Consolidated financial statements for the year ended 31 December 2012

Transcription

1 Renoir Topco Limited Consolidated financial statements for the year ended together with directors and independent auditor s reports Registered number: (Jersey, C.I.)

2 Company information Directors A L Craig P Giraud D Paradis A Cooper-Evans N J Martin R L Davies L B Terricabras (appointed 19 June ) Company number Registered office Auditor 26 New Street St. Helier Jersey Channel Islands JE2 3RA Deloitte LLP Abbots House Abbey Street Reading RG1 3BD United Kingdom

3 Directors report The directors present their annual report on the affairs of the group, together with the financial statements and independent auditor s report, for the year ended. The company was incorporated on 17 March. Principal activity The company s principal activity is that of an investment holding company. The principal activity of the company s subsidiary undertakings is the manufacture and global distribution of artist materials under the Daler-Rowney brand name. Daler-Rowney is an internationally respected brand of art materials sold throughout the world. Sales are generated either by the group s own sales teams, or through third-party distribution arrangements. The large majority of products carry brands that are owned by the group and are known for high quality and consistency. Daler-Rowney ranks highly within the industry on a global basis, and considers itself to be the one of the few groups within the industry that has a comprehensive range of products covering the broad spectrum of art materials. Business review The audited financial statements for the year ended are set out on pages 8 to 40. The group loss for the period, after taxation, was 1,801,000 (: loss 1,705,000). Despite the current adverse economic conditions, the directors are pleased with the sales performance. has been a challenging year, as macroeconomics were not favourable in a lot of countries where the group are selling products. Despite this the group has seen sales growth in the UK and USA, and improvements in operating profits. Group policies in relation to cost control and pricing have seen gross margins increase from 34.3% to 36.1% in could be even tougher but we remain confident that our business model will overcome these difficulties. The directors see Key Performance Indicators (KPIs) as a way to provide a well-balanced and comprehensive review of the group s overall performance. The following table highlights some of the KPIs the group measures and shows the position for the year ended : Operating Margin 9.81% 9.68% Other operating expenses % of sales (excluding acquisition costs) 26.30% 25.26% Revenue per employee (annualised) 114, ,673 Current ( Liquidity ) Stock turnover Working Capital as % of Sales 36.6% 37.0% Return on assets (1.2)% (1.2)% 1 RENOIR TOPCO LIMITED

4 Directors report (continued) Business review (continued) The directors continue to invest in global marketing strategies to further capitalise on the group s strong brands, in particular in colours (Georgian, System 3, Graduate and Simply), in papers (Langton, Murano, Canford, Cachet and Daler Rowney pads) and brushes (Robert Simmons, Simply Simmons and Daler Rowney). On the Daler-Rowney acquired the assets of the German company Dr Fr. Schoenfeld GmbH through two newly formed German subsidiaries. The combined assets were acquired for total consideration of 2,992,000 (including cost of acquisition of 312,000). The acquisition provides additional capacity for the group in the European market will be a year of integration of this new business into the worldwide business model. The acquisition brings new and exciting brands into the Daler-Rowney portfolio and will allow Daler-Rowney to compete in new sectors within the market place, plus capitalise on its new and existing distribution channels to cross sell the new enlarged product offering. Following this acquisition, the directors expect the results and the level of activity to improve over the next year. Dividends The directors do not recommend the payment of a final dividend. Going concern The accompanying financial statements have been prepared on the assumption that the group will continue as a going concern. The group s business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review above. This includes the financial position of the group and its liquidity position. The group meets its day-to-day working capital requirements via cash at bank. The Group has access to a revolving 5,000,000 credit facility, of which 1,000,000 had been drawn down subsequent to the year end. At the date of signing these financial statements the 4,000,000 remained undrawn. The group also has access to a further 5,000,000 senior multicurrency term facility secured by fixed charge and floating charge over the group s assets of which 3,765,000 remained undrawn. The group s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facility and the financial covenants set therein. The current economic conditions create uncertainty particularly over (a) the level of demand for the group s products; (b) the exchange rate between sterling and US dollars and thus the consequence for the cost of the group s raw materials. The group operates a foreign exchange hedging program on the net euro and US Dollar cash flow exposure. Both the company and consolidated balance sheet include significant amounts owed to its shareholders, which has resulted in a net shareholders deficit as at the balance sheet date. These amounts can only be requested to be repaid in limited circumstances. The directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Thus, the company continues to adopt the going concern basis in preparing the financial statements. 2 RENOIR TOPCO LIMITED

