Annual report
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AS MADARA COSMETICS 2024 SEPARATE AND CONSOLIDATED ANNUAL REPORT, PREPARED IN ACCORDANCE WITH LATVIAN STATUTORY REQUIREMENTS AND INDEPENDENT AUDITORS' REPORT* * This version of separate and consolidated financial statements is a translation from the original, which was prepared in the Latvian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of financial statements takes precedence over this translation. MARUPE, 2025
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TABLE OF CONTENTS INFORMATION ABOUT THE GROUP 3 STATEMENTS OF MANAGEMENT RESPONSIBILITIES 4 MANAGEMENT REPORT 5-6 FINANCIAL STATEMENTS Statement of Profit and Loss 8 Balance Sheet 9-10 Statement of Cash Flows 11 Statement of Changes in Equity 12 NOTES TO THE FINANCIAL STATEMENTS 13-34 INDEPENDENT AUDITORS' REPORT 36-38
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Name of the Group MADARA Cosmetics AS Legal Status of the Parent Company Joint stock Company Registration number of the Parent Company No 40003844254 Registration place and date Riga, 28 July 2006 Parent Company's legal address Zeltinu Street 131, Marupe, Marupe district, LV-2167, Latvia Shareholders (above 5 %) Uldis Iltners – owns 23.84 % of shares (31.12.2024: 23,86 %) Lote Tisenkopfa - Iltnere – owns 23,68 % of shares (31.12.2024: 23,70 %) Oy Transmeri Group Ab – owns 22,86 % of shares (31.12.2024: 22,87 %) Liene Drāzniece – owns 6,76 % of shares (31.12.2024: 6,76 %) Zane Tamane – owns 6,19 % of shares (31.12.2024: 6,19 %) Type of operations and NACE code Manufacture of perfumes and cosmetic preparations 20.42 Wholesale of perfume and cosmetics 46.45 Retail sale of cosmetic and related articles in specialized stores 47.75 Retail sale via mail order houses or via Internet 47.91 Board of the Parent Company Lote Tisenkopfa - Iltnere – Chairman of the Board Uldis Iltners – Member of the Board Tatjana Nagle – Member of the Board Gunta Šulte – Member of the Board Council of the Parent Company Anna Ramata Stunda – Chairman of the Council Liene Drāzniece – Deputy Chairman of the Council Anna Andersone – Member of the Council Edgars Pētersons – Member of the Council Sari Hannele Rosin – Member of the Council (until 28 Nov 2024)* Reporting period From 1.1.2024 to 31.12.2024 Previous reporting period From 1.1.2023 to 31.12.2023 Subsidiaries of the Group Madara Retail SIA, reg. No 40103212103 – 100% MADARA Cosmetics Inc., reg. No. 37-2087771 – 100% Madara Cosmetics LTD, reg. No. 15967488 – 100% MADARA Cosmetics GmbH, reg. No. HRB 177689 – 100% Brand Lab Cosmetics SIA, reg. No. 40203612673 – 100% Independent auditor and its address Deloitte Audits Latvia SIA Reg. No 40003606960 License No 43 Republikas laukums 2A, Riga, LV-1010, Latvia Certified Auditor Inguna Staša LR Certified Auditor Certificate No 145 4 The Board of MADARA Cosmetics AS (hereinafter – “Parent Company” or “Company”) is responsible for the preparation of the separate and consolidated financial statements of the Parent Company and its subsidiaries (hereinafter – the Group). The separate and consolidated financial statements are prepared in accordance with the accounting records and source documents and present fairly the financial position of the Parent Company and the Group as of 31 December 2024 and the results of its operations and cash flows for the year 2024. Separate and the consolidated financial statements have been prepared in accordance with the law “On the Annual Reports and Consolidated Annual Reports”. Appropriate accounting policies have been used and applied consistently, reasonable and prudent judgements and estimates have been made by the Board in the preparation of these financial statements. The Board of the Parent Company is also responsible for maintaining proper accounting records, internal control system, for taking reasonable steps to safeguard the assets of the Parent Company and the Group, and to prevent and detect fraud and other unfair practices and inaccuracies. 22 May 2025 *Pursuant to the statement made by the Member of Council regarding their resignation from the position. The change in the Company register will be effected in accordance with the outcome of the Council re-election, which is scheduled to take place at the shareholders' meeting on 20 June 2025. 3 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia GENERAL INFORMATION ABOUT THE GROUP STATEMENT OF MANAGEMENT RESPONSIBILITIES Lote Tisenkopfa - Iltnere Chairman of the Board Tatjana Nagle Member of the Board Uldis Iltners Member of the Board Gunta Šulte Member of the Board
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22 May 2025 During the reporting year, the MADARA Cosmetics Group consisted of the Parent Company MADARA Cosmetics AS and its subsidiaries: MADARA Retail SIA, Brand Lab Cosmetics SIA, MADARA Cosmetics GmbH (Germany), MADARA Cosmetics Inc. (USA), Madara Cosmetics LTD (the United Kingdom), Cosmetics NORD SIA (until 30.06.2024), and NORD Beauty SIA (until 30.06.2024), which is a subsidiary of Cosmetics NORD SIA. MADARA Cosmetics AS is the largest cosmetics producer in Latvia and one of the leading natural cosmetics manufacturers in the Baltics and Nordic region. The Group's products are exported to more than 30 countries, mainly European Union countries. The Group's main business is the production of natural Ecocert/Cosmos certified skincare and makeup products under the brands “MÁDARA” and “MOSSA” (from 1 May 2024 as a contract manufacturing brand), as well as providing contract manufacturing services. The Group's Parent Company operates in a leased office and production plant on Zeltinu Street 131 in Marupe, one of the region's most advanced and capacity-wise largest cosmetics production plants. In addition, the Parent Company uses leased office premises on Baložu Street 20A, Riga. In 2024, the Group took significant steps to refine its business strategy, including the divestment of the MOSSA and SELFNAMED.COM brands, along with its participation shares in Cosmetics NORD SIA. On 30 April 2024, MADARA Cosmetics AS signed a binding agreement with Finnish cosmetics distributor Oy Transmeri Ab for EUR 4 million, transferring the MOSSA brand assets while continuing production through contract manufacturing. Furthermore, on 1 July 2024, a contract was signed for the sale of 100% participation shares in Cosmetics NORD SIA. These strategic initiatives enabled the Group to focus more effectively on its core brand MÁDARA while ensuring sustained production capabilities and fostering innovation through newly established partnerships. In 2024 the Groupachieved revenue of EUR 21.52 million, reflecting an 11% increase compared to the previous year’s like-for-like figures (Group’s adjusted revenue) 1 or a 6.4% growth compared to the previous year. Profit Furthermore, the Parent Company participated in the ECSEL joint project “Intelligent Motion Control,” receiving EUR 32 thousand in co-financing. In 2024, the Group received EUR 230 thousand in co-financing from government and EU sources to support the achievement of its development project objectives. In 2024, MADARA Cosmetics AS created 6 new positions to strengthen its team and support its strategic objectives. The Group’s financial risk management policy is disclosed in Note 33 to these financial statements. MADARA Retail SIA (hereinafter – MADARA Retail SIA or the Subsidiary), responsible for the retail sale operations of the MÁDARA brand in shopping centers “Galerija Centrs,” “Spice,” “AKROPOLE Alfa,” and “Galleria Riga” in Riga, achieved net revenue of EUR 1.06 million in 2024, representing a EUR 62.2 thousand (6.2%) increase compared to the previous year. However, the Subsidiary closed the reporting year with a loss of EUR 70 thousand, compared to a profit of EUR 17.7 thousand in 2023. The increased costs and profitability decline were primarily attributable to strategic investments in human resources aimed at enhancing sales performance, improving work efficiency, and ensuring long-term customer service quality. MADARA Cosmetics GmbH provides cosmetics sales services in Germany and organizes the distribution of products manufactured by the Parent Company on the German market. before corporate income tax amounted to EUR 6 million, while net profit after tax was EUR 5.46 million. These results were significantly influenced by the divestment of the MOSSA brand and sale of Cosmetics NORD SIA (SELFNAMED.COM). Although transitioning to a contract manufacturing model had