Cheyne's (Management) Limited - Limited company accounts 20.1

REGISTERED NUMBER: SC231973 (Scotland)

Strategic Report,

Report of the Directors and

Financial Statements

for the Year Ended 31 July 2021

for

CHEYNE'S (MANAGEMENT) LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

Statement of Comprehensive Income

8

Balance Sheet

9

Statement of Changes in Equity

10

Cash Flow Statement

11

Notes to the Cash Flow Statement

12

Notes to the Financial Statements

13

Directors:

S Adamczuk

P Adamczuk

N R Stitt

Secretary:

B M Fox

Registered office:

46 George Street

Edinburgh

EH2 2LE

Registered number:

SC231973 (Scotland)

Auditors:

Haines Watts Manchester Limited, Statutory Auditor

Northern Assurance Buildings

9-21 Princess Street

Manchester

M2 4DN

The directors present their strategic report for the year ended 31 July 2021.

The principal activities of the company in the year under review were those of hairdressing salons, training and shows and demonstrations.

Review of business

The directors are satisfied with the performance for the year in view of the effects that the coronavirus pandemic has had on the hairdressing industry.

There has been a 15.6% reduction in turnover this year to £3.58m with training income continuing to contribute approximately 40% of this. This reduction is in line with the period the salons were closed during the year. The gross profit rate achieved has fallen from 17.7% to 14.3% as some staff were furloughed and income in respect of this is shown below the gross profit figure. Overheads have again been significantly reduced as a result of which, although profitability has reduced, the company has still achieved profits before tax of over £120,000.

The directors do not consider that Brexit will have a major impact on the company.

Principal risks and uncertainties

The hairdressing trade is highly competitive and the company continues to invest in customer services, staff education, business management and information technology systems.

The business is also affected by the performance of the United Kingdom economy, in particular its impact on consumer confidence.

Covid-19

The coronavirus epidemic had an effect throughout the year and has a potential impact on the going concern status of many companies. It resulted in the closure of the salons for several weeks but the directors have taken advantage of available government assistance to mitigate the impact. Given the current resources available, the Directors have concluded that they can continue to adopt the going concern basis in preparing the annual report and accounts.

On behalf of the board:

P Adamczuk - Director

28 April 2022

The directors present their report with the financial statements of the company for the year ended 31 July 2021.

Principal activity

The principal activity of the company in the year under review was that of running hairdressing salons and providing training.

Dividends

No dividends will be distributed for the year ended 31 July 2021.

Future developments

The company is continually seeking new opportunities and the directors are confident about future trading prospects.

Directors

The directors shown below have held office during the whole of the period from 1 August 2020 to the date of this report.

S Adamczuk

P Adamczuk

N R Stitt

Other changes in directors holding office are as follows:

W Howarth ceased to be a director after 31 July 2021 but prior to the date of this report.

Financial instruments

Objectives and policies

The company’s activities expose it to a number of financial risks including credit risk, liquidity risk and cash flow risk. As a matter of policy the company does not trade in financial instruments nor does it enter into any derivative transactions.

Credit risk, liquidity risk and cash flow risk

In addition to the risks outlined in the strategic report the company addresses other financial risks as follows:

Credit risk

The company's principal financial assets are bank balances and cash.

The credit risk on liquid funds is limited because the bank has a high credit rating assigned by international credit rating agencies.

Liquidity risk

In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the company uses a mixture of long-term and short-term debt finance.

All of the business' cash balances are held in such a way that achieves a competitive rate of interest.

Trade creditor' liquidity risk is managed by ensuring sufficient funds are available to meet the amounts due.

Cashflow risk

The Board monitors the level of funds held within the business to ensure that there are sufficient funds available for working capital requirements, capital expenditure, loan payments and the payment of tax and dividends. Consideration is also given to the impact of potential downturns in the level of business.

Statement of directors' responsibilities

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement as to disclosure of information to auditors

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

Auditors

The auditors, Haines Watts Manchester Limited, Statutory Auditor, will be proposed for re-appointment at the forthcoming Annual General Meeting.