5 Directors report (continued) Directors The directors who served during the period and to the date of this report are as shown below: P Giraud A L Craig D Paradis A Cooper-Evans N J Martin R L Davies L B Terricabras (appointed 19 June ) Charitable and political contributions The group contributed nil (: 150) to charities. There were no political contributions. Disabled persons It is the group s policy to give full and fair consideration to suitable applications for employment from disabled persons. Disabled employees are eligible to participate in all career development opportunities available to staff. Opportunities also exist for employees of the company who become disabled to continue in their employment or to be trained for other positions in the company. Employee involvement The group is committed to involve all employees in the performance and development of the group. Supplier payment policy The group s policy is to settle terms of payment with suppliers when agreeing the terms of each transaction and ensures that suppliers are made aware of the terms of payment. Trade creditors of the group at were equivalent to 67 days (: 82 days) purchases, based on the average daily amount invoiced by suppliers during the period. Financial risk management The group s operations expose it to a variety of financial risks that include the effects of changes in market prices of commodities, credit risks, foreign exchange risk, liquidity risks and interest rate risks. The group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the group by monitoring levels of debt finance and the related finance costs. The group does not use derivative financial instruments to manage interest rate costs, and as such, no hedge accounting is applied. Given the size of the group, the directors have not delegated the responsibility of the monitoring financial risk management to a sub-committee of the board. Price risk The group is exposed to commodity price risk as a result of its operations. Given the size of the group, the cost of managing the exposure to commodity price risk is considered to exceed the potential benefits. The directors will revisit the appropriateness of this policy should the group s operations change in size or nature. The group has no exposure to equity securities price risk as it holds no listed or other equity investments, other than subsidiary undertakings. 3 RENOIR TOPCO LIMITED

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7 Statement of directors responsibilities Directors responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company (Jersey) Law 1991 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 group and company and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 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 proper 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 (Jersey) Law 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. 5 RENOIR TOPCO LIMITED

8 Independent auditor s report to the members of Renoir Topco Limited We have audited the consolidated financial statements ( the financial statements ) of Renoir Topco Limited for the year ended which comprise the consolidated profit and loss account, the consolidated statement of total recognised gains and losses, the consolidated note of historical cost profit and losses, the consolidated and company balance sheets, the consolidated cash flow statement, the statement of accounting policies and the related notes 1 to 26. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an 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 members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Statement of Directors Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the group s and of the parent company s affairs as at and of the group s loss for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been properly prepared in accordance with the Companies (Jersey) Law RENOIR TOPCO LIMITED

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10 Consolidated profit and loss account Notes 17 March to Turnover 1 49,730 34,721 Cost of sales (31,765) (22,787) Gross profit 17,965 11,934 Other operating expenses 2 (13,083) (9,329) Past service credit of pension scheme 22(e) Operating profit 4,882 3,361 Other finance income 22(f) Interest payable and similar charges 3 (5,836) (4,083) Loss on ordinary activities before taxation 4 (764) (540) Tax on loss on ordinary activities 6 (1,037) (1,165) Loss for the financial period 17 (1,801) (1,705) All results arose from continuing operations in the period. The accompanying notes form an integral part of this consolidated profit and loss account. Consolidated statement of total recognised gains and losses March to Retained loss for the financial period (1,801) (1,705) Actuarial loss 22(g) (902) (2,108) Deferred tax on actuarial loss Movement on pension surplus 22(a) 177 (437) Deferred tax on pension surplus (56) 116 Exchange (loss)/gain on retranslation of opening net investment in subsidiary undertakings (257) 145 Total recognised gains and losses relating to the period (2,702) (3,462) Note of historical cost profits and losses March to Reported loss on ordinary activities before taxation (764) (540) Adjustment of depreciation to historical cost basis Historical cost loss on ordinary activities before taxation (716) (433) Historical cost loss for the year retained after taxation (1,753) (1,598) 8 RENOIR TOPCO LIMITED

