -----------  ---------- 
 Reported Results from continuing 
  operations 
                                      -----------  ---------- 
  Revenue (note 5)                     GBP16.3m     GBP19.7m 
                                      -----------  ---------- 
  Underlying operating profit          GBP0.1m      GBP2.4m 
   (1) 
                                      -----------  ---------- 
  (Loss) / Profit before taxation      GBP(4.3)m    GBP1.8m 
                                      -----------  ---------- 
 
  Reported Results from continuing 
   and discontinued operations 
                                      -----------  ---------- 
  Revenue (note 5)                     GBP23.7m     GBP77.3m 
                                      -----------  ---------- 
  Underlying operating (loss)          GBP(0.8)m    GBP4.4m 
   / profit (1) 
                                      -----------  ---------- 
  Profit before taxation               GBP2.2m      GBP4.1m 
                                      -----------  ---------- 
  Basic earnings per share              GBP12.9p    20.7p 
                                       ----------  ---------- 
  Net cash / (debt)                     GBP18.0m    GBP(7.2)m 
                                       ----------  ---------- 
 

(1) Underlying operating profit is calculated before exceptional items, share based payments, and amortisation of acquisition-related intangibles

A reconciliation of underlying operating profit to profit before taxation is shown below:

 
                             2020         2020           2020      2019         2019           2019 
-------------------------   -----------  -------------  --------  -----------  -------------  ------ 
                             Continuing   Discontinued    Total    Continuing   Discontinued   Total 
 Underlying 
  (loss) / 
  profit from 
  operations                    121          (909)        (788)      2,355         2,073       4,428 
                            -----------  -------------  --------  -----------  ------------- 
 Exceptional 
  Cost of 
  Sales                       (2,535)                    (2,535) 
 Amortisation 
  of acquisition-related 
  intangibles                  (260)                      (260)      (260)                     (260) 
 Charge for 
  share-based 
  payments                      (4)            -           (4)       (115)                     (115) 
 Adjusted 
  Operating 
  (loss) / 
  profit                      (2,678)        (909)       (3,587)     1,980         2,073       4,053 
                            -----------  -------------  --------  -----------  ------------- 
 Net finance 
  (costs) 
  / income                     (224)          (23)        (246)      (144)          901         757 
-------------------------- 
 Adjusted 
  (loss) / 
  profit before 
  taxation                    (2,902)        (931)       (3,833)     1,836         2,974       4,810 
 Other exceptional 
  items                       (1,444)        7,460        6,016       (48)         (669)       (717) 
 (Loss) / 
  profit before 
  taxation                    (4,346)        6,529        2,183      1,788         2,305       4,093 
                            -----------  -------------  --------  -----------  ------------- 
 

The Group implements a number of non-statutory measures which are summarised in the tables above and in more detail within the segmental Income Statement (note 5). These measures are used to illustrate the impact of non-recurring and non-trading items on the Group's financial results.

In addition to the financial key performance measures, a range of operational non-financial key performance indicators are also monitored at a management level covering, amongst others, new product development and innovation. The Board receives an overview of these as part of its board management report.

Group statutory revenue at GBP16.3m from continuing operations was down 17% against prior year, adversely impacted by the continued decline in consumer confidence and retailer pressures, coupled with international pressures following the currency devaluation in Turkey and increased US tariffs from goods shipped from China and also the impact of COVID-19 in the last quarter of the financial year.

The gross profit margin declined to 19.6% (2019: 35.6%). This decline is driven by exceptional adjustments as discussed in the Chairman's statement. Adjusting for these items Underlying Gross Profit margin was 35.2%. As these are one off costs, margins are expected to normalise in 2021.

Continuing operations made an underlying operating profit of GBP0.1m, while the Group made an underlying operating loss of GBP0.8m (2019: underlying operating profit GBP4.4m). Underlying operating profit is shown before amortisation of intangibles, exceptional costs and charges for share-based payments. Share options are put in place in order to incentivise the Group's wider management team (including the Executive Directors) and to ensure that their interests are aligned with shareholders. At the year-end, all previous executive share option schemes had been settled in full. At the reporting date, new schemes are in the process of being implemented.

The Group made a Profit Before Tax of GBP2.2m including other exceptional items of GBP3.5m made from the disposal of the manufacturing business of GBP8.9m offset with exceptional costs of GBP5.4m.

The effective tax rate for the period was negative 1% (2019: positive 11.1%) of pre-tax profits. The effective rate is below the statutory rate of 19% mainly due to the impact of the untaxable profit on disposal of the manufacturing division, losses carried back to previous period and the non recognition of deferred tax assets in relation to taxable losses carried forward. The current year tax charge reflects standard UK rates of taxation.

Net debt and cash flow

The Group has moved from a net debt to a net cash position primarily as a result of the net proceeds from the disposal of the manufacturing business in August 2019. The Group's net cash position at the year ended June 2020 was GBP18.0m (2019: net debt GBP7.2m). Following the disposal of the manufacturing business, the majority of the Group's trading was in GBP. Note 10 provides an analysis of net cash.

Financing costs of GBP0.3m (2019: GBP0.4m) comprised interest expense of GBP0.1m (2019: GBP0.26m) plus a pension plan notional finance charge of GBP0.2m (2019: charge GBP0.13m). Finance income in the year is interest received on cash deposits. Finance income in the prior year was the receipt of GBP1.15m income from the investment holding in Shanghai Colour Cosmetics Technology Company Limited (which was disposed of as part of the sale of the manufacturing business).

Capital expenditure in the year was limited to the design and implementation of a new ERP system (GBP0.1m), plus purchases of laptops and fixtures and fittings for the office (GBP0.03m).