a short-term negative impact on revenue growth, the sales proceeds from these transactions increased the Group’s overall profitability. Group’s earnings per share for 2024 amounted to EUR 1.44 (3 782 984 total shares as of the financial statements approval date). In 2024, the Group has launched 14 new MÁDARA skincare and makeup products, as well as new shades for existing MÁDARA makeup products. The Retinol Alternative line, introduced in 2023, was expanded with a day cream, night cream, and eye cream. To enhance the MÁDARA makeup range, additional SKINONYM foundation shades were introduced to appeal to a broader market audience. A new makeup product category was added—talc-free pressed powders and blushes—positively contributing to the segment’s growth and reaffirming MÁDARA’s commitment to offering high-performance and organic, clean formulations. The year also saw the long-anticipated expansion into the men’s skincare segment with the launch of the HIS product line. The revenue from new products in 2024 exceeded EUR 950 thousand. The Group’s non-current investments in 2024 totaled EUR 782 thousand, including EUR 377 thousand invested in the MÁDARA brand website and over EUR 90 thousand in technological equipment. The Group continued to attract additional financing for strategically important projects. Total research and development expenses for the 2024 reporting year amounted to EUR 207 thousand, of which approximately EUR 90 thousand was received as co-financing support from the Pharmaceutical, Biomedical, and Medical Technology Competence Center (Farmācijas, biomedicīnas un medicīnas tehnoloģiju kompetences centrs). The average number of employees engaged in these projects was 13. Additionally, the Group received the remaining EUR 60 thousand in co-financing from the Norwegian Financial Instrument Program Activity “Green Innovations and the Introduction of Information and Communication Technology Products into Production”. The US subsidiary, MADARA Cosmetics Inc., established in 2023, is engaged in operating activities – online cosmetics retail. Product sales in online e-commerce channel began in the second half of 2024. In the UK, MADARA Cosmetics LTD was founded in 2024 to initiate product sales via the TikTok e-commerce channel. Additionally, the subsidiary Brand Lab Cosmetics SIA was established to engage in the production of perfumes and body care products. The production capacity of the Parent Company remains sufficient to support anticipated growth. The Group’s priorities for the next reporting year remain unchanged: fostering innovation, expanding presence across various markets and sales channels, and continuing to build stable and sustainable growth. Since the end of the reporting year, no significant events have occurred that would requiring adjustment in the 2024 financial statements or reassessment of the Group’s assets, liabilities, financial position, or financial results. The Management Board of the Parent Company proposes to distribute part of 2024 year’s profit into dividends – EUR 3 480 345.28, or EUR 0.92 per share (3,782,984 number of shares as of the date of approval of the financial statements). The remaining profit will be transferred to retained earnings for future development. 65 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia 1 Considering the transactions related to MOSSA and SELFNAMED.COM (COSMETICS Nord SIA), the revenue of SELFNAMED.COM has been excluded from the consolidated revenue figures of MADARA Cosmetics AS for the second half of 2023. Additionally, the sales volumes of MOSSA have been recalculated from 1 May 2023, onwards, based on the new contract manufacturing prices. This recalculation reflects the new business structure established in 2024, ensuring comparable data across periods. MANAGEMENT REPORT MANAGEMENT REPORT (continued) Lote Tisenkopfa - Iltnere Chairman of the Board Tatjana Nagle Member of the Board Uldis Iltners Member of the Board Gunta Šulte Member of the Board
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Note Group 2024 / EUR Group 2023 / EUR *reclassified Company 2024 / EUR Company 2023 / EUR *reclassified Revenue 2 21 521 854 20 234 218 20 505 076 18 94 0 466 Cost of goods sold 3 (7 462 278) (6 886 013) (7 715 245) (6 796 326) Gross profit 14 059 576 13 348 205 12 789 831 12 144 140 Selling expenses 4 (10 4 33 15 2) (9 118 938) (9 540 250) (8 154 022 ) Administration expenses 5 (2 491 79 4) (2 199 268) (2 211 960) (1 891 64 7) Other operating income 6 4 900 563 236 236 4 732 256 239 729 Other operating expenses 7 (246 388) (301 325) (227 755) (278 135) Interest and similar income 8 219 136 12 229 218 091 12 217 Interest and similar expenses 9 (18 304) (43 988) (17 221) (42 784) Profit before corporate income tax 5 989 637 1 93 3 151 5 7 42 992 2 029 498 Corporate income tax for the reporting year 10 (553 342) (335 772) (553 283) (335 15 9) Profit after corporate income tax 5 436 295 1 5 97 379 5 189 709 1 694 339 Profit for the year 5 436 295 1 5 97 379 5 189 709 1 694 339 *See Note 1 to the financial statements. The accompanying notes on pages 13 to 34 are an integral part of these financial statements. 8 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia STATEMENT OF PROFIT AND LOSS
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Assets Note Group 31.12.2024. EUR Group 31.12.2023. EUR Company 31.12.2024. EUR Company 31.12.2023. EUR Non-current assets Intangible assets Concessions, patents, licenses, trademarks and similar rights 1 047 237 1 33 7 192 1 047 237 1 072 495 Other intangible assets 15 127 21 386 15 127 2 1 386 Prepayments for intangible assets - 12 570 - 12 570 Total intangible assets 12 1 062 364 1 371 148 1 062 364 1 106 451 Property, plant and equipment Land 468 722 468 722 468 722 468 722 Leasehold improvements 306 636 400 724 208 222 275 022 Technological equipment and machinery 1 67 1 261 2 077 800 1 671 261 1 948 981 Other fixed assets 309 349 416 081 280 523 387 251 Construction in progress 83 154 40 758 83 154 38 739 Prepayments for property, plant and equipment 15 502 24 569 15 502 21 786 Total property, plant and equipement 13 2 854 624 3 428 654 2 727 384 3 140 501 Non-current financial investments Investments in subsidiaries 14 - - 310 684 18 156 Other non-current receivables 15 101 949 96 728 61 915 40 000 Other securities and investments 691 826 691 826 Total non-current financial investments 102 640 97 554 373 290 58 982 Total non-current assets 4 019 628 4 897 356 4 16 3 038 4 305 934 Current assets Inventories Raw materials, materials and consumables 16 3 049 331 2 435 579 3 049 331 2 434 869 Finished goods and goods for sale 17 1 555 598 1 762 900 1 333 776 1 57 4 011 Prepayments for inventories 240 820 282 168 240 820 282 168 Total inventories 4 845 749 4 480 647 4 623 927 4 291 048 Receivables Trade receivables 18 1 801 457 1 677 087 1 800 509 1 534 628 Trade receivables from subsidiaries 19 - - 473 122 1 752 058 Other receivables 20 73 025 136 590 63 583 116 818 Accrued revenue 53 630 12 057 53 630 12 057 Deferred expenses 103 567 133 975 98 128 121 515 Total receivables 2 03 1 679 1 959 709 2 488 972 3 537 076 Long-term financial investments Other loans 11 690 000 - 714 049 - Cash and cash equivalents 21 8 601 020 5 486 715 8 15 7 612 4 546 407 Total current assets 16 168 448 11 9 27 071 15 984 560 12 374 531 Total assets 20 188 076 16 824 427 20 147 598 16 680 465 Equity and liabilities Note Group 31.12.2024. EUR Group 31.12.2023. EUR Company 31.12.2024. EUR Company 31.12.2023. EUR Equity Share capital 22 378 044 377 658 378 044 377 658 Share premium 4 023 455 4 023 455 4 023 455 4 023 455 Foreign currency revaluation reserve 205 - - - Retained earnings: a) prior year retained earnings 7 509 947 8 103 370 7 581 092 8 077 554 b) profit for the year 5 436 295 1 597 379 5 189 709 1 694 339 Total equity 17 347 946 14 101 862 17 172 300 14 173 006 Liabilities Non-curent liabilities Deferred revenue 25 279 154 281 374 279 154 281 374 Total non-current liabilities 279 154 281 374 279 154 281 374 Current liabilities Advances from customers 109 123 173 995 109 123 79 616 Trade payables 666 220 742 509 652 230 687 460 Trade payables to subsidiaries - - - 95 267 Taxes and mandatory state social insurance contributions 23 508 268 477 446 494 235 422 373 Other liabilities 24 278 312 286 228 249 508 238 357 Deferred revenue 25 72 075 54 084 72 075 54 084 Accrued liabilities 26 926 978 706 929 1 118 973 648 928 Total current liabilities 2 560 976 2 441 191 2 696 144 2 226 085 Total liabilities 2 840 130 2 722 565 2 97 5 298 2 507 459 Total equity and liabilities 20 188 076 16 824 427 20 147 598 16 680 465 The accompanying notes on pages 13 to 34 are an integral part of these financial statements. The accompanying notes on pages 13 to 34 are an integral part of these financial statements. BALANCE SHEETBALANCE SHEET 109 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia