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13 Consolidated cash flow statement Notes 17 March to Net cash inflow from operating activities 7, Returns on investment and servicing of finance 20 (1,404) (890) Taxation 20 (1,804) (335) Capital expenditure 20 (1,564) (695) Acquisitions 20 - (38,038) Cash inflow/(outflow) before financing 2,324 (38,977) Financing 20 (740) 40,791 Increase in cash in the period 20 1,584 1,814 The accompanying notes are an integral part of this cash flow statement. Reconciliation of operating profit to net cash flow from operating activities 17 March to Operating profit 4,882 3,361 Depreciation 1, Amortisation of goodwill 1, Loss on disposal fixed assets 3 - Amortisation of finance costs Impairment charge Increase in stock (302) (248) Decrease/(increase) in debtors 115 (3,804) Increase in creditors 867 2,780 Past service cost of pension scheme - (756) Adjustment for pension funding (725) (2,679) Other finance income Foreign exchange movement (450) 221 Net cash inflow from operating activities 7, The accompanying notes form an integral part of this consolidated cash flow statement. 11 RENOIR TOPCO LIMITED

14 Statement of accounting policies A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set out below. a) Basis of accounting The financial statements are prepared under the historical cost convention modified by the revaluation of freehold property, in accordance with applicable UK accounting standards. b) Basis of consolidation The group financial statements consolidate the financial statements of Renoir Topco Limited and all its subsidiary undertakings for the year ended. The results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal. Business combinations undertaken on a share for share basis whereby the ultimate shareholders remain the same, the rights of each shareholder, relative to the others, remain unchanged and no minorities interest in the net assets of the group are altered by the transfer of ownership, are treated in accordance with the merger method of accounting as required by Financial Reporting Standard number 6 Acquisition and mergers. c) Going concern The accompanying consolidated financial statements have been prepared on the assumption that the Group will continue as a going concern, notwithstanding net liabilities of 5,350,000 (: 2,688,000). The directors believe this to be appropriate for the following reasons. The group s business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review on page 2. This includes the financial position of the group and its liquidity position. Both the company and consolidated balance sheet include significant amounts owed to its shareholders, which has resulted in a net shareholders deficit as at the balance sheet date. These amounts can only be requested to be repaid in limited circumstances. The group meets its day-to-day working capital requirements via cash at bank. The group also has access to a revolving 5,000,000 credit facility, of which 1,000,000 had been drawn down subsequent to the year end. At the date of signing these financial statements 4,000,000 remained undrawn. The group also has access to a further 5,000,000 senior multicurrency term facility secured by fixed charge and floating charge over the group s assets of which 3,765,000 remained undrawn. The current economic conditions create uncertainty particularly over (a) the level of demand for the group s products; (b) the exchange rate between sterling and US dollars and thus the consequence for the cost of the group s raw materials. The group s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current loan facility and the financial covenants set therein. The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus, the company continues to adopt the going concern basis in preparing the financial statements. 12 RENOIR TOPCO LIMITED

15 Statement of accounting policies (continued) d) Cash flow Cash flows on movements in debt factoring have been included as creditors movements in the cash flow statement. e) Intangible assets goodwill Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and written off on a straight line basis over its useful economic life, which is 20 years. Provision is made for any impairment f) Tangible fixed assets Land and buildings are shown at original historical cost or subsequent valuations. Other fixed assets are shown at cost net of depreciation and provision for impairment. Freehold land is not depreciated. Other fixed assets are depreciated at rates calculated to write off the cost or valuation, less estimated residual value, of each asset on a straight line basis over its expected useful life as follows: Freehold buildings Leasehold property Plant and machinery Merchandising display units years Over the term of the lease 1-12 years 3 years g) Revaluation of properties The properties were last revalued at 2 November. The directors believe there has been no diminution in the value since the valuation and consider this to be a fair value as at. Where depreciation charges are increased following a revaluation, an amount equal to the increase is transferred annually from the revaluation reserve to the profit and loss account as a movement on reserves. On the disposal or recognition of a provision for impairment of a revalued fixed asset, any related balance remaining in the revaluation reserve is also transferred to the profit and loss account as a movement on reserves. Individual freehold and leasehold properties are revalued every year with the surplus or deficit on book value being transferred to the revaluation reserve, except that a deficit which is in excess of any previously recognised surplus over depreciated cost relating to the same property, or the reversal of such a deficit, is charged (or credited) to the profit and loss account. A deficit which represents a clear consumption of economic benefits is charged to the profit and loss account regardless of any such previous surplus. h) Stocks Stocks are stated at the lower of cost and net realisable value. Cost incurred in bringing each product to its present location and condition is based on: Raw materials - purchase cost on a first in, first out basis, including transport Work-in-progress - cost of direct materials and labour, plus a reasonable proportion and finished goods of manufacturing overheads based on normal levels of activity 13 RENOIR TOPCO LIMITED