Defined benefit pension plan

The defined benefit pension plan underwent its last triennial valuation on 5 April 2017. The deficit on a statutory funding basis was GBP2.6m and the Group entered into a revised deficit recovery plan and schedule of contributions in July 2018. Under this there is a commitment to make deficit reduction payments of GBP318k per annum for seven years and GBP210k for a further three years, and to pay certain administration costs and the PPF levy for the life of the plan. This commitment will be re-assessed and is likely to be increased once the results of the next triennial valuation at 5 April 2020 are available. At the reporting date, the April 2020 valuation is still in progress.

Accounting Standards require the discount rate used for valuations under IAS19 'employee benefits' to be based on yields on high quality (usually AA-rated) corporate bonds of appropriate currency, taking into account the term of the relevant pension plan's liabilities. Corporate bond indices are used as a proxy to determine the discount rate. At the reporting date, the yields on bonds of all types were lower than they were at 29 June 2019. This has resulted in lower discount rates being adopted for accounting purposes compared to last year. This has materially increased the fair value of the plan liabilities as measured under IAS 19, which combined with the anticipated investment return performance, has translated into an increased liability under the IAS19 methodology. For accounting purposes at 27 June 2020, the Group recognised under IAS19 'employee benefits', a net liability of GBP13.2m (2019: GBP9.4m).

Going Concern

As part of its normal business practice, the Group prepares annual and longer-term plans and, in reviewing this information the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. The Group has significant cash reserves of GBP21.2m following the sale of the manufacturing business. Accordingly, we continue to adopt the going concern basis in preparing the annual report and accounts.

Group Statement of Comprehensive Income

For the 52 weeks ended 27 June 2020 and 52 weeks ended 29 June 2019

 
                                                                                    2020       2019 
                                                                        Notes    GBP'000    GBP'000 
 Revenue                                                                    5     16,250     19,676 
 Cost of sales (including Exceptional costs)                                6   (13,069)   (12,680) 
---------------------------------------------------------------------  ------  ---------  --------- 
 Gross profit                                                                      3,181      6,996 
 Commercial and administrative costs                                             (5,859)    (5,016) 
---------------------------------------------------------------------  ------  ---------  --------- 
 Operating (loss) / profit before other exceptional items                        (2,678)      1,980 
 Exceptional items                                                          6    (1,444)       (48) 
---------------------------------------------------------------------  ------  ---------  --------- 
 Operating (loss) / profit                                                       (4,122)      1,932 
---------------------------------------------------------------------  ------  ---------  --------- 
 Finance income                                                                       77          - 
 Finance expense                                                                   (301)      (144) 
---------------------------------------------------------------------  ------  ---------  --------- 
 (Loss) / Profit before taxation                                            7    (4,346)      1,788 
 Taxation                                                                   8         55      (198) 
---------------------------------------------------------------------  ------  ---------  --------- 
 (Loss) / Profit for the year                                                    (4,291)      1,590 
---------------------------------------------------------------------  ------  ---------  --------- 
 Profit on Discontinued Operations after taxation                          11      6,529      2,050 
---------------------------------------------------------------------  ------  ---------  --------- 
 Profit for the year                                                               2,238      3,640 
=====================================================================  ======  =========  ========= 
 
   Other comprehensive income/(loss): 
 Items that will not be reclassified subsequently to profit or loss: 
 Re-measurement of defined benefit liability                                     (4,086)    (4,011) 
 Items that will be reclassified subsequently to profit or loss: 
 Exchange differences on translating foreign operations                             (49)       (35) 
 Loss on financial assets held at fair value                                           -        (6) 
 Other comprehensive loss for the year                                           (4,135)    (4,052) 
---------------------------------------------------------------------  ------  ---------  --------- 
 Total comprehensive loss for the year                                           (1,897)      (412) 
=====================================================================  ======  =========  ========= 
 
 Profit attributable to: 
---------------------------------------------------------------------  ------  ---------  --------- 
 Equity shareholders                                                               2,217      3,539 
---------------------------------------------------------------------  ------  ---------  --------- 
 Non-controlling interests                                                            21        101 
 
 Total comprehensive (loss) / income attributable to: 
---------------------------------------------------------------------  ------  ---------  --------- 
 Equity shareholders                                                             (1,918)      (513) 
---------------------------------------------------------------------  ------  ---------  --------- 
 Non-controlling interests                                                            21        101 
 
 
 Earnings per share 
 - basic                                                                    9      12.9p      20.7p 
 - diluted                                                                  9      12.9p      20.0p 
 
 Dividends 
 Paid in year (GBP'000)                                                              745      1,088 
 Paid in year (pence per share)                                                    4.35p      6.35p 
 Proposed (GBP'000)                                                                  Nil        745 
 Proposed (pence per share)                                                          Nil      4.35p 
 

Group Statement of Financial Position

For the 52 weeks ended 27 June 2020, and 52 weeks ended 29 June 2019

 
                                                                            2020      2019 
                                                                Notes    GBP'000   GBP'000 
 ASSETS 
 Non-current assets 
 Property, plant and equipment including right of use assets                 142        21 
 Intangible assets                                                        11,714    12,817 
 Deferred tax assets                                                       2,515     1,714 
 Total non-current assets                                                 14,371    14,552 
 Current assets 
 Inventories                                                               3,724     5,211 
 Trade and other receivables                                               3,969     3,475 
 Assets held for resale                                            11          -    22,700 
 Cash and cash equivalents                                                21,240       381 
 Current tax receivable                                                      836       285 
-------------------------------------------------------------  ------  ---------  -------- 
 Total current assets                                                     29,769    32,052 
-------------------------------------------------------------  ------  ---------  -------- 
 Total assets                                                             44,140    46,604 
-------------------------------------------------------------  ------  ---------  -------- 
 