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Note Group 2024 / EUR Group 2023 / EUR Company 2024 / EUR Company 2023 / EUR Cash flow from operating activities Profit before corporate income tax 5 989 637 1 93 3 151 5 742 992 2 029 498 Adjustments for: Depreciation of property, plant and equipment 13 595 819 530 974 545 545 486 203 Amortisation of intangible assets 12 496 006 410 107 448 042 349 373 Net loss/(gain) on disposal of property, plant and equipment 6, 7 9 76 (7 438) (9 135) (7 438) Net profit on disposal of intangible assets 6 (3 993 704) - (3 993 706) - Net gain on investments in subsidiaries 6 (578 740) - (197 172) - Foreign currency revaluation reserve 205 - - - Government and the EU institutions co-financing 6 (230 298) (145 005) (230 298) (145 005) Other interest and similar income 8 (219 136) (12 229) (218 091) (12 217) Profit before adjustments for current assets and current liabilities 2 060 765 2 709 560 2 088 177 2 700 414 Adjustments for: (Increase)/decrease in receivables (183 557) (339 521 ) 82 710 (738 405) Increase in inventories (696 356) (240 715) (332 879) (173 070) Increase in payables and other payables 757 803 87 450 472 685 23 805 Gross cash flow from operating activities 1 93 8 655 2 216 7 74 2 310 693 1 812 744 Corporate income tax paid (557 635) (330 879) (557 576 ) (330 266) Net cash flow from operating activities 1 381 020 1 885 895 1 75 3 117 1 482 478 Cash flow from/(used in) investment activities Proceeds from sale of other investments 6 135 - 135 - Proceeds from sale of shares in subsidiaries 6 200 000 - 200 000 - Acquisition of shares in subsidiaries 14 - - (295 356) - Payments for property, plant and equipement and intangible assets 12, 13 (782 344) (1 380 804) (588 005) (1 07 3 096) Proceeds from sale of the property, plant and equipement 6, 7 44 463 - 54 463 - Proceeds from sale of intangible assets 6 4 000 000 7 438 4 000 000 7 438 Loans issued 11 (14 097) (13 992) (24 049) - Loans repaid 300 000 300 000 - Interest received 209 271 12 217 208 226 12 217 Net cash flow from/(used in) investing activities 3 957 428 (1 375 141) 3 855 414 (1 053 441) Cash flows used in financing activities Proceeds from government and the EU institution co-financing 25 193 089 346 297 193 089 346 297 Dividends paid (2 190 415) (1 321 220) (2 190 415) (1 321 220) Net cash flow used in financing activities (1 99 7 326) (974 923) (1 997 326) (974 923) Net increase/(decrease) in cash and cash equivalents 3 341 122 (464 169 ) 3 61 1 205 (545 886) Cash transferred as the result of disposed subsidiary 6 (226 817) - - - Cash and cash equivalents at the beginning of the reporting year 21 5 486 715 5 95 0 884 4 546 407 5 09 2 293 Cash and cash equivalents at the end of the reporting year 21 8 601 020 5 486 715 8 15 7 612 4 546 407 Group Share capital EUR Share premium EUR Retained earnings EUR Foreign currency revaluation reserve EUR Total equity EUR Balance as of 31.12.2022. 37 7 391 4 023 455 9 42 4 857 - 13 825 703 Distribution of dividends - - (1 321 220) - (1 321 220 ) Increase in share capital 267 - (267) - - Profit for the reporting year - - 1 597 379 - 1 597 379 Balance as of 31.12.2023. 377 658 4 023 455 9 700 749 - 1 4 101 862 Distribution of dividends - - (2 190 415) - (2 190 415) Increase in share capital 386 - (386) - (0) Profit for the reporting year - - 5 43 6 295 - 5 436 295 Foreign currency revaluation reserve - - - 205 205 Balance as of 31.12.2024. 378 044 4 023 455 12 946 242 205 17 347 946 Company Share capital EUR Share premium EUR Retained earnings EUR Total equity EUR Balance as of 31.12.2022. 377 391 4 023 455 9 399 041 13 799 887 Distribution of dividends - - (1 321 220) (1 321 220 ) Increase in share capital 267 - (267) - Profit for the reporting year - - 1 69 4 339 1 69 4 339 Balance as of 31.12.2023. 377 658 4 023 455 9 771 893 14 173 006 Distribution of dividends - - (2 190 415) (2 190 415) Increase in share capital 386 - (386) - Profit for the reporting year - - 5 189 709 5 189 709 Balance as of 31.12.2024. 378 044 4 023 455 12 770 801 17 172 300 The accompanying notes on pages 13 to 34 are an integral part of these financial statements. The accompanying notes on pages 13 to 34 are an integral part of these financial statements. STATEMENT OF CHANGES IN EQUITYSTATEMENT OF CASH FLOWS 1211 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia
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Basis of preparation The annual Report has been prepared in accordance with the Laws of the Republic of Latvia on Accounting and on Annual Reports and Consolidated Annual Reports. The statement of profit and loss is prepared based on function of expense method and statement of cash flows is prepared using the indirect method. These are consolidated and separate financial statements of the Company. Principal accounting policies adopted The Annual Report has been prepared in accordance with the following policies: a) Going concern assumption, the Parent Company and Group will continue as a going concern. b) Evaluation principles are consistent with the prior year. c) Items have been valued in accordance with the principle of prudence: - The Annual Report reflects only the profit generated till the date of the balance sheet; - All incurred liabilities and current or prior year losses have been taken into consideration even if discovered within the period after the balance sheet date; - All impairments and depreciation have been taken into consideration irrespective of whether the financial result was a loss or profit. d) Revenue and expenses incurred during the reporting year have been taken into consideration irrespective of the payment date or date when the invoice was issued or received. Expenses have been matched with revenues for the reporting period. e) Asset and liability items have been valued separately. f) The opening balance sheet of the current reporting year corresponds to the closing balance sheet of the previous year. The reporting period The reporting year covers the period from 1 January 2024 to December 31, 2024. Foreign currency transactions These financial statements are presented in the currency of the European Union, the euro (hereinafter – EUR), which is the Group's functional and presentational currency. All transactions denominated in foreign currencies are translated into EUR at the exchange rate set by the European Central Bank on the transaction day. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate set by the European Central Bank on 31 December. Gain or loss resulting from the exchange rate fluctuations is recognised in the corresponding period's statement of profit and loss. As of end of the reporting year, the Group has no significant assets and liabilities denominated in foreign currencies. Investments in subsidiaries and associated companies and other financial investments Investments in subsidiaries (i.e. where the Company owns more than 50% of share capital or otherwise controls the investee Company) are measured initially at cost. The control is the power to govern the financial and operating policies of the investee Company. Associated companies are entities over which the Company has significant influence but not control, generally between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the other Company but it is not control or joint control over those policies. Investments in associates are initially measured at cost. Other financial investments are investments in the share capital of other companies in the amount not exceeding 20% of the Company's share capital. Subsequent to initial recognition, all investments are stated at historical cost less any accumulated impairment losses. The carrying amounts of investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised in the profit and loss statement. In the consolidated balance sheet, when initially including the investment in the associate's capital, it is valued as the amount consisting of the purchase value of the associate’s shares or stakes and the increase or decrease in the value of this investment during the period from the