16 Statement of accounting policies (continued) h) Stocks (continued) Net realisable value is based on estimated normal selling price, less further costs expected to be incurred to completion and disposal. Provision is made for obsolete, slow-moving or defective items where appropriate. Raw material stocks now include a valuation of labels for manufactured colour products which were previously charged to cost of sales on purchase. Net realisable value is based on estimated normal selling price, less further costs expected to be incurred to completion and disposal. i) Investments Fixed asset investments are shown at cost less amounts written off. Provisions are made for permanent reductions in value. Income from investments is included in the financial statements of the year in which it is receivable. j) Taxation UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred taxation (which arises from differences in the timing of the recognition of items, principally depreciation in the financial statements and by the tax legislation) has been calculated on the liability method. Deferred taxation is provided on timing differences which will probably reverse, at the rates of tax likely to be in force at the time of the reversal. Deferred tax is not provided on timing differences which, in the opinion of the directors, will probably not reverse. Deferred tax is not discounted. Deferred tax is not recognised when fixed assets are revalued unless by the balance sheet date there is a binding agreement to sell the revalued assets and the gain or loss expected to arise on sale has been recognised in the financial statements. Neither is deferred tax recognised when fixed assets are sold and it is more likely than not that the taxable gain will be rolled over, being charged to tax only if and when the replacement assets are sold. k) Pensions Defined benefit schemes are funded, with the assets of the scheme held separately from those of the group, in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of the related deferred tax, is presented separately after other net assets on the face of the balance sheet. The amounts charged to operating profit are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the profit and loss account if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period until vesting occurs. The interest cost and the expected return on assets are shown as a net amount of other finance costs or credits adjacent to interest. Actuarial gains and losses are recognised immediately in the statement of total recognised gains and losses. For defined contribution schemes the amount charged to the profit and loss account in respect of pension costs and other post-retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet. 14 RENOIR TOPCO LIMITED

17 Statement of accounting policies (continued) l) Foreign currency Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as of the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the profit and loss account. For operations where the functional currency is not sterling, for the purposes of preparing statutory financial statements, fixed assets and prior year reserves are recorded at their historical sterling values. All other assets and liabilities for these operations are translated into sterling at the year end exchange rate. The profit and loss account for these operations is translated at the average exchange rate for the year. The resulting exchange differences are dealt with as a movement on reserves. Exchange differences on foreign currency borrowings, to the extent that they relate to investments in overseas operations, are taken to reserves and separately reported. m) Turnover Turnover comprises the value of sales (excluding VAT, trade discounts and intra-group transactions) of goods and services in the normal course of business. Turnover from the sale of goods is recognised when the goods are physically delivered to the customer. n) Leases The group enters into operating and finance lease agreements. Assets held under finance leases are initially reported at the fair value of the asset, with an equivalent liability categorised as appropriate under creditors due within or after one year. The asset is depreciated over the shorter of the lease term and its useful economic life. Finance charges are allocated to accounting periods over the period of the lease to produce a constant rate of charge on the outstanding balance. Rentals are apportioned between finance charges and reduction of the liability, and allocated to cost of sales and other operating expenses as appropriate. Rentals under operating leases are charged on a straight line basis over the lease term, even if the payments are not made on such a basis. o) Bank borrowings Interest-bearing bank loans are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in profit or loss account using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. p) Financial instruments The Group uses derivative financial instruments in the form of forward exchange contracts to reduce the exposure to foreign exchange risk. The company does not hold or issue derivative financial instruments for speculative purposes. Gains and losses arising from these contracts are deferred and recognised in the profit and loss account only when the hedged transaction has itself been reflected in the financial statements. 15 RENOIR TOPCO LIMITED

18 Notes to the financial statements 1 Turnover Contributions to turnover and loss on ordinary activities before taxation all arise from the group's principal activity. Further segmental information has been omitted as the directors believe it would be seriously prejudicial to the business. 2 Other operating expenses 17 March to Distribution costs 9,056 5,540 Administrative expenses 3,915 3,597 Current service cost of pension scheme (note 22(e)) Administrative expenses include 1,177,000 (: 887,000) goodwill amortisation. 13,083 9,329 3 Interest payable and similar charges 17 March to Bank loans 1, Other loans 4,432 2,975 Amortisation of finance cost Other 53-4 Loss on ordinary activities before taxation Loss on ordinary activities before taxation is stated after charging: 5,836 4, March to Goodwill amortisation 1, Depreciation of tangible fixed assets - owned 1, held under finance leases Loss on disposal of fixed assets 3 - Operating lease rentals - plant and machinery other Foreign exchange losses Auditor s remuneration - Audit Non audit RENOIR TOPCO LIMITED