 LIABILITIES 
 Current liabilities 
 Trade and other payables                                                  4,503     6,628 
 Interest-bearing loans and borrowings                                     1,029     1,139 
 Current tax payable                                                           -       527 
-------------------------------------------------------------  ------  ---------  -------- 
 Total current liabilities                                                 5,532     8,294 
-------------------------------------------------------------  ------  ---------  -------- 
 Non-current liabilities 
 Interest-bearing loans and borrowings                                     1,066     2,091 
 Post-retirement benefit obligations                                      13,237     9,417 
 Lease liabilities                                                            81         - 
 Deferred tax liabilities                                                  1,154     1,061 
 Total non-current liabilities                                            15,538    12,569 
-------------------------------------------------------------  ------  ---------  -------- 
 Total liabilities                                                        21,070    20,863 
-------------------------------------------------------------  ------  ---------  -------- 
 Net assets                                                               23,070    25,741 
-------------------------------------------------------------  ------  ---------  -------- 
 
 EQUITY 
 Share capital                                                               862       857 
 Share premium                                                            11,987    11,987 
 Revaluation of investment reserve                                             -     1,241 
 Exchange reserve                                                              -     (147) 
 Pension re-measurement reserve                                         (10,588)   (6,502) 
 Retained earnings                                                        20,711    18,160 
-------------------------------------------------------------  ------  ---------  -------- 
 Equity attributable to holders of the parent                             22,972    25,596 
-------------------------------------------------------------  ------  ---------  -------- 
 Non-controlling interest                                                     98       145 
-------------------------------------------------------------  ------  ---------  -------- 
 Total equity                                                             23,070    25,741 
-------------------------------------------------------------  ------  ---------  -------- 
 

Group Statement of Changes in Equity

For the 52 weeks ending 27 June 2020 and 52 weeks ending 29 June 2019

 
                      Share     Share   Revaluation   Exchange          Pension   Retained   Non-controlling     Total 
                    Capital   Premium       of         Reserve   re-measurement   Earnings          interest    Equity 
                                        investment                      reserve 
                                          reserve 
 Group              GBP'000   GBP'000       GBP'000    GBP'000          GBP'000    GBP'000           GBP'000   GBP'000 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Balance as at 
  June 2019             857    11,987         1,241      (147)          (6,502)     18,160               145    25,741 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Dividends                -         -             -          -                -      (745)              (68)     (813) 
 Issue of new 
  shares                  5         -             -          -                -          -                 -         5 
 Non-controlling 
  interest                -         -             -          -                -          -                21        21 
 Share based 
  payments 
  (credit)                -         -             -          -                -      (162)                 -     (162) 
 Realisation of 
  exchange 
  differences on 
  sale of 
  subsidiary              -         -             -        196                -          -                 -       196 
 Transactions 
  with owners             5         -             -        196                -      (907)              (47)     (753) 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Profit for the 
  year                    -         -             -          -                -      2,217                 -     2,217 
 Other 
 comprehensive 
 income: 
 Re-measurement 
  of defined 
  benefit 
  liability               -         -             -          -          (4,086)          -                 -   (4,086) 
 Exchange 
  difference on 
  translating 
  foreign 
  operations              -         -             -       (49)                -          -                 -      (49) 
 Realised profit 
  on asset sold           -         -       (1,241)          -                -      1,241                 -         - 
 Total 
  comprehensive 
  income for the 
  year                    -         -       (1,241)       (49)          (4,086)      3,458                 -   (1,918) 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Balance as at 
  June 2020             862    11,987             -          -         (10,588)     20,711                98    23,070 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 
 
                      Share     Share   Revaluation   Exchange          Pension   Retained   Non-controlling     Total 
                    Capital   Premium       of         Reserve   re-measurement   Earnings          interest    Equity 
                                        investment                      reserve 
                                          reserve 
 Group              GBP'000   GBP'000       GBP'000    GBP'000          GBP'000    GBP'000           GBP'000   GBP'000 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Balance as at 
  June 2018             857    11,987         1,247      (112)          (2,491)     15,455                79    27,022 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Dividends                -         -             -          -                -    (1,088)              (35)   (1,123) 
 Non-controlling 
  interest                -         -             -          -                -          -               101       101 
 Share based 
  payments charge         -         -             -          -                -        254                 -       254 
 Transactions 
  with owners             -         -             -          -                -      (834)                66     (768) 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Profit for the 
  year                    -         -             -          -                -      3,539                 -     3,539 
 Other 
 comprehensive 
 income: 
 Re-measurement 
  of defined 
  benefit 
  liability               -         -             -          -          (4,011)          -                 -   (4,011) 
 Exchange 
  difference on 
  translating 
  foreign 
  operations              -         -             -       (35)                -          -                 -      (35) 
 Gain on 
  available for 
  sale financial 
  assets                  -         -           (6)          -                -          -                 -       (6) 
 Total 
  comprehensive 
  income for the 
  year                    -         -           (6)       (35)          (4,011)      3,539                 -     (513) 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 Balance as at 
  June 2019             857    11,987         1,241      (147)          (6,502)     18,160               145    25,741 
-----------------  --------  --------  ------------  ---------  ---------------  ---------  ----------------  -------- 
 