acquisition date or from the date the Company became an associate, if the shares or stakes of the associate were purchased on different dates, until the balance sheet date of the consolidated g) All accounts, which significantly affect the evaluation and decision-making of the annual report users, have been disclosed. Insignificant items have been combined and the details disclosed in the Notes. h) Business transactions are recorded in the annual report taking into account their economic content and substance, not merely the legal form. Consolidation principles Subsidiaries, in which the Group has direct or indirect control over operating activities, are consolidated. Control is obtained if the Group has an ability to influence the financial and management matters in a subsidiary, thereby benefiting from it. The control is obtained if the Group is entitled to influence the financial and operating policies applied in a subsidiary, as well as to benefit from its transactions. The consolidation of subsidiaries is based on a cost or acquisition method. The subsidiaries of the Group are consolidated from the moment when the Group has taken over control and the consolidation is discontinued with the disinvestment of the Group's subsidiary. The financial statements of subsidiaries are consolidated in the Group's financial statements, combining the respective assets, liabilities, profit and loss items. All transactions between the Group companies, settlements and unrealised profit or loss from transactions are eliminated. If necessary, the accounting policies of the Group's subsidiaries have been changed to the Group's accounting policies to ensure compliance with the accounting and measurement methods used by the Group. Companies included in consolidation All companies in which MADARA Cosmetics AS is the Group's Parent Company directly or through the subsidiary's intermediation are included in the 2024 consolidation. financial statements. The increase or decrease in value is calculated based on the associate’s annual financial statements, in proportion to the share of invested capital (in percentage) in the associate's equity (equity method). Inclusion of an associate in the consolidated financial statements (1) Where a consolidated entity has an associate, it shall be presented in the consolidated balance sheet under 'Equity interests in associates'. (2) On initial recognition in the consolidated balance sheet, an interest in an associate shall be measured as the sum of the acquisition value of the associate's shares and the increase or decrease in the value of that interest between the acquisition date and the balance sheet date of the consolidated annual report. The increase or decrease is calculated in accordance with the annual financial statements of the associateon the basis of the proportion (as a percentage) of the contributed capital in the equity of the associate (equity method) Intangible assets and property, plant and equipment In the balance sheet, intangible assets and property, plant and equipment are recognised at their cost of acquisition less accumulated depreciation and amortisation. The Group capitalises items of property, plant and equipment with an initial cost exceeding 1 000 EUR. Acquired property, plant and equipment below 1 000 EUR are recognised in the low value inventory account. The asset purchase value is the sum of the purchase price, import duties, non-deductible taxes and other directly attributable expenses needed to deliver the asset to its intended location and prepare it for its intended use. Only the rights acquired for consideration are recognised as “Concessions, patents, licenses, trademarks and similar rights”. Depreciation and amortisation is calculated over the useful life of the asset according to the straight-line method, applying the following depreciation rates: ( 1 ) STATEMENT OF ACCOUNTING POLICIES – GENERAL PRINCIPLES NOTES TO THE FINANCIAL STATEMENTS 1413 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia Intangible assets: Licenses 20-33% Other intangible assets 10-20% Property, plant and equipment: Technological equipment 10-20% Hardware and electronic equipment 33% Vehicles 20% Other fixed assets 20-33% Name of the Company Country Group's ownership as of 31 December 2024 Group's ownership as of 31 December 2023 MADARA Retail SIA Latvia 100% 100% Cosmetics NORD SIA Latvia 0% (until 30 June 2024: 100%) 100% NORD Beauty SIA Latvia 0% (Until 30 June 2024: 100%) 100% MADARA Cosmetics GmbH Germany 100% 100% Madara Cosmetics LTD United Kingdom 100% 0% Brand Lab Cosmetics SIA Latvia 100% 0% MADARA Cosmetics Inc. United States of America 100% 100%
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Profit or loss arising from the asset disposal is recognised in the profit and loss statement for the respective period. Repair and renovation expenses increasing useful life or asset value are capitalised and depreciated over its useful life. All other repair and maintenance costs are recognised on profit and loss statement, in the period when they incurred. Leasehold improvements are capitalised and are included in the asset's carrying amount. Leasehold improvements are depreciated using the straight line method over the shortest period - useful life or lease term. Research costs are recognised in the profit and loss statement in the reporting period they incurred. The development costs are capitalised if the ability of the asset to generate economic benefits can be reliably demonstrated. Amortisation is calculated over the period of development cost use. Impairment of non-current assets If the non-current asset's recoverable amount at the balance sheet date is lower than its acquisition value less accumulated depreciation, the asset is measured at the lower of cost. The value of assets is reviewed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the amount by which the asset's carrying amount exceeds its recoverable amount. Inventories Inventory cost is determined using the weighted average cost method. Inventories are stated at the lower cost, purchasing or net realisable value. Net realisable value represents the estimated selling price for inventories in the ordinary course of business less all estimated costs of completion and sales expenses. Inventories held in net realisable value are recognised at carrying amount of inventories reduced by allowances. Trade receivables Trade receivables are recognised according to the value of initial invoices less allowances for doubtful debts. An allowance for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amount. Receivables are written off if considered to be uncollectible. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, current bank account balances and short-term bank deposits with the initial maturity of 90 days or less. Accrual for unused employee vacations Accrual is computed by multiplying employees' average daily salary for the last 6 months by the number of unused vacation days at the end of the reporting year, additionally calculating employers' mandatory social insurance contributions. Leases Lease that in essence transfers all the risks and rewards associated with the asset to the lessee is classified as finance lease. All other leases are classified as operating leases. Operating lease Lease under which the risks and rewards of ownership are not transferred to the lessee is classified as operating lease. Operating lease payments are recognised in the profit and loss statement over the term of the lease, using the linear method. Provisions Provisions are recognised when the Company and the Group has a liability (legal or reasonable) due to a past event and it is probable that an outflow of resources embodying economic benefits from the Company or Group will be required to settle the obligation and the amount of the liability can be measured reliably. Trade payables Initially trade payables are recognised at fair value. In subsequent periods, the carrying amount of trade receivables is measured at amortised inicial value by applying the effective interest rate. Trade payables are classified as current liabilities if the payment is due within one year or less. Otherwise, they are classified as non- current liabilities. The amount of the Group's liabilities can be reliably estimated. Revenue recognition Revenue is recognized based on the expectation that is probable the Company and the Group will obtain economic benefits and to the extent that it can be reasonably