19 4 Loss on ordinary activities before taxation (continued) The analysis of auditor s remuneration is as follows: Fees payable to the company s auditor and its associates for the audit of the 17 March to company s annual accounts 1 1 Fees payable to the company s auditor and its associates for other services to the Group - Audit of the company s subsidiaries Total audit fees Other services - Tax services Other services Total non-audit fees Fees payable to the company s auditor for the audit of the company s annual financial statements was paid by other group undertakings. Other services relate to the preparation of corporation tax and deferred taxation computations, tax advice on various group matters. 5 Staff costs Particulars of employees (including executive directors) are as shown below: Employee costs during the period amounted to: 17 March to Wages and salaries 7,609 6,631 Social security costs Other pension costs ,448 7,423 The average number of persons employed by the group during the period was as follows: Number Number Production Distribution Sales and administration RENOIR TOPCO LIMITED

20 5 Staff costs (continued) Directors remuneration: 17 March to Emoluments Social security costs Pension contributions , The directors of Renoir Topco Limited received total emoluments from the two main trading subsidiaries, Daler- Rowney Limited and Daler-Rowney USA Limited for services provided to those companies and other group companies. The number of directors who were members of pension schemes was as follows: Number 17 March to Number Defined benefit schemes 1 1 The above amounts for remuneration include the following in respect of the highest paid director: 17 March to Emoluments Social security costs The accrued pension entitlement under the company s defined benefit scheme of the highest paid director at 31 December was nil (: nil). 18 RENOIR TOPCO LIMITED

21 6 Tax on loss on ordinary activities The tax charge is based on the result for the period and comprises: 17 March to Profit and loss account: UK corporation tax - - Overseas tax Adjustment in respect of prior years (106) - Current tax for year Deferred tax - current year 219 (482) - prior year (34) 2 Difference due to rate change Deferred tax on pension deficit 181 1,015 1,037 1,165 Statement of total recognised gains and losses: Deferred tax on pension deficit current period (226) (559) Deferred tax on change in tax rate (pension) (137) (527) The parent company is subject to both UK corporation tax at the standard rate and Jersey income tax at the rate of 0% (:0%). 19 RENOIR TOPCO LIMITED

22 6 Tax on loss on ordinary activities (continued) 17 March to Loss on ordinary activities before tax (764) (540) Tax on loss on ordinary activities at standard UK corporation tax rate of 24.5% (: 26.49%) (186) (143) Effects of: Expenses not deductible for tax purposes 1,328 1,050 Differences between depreciation and capital allowances Carry forward of tax losses Utilisation of pre-acquisition of tax attributes - (191) Utilisation of tax losses (673) (3) Apportioned controlled foreign company chargeable profits 79 - Other short term timing differences Pensions (325) (930) Prior year adjustment (106) - Impact of tax rates in overseas jurisdictions (195) (612) Current tax for the period Intangible fixed assets - goodwill Cost Group At 1 January 23,536 Additions 312 At 23,848 Amortisation At 1 January (887) Charge for the year (1,177) At (2,064) Net book value At 21,784 At 22,649 There were no intangible assets in the company as at. 20 RENOIR TOPCO LIMITED

23 8 Tangible fixed assets Land and buildings Group Freehold Leasehold improvements Plant and machinery Merchandising units Assets under construction Total Cost or valuation At 1 January 5, ,320 1,711-8,650 Additions ,564 Acquisitions (note 10) Disposals - - (36) (201) - (237) At 5, ,617 2, ,134 Depreciation At 1 January Charge for the period ,042 Disposals - - (33) (201) - (234) At ,060-1,718 Net book value At 5, ,224 1, ,416 At 5, ,155 1,111-7,740 Leased assets included in the above: Group Net book value RENOIR TOPCO LIMITED

24 8 Tangible fixed assets (continued) Freehold land amounting to 2,933,000 (: 2,933,000) has not been depreciated. The main freehold property, land and buildings, of the group, held by the UK subsidiary Daler Rowney Limited, was revalued on an existing use value basis as at 2 November by American Appraisal (UK) Ltd, Consultant Surveyors, at 5,797,000 at the end of fiscal. The director s had taken a more prudent view and as such revised the value down to 4,836,000. As at the directors consider this valuation to remain appropriate and consider this to represent the fair value of the property. This together with the existing valuation of the other freehold property, land and buildings, of the group gives a total valuation of 5,444,000 (: 5,444,000). If the property had not been revalued it would have been carried in the balance sheet at at a cost of 4,510,000 (: 4,510,000), and accumulated depreciation of 1,221,000 (: 1,171,000) giving a net book value of 3,289,000 (: 3,339,000). Assets under construction comprise a new corporate management information system which is being rolled out across the group companies in stages between January 2013 and January The costs incurred as at 31 December relate to software licences, hardware infrastructure and consultants costs for the solution development. There were no tangible assets in the company as at or at. 22 RENOIR TOPCO LIMITED