Cash Flow Statement

For the 52 weeks ending 27 June 2020 and 53 weeks ending 29 June 2019

 
                                                                            Group              Company 
                                                                         2020      2019      2020      2019 
                                                                      GBP'000   GBP'000   GBP'000   GBP'000 
 Cash flow from operating activities 
 Profit before taxation                                                 2,183     4,093     5,627       461 
 Depreciation                                                              93     1,262         -     1,064 
 Amortisation                                                           1,204       944     1,020       768 
 Gain on disposal of subsidiaries                                     (8,922)         -   (9,015)         - 
 Change in value of assets held for resale prior to sale in period    (3,225)         -   (3,681)         - 
 Finance income                                                          (77)   (1,146)     (149)   (1,182) 
 Finance cost                                                             324       389       278       382 
 Decrease/(Increase) in inventories                                     1,487   (2,129)         -     (877) 
 Decrease /(Increase) in trade and other receivables                    (494)     1,252     (214)   (1,693) 
 Increase/(Decrease) in trade and other payables                          923     3,059   (1,562)     7,712 
 (Decrease) in share-based payments provision                           (124)     (221)     (124)     (221) 
 Contributions to defined benefit plans                                 (318)     (282)     (318)     (282) 
 Cash generated from operations                                       (6,946)     7,221   (8,138)     6,132 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 Finance expense paid                                                   (128)     (263)      (82)     (256) 
 Taxation paid                                                          (773)     (593)      (50)     (197) 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 Net cash flow from operating activities                              (7,847)     6,365   (8,270)     5,679 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 Cash flow from investing activities 
 Investment income received                                                 -     1,146         -     1,182 
 Purchase of property, plant and equipment                               (28)   (1,088)         -     (900) 
 Purchase of intangible assets                                          (101)     (699)         -     (699) 
 Proceeds from the sale of subsidiaries                                35,255              35,255 
 Cost associated with disposal of subsidiaries                        (1,315)         -   (1,315)         - 
 Net cash flow from investing activities                               33,811     (641)    33,940     (417) 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 Cash flow from financing activities 
 Movements in invoice discounting facility                            (3,187)   (4,027)   (3,592)   (3,637) 
 Finance income received                                                   77         -       149         - 
 Repayment of loans                                                   (1,135)   (1,127)   (1,135)   (1,127) 
 Lease payments                                                          (52)         -         -         - 
 Issue of new shares                                                        5         -         5         - 
 Dividends paid                                                         (813)   (1,123)     (745)   (1,088) 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 Net cash flow from financing activities                              (5,105)   (6,277)   (5,318)   (5,852) 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 Net increase / (decrease) in cash and cash equivalents                20,859     (553)    20,352     (590) 
 Cash and cash equivalents at beginning of year                           381       934       147       737 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 Cash and cash equivalents at end of year                              21,240       381    20,499       147 
-------------------------------------------------------------------  --------  --------  --------  -------- 
 

Notes to the Accounts

   1.     Statutory Accounts 

The financial information does not constitute statutory accounts as defined in section 435 of the Companies Act 2006, but has been extracted from the statutory accounts for the year ended June 2020 on which an unqualified audit report has been issued and which will be delivered to the Registrar following their adoption at the Annual General Meeting.

The statutory accounts for the financial year ended June 2019 have been delivered to the Registrar of Companies with an unqualified audit report and did not contain a statement under section 498 of the Companies Act 2006.

Copies of the 2020 Annual Report and Accounts will be posted to shareholders with the notice of the Annual General Meeting. Further copies may be obtained by contacting the Company Secretary at Brand Architekts Group plc, 8 Waldegrave Rd, Teddington, TW11 8GT. An electronic copy will be available on the Group's web site ( www.brandarchitektsplc.com ).

   2.     Basis of preparation 

The Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and also in accordance with IFRS issued by the International Accounting Standards Board. These financial statements have been prepared under the historical cost convention, modified to include the revaluation of certain non-current assets and financial instruments.

The Directors have considered trading and cash flow forecasts prepared for the Group, and based on these, and the confirmed banking facilities, are satisfied that the Group will continue to be able to meet its liabilities as they fall due for at least one year from the date of signing of these accounts. On this basis, they consider it appropriate to adopt the going concern basis in the preparation of these accounts.

The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand (GBP'000) except where otherwise indicated.

   3.     Discontinued activities 

As a result of the disposal of the manufacturing business (completed 23 August 2019), these operations have been disclosed as discontinued and the related assets classified as held for sale at the prior year end.

   4.     Basis of consolidation 

The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings. The results and net assets of undertakings acquired or disposed of during a financial year are included in the Group Statement of Comprehensive Income and Group Statement of Financial Position from the effective date of acquisition or to the effective date of disposal. Subsidiary undertakings have been consolidated using the purchase method of accounting. In accordance with the exemptions given by section 408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The Company's profit after tax for the year to June 2020 was GBP5.518m (2019: profit after tax GBP0.487m).

The Group financial statements consolidate those of the parent company and all of its subsidiaries as of June 2020. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of June.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

   5.     Segmental analysis 

During the year, the reportable segments of the Group were aggregated as follows:

-- Brands - we leverage our skilled resources to develop and market a growing portfolio of Brand Architekts Group owned and managed Brands. These include organically developed MR. and Tru, plus the acquisitions of The Real Shaving Company (in 2015), the portfolio of Brands included in The Brand Architekts acquisition (in 2016) and the Fish brand acquired during 2018.

-- Manufacturing - the contracted development, formulation and production of quality products for many of the world's leading personal care and beauty Brands. Disposal of the manufacturing business completed on the 23 August 2019.

-- Eliminations and Central Costs. Other Group-wide activities and expenses, including defined benefit pension costs, share-based payment expenses / (credits), amortisation of acquisition-related intangibles, interest, taxation and eliminations of intersegment items, are presented within 'Eliminations and central costs'.

This is the basis on which the Group presents its operating results to the Directors, which is considered to be the Chief Operating Decision Maker (CODM) for the purposes of IFRS 8. Comparative full year numbers have been presented on the same basis.