determined, excluding value-added tax and sales-related discounts. Revenues are recognized in accordance with the economic substance and nature of the transaction, rather than its legal form. In recognizing revenue, the following conditions are also considered: Sale of goods: - Goods (in relevant cases – ownership rights to goods), all risks associated with their damage or destruction (hereinafter referred to as the risks inherent to the ownership rights of goods), and all potential benefits from these goods (such as income and value appreciation) have been transferred to the buyer; Deferred expenses Expenses incurred before the balance sheet date but related to the next reporting periods are recognised as deferred expenses. Financial assets - Non-current loans and claims are financial assets created by the Company and Group by providing money or rendering services directly to the debtor and which are not intended to be sold immediately or in a short time period. Initially loans are recognised at fair value plus costs related to the loan issuance. Subsequent to initial recognition loans are stated at amortised value, using the effective interest rate method. Amortised value is calculated considering loan issuance costs incurred, as well as any loan-related discounts or premiums. Profit or loss arising from the amortisation is recognised in the profit and loss statement as an interest income or expense. If events or changes in circumstances indicate that the carrying amount is impaired, provisions of asset impairment are recognised. - Other non-current financial investments Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturities that the Company or the Group has decided and is able to hold to maturity. Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequent to initial recognition all loans are carried at amortised value, using the effective interest rate method. Held-for-sale financial assets are financial assets other than issued loans, invoices and held-to-maturity investments. These assets can be sold in order to increase liquidity or in the event of changes in interest rates, exchange rates and capital value. If there is an objective indication that the carrying amount of an asset could be is impaired, an allowance for impairment is made. - Current financial investments are financial assets held for trading, which are acquired or incurred for the primary purpose of making profit from short-term fluctuations of price or profit margins. Financial assets held for trading are initially recognised at cost value plus transaction costs directly attributable to the acquisition of the financial asset. Cost value usually corresponds to the amount paid for the asset, including fees and commissions. Cost value is an amount at which a financial asset is measured at initial recognition less principal repayments, and is adjusted for any allowance for impairment. - The Company or the Group is able to reliably estimate the revenue; - It is expected that the Company or the Group will receive the economic benefits associated with the transaction; - The Company or the Group is able to reliably estimate the expenses incurred or to be incurred in relation to the sale of goods. Provision of services: Revenue from services is recognized in the period when the services are rendered. Revenue from services and the corresponding costs are recognized based on the stage of completion of the transaction as of the balance sheet date. If the outcome of the service-related transaction cannot be reliably estimated, revenue is recognized only to the extent of the recoverable costs incurred. Dividend income is recognised when the shareholder's right to receive the payment is established. Interest income is recognized over the relevant time period. Accrual of interest income is discontinued when its collection is doubtful. Corporate income tax Corporate income tax is recognised in the profit and loss statement on the basis of calculations made by the management in accordance with the laws and regulations of the Republic of Latvia. Corporation tax is calculated on the profits distributed, calculated as 20/80 of the net amount payable to members and certain expenses attributable to the distribution of profits, applying a coefficient of 0.8. Corporation tax on distributed profits will be recognised at the time when the members of the Company decide on the distribution of profits. The accumulated undistributed profits subject to corporation tax at the end of the reporting year amount to EUR 10 668 310 at the time of distribution of dividends. Fair value The fair value represents the value, at which an asset may be sold or liabilities settled within the normal market conditions. If based on the management assessment the fair value of financial assets and liabilities significantly differs from its carrying value, the fair value is disclosed separately in notes to the financial statements. Use of estimates To prepare the financial statements, the management of the Company and the Group makes estimates and 1615 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia
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assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The management has assessed the profit and loss and believes that based on all the available information the financial statements give a true and fair view of the financial position. - Allowance for doubtful and bad trade receivables: The Group's management evaluates the carrying amounts of trade receivables and assesses their recoverability, making an allowance for doubtful and bad trade receivables, if necessary. Provisions are based on the aging analysis of receivables and the Company's experience in working with each individual debtor. The management has assessed the receivables and believes that significant additional provisions are not necessary as of 31 December 2024. - Net realisable value of inventories: The Group's management evaluates the net realisable value of inventories based on the expected sales prices and selling expenses, as well as assesses the physical condition of inventories during the annual inventory counting. If the net realisable value of inventories is lower than the cost of inventories, then an allowance is recorded. The Group's management has evaluated the net realisable value of inventoriesand believes that no significant additional allowance is required as of 31 December 2024. - Useful life of property, plant and equipment: Useful life of property, plant and equipment is assessed at each balance sheet date and adjusted, if necessary, to reflect the Company's management current view on the remaining useful life of the assets, taking into account changes in technology, the remaining economic life of the assets and their physical condition. - Contingent liabilities: Contingent liabilities are disclosed in notes to these financial statements. They are recognised as liabilities only if the possibility of an outflow of resources embodying economic benefits becomes probable. - Carrying amount of issued loans: The management of the Group’s Parent Company evaluates the issued loans and assesses their recoverability, making an allowance for doubtful loans, if necessary. The management has evaluated the issued loans and considers that it is not necessary to make an additional significant allowance as of 31 December 2024. Deferred Revenue Deferred revenue represents non-current and current portion of advances received from customers for services which have not been provided as of the balance sheet date. Deferred revenue is initially recognized at the present value of the consideration received. Revenue is recognized in the statement of profit and loss in the period when the services have been provided. In 2024, the Group's Parent Company launched a customer loyalty program – rewards program, under which customers earn reward points from each purchase. These points are awarded at a specific rate based on the purchase amount. Rewarded points, expressed in monetary value, can be used by customers as partial payment for the future purchases with no expiration period. Based on the rewarded points, expressed in monetary value, the corresponding portion of revenue is deferred until the points are redeemed – i.e., when related services are provided, and revenue is recognized in the statement of profit and loss. As of 31 December 2024, deferred revenue related to the rewards program is estimated based on the historical experience with repeat