25 9 Fixed asset investments Company Company At 1 January and at 493 On 28 March, the company acquired the existing group of Renoir Bidco Limited, by way of share for share exchange within the scope of FRS 6. As the relative rights of shareholders were preserved, it was appropriate to use merger accounting to present consolidated information for the group as if the new legal structure had always existed. The parent company and the group have investments in the following subsidiary undertakings which are principally attached to the profits or net assets of the group. To avoid a statement of excessive length, details of investments which are not significant have been omitted. Subsidiary undertakings The company owns 100% of the ordinary share capital of all its direct subsidiary undertakings. The group owns 100% of the ordinary share capital of all other subsidiary undertakings. Held by the company Nature of business Country of incorporation/ registration Principal place of business Renoir Midco Limited Investment company Jersey U.K. Held by subsidiary undertakings Nature of business Country of incorporation/ registration Principal place of business Renoir Bidco Limited Investment company England and Wales U.K. Longbeach Arts Limited Investment company Jersey U.K. Daler Holdings Limited Investment company Jersey U.K. Daler-Rowney Group Limited Investment company Jersey U.K. Daler-Rowney S.A. Distributor of artists materials Belgium Europe Daler-Rowney USA Limited Distributor of artists materials England and Wales U.S.A. Brideshore S.r.l Manufacturer of artists materials Dominican Republic Dominican Republic Daler Board Company Limited Investment company England and Wales U.K. Daler-Rowney Limited Manufacturer of artists materials England and Wales U.K. Daler-Rowney GmbH Distributor of artists materials Germany Germany Lukas Nerchau GmbH Manufacturer of artists materials Germany Germany Nerchauer Malfarben Manufacturer of artists materials Germany Germany. 23 RENOIR TOPCO LIMITED

26 10 Acquisition of subsidiary undertaking On, two newly formed subsidiaries of the group, Lukas Nerchau GmbH and Nerchauer Malfarben GmbH, acquired the trading stock and fixed assets of Dr Fr Schoenfeld GmbH & Co. which previously manufactured and distributed artist materials in Germany. Consideration of 2,992,000 (including cost of acquisition of 312,000) was satisfied by cash. The provisional fair values of the assets and liabilities acquired were assessed and adjustments were made to the book values where considered necessary. The following table sets out the fair value of the identifiable assets and liabilities to the Group: Fixed assets Fair value to Group Tangible 157 Current assets Stocks 2,485 Other debtors and prepayments 38 Total assets acquired 2,680 Goodwill 312 2,992 Satisfied by Cash paid to seller 2,680 Acquisition costs 312 2,992 Acquisition of subsidiary undertaking On 28 March, the Group s subsidiary Renoir Bidco Limited acquired 100 percent of the issued share capital of Longbeach Arts Limited for consideration of 38,229,000 (including cost of acquisition of 2,748,000), satisfied by cash. The fair values of the consolidated assets and liabilities acquired were assessed and adjustments were made to the book values where considered necessary. 24 RENOIR TOPCO LIMITED

27 10 Acquisition of subsidiary undertaking (continued) Acquisition of subsidiary undertaking (continued) The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group: Book value Fair value Tax Fair value to adjustment adjustment Group Fixed assets Tangible 9,043 (961) - 8,082 Current assets Stocks 10, ,946 Debtors 8, ,223 Other debtors and prepayments 1, ,654 Cash Deferred tax assets 142-1,222 1,364 Current tax assets Total assets 30,199 (961) 1,483 30,721 Creditors Bank loans and finance leases (8,210) - - (8,210) Trade creditors (5,601) - - (5,601) Other creditors and accruals (1,295) (75) - (1,370) Pension (760) (501) Current tax liabilities (493) (346) Total liabilities (16,359) (16,028) Net assets 13,840 (862) 1,715 14,693 Goodwill 23,536 38,229 Satisfied by Shares issued 6,359 Shareholders loan note 26,504 Bank loans 5,366 38,229 The provisional fair values associated with the Longbeach Arts acquisition have been finalised during with no further fair value adjustments being recorded. 25 RENOIR TOPCO LIMITED