On behalf of the board:

P Adamczuk - Director

28 April 2022

Opinion

We have audited the financial statements of Cheyne's (Management) Limited (the 'company') for the year ended 31 July 2021 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 July 2021 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

We assessed the susceptibility of the company's financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the company engagement team included:

- identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;

- understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;

- challenging assumptions and judgements made by management in its significant accounting estimates, in particular we have reviewed goodwill valuation to confirm that it is fairly stated;

- performing walkthrough testing to confirm that the company's controls were operating correctly;

- We test a sample of sales and purchases to confirm they are accounted for correctly and are appropriately disclosed;

- We test a sample of creditors to confirm they are correctly stated;

- We test a sample of journals to confirm they are genuine transactions.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

David Fort FCA (Senior Statutory Auditor)

for and on behalf of Haines Watts Manchester Limited, Statutory Auditor

Northern Assurance Buildings

9-21 Princess Street

Manchester

M2 4DN

28 April 2022

Turnover

4

3,577,451

4,240,611

Cost of sales

(3,066,291

)

(3,491,824

)

Gross profit

511,160

748,787

Administrative expenses

(951,769

)

(1,055,822

)

(440,609

)

(307,035

)

Other operating income

5

572,953

595,536

Operating profit

7

132,344

288,501

Interest receivable and similar income

34

577

132,378

289,078

Interest payable and similar expenses

8

(11,383

)

(7,145

)

Profit before taxation

120,995

281,933

Tax on profit

9

(24,305

)

(55,639

)

Profit for the financial year

96,690

226,294

Other comprehensive income

-

-

Total comprehensive income for the year

96,690

226,294

Fixed assets

Intangible assets

10

4,300,000

4,300,000

Tangible assets

11

173,340

237,203

4,473,340

4,537,203

Current assets

Stocks

12

70,013

65,837

Debtors

13

232,562

169,638

Cash at bank and in hand

547,029

684,364

849,604

919,839

Creditors

Amounts falling due within one year

14

675,419

788,286

Net current assets

174,185

131,553

Total assets less current liabilities

4,647,525

4,668,756

Creditors

Amounts falling due after more than one year

15

(388,765

)

(496,068

)

Provisions for liabilities

19

(25,913

)

(36,531

)

Net assets

4,232,847

4,136,157

Capital and reserves

Called up share capital

20

1,000

1,000

Retained earnings

21

4,231,847

4,135,157

Shareholders' funds

4,232,847

4,136,157

The financial statements were approved by the Board of Directors and authorised for issue on 28 April 2022 and were signed on its behalf by:

P Adamczuk - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 August 2019

1,000

3,908,863

3,909,863

Changes in equity

Total comprehensive income

-

226,294

226,294

Balance at 31 July 2020

1,000

4,135,157

4,136,157

Changes in equity

Total comprehensive income

-

96,690

96,690

Balance at 31 July 2021

1,000

4,231,847

4,232,847

Cash flows from operating activities

Cash generated from operations

1

54,390

455,032

Interest paid

(11,383

)

(7,145

)

Tax paid

(59,865

)

(94,492

)

Net cash from operating activities

(16,858

)

353,395

Cash flows from investing activities

Purchase of tangible fixed assets

-

(16,792

)

Interest received

34

577

Net cash from investing activities

34

(16,215

)

Cash flows from financing activities

New loans in year

-

650,000

Loan repayments in year

(120,511

)

(854,168

)

Net cash from financing activities

(120,511

)

(204,168

)

(Decrease)/increase in cash and cash equivalents

(137,335

)

133,012

Cash and cash equivalents at beginning of year

2

684,364

551,352

Cash and cash equivalents at end of year

2

547,029

684,364

1.	Reconciliation of profit before taxation to cash generated from operations

2021

2020

£

£

Profit before taxation

120,995

281,933

Depreciation charges

63,863

60,178

Finance costs

11,383

7,145

Finance income

(34

)

(577

)

196,207

348,679

Increase in stocks

(4,176

)

(730

)

(Increase)/decrease in trade and other debtors

(62,924

)

116,021

Decrease in trade and other creditors

(74,717

)

(8,938

)

Cash generated from operations

54,390

455,032

2.	Cash and cash equivalents

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 July 2021

31/7/21

1/8/20

£

£

Cash and cash equivalents

547,029

684,364

Year ended 31 July 2020

31/7/20

1/8/19

£

£

Cash and cash equivalents

684,364

552,352

Bank overdrafts

-

(1,000

)

684,364

551,352

3.	Analysis of changes in net funds/(debt)

At 1/8/20

Cash flow

At 31/7/21

£

£

£

Net cash

Cash at bank and in hand

684,364

(137,335

)

547,029

684,364

(137,335

)

547,029

Debt

Debts falling due within 1 year

(148,779

)

13,208

(135,571

)

Debts falling due after 1 year

(496,068

)

107,303

(388,765

)

(644,847

)

120,511

(524,336

)

Total

39,517

(16,824

)

22,693

1.	Statutory information

Cheyne's (Management) Limited is a private company, limited by shares , registered in Scotland. The company's registered number and registered office address can be found on the Company Information page.