customer purchases. The Group’s management considers that is not necessary to make an additional adjustments to deferred revenue as of 31 December 2024. Government and the EU institution co-financing Government and EU institution aid is included in the balance sheet of the Company and the Group when it is certain that the terms will be met and the Company and Group will be eligible to receive it. If state aid is received for long-term investments, state aid is reflected in the balance sheet as a deferred income. Government and the EU institution aid is not recognised until there is reasonable assurance that the Company and Group will comply with the terms and that the aid will be received. Aid is recognised as revenue over the period in which the Company and the Group incur costs that are offset by government aid. Thus, government aid, the aim of which is a purchase or creation of the non-current assets, is recognised as deferred revenue in the balance sheet and included in the profit and loss statement in a systemation and rational manner over the non-current asset's useful life. Events after the reporting date The financial statements reflect such events after the balance sheet date that provide additional information about the financial position of the Company and the Group at the balance sheet date (adjusting events). If the events after the end of the reporting year are not adjusting, they are reflected in the notes to the financial statements only if they are significant. ( 2 ) Net revenue Net revenue is the revenue generated during the year from the main operating activities – the sale of goods and rendering services less value added tax and discounts granted. Revenue is generated from the production and sale of cosmetics, as well as from the provision of services and the sale of makeup stands. Group 2024 / EUR Group 2023 / EUR Company 2024 / EUR Company 2023 / EUR Breakdown of net revenue by geographical markets: Revenue from the sale of goods in the European Union 14 830 323 13 668 174 14 110 673 12 461 240 Revenue from the sale of goods in Latvia 5 066 553 4 482 142 5 044 594 5 116 224 Revenue from the sale of goods in other markets 1 474 623 1 853 538 1 24 4 517 1 240 828 Revenue from the provision of services 102 558 219 811 102 558 111 621 Other revenue from operating activities 47 797 10 553 2 734 10 553 Total 21 52 1 854 20 234 218 20 505 076 18 940 466 ( 3 ) Cost of goods sold Raw materials consumed 3 67 8 155 3 178 987 4 046 880 3 27 0 743 Remuneration for work 1 83 5 049 1 661 918 1 79 2 711 1 609 794 Mandatory state social insurance contributions 432 587 391 172 422 500 378 863 Depreciation of property, plant and equipment (Note 13) 403 398 340 383 388 714 319 166 Production service costs 215 456 273 627 203 750 257 599 Current assets consumed 200 011 262 982 196 905 255 860 Research and development costs for new products 207 379 233 082 207 379 231 654 Premises rent and maintenance costs 196 264 215 140 162 437 149 123 Resource costs 96 615 134 977 96 615 134 977 Leasehold improvements write-off (see Note 13) 91 897 85 981 91 897 85 982 ECOCERT quality certificate maintenance costs 32 465 49 802 32 465 44 619 Car maintenance, fuel and repair costs 16 919 22 627 16 919 22 627 Business trip costs 10 004 11 481 10 004 11 481 Other production and maintenance related costs 46 079 23 854 46 069 23 838 Total 7 462 278 6 886 013 7 715 245 6 796 326 1817 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia Item name Amount for 2023 before reclassification / EUR Amount of reclassification / EUR Amount for 2023 after reclassification / EUR Selling expenses (8 173 755) 19 733 (8 154 022) Other operating expenses (258 402) (19 733) (278 135) Item name Amount for 2023 before reclassification / EUR Amount of reclassification / EUR Amount for 2023 after reclassification / EUR Selling expenses (9 139 174) 20 236 (9 118 938 ) Other operating expenses (281 089) (20 236) (301 325) The Company’s statement of profit and loss for 2023: Reclassification of comparative item figures To improve the comprehensibility of the financial statements, in 2024 the Company’s management changed the classification of representation expenses, which resulted in the reclassification of certain comparative items in the 2023 statement of profit and loss presented in these financial statements: The Group's statement of profit and loss for 2023:
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Group 2024 / EUR Group 2023 / EUR *reclassified Company 2024 / EUR Company 2023 / EUR *reclassified ( 4 ) Selling expenses Advertising and marketing costs 3 84 7 818 3 141 029 3 725 595 2 939 857 Remuneration for work 2 110 910 1 863 189 1 774 629 1 550 129 Transportation costs 1 083 035 1 280 697 1 024 550 1 173 764 Production costs of product samples 699 790 688 221 699 790 688 221 Depreciation of property, plant and equipment and amortisation of intangible assets (Note 12 and Note 13) 533 432 413 043 476 801 344 000 Mandatory state social insurance contributions 497 522 440 323 418 197 365 764 Intermediate services costs 587 465 321 272 598 173 369 422 Trade promotion costs 98 453 178 588 98 453 279 703 Maintenance costs of sales platforms 135 595 281 275 135 595 178 588 Premises rent and maintenance costs 183 840 169 978 - - Business trips and exhibitions costs 65 973 62 957 65 954 48 626 Royalties 17 404 9 348 17 404 9 348 Sales activity risk insurance 25 014 28 905 25 014 28 905 Leasehold improvements write-off (Note 13) 26 922 15 246 - - E-shop WEB page maintenance costs and other IT costs 109 747 14 662 109 747 14 662 Car maintenance, fuel and repair costs 15 992 17 442 14 265 15 766 Other selling expenses 394 240 192 763 356 083 147 267 Total 10 433 152 9 118 938 9 540 250 8 154 022 Group 2024 / EUR Group 2023 / EUR Company 2024 / EUR Company 2023 / EUR ( 5 ) Administration expenses Remuneration for work 912 041 850 606 784 106 715 686 Office costs 264 642 221 641 24 4 165 197 623 Mandatory state social insurance contributions 21 5 337 200 427 184 912 168 671 Cash transactions related costs 203 274 184 873 163 460 137 775 Premises rent and maintenance costs 162 962 119 970 162 962 119 969 Depreciation of property, plant and equipment and amortisation of intangible assets (Note 12 and Note 13) 36 176 86 428 36 176 86 428 Employee health insurance 93 022 62 521 80 454 49 791 Employee meal costs 82 519 79 102 74 690 70 358 Personnel sustainability costs 81 424 67 625 77 933 61 675 Audit costs** 42 393 38 700 40 593 35 100 Car maintenance, fuel and repair costs 39 218 30 849 35 693 30 849 Securities circulation costs 19 057 21 337 19 057 21 337 Group 2024 / EUR Group 2023 / EUR Company 2024 / EUR Company 2023 / EUR ( 5 ) Administration expenses (continued) Research consultation and conference costs 43 217 60 882 43 217 60 882 Legal and other professional service costs 93 618 42 543 89 381 37 085 Communication service costs 21 195 20 063 17 890 15 304 Net change in allowance for doubtful receivables (Note 18) 14 485 9 129 - 8 805 Business trip costs 6 272 19 464 6 272 19 464 Other management and administration costs 160 942 83 108 150 999 54 845 Total 2 491 794 2 199 268 2 211 960 1 891 647 Group 2023 / EUR Group 2022 / EUR Company 2023 / EUR Company 2022 / EUR ( 6 ) Other operating income Income from ERAF projects co-financing 230 298 145 005 230 298 145 005 Income from the sale of current assets 37 786 4 172 37 786 4 172 Net gain on disposal of property, plant and equipment - 7 438 9 135 7 438 Proceeds from the sale of property, plant and equipment - 7 438 54 463 7 438 Residual carrying amount of property, plant and equipment (Note 13) - - (45 328) - Net gain from disposal of other non-current assets 3 993 704 - 3 993 706 - Proceeds from the sale of the "MOSSA" brand* 4 000 000 - 4 000 000 - Residual carrying amount of non-current assets (Note 12) (6 296) - (6 294) - Net gain from disposal of shares in subsidiary** 578 740 - 197 172 - Proceeds from the sale of subsidiary shares 578 740 - 200 000 - Carrying amount of the investment in subsidiary (Note 14) - - (2 828) - Net gain from disposal of other securities and investments - - - - Proceeds from the sale of other securities and investments 135 - 135 - Carrying amount of other securities and investments (135) - (135) - Net change in allowance for doubtful receivables (Note 18) - - 185 515 - Other income 60 035 79 621 78 644 83 114 Total 4 900 563 236 236 4 732 256 239 729 19 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia *See Note 1 to the financial statements. **Deloitte Audits Latvia, the auditor of the Parent Company, provided only services related to the statutory audit of financial statements during the reporting year. *On 30 April 2024, the Parent Company divested the 'MOSSA' brand, along with associated intangible and tangible assets – including trademarks, the online store, and distribution-related databases and etc. assets – to the Finnish cosmetics distributor Oy Transmeri Ab. The market value of these assets was determined by an independent valuator engaged by the Company. The valuer possesses the appropriate qualifications and experience in valuing financial assets. The valuation was determined using the income approach, the discounted cash flow (DCF) method, which involved calculating the present value of projected future cash flows and discounting them at the effective interest rate. **On 1 July 2024, the Parent Company sold its shares (100%) of the subsidiary Cosmetics NORD SIA to another Company – SLFNMD SIA. 20