28 10 Acquisition of subsidiary undertaking (continued) Acquisition of subsidiary undertaking (continued) Net cash outflows in respect of the acquisition comprised: Cash at bank acquired 191 Bank loans acquired (8,128) (7,937) Longbeach Arts Limited earned a profit after taxation of 2,257,000 in the period from 1 January to 28 March. The summarised profit and loss account and statement of total recognised gains and losses for the period from 1 January to 28 March, shown on the basis of the accounting policies of Longbeach Arts Limited prior to the acquisition, are as follows: Profit and loss account Turnover 9,437 Cost of sales (5,291) Gross profit 4,146 Other operating expenses (3,216) Operating profit 930 Finance charges (net) (107) Profit on ordinary activities before taxation 823 Tax on profit on ordinary activities 1,434 Profit for the financial period 2,257 Statement of total recognised gains and losses Profit for the financial period 2,257 Gain on foreign currency translation 99 Total recognised gains and losses relating to the period 2, RENOIR TOPCO LIMITED

29 11 Stocks Group 000 Raw materials 4,415 2,982 Work in progress Finished goods 8,834 7,538 13,981 11,194 Raw material stocks include a valuation of labels for manufactured colour products. There is no material difference between the balance sheet value of stocks and their replacement cost. The company held no stock as at the year end. 12 Debtors Group Company Trade debtors 12,183 11, Other debtors Current tax asset Deferred tax asset (note 15) 1,451 1, Prepayments and accrued income Amounts falling due after one year 15,526 15, Amounts owed by subsidiary undertakings - - 5,880 6,375 Total debtors 15,526 15,342 5,880 6, RENOIR TOPCO LIMITED

30 13 Creditors: Amounts falling due within one year Group Company Bank and other loans 1,925 1, Finance costs (297) (297) - - 1,628 1, Obligations under finance leases Trade creditors 6,984 7, Corporation tax Other taxes and social security Other creditors 2, Accruals and deferred income 2, ,714 11, The bank loans are secured by fixed and floating charges over all assets of the group. Obligations under finance leases are secured on the assets to which the creditor relates. 14 Creditors: Amounts falling due after more than one year Group Company Bank and other loans 15,396 16, Finance costs (1,151) (1,147) ,245 15, Loan notes 26,505 26, Preference shares 5,609 5,609 5,609 5,609 Obligations under finance leases Accrued interest on loan notes 6,099 2, Accrued interest on preference shares 1, , ,741 50,214 6,892 6,752 Included in bank and other loans are the following group borrowing facilities. Facility A, with the principal amount of 9,250,000 is repayable in half yearly instalments on 31 May and 30 November each year, and is subject to fixed annual interest at LIBOR plus 3.75% per annum. As at the year end 7,175,000 remained outstanding (: 8,600,000). Facility B1, with the principal amount of 2,750,000 is repayable in full on 31 May 2017 and is subject to a fixed annual interest of LIBOR plus 4.5% per annum. As at the year end the full amount of the facility remained outstanding (: 2,750,000) 28 RENOIR TOPCO LIMITED

31 14 Creditors: Amounts falling due after more than one year (continued) Facility B2, with a principal amount of US$6,540,000 is repayable in full on 31 May 2017 and is subject to a fixed annual interest of LIBOR plus 4.5% per annum. As at the year end 4,045,000 remained outstanding (: 4,045,000) which represents the entire principal amount. Facility C, with a principal amount of 2,500,000 is repayable in half-year instalments on 31 May and 30 November by 31 May 2017 and is subject to fixed annual interest at 4.79% per annum. As at the year end 2,125,000 remained outstanding (: 2,375,000) In addition to the above, the group has access to a 5,000,000 multi-currency loan facility which can be drawn down until 31 May As at the year end 1,226,000 ( 1,500,000 Euros) has been drawn down and it is repayable in half yearly instalments by 31 May The facility attracts interest at LIBOR plus 4.7% on any amounts drawn down, and a further 2.25% on the undrawn facility. The bank loans are secured by fixed and floating charges over all assets of the group. Obligations under finance leases are secured on the assets to which the creditor relates. The loan notes issued to the group are repayable in 2021 and are subject to annual interest at 12% and 15%. Borrowings are repayable as follows: Bank loans and other loans Between one and two years 2,790 1,925 Between two and five years 12,606 6,250 After five years - 8,106 15,396 16,281 On demand or within one year 1,925 1,675 17,321 17,956 Obligations under finance leases Between two and five years On demand or within one year RENOIR TOPCO LIMITED