2.	Statement of compliance

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006 as modified by the valuation of goodwill.

3.	Accounting policies

Basis of preparing the financial statements

The financial statements have been prepared under the historical cost convention.

The coronavirus epidemic had an effect throughout the year and has a potential impact on the going concern status of many companies. It resulted in the closure of the salons for several weeks but the directors have taken advantage of available government assistance to mitigate the impact. Given the current resources available, the Directors have concluded that they can continue to adopt the going concern basis in preparing the annual report and accounts.

Significant judgements and estimates

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

There are not considered to be any critical judgements in applying the company's accounting policies.

The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets or liabilities within the next financial year are addressed below.

(i) Goodwill valuation

The valuation of goodwill involves a number of estimates including future profitability and consideration of any factors which may lead to an impairment.

Turnover

Turnover represents amounts chargeable, net of value added tax, in respect of the sale of goods and services to customers.

Turnover is recognised when customers receive goods and when services are performed.

Goodwill

Positive goodwill is capitalised, classified as an asset on the balance sheet and amortised unless the durability of the acquired business can be demonstrated. It is reviewed for impairment at the end of the first full financial year following the acquisition and annually thereafter.

Cheyne's is recognised as a leading brand within the industry and has won many awards. The salons are located in prime sites and high levels of repeat business over many years demonstrate the durability of goodwill.

An impairment review was carried out at 31 July 2021 and goodwill was calculated to have a value in excess of the carrying value at that date and, therefore, no amortisation has been provided. This is a departure from the requirements of the Companies Act 2006 and has been adopted in order to present a true and fair view of the company's results. Amortisation of £nil has been charged for the year ended 31 July 2021. If the goodwill had been amortised over 20 years the amortisation charge for the year ended 31 July 2021 would have been £434,450 and the net book value of goodwill as at that date would have been £434,450.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Short leasehold improvements

-

straight line over the term of the lease

Fixtures and fittings

-

20% straight line and 15% straight line

Tangible assets are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price and costs directly attributable to bringing the asset to its working condition for its intended use.

Government grants

Other income represents grants which have been received in respect of furloughed staff and based on the rateable value of properties. Such grants are taken to profit and loss in the period to which they relate.

Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Financial instruments

The company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.

(i) Financial assets

Basic financial assets, including trade and other debtors and cash and bank balances, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

Such assets are subsequently carried at amortised cost using the effective interest method.

There are no assets which are initially measured at fair value.

(ii) Financial liabilities

Basic financial liabilities, including trade and other creditors, bank loans, loans from fellow group companies that are classified as debt, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Hire purchase and leasing commitments

Operating leases are charged to profit and loss account over the period of the lease.

4.

Turnover

The turnover and profit before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

2021

2020

£

£

Salon

2,102,364

2,332,688

Retail

112,209

202,180

Training

1,362,878

1,643,988

Advertising and marketing

-

61,755

3,577,451

4,240,611

5.	Other operating income

Other operating income represents CJRS grants and grants received in respect of the rateable value of salons.

6.	Employees and directors

2021

2020

£

£

Wages and salaries

1,972,208

2,013,132

Social security costs

165,998

162,546

Other pension costs

36,259

33,286

2,174,465

2,208,964

The average number of employees during the year was as follows:

2021

2020

Administration and support

10

10

Sales, marketing and distribution

78

85

88

95

2021

2020

£

£

Directors' remuneration

232,896

243,392

Directors' pension contributions to money purchase schemes

1,883

1,724

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

2

2

Information regarding the highest paid director is as follows:

2021

2020

£

£

Emoluments etc

80,075

73,570

7.	Operating profit

The operating profit is stated after charging:

2021

2020

£

£

Depreciation - owned assets

63,863

60,178

Auditors' remuneration

6,500

6,250

Operating leases

196,532

186,362

8.

Interest payable and similar expenses

2021

2020

£

£

Bank loan interest

11,383

7,145

9.

Taxation

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

2021

2020

£

£

Current tax:

UK corporation tax

34,923

59,865

(Over)/under provision PY

-

(1,065

)

Total current tax

34,923

58,800

Deferred tax

(10,618

)

(3,161

)

Tax on profit

24,305

55,639