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AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia Group 2024 / EUR Group 2023 / EUR *reclassified Company 2024 / EUR Company 2023 / EUR *reclassified ( 7 ) Other operating expenses Donations 4 415 3 455 4 000 3 455 Employees recruitment and training costs 58 733 134 360 58 733 134 360 Net loss on disposal of property, plant and equipment 976 - - - Proceeds from the sale of property, plant and equipment (44 463) - - - Residual carrying amount of property, plant and equipment (Note 13) 45 439 - - - Nature protection costs 34 355 36 731 33 455 36 731 Resold purchased goods and services 3 681 6 302 3 681 6 302 Labour protection costs 13 795 8 773 13 795 8 773 Security costs - 7 815 - - Representation costs 22 367 20 236 22 367 19 733 Other expenses 108 066 83 653 91 724 68 781 Total 246 388 301 325 227 755 278 135 Group 2024 / EUR Group 2023 / EUR Company 2024 / EUR Company 2023 / EUR ( 8 ) Interest and similar income Other interest income 219 136 12 229 218 091 12 217 Total 219 136 12 229 218 091 12 217 ( 9 ) Interest and similar expenses Net loss on foreign currency exchange rate fluctuations 13 549 28 699 13 549 28 699 Factoring fees 529 965 - - Other interest payments 484 45 - 45 Penalties paid 3 742 14 279 3 672 14 040 Total 18 304 43 988 17 221 42 784 ( 10 ) Corporate income tax for the reporting year Corporate income tax calculated** 553 342 335 772 553 283 335 159 Total 553 342 335 772 553 283 335 159 ( 11 ) Other loans Loans to related parties*** - - 24 049 - Other short term loans**** 690 000 - 690 000 - Total 690 000 - 714 049 - 30.04.2024 / EUR Intangible assets 941 Inventories 197 Total 1 138 Proceeds from the sale of the "MOSSA" brand (4 000 000) Total (3 998 862) 01.07.2024 / EUR Consideration received in cash 200 000 Less: transferred cash due to disposal (226 817) Net (decrease)/increase in cash (26 817) 01.07.2024 / EUR Intangible assets 308 566 Property, plant and equipment 213 032 Other loans and other non-current receivables 14 097 Finished goods and goods for sale 326 063 Prepayments for inventories 5 191 Trade receivables 64 285 Trade receivables from related parties 69 323 Other receivables 15 731 Deferred expenses 3 548 Cash 226 817 Advances from customers (210 729) Trade payables (26 631) Trade payables to related parties (1 218 950) Taxes and mandatory state social insurance contributions (72 477 ) Other liabilities (43 417) Accrued liabilities (53 189) Total net assets (378 740) Proceeds from the sale of shares (200 000) Total (578 740) "MOSSA" brand associated non-current assets and transferable assets as of the date of disposal: Net cash flow arising on disposal: Cosmetics NORD SIA net assets as of the date of disposal were as follows: *See Note 1 to the financial statements. **During 2024 year corporate income tax calculated on previously retained 2023 year distributed profit into dividends, less tax benefits. ***The Parent Company has granted a loan to its subsidiary. The loan carries a fixed annual interest rate. The loan is unsecured. The repayment term is set to mature on 29 August 2025. *****During the reporting year, certain trade receivable from another Company were coverted into loan. The loan carries a base annual interest rate equal to the 6-month EURIBOR plus a fixed annual interest rate. The loan is guaranteed by another company that has significant and decisive control over the borrower. The repayment term is set to mature on 30 June 30 2025. 2221
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Group Concessions, patents, licenses, trademarks, and similar rights (EUR) Other intangible assets (EUR) Prepayments for intangible assets (EUR) Total intangible assets (EUR) Cost as of 31.12.2023. 2 145 364 31 226 12 569 2 189 159 Additions - - 502 084 502 084 Disposals (51 219 ) - - (51 219 ) Disposal of intangible assets* (447 462) - - (447 462) Transfers 51 4 653 - (514 653) - Cost as of 31.12.2024. 2 16 1 336 31 226 - 2 192 562 Accumulated amortisation 31.12.2023. 808 171 9 840 - 818 011 Amortisation charged 489 747 6 259 - 496 006 Disposals (44 923) - - (44 923) Disposal of intangible assets* (138 896) - - (138 896) Accumulated amortisation 31.12.2024. 1 114 099 16 099 - 1 130 198 Net carrying amounts 31.12.2023. 1 33 7 193 21 386 12 569 1 371 148 Net carrying amounts 31.12.2024. 1 047 237 15 127 - 1 062 364 Company Concessions, patents, licenses, trademarks, and similar rights (EUR) Other intangible assets (EUR) Prepayments for intangible assets (EUR) Total intangible assets (EUR) Cost as of 31.12.2023. 1 789 736 31 226 12 569 1 83 3 531 Additions - - 410 250 410 250 Disposals (51 217 ) - - (51 217 ) Transfers 422 819 - (422 819) - Cost as of 31.12.2024. 2 161 338 31 226 - 2 192 564 Accumulated amortisation 31.12.2023. 717 241 9 839 - 727 080 Amortisation charged 441 783 6 260 - 448 043 Disposals (44 923) - - (44 923) Accumulated amortisation 31.12.2024. 1 114 101 16 099 - 1 130 200 Net carrying amounts 31.12.2023. 1 072 495 21 387 12 569 1 106 451 Net carrying amounts 31.12.2024. 1 04 7 237 15 127 - 1 062 364 ( 12 ) INTANGIBLE ASSETS 23 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia *Disposal of intangible assets due to the sale of subsidiary shares. Refer to Note 6 to the financial statements.
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Group Land (EUR) Leasehold improve- ments (EUR) Techno- logical equip- ment and machinery (EUR) Other fixed assets and equipment (EUR) Assets under construc- tion (EUR) Prepay- ments for property, plant and equipment (EUR) Total property, plant and equipment (EUR) Cost as of 31.12.2023. 468 722 1 07 4 277 4 789 040 1 232 616 40 757 24 569 7 629 981 Additions - - - - 140 504 139 756 280 260 Adjustments - - - - 18 516 (18 516) - Disposals - (36 004) - (221 042 ) - - (257 046) Disposal of property, plant and equipment* - (4 660) (218 756) (55 377) - (8 756) (287 549) Transfers - 2 5 9 74 91 172 121 028 (116 623 ) (121 551) - Cost as of 31.12.2024. 468 722 1 05 9 587 4 66 1 456 1 077 225 83 154 15 502 7 365 646 Accumulated depreciation 31.12.2023. - 673 552 2 711 240 816 535 - - 4 201 327 Depreciation charged - 119 641 326 536 149 642 - - 595 819 Disposals - (35 893) - (175 714) - - (211 607) Disposal of property, plant and equipment* - (4 349) (47 581) (22 587) - - (74 517) Accumulated depreciation 31.12.2024. - 752 951 2 990 195 767 876 - - 4 511 022 Net carrying amounts 31.12.2023. 468 722 400 725 2 077 800 416 081 40 757 24 569 3 428 654 Net carrying amounts 31.12.2024. 468 722 306 636 1 67 1 261 309 349 83 154 15 502 2 854 624 Company Land (EUR) Leasehold improve- ments (EUR) Techno- logical equip- ment and machinery (EUR) Other fixed assets and equipment (EUR) Assets under construc- tion (EUR) Prepay- ments for property, plant and equipment (EUR) Total property, plant and equipment (EUR) Cost as of 31.12.2023. 468 722 815 306 4 625 884 1 148 502 38 739 21 786 7 118 939 Additions - - - - 84 729 93 027 177 756 Disposals - - - (217 017) - - (217 017) Transfers - 25 096 35 572 78 957 (40 314) (99 311) - Cost as of 31.12.2024. 468 722 840 402 4 661 456 1 010 442 83 154 15 502 7 079 678 Accumulated depreciation 31.12.2023. - 540 284 2 67 6 903 761 251 - - 3 978 438 Depreciation charged - 91 896 313 292 140 357 - - 545 545 Disposals - - - (171 689) - - (171 689) Accumulated depreciation 31.12.2024. - 63 2 180 2 990 195 729 919 - - 4 35 2 294 Net carrying amounts 31.12.2023. 468 722 275 022 1 948 981 38 7 251 38 739 21 786 3 140 501 Net carrying amounts 31.12.2024. 