32 15 Provisions for liabilities and charges a) Deferred taxation Group Company Deferred taxation asset (1,451) (1,755) - - Deferred taxation Group Balance at acquisition - (1,364) At 31 January (1,755) - Credited to the profit and loss account 219 (482) Effect of change in tax rate Prior year (34) 2 At (1,451) (1,755) Differences between depreciation and capital allowances (451) (255) Other short term timing differences (484) (486) Losses (516) (1,014) (1,451) (1,755) Deferred taxation has been provided to the extent that the directors have concluded on the basis of reasonable assumptions and the intentions of management that it is probable that the liability will crystallise. No provision has been made for taxation which would become payable in circumstances where the group's freehold property was disposed of at the amount of the valuation included in these financial statements, since the directors have no intention of disposing of the building. A deferred tax asset of 384,238 (: 134,221) has not been recognised in respect of losses carried forward for Renoir Topco Limited as the recoverability of these assets is not certain. 30 RENOIR TOPCO LIMITED

33 16 Called-up share capital Issued and allotted, called up and fully paid Class A 182,400 (: 1,736,000) ordinary shares of 1p each 2 2 Class B 600,001 ordinary shares of 1p each On incorporation on 17 March, 150,000 A ordinary shares and 600,000 of B ordinary shares of 1p were allotted, called up and fully paid with an aggregate nominal value of 7,500 for a consideration of 750,000. On dates between 21 November and 20 December, 23,600 A ordinary shares of 1p were allotted, called up and fully paid with a nominal value of 236 for a consideration of 23,600. On 29 May the company issued a further 8,800 A ordinary shares of 1p with a nominal value of 88 for consideration of 40, Reserves Group Share premium account Profit and loss account At 1 January 766 (3,462) Loss for the period - (1,801) Shares issued 40 - Actuarial loss (net) - (765) Provision against pension surplus (net) Exchange gain on subsidiary net investment - (257) At 806 (6,164) Company Share premium account Profit and loss account At 1 January 766 (579) Shares issued 40 - Loss for the period - (751) At 806 (1,330) 31 RENOIR TOPCO LIMITED

34 18 Reconciliation of movements in shareholders' funds Share capital Group 000 Share Premium 000 Profit and loss account 000 Total Opening shareholders funds (3,462) (2,688) Loss for the period - - (1,801) (1,801) Actuarial loss net - - (765) (765) Provision against pension surplus (net) Issue of share capital Exchange gain on retranslation of opening net investment in subsidiary - - (257) (257) Closing shareholders' funds (6,164) (5,350) Company Share capital 000 Share Premium 000 Profit and loss account 000 Opening shareholders funds (579) 195 Total Loss for the period - - (751) (751) Issue of share capital Closing shareholders' funds (1,330) (516) 19 Company profit and loss account The company has not presented its own profit and loss account. The loss for the year ended after taxation was 751,000 (: 579,000). 32 RENOIR TOPCO LIMITED

35 20 Cash flow information Returns on investments and servicing of finance Interest paid (1,404) (890) Taxation Corporation tax paid (1,804) (335) Capital expenditure Payments to acquire tangible fixed assets (1,564) (702) Receipts from sale of tangible fixed assets - 7 Acquisitions and disposals (1,564) (695) Purchase of subsidiary undertaking - (35,481) Cash acquired with subsidiary undertaking Acquisition cost on purchase of subsidiary undertaking - (2,748) Financing - (38,038) Bank loan acquired with subsidiary undertaking and subsequently repaid - (8,128) Bank loan repayment (1,675) (775) Capital element of finance lease repayment (38) (28) Issue of shares Shareholders loan notes - 26,505 Preference shares - 5,609 Cost incurred in obtaining finance (301) (1,666) New bank loans 1,234 18,500 Net cash outflow (740) 40,791 Analysis of changes in net debt At 1 January Other noncash Exchange Cash flow changes movement Cash at bank and in hand 1,814 1, ,398 1,814 1, ,398 Debt due within one year (1,675) 1,675 (1,925) - (1,925) Debt due after more than one year (51,345) (1,234) (2,507) 194 (54,892) Finance cost 1, (297) - 1,448 Finance leases (54) (16) Net debt (49,816) 2,364 (4,729) 194 (51,987) 33 RENOIR TOPCO LIMITED