IFRS15 requires the disaggregation of revenue into categories that depict how the nature, timing, amount and uncertainty of revenue and cash flows are affected by economic factors. The Directors have considered how the Group's revenue might be disaggregated in order to meet the requirements of IFRS15 and has concluded that the activity and geographical segmentation disclosures set out below represent the most appropriate categories of disaggregation.

a) Principal measures of profit and loss - Income Statement segmental information for 52 weeks ending 27 June 2020 and 52 weeks ending 29 June 2019:

 
 52 weeks ended                                Brands                  Manufacturing                      Eliminations                             Total                         2019 
  27 June 2020                                                                                             and Central 
                                                                                                                 Costs 
                                                                                                                                                                                Total 
                                              GBP'000                        GBP'000                           GBP'000                           GBP'000                      GBP'000 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 UK revenue                                    13,796                          4,841                                 -                            18,637                       52,144 
 International 
  revenue                                       2,454                          2,639                                 -                             5,093                       25,194 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Revenue - External                            16,250                          7,480                                 -                            23,730                       77,338 
 Revenue - Internal                                 5                            444                             (449)                                 -                            - 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Total Revenue                                 16,255                          7,924                             (449)                            23,730                       77,338 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Discontinued 
  Operation                                         -                        (7,924)                               444                           (7,480)                     (57,662) 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Total Revenue 
  Continuing 
  Operations                                   16,255                              -                               (5)                            16,250                       19,676 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Underlying (loss) 
  / profit from 
  operations*                                   1,204                          (909)                           (1,083)                             (788)                        4,428 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Charge for 
  share-based 
  payments                                          -                              -                               (4)                               (4)                        (115) 
 Amortisation of 
  acquisition-related 
  intangibles                                       -                              -                             (260)                             (260)                        (260) 
 Exceptional items 
  included in cost 
  of sales (Note 
  3)                                          (2,535)                              -                                 -                           (2,535)                            - 
 Other Exceptional 
  items (Note 3)                                (176)                          7,460                           (1,268)                             6,016                        (717) 
 Net borrowing costs                             (46)                           (22)                             (178)                             (246)                          757 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Tax charge on 
  discontinued 
  operations                                        -                              -                                 -                                 -                        (255) 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Segment Profit 
  included in 
  Discontinued 
  Operations                                        -                        (6,529)                                 -                           (6,529)                      (2,050) 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 (Loss) / Profit 
  before taxation                             (1,553)                              -                           (2,793)                           (4,346)                        1,788 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Tax credit / 
  (charge)                                        328                              -                             (273)                                55                        (198) 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 Profit for the 
  period from 
  continuing 
  activities                                  (1,225)                              -                           (3,066)                           (4,291)                        1,590 
---------------------  ------------------------------  -----------------------------  --------------------------------  --------------------------------  --------------------------- 
 

*The underlying profit net of eliminations and central costs are as follows:

 
                                               Continuing       Discontinued     Total 
                                               operations         operations 
                                                 - Brands    - Manufacturing 
                                                  GBP'000            GBP'000   GBP'000 
 Underlying profit / (loss) from 
  operations - operating segments                   1,204              (909)       295 
 Eliminations and central costs                   (1,083)                  -   (1,083) 
                                             ------------  -----------------  -------- 
 Underlying profit /(loss) from operations            121              (909)     (788) 
 
 
 52 weeks ended 30                                                             Eliminations and                                                2018 
 June 2019                                Brands            Manufacturing         Central Costs                     Total                     Total 
                                         GBP'000                  GBP'000               GBP'000                   GBP'000                   GBP'000 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 UK revenue                               16,381                   35,763                     -                    52,144                    51,253 
 International 
  revenue                                  3,220                   21,974                     -                    25,194                    22,692 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 Revenue - External                       19,601                   57,737                     -                    77,338                    73,945 
 Revenue - Internal                           75                    4,235               (4,310)                         -                         - 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 Total revenue                            19,676                   61,972               (4,310)                    77,338                    73,945 
 Discontinued 
  Operation                                    -                 (61,972)                 4,310                  (57,662)                  (52,860) 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 Total Revenue 
  Continuing 
  Operations                              19,676                        -                     -                    19,676                    21,085 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 Underlying profit 
  from operations*                         3,619                    2,515               (1,706)                     4,428                     5,470 
 Charge for 
  share-based 
  payments                                     -                        -                 (115)                     (115)                     (297) 
 Amortisation of 
  acquisition-related 
  intangibles                                  -                        -                 (260)                     (260)                     (197) 
 Other Exceptional 
  items (Note 3)                               -                    (669)                  (48)                     (717)                     (279) 
 Net borrowing costs                           -                      901                 (144)                       757                     (173) 
 Tax charge on 
  discontinued 
  operations                                   -                    (255)                     -                     (255)                     (438) 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 Segment Profit 
  included in 
  Discontinued 
  Operations                                   -                  (2,492)                   442                   (2,050)                   (1,701) 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 Profit before 
  taxation                                 3,619                        -               (1,831)                     1,788                     2,385 
 Tax charge                                                                               (198)                     (198)                     (453) 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 Profit for the 
  period from 
  continuing 
  activities                               3,619                        -               (2,029)                     1,590                     1,932 
---------------------  -------------------------  -----------------------  --------------------  ------------------------  ------------------------ 
 

*The underlying profit net of eliminations and central costs are as follows:

 
                                       Continuing       Discontinued     Total 
                                       operations         operations 
                                         - Brands    - Manufacturing 
                                          GBP'000            GBP'000   GBP'000 
 Underlying profit from operations 
  - operating segments                      3,619              2,515     6,134 
 Eliminations and central costs           (1,264)              (442)   (1,706) 
                                     ------------  -----------------  -------- 
 Underlying profit from operations          2,355              2,073     4,428 
 

The segmental Income Statement disclosures are measured in accordance with the Group's accounting policies.

