TOTALLY_WICKED_BIDCO_LIMI - Accounts

The directors present the strategic report and financial statements for the year ended 31 March 2021.

The company is primarily an intermediate holding company and also employs the senior management team whose costs are recharged to other group companies.

The vaping sector like many other industries has seen significant disruption caused by the Covid-19 epidemic. However, important to note is that whilst there were structural changes to where consumers could purchase their products of choice due to the forced store closures, the group has delivered a resilient financial performance which has been underpinned by a combination of our strong and established omni-channel proposition, and enduring consumer demand for our brand.

English vape stores were required to close between 24 March and 15 June 2020 with similar restrictions in Scotland, Wales and Germany. During this period the business saw significant growth in revenues through its two principal e-commerce sites; totallywicked.co.uk and theelectroniccigarettecompany.co.uk and also through convenience partners such as Euro Garages who were able to remain open during this period.

Further lockdowns during November 2020 and January to March 2021 meant that the retail stores were only able to operate a limited call and collect service to customers during these periods.

This significant channel shift along with the government requirements to ensure the Group had a safe operating environment created many challenges for our business, however, our colleagues across the business have performed admirably throughout this period to ensure that we were able to meet all of our customers needs and requirements, whilst still providing an excellent level of customer service and operating under “Covid Secure” protocols.

As restrictions continue to ease, footfall and revenues in retail stores continue to improve and whilst understandably below pre-pandemic levels this has been offset by the strong and enduring growth seen across our e-commerce platforms and through our convenience and grocer partners.

The direction of the UK government to close all of our retail stores required us to place at its peak, 170 of our colleagues on furlough, utilising the Coronavirus Job Retention Scheme.

Whilst Covid-19 has almost certainly accelerated the shift from bricks and mortar retail to online in all sectors, Totally Wicked remains absolutely committed to its retail store portfolio which consisted of 152 dedicated vaping stores at the year-end (71 corporate and 81 dedicated resellers). Retail is critical to enabling Totally Wicked to offer the advice and expertise that has and will continue to enable many thousands of successful quit attempts of smokers, and deliver on our purpose of “empowering smokers to transform their lives”.

The distribution division of UK Vapour Brands delivered a resilient performance given the disproportionate negative impact of Covid-19 on the independent vaping sector where smaller operators did not have a strong online offering. The recent and ongoing investment made into UKVB’s principal e-commerce operation (theelectroniccigarettcompany.co.uk) enabled strong further growth during the year online.

Throughout this turbulent period, the main advocates of vaping in the UK have remained steadfastly supportive of the positive benefits of smokers switching to vaping, including Public Health England, Department of Health, NHS, Cancer Research UK and the Royal College of Physicians.

The business completed the final phase of its head office refurbishment at Stancliffe Street during the period to reorganise its production and office facilities and complete the development of the Blackburn based site.

Clarity arising from agreement on the terms of the United Kingdom leaving the European Union has seen sterling strengthen during the year which benefits the group. However, currency fluctuations continue to remain a risk.

The Group is exposed to the risk of exchange rate movements (primarily US$) and from time to time uses exchange rate hedging products to reduce some of this risk. The company does not actively use any other financial instruments as part of its financial risk management.

The Group has a fixed 4 year credit facility (expiring September 2022) with HSBC Bank Plc that is repayable on a straight line amortising basis. Other credit facilities are provided in the form of various vendor loan notes provided by existing and former shareholders.

The UK government is currently carrying out a consultation to see what regulatory changes could potentially be made to further enable vaping as the most effective smoking cessation method in the UK.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 March 2021.

The principal activity of the company continued to be that of an intermediate holding and group management company.

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Pierce C A Limited were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The directors are responsible for preparing the annual report 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.

We have audited the financial statements of Totally Wicked Bidco Limited (the 'company') for the year ended 31 March 2021 which comprise the profit and loss account, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 March 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 Auditor's 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 other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

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.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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.

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

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

In identifying and assessing risks of material misstatement in respect of irregularities we considered the following:

• The nature of the industry and the company’s control environment.

• Results of our enquiries of management.

• The company’s procedures and controls on compliance with laws and regulations and the risks of fraud.

• Discussions among the audit engagement team concerning potential indicators of fraud.

We are also required to perform specific procedures to respond to the risk of management override.

As a result of our audit procedures we did not identify a material risk of fraud or other non-compliance with laws and regulations.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's member 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 member those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's member for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Totally Wicked Bidco Limited is a private company limited by shares incorporated in England and Wales. The registered office is Stancliffe Street, Blackburn, Lancashire, BB2 2QR.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The company has taken advantage of the exemption in FRS 102 paragraph 1.12 from the requirement to produce a cash flow statement and to disclose certain related party transactions.

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

The ultimate parent company is Totally Wicked Holdings Limited, a company registered in England and Wales. Totally Wicked Holdings Limited prepares group financial statements and these can be obtained from the company's registered office.

The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. Goodwill is amortised over its expected useful economic life, being 15 years.

Atruet the time of approving the financial statements, the directors have a reasonable expectation that, with the continued support of the company's bankers and directors, the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Whilst the directors have adopted the going concern basis set out above, the impact of the worldwide Coronavirus pandemic, Covid-19, on all businesses represents an uncertainty and the true impact of this pandemic will only become apparent over time.

The directors have given due consideration to the impact of the pandemic on the company and consider that it will have adequate resources to manage that impact.

Turnover is recognised at the fair value of the consideration received or receivable for management services provided in the normal course of business, and is shown net of VAT.

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans and loans from fellow group companies are recognised at transaction price unless.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.

The directors have determined that the expected useful life of the goodwill is 15 years and as a result the cost of goodwill is being amortised over this period.

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

The actual charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:

Details of the company's subsidiaries at 31 March 2021 are as follows:

Registered office addresses (all UK unless otherwise indicated):

Included within other debtors are amounts owing to the Company by a Director, totaling £66,250.

The bank loan is secured by a fixed and floating charge over all of the current and future assets of the company.

Included within other creditors was an unsecured loan from a Director of £1,000,000.

The company, together with fellow group companies, has provided a guarantee in favour of Mr F B N Cropper as Security Trustee which is secured over the assets of this and fellow group companies. At the balance sheet date the outstanding amount in respect of this guarantee was £102,805,334 (2020 - £103,805,334).

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

This company, together with fellow group companies, has provided its bankers with a multilateral guarantee. At the balance sheet date an amount of £5,625,000 (2020 - £10,312,500) was outstanding in respect of this guarantee.

The company, together with fellow group companies, has provided a guarantee in favour of Mr F B N Cropper as Security Trustee which is secured over the assets of this and fellow group companies. At the balance sheet date the outstanding amount in respect of this guarantee was £102,805,334 (2020 - £103,805,334).

Advances or credits have been granted by the company to its directors as follows:

The maximum overdrawn balance during the year was £66,250.