Inter segment revenue earned by Manufacturing from sales to Brands is determined on commercial trading terms as if Brands were a third-party customer, prior to disposal.

All defined benefit pension costs and share-based payment expenses are recognised for internal reporting to the CODM as part of Group-wide activities and are included within 'Eliminations and central costs' above. Other costs, such as Group insurance and auditors' remuneration which are incurred on a Group-wide basis are recharged by the head office to segments on a reasonable and consistent basis for all periods presented, and are included within segment results above.

b) Other Income Statement segmental information

The following additional items are included in the measures of underlying profit and loss reported to the CODM and are included within (a) above:

 
 52 weeks ended 27 June 2020                                                    Eliminations and 
                                        Brands           Manufacturing             Central Costs              Total 
                                       GBP'000                 GBP'000                   GBP'000            GBP'000 
------------------------------  --------------  ----------------------  ------------------------  ----------------- 
 Depreciation                               93                       -                         -                 93 
 Amortisation / impairment*                 16                       -                     1,188              1,204 
 * Impairment losses of GBP924,000 in Central Costs is included in 
 Exceptional Items 
 52 weeks ended 29 June 2019                                                    Eliminations and 
                                        Brands           Manufacturing             Central Costs              Total 
                                       GBP'000                 GBP'000                   GBP'000            GBP'000 
------------------------------  --------------  ----------------------  ------------------------  ----------------- 
 Depreciation                               13                   1,249                         -              1,262 
 Amortisation                                -                     684                       260                944 
 
 
 

c) Principal measures of assets and liabilities

The Groups assets and liabilities are managed centrally by the CODM and consequently there is no reconciliation between the Group's assets per the statement of financial position and the segment assets. All assets and liabilities in relation to the contract manufacturing division were sold during the period.

d) Additional entity-wide disclosures

The distribution of the Group's external revenue by destination is shown below:

 
 Geographical segments              52 weeks ended   52 weeks ended 
                                      27 June 2020     29 June 2019 
                                           GBP'000          GBP'000 
                                   ---------------  --------------- 
 UK                                         18,637           52,144 
 Other European Union countries              2,683           17,482 
 Rest of the World                           2,410            7,712 
                                   ---------------  --------------- 
                                            23,730           77,338 
                                   ---------------  --------------- 
 
 
 Geographical segments - Continuing Operations     52 weeks ended   52 weeks ended 
                                                     27 June 2020     29 June 2019 
                                                          GBP'000          GBP'000 
                                                  ---------------  --------------- 
 UK                                                        13,796           16,456 
 Other European Union countries                               541              609 
 Rest of the World                                          1,913            2,611 
                                                  ---------------  --------------- 
                                                           16,250           19,676 
                                                  ---------------  --------------- 
 

In the 52 weeks ended 27 June 2020, the Group had three customers from Continuing Operations (being the Brands division) that exceeded 10% of total revenues, being 26%, 13% and 11% respectively. In the 52 weeks ended 29 June 2019, the Group had three customers that exceeded 10% of total revenues from Continuing Operations, being 26%, 15% and 11% respectively.

At 2020 year end the Group had non-current assets held overseas of GBPnil (2019: GBP2,247,000).

   6.     Exceptional items 
 
 Exceptional charges / (credits) from Continuing 
  Operations:                                        52 weeks ended   52 weeks ended 
                                                       27 June 2020     29 June 2019 
                                                            GBP'000          GBP'000 
                                                    ---------------  --------------- 
 Included within Cost of sales: 
 Inventory related                                            2,535                - 
                                                    ---------------  --------------- 
 
 Other exceptional items: 
 Impairment / amortisation of 
  RSC                                                           928                - 
 Severance costs (including social 
  security costs)                                               311                - 
 Consultancy fees                                               205                - 
 Write back of contingent consideration                           -            (240) 
 GMP equalisation                                                 -              288 
                                                    ---------------  --------------- 
                                                              1,444               48 
                                                    ---------------  --------------- 
 
 Total exceptional items from Continuing 
  Operations                                                  3,979               48 
                                                    ---------------  --------------- 
 

As discussed in the Chairman's statement, as part of the business transformation to focus on Owned Brands business with a new management team, a number of decisions were taken to reshape the brand portfolio, triggering adjustments to these brands and related inventory. This resulted in an exceptional charge of GBP2.5m which includes provisions for payments due to manufacturers for inventory not expected to be utilised and changes in estimates surrounding the valuation of inventory. These are considered one off and exceptional.

Other exceptional items includes GBP0.9m impairment of the RSC brand, GBP0.3m cost in relation to the departure in September of the former Chief Executive Officer and GBP0.2m exceptional consultancy fees following the reorganisation of the group.

The prior year exceptional items charge represents a provision of GBP0.3m made in respect to the GMP equalisation on the Group's DB Pension scheme and write back of contingent consideration from the acquisition of Fish which was not required to be paid.

 
 Exceptional charges / (credits) from Discontinued 
  Operations (note 11):                                52 weeks ended   52 weeks ended 
                                                         27 June 2020     29 June 2019 
                                                              GBP'000          GBP'000 
                                                      ---------------  --------------- 
 Other exceptional items: 
 Profit on disposal of the manufacturing 
  division                                                    (8,922)                - 
 Deal related costs                                                 -              669 
 Bonus payments                                                 1,116                - 
 Inventory write offs and disposal 
  costs                                                           346                - 
                                                              (7,460)              669 
                                                      ---------------  --------------- 
 

The year ended 27 June 2020 exceptional items income includes GBP8.9m profit on disposal of the manufacturing business, GBP1.1m employee bonuses paid out following disposal of the manufacturing business, and GBP0.3m relating to inventory disposals which were intrinsically linked with the manufacturing division.

Exceptional items included within the prior year related to the disposal of the manufacturing business of GBP0.7m

   7.     Profit before taxation 
 
                                                                            2020      2019 
                                                                         GBP'000   GBP'000 
 (a) This is stated after charging/ (crediting) 
 Depreciation of property, plant and equipment of purchased assets            93     1,262 
 Amortisation of intangible assets                                           276       944 
 Impairment of intangible assets (classified as exceptional - Note 3)        928         - 
 Research                                                                    177     1,039 
 Foreign exchange (gains) / losses                                             3      (37) 
 Gain on disposal of subsidiaries                                          8,922         - 
 Amounts expensed for short term and low value leases                          5         - 
 
 (b) Auditors' remuneration 
 Audit services: 
 Audit of the Company financial statements                                    41        35 
 Audit of subsidiary undertakings                                             11        12 
 Audit related services: 
 Interim review                                                                7         - 
 Other non-audit services: 
 Corporate finance advice                                                      9         - 
 
   8.     Taxation 
 
                                                          2020      2019 
 (a) Analysis of tax charge in the year                GBP'000   GBP'000 
 UK corporation tax: 
 - on profit for the year                                   14       528 
 - adjustment in respect of previous years               (323)     (171) 
 -foreign tax                                                -        77 
 Total current tax (credit)/charge                       (309)       434 
                                                      --------  -------- 
 Deferred tax: 
 -current year (credit)                                  (283)      (28) 
 -prior year charge/(credit)                               115        47 
 -effect of tax rate change on opening balance           (122)         - 
 -non-recognition of deferred tax asset for losses         544         - 
 Total deferred tax (credit)/charge                        254        19 
                                                      --------  -------- 
 Tax (credit)/charge                                      (55)       453 
                                                      --------  -------- 
 

Total tax credit of GBP55,000 (2019: tax charge GBP453,000) comprised tax credit on ongoing operations of GBP55,000 (2019: tax charge GBP198,000) plus tax on discontinued operations of GBPnil (2019: tax charge GBP255,000).

(b) Factors affecting total tax charge for the year

The tax assessed on the profit before taxation for the year is lower (2019: lower) than the standard rate of UK corporation tax of 19.00% (2019: 19.00%). The differences are reconciled below:

 
                                                                             2020      2019 
                                                                          GBP'000   GBP'000 
 Profit before taxation (from continuing and discontinued activities)       2,183     4,093 
                                                                         --------  -------- 
 Tax at the applicable rate of 19.00% (2019: 19.00%)                          415       778 
 Effect of: 
 Adjustment in respect of previous years                                    (208)     (124) 
 Income not taxable for tax purposes                                        (806)         - 
 Adjustment to deferred tax                                                     -       (7) 
 Deferred tax asset not recognised on taxable losses                          544 
 Differences between UK and foreign tax rates                                   -        10 
 Permanent differences and other                                                -     (168) 
 R&D tax credit                                                                 -      (36) 
 Actual tax charge                                                           (55)       453 
                                                                         --------  -------- 
 

The group has tax losses of GBP2.9m (2019: GBPnil) which have not been recognised as there is no certainty that they can be utilised.

   9.     Earnings per share 
 
                                                                                                 2020           2019 
 Basic and Diluted 
 Profit for the year attributable to equity holders (GBP'000)                                   2,217          3,539 
 (Loss) / Profit for the year (GBP'000) continuing operations attributable to equity 
  holders                                                                                     (4,312)          1,489 
 
 
 Basic weighted average number of ordinary shares in issue during the year                 17,143,646     17,135,542 
 Diluted number of shares                                                                  17,143,646     17,659,183 
                                                                                        -------------  ------------- 
 Basic earnings per share                                                                       12.9p          20.7p 
                                                                                        -------------  ------------- 
 Diluted earnings per share                                                                     12.9p          20.0p 
                                                                                        -------------  ------------- 
 Basic (loss) / earnings per share continuing operations                                      (25.2)p           8.7p 
                                                                                        -------------  ------------- 
 Diluted (loss) / earnings per share continuing operations                                    (25.2)p           8.4p 
                                                                                        -------------  ------------- 
 

Basic earnings per share has been calculated by dividing the profit for each financial year by the weighted average number of ordinary shares in issue at 27 June 2020 and 29 June 2019 respectively.

10. Notes to cash flow statement

 
 GROUP 
 (a) Reconciliation of cash and cash equivalents to movement in net cash / (debt): 
                                                            2020       2019 
                                                         GBP'000    GBP'000 
 Increase / (Decrease) in cash and cash 
  equivalents                                             20,859      (553) 
 Net cash outflow from decrease in borrowings              4,322      5,154 
                                                   -------------  --------- 
 Change in net cash / (debt)                              25,181      4,601 
 Opening net (debt)                                      (7,168)   (11,769) 
                                                   -------------  --------- 
 Closing net cash / (debt)                                18,013    (7,168) 
                                                   -------------  --------- 
 
 (b) Analysis of net cash / (debt):                 Closing 2019   Cash Flow   Non-Cash Movement     Closing 2020 
                                                         GBP'000     GBP'000             GBP'000          GBP'000 
 Cash at bank and in hand                                    381      20,858                   1           21,240 
 CID facility                                            (4,319)       3,187                   -          (1,132) 
 Borrowings due within one year                          (1,139)         110                   -          (1,029) 
 Borrowings due after one year                           (2,091)       1,025                   -          (1,066) 
                                                   -------------  ----------  ------------------  --------------- 
                                                         (7,168)      25,180                   1           18,013 
                                                   -------------  ----------  ------------------  --------------- 
 
 
 
 
   COMPANY 
 (a) Reconciliation of cash and cash equivalents to movement in net cash / (debt): 
                                                                 2020        2019 
                                                              GBP'000     GBP'000 
 Increase / (Decrease) in cash and cash 
  equivalents                                                  20,352       (590) 
 Net cash outflow / (inflow) from decrease / 
  (increase) in borrowings                                      4,727       4,764 
                                                        -------------  ---------- 
 Change in net cash / (debt)                                   25,079       4,174 
 Opening net cash / (debt)                                    (6,675)    (10,849) 
                                                        -------------  ---------- 
 Closing net cash / (debt)                                     18,404     (6,675) 
 
 (b) Analysis of net cash / 
 (debt):                                                 Closing 2019   Cash Flow   Non-Cash Movement   Closing 2020 
                                                              GBP'000     GBP'000             GBP'000        GBP'000 
 Cash at bank and in hand                                         147      20,352                   -         20,499 
 Secured debt facility                                        (3,592)       3,592                   -              - 
 Borrowings due within one year                               (1,139)         110                   -        (1,029) 
 Borrowings due after one year                                (2,091)       1,025                   -        (1,066) 
                                                        -------------  ----------  ------------------  ------------- 
                                                              (6,675)      25,079                   -         18,404 
                                                        -------------  ----------  ------------------  ------------- 
 
 

11. Discontinued operations

On 23 August 2019, the Group sold its 100% interest in Curzon Supplies Ltd for consideration of GBP35,255,000 (completing the disposal of the manufacturing division) which is the only operation presented as discontinued operations in 2019. Curzon Supplies Ltd was incorporated in March 2019. Assets relating to the manufacturing division, along with the related investments in Swallowfield Consumer Products Limited, Swallowfield SARL, Swallowfield s.r.o. and Swallowfield Inc, were transferred to Curzon Supplies Ltd prior to its disposal.

 
 Profit on disposal                                             Group 
                                                          At Disposal 
                                                            23 August 
                                                                 2019 
                                                              GBP'000 
 Property, plant and equipment                                 11,338 
 Intangible fixed assets                                          695 
 Equity instruments held at fair 
  value                                                         1,558 
 Inventories                                                    9,724 
 Trade and other receivables                                   13,196 
 Trade and other payables                                    (10,025) 
 Deferred tax liability                                         (561) 
 Post-retirement pension obligations 
  *                                                           (1,103) 
 Realisation of exchange differences                              196 
                                                               25,018 
                                                       -------------- 
 
 Deal costs                                                     1,315 
 
 Profit on disposal **                                          8,922 
 
 Satisfied by: 
 Cash consideration                                            35,255 
 
 * Post-retirement pension scheme obligations figure of GBP1,103,000 
  in this table relates to reassessment of annual uprating of pension 
  liabilities. 
 
  ** Profit on disposal increased by GBP161,000 compared to the 
  interim accounts owing mainly to recovery of VAT on deal related 
  costs and changes in consideration following agreement on the 
  final completion accounts. 
 Result of discontinued operations                   2020         2019 
                                                  GBP'000      GBP'000 
 
 Revenue                                            7,480       57,663 
 Expenses other than finance costs                (8,389)     (55,835) 
 (Finance Costs) / Investment Income                 (22)        1,146 
 Exceptional costs                                (1,462)        (669) 
 Profit on disposal of manufacturing 
  business                                          8,922            - 
 Tax expense                                            -        (255) 
 
 Profit for the year                                6,529        2,050 
                                              -----------  ----------- 
 
 
 
                              Included in 2020 Exceptional costs in discontinued operations 
                              are GBP1,116,000 employee bonuses paid out following disposal 
                          of the manufacturing business and GBP346,000 relating to specific 
                             branded inventory write offs that were intrinsically linked to 
                                                                the manufacturing division. 
 
                              Included in 2019 Exceptional costs in discontinued operations 
                        are restructuring charges of GBP535,000 and deal fees of GBP88,000. 
 
                             No tax charge has been allocated to discontinued operations as 
                            the division was loss making, excluding the profit on disposal, 
                          in the period from 30 June 2019 to disposal. These taxable losses 
                                                           were transferred with the trade. 
 Earnings per share from discontinued 
  operations:                                        2020         2019 
 
                                                      GBP          GBP 
 
 Basic earnings per share                            38.1         12.6 
 
 Diluted earnings per share                          38.1         11.6 
 
 
 
 Cashflow in respect of discontinued 
  activities                               2020      2019 
                                         GBP000    GBP000 
 Operating cash flows                   (5,761)     6,717 
 Investing cash flows                    35,255     (602) 
 Financing cash flows                   (3,592)   (3,637) 
                                       --------  -------- 
 Total cash flows                        25,902     2,478 
                                       --------  -------- 
 
 
 Assets held for sale                       Group               Company 
                                         2020       2019      2019       2019 
                                      GBP'000    GBP'000   GBP'000    GBP'000 
 Property, plant and equipment              -     11,190         -     10,329 
 Intangible fixed assets                    -        779         -        779 
 Equity instruments held at fair 
  value                                     -      1,385         -      1,385 
 Inventories                                -     10,743         -     10,743 
 Trade and other receivables                -     13,966         -     13,962 
 Trade and other payables                   -   (14,800)         -   (14,550) 
 Deferred tax liability                     -      (563)         -      (497) 
                                            -     22,700         -     22,151 
  -------------------------------------------  ---------  --------  --------- 
 

Annual Report

This report will also be available from the Company's registered office and on the Company's website www.brandarchitektsplc.com.

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September 28, 2020 02:00 ET (06:00 GMT)