468 722 208 222 1 67 1 261 280 523 83 154 15 502 2 727 384 ( 13 ) PROPERTY , PLANT AND EQUIPMENT ( 14 ) INVESTMENTS IN SUBSIDIARIES Company 31.12.2024 / EUR Company 31.12.2023 / EUR Acquisition value 310 684 18 156 Total 310 684 18 156 Name of the company Acquisition cost / EUR Owned shares, % 31.12.2024. Owned shares, % 31.12.2023. Carrying amount of investment 31.12.2024. /EUR Carrying amount of investment 31.12.2023. / EUR Investment in participation / (disposal) 2024 / EUR MADARA Retail SIA 2 828 100 100 2 828 2 828 - Brand Lab Cosmetics SIA 200 000 100 100 200 000 - 200 000 MADARA Cosmetics GmbH 25 000 100 100 25 000 12 500 12 500 MADARA Cosmetics Inc. 22 647 100 100 22 647 - 22 647 Madara Cosmetics LTD 60 209 100 100 60 209 - 60 209 Cosmetics NORD SIA* 2 828 - 100 - 2 828 (2 828) Total 313 512 - - 310 684 18 156 292 528 2625 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia *Disposal of property, plant and equipment due to the sale of subsidiary shares. Refer to Note 6 to the financial statements. *See Note 6 to the financial statements. 31.12.2024 / (EUR) 31.12.2023 / (EUR) MADARA Retail SIA, registration number 40103212103, 131 Zeltinu street, Marupe, Latvia. Type of operating activities – retail sale of cosmetics products. Equity, EUR, audited by another auditor 112 975 183 032 Loss for the reporting year, EUR, audited by another auditor (70 056) 17 686 Brand Lab Cosmetics SIA, registration number 40203612673, 20A Balozu street, Riga, LV-1048, Latvia. Type of operating activities – manufacture of perfumes and body care products. Equity, EUR, unaudited 199 990 - Profit or (loss) of the reporting year, EUR, unaudited (10) - MADARA Cosmetics GmbH, registration number HRB 177689, Potsdamer Platz 1, Berlin. Type of operating activities – cosmetics products distribution services. Equity, EUR, unaudited 8 032 14 786 Profit or (loss) of the reporting year, EUR, unaudited (6 754) (5 243) MADARA Cosmetics Inc., registration number 37-2087771, 291 Main Street, Beacon, NY 12508. Type of operating activities - retail sale of cosmetics products. Equity, EUR, unaudited (7 669) - Profit or (loss) of the reporting year, EUR, unaudited (30 794) - MADARA Cosmetics LTD., registration number 15967488, 10 Village Way, Pinner, United Kingdom HA5 5AF. Type of operating activities – retail sale of cosmetics products. Equity, EUR, unaudited 5 2 118 - Profit or (loss) of the reporting year, EUR, unaudited (8 145) -
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Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Trade receivables, gross value 1 83 4 318 1 69 5 787 1 833 370 1 553 004 Allowance for doubtful trade receivables (32 861) (18 700) (32 861) (18 376 ) Total 1 801 457 1 677 087 1 800 509 1 53 4 628 Group 2024 / EUR Group 2023 / EUR Company 2024 / EUR Company 2023 / EUR Allowance for doubtful trade receivables at the beginning of the reporting year 18 700 31 033 218 376 230 033 Allowance charged* 14 485 9 129 14 485 8 805 Release of allowance for doubtful trade receivables from related parties (Note 19)* - - (200 000) - Receivables written off during the year as uncollectible - (21 462) - (20 462) Allowance for doubtful trade receivables at the end of the reporting year 33 185 18 700 32 861 218 376 ( 18 ) TRADE RECEIVABLES 2827 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Raw materials and materials, gross value 2 83 3 196 2 362 093 2 8 33 196 2 362 093 Goods in transit 216 135 73 486 216 135 72 7 76 Total 3 049 331 2 43 5 579 3 049 331 2 434 869 Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Cosmetic products at gross value 1 326 819 1 59 9 731 1 104 997 1 411 639 Advertising materials 174 402 135 261 17 4 402 135 261 Goods in transit 57 877 31 408 57 877 30 611 Alowance for slow-moving inventories (3 500) (3 500) (3 500) (3 500) Total 1 555 598 1 762 900 1 333 776 1 57 4 011 Group 2024 / EUR Group 2023 / EUR Company 2024 / EUR Company 2023 / EUR Allowance for obsolete and slow-moving inventories at the beginning of the year 3 500 6 500 3 500 6 500 Released accruals - (3 000) - (3 000) Allowance for obsolete and slow-moving inventories at the end of the year 3 500 3 500 3 500 3 500 ( 16 ) RAW MATERIALS, MATERIALS AND CONSUMABLES ( 17 ) FINISHED GOODS AND GOODS FOR SALE Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR VAT overpayment (Latvia) - 42 509 - 42 509 VAT overpayment (Germany) - 6 383 - 6 383 Security deposits 239 882 - 882 Other receivables 72 786 86 816 63 583 67 044 Total 73 025 136 590 63 583 116 818 ( 20 ) OTHER RECEIVABLES ( 19 ) TRADE RECEIVABLES FROM SUBSIDIARIES Company 31.12.2024 / EUR Company 31.12.2023 / EUR MADARA Retail SIA 227 544 310 970 Madara Cosmetics Inc. 218 019 - Madara Cosmetics LTD 27 559 - Cosmetics NORD SIA - 1 641 088 Allowance for doubtful trade receivables - (200 000) Total 473 122 1 752 058 Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Rent security deposits 101 949 96 728 61 915 40 000 Total 101 949 96 728 61 915 40 000 ( 15 ) OTHER NON-CURRENT RECEIVABLES Changes in allowance for doubtful trade receivables and trade receivables from related parties: *Net change in allowance as gain is presented in the "Other operating income" of the statement of profit or loss, while the net change as loss is presented in the "Administration expenses" of the statement of profit or loss. According to the Group's management assessment, allowances for certain trade receivables were released in the reporting year, as expected full collection of these receivables.
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( 22 ) Share capital As of December 31, 2024, the issued and fully paid-up share capital of the Group's Parent Company is 378 043.40, consisting of 3 780 434 shares (31.12.2023: 377 657.80 EUR, 3 776 578 shares). The share capital has increased by 385.60 EUR compared to 31 December 2023, using previously accumulated retained earnings under the employee option program. The nominal value of one share is 0.10 EUR. The Parent Company MADARA Cosmetics AS implements an employee option program as an additional tool for employee motivation and engagement. Employee options can be granted to the Company's employees, heads of departments, and board members who have made a significant contribution to the Company. The allocation of employee options is carried out by the Board in accordance with the procedures and the volume of options determined by the shareholders' meeting. The Company does not apply the fair value model to the option program, and in accordance with the stated procedures, the exercise of the options is carried out at nominal value, charged against retained earnings. In 2024, 3856 employee options were exercised, resulting in the option holders acquiring 3856 shares of the Company. As of 31 December 2024, the number of share options granted for which the rights to use will vest in the following years is 32 408 (31.12.2023: 36 264 options). As a result of using these options, share options participants – employees will acquire 32 408 shares of the Parent Company. In order to receive additional financing, the Parent Company in 2024 participated in Norwegian Financial Instrument Program Activity – "Green Innovations and the Introduction of Information and Communication Technology Products into Production," as well as in the joint venture ECSEL project "Intelligent Motion Control", as well as in the Competence Centre projects, which provides support for the development of new products and technologies. During the implementation of these projects, all necessary participation conditions were met, and the Parent Company received funding totaling 60 076 EUR during 2024 (247 288 EUR in 2023). The project monitoring period is 5 years after the date of approval of the project completion report. In the year 2024 and as of 31 December 2024, the Group is in compliance with all contractual conditions related to deferred revenues. In the year 2024, payments for other project support of 133 013 EUR (99 009 EUR in the year 2023) were received. 3029 Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Salaries 247 308 244 344 230 598 214 240 Balance of gift cards 20 163 13 656 9 009 4 718 Other liabilities 10 841 28 228 9 901 19 399 Total 278 312 286 228 249 508 238 357 Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Accrued liabilities for unused vacations 310 243 336 333 296 355 288 837 Accrued liabilities for services received 385 096 215 380 369 075 203 503 Accrued liabilities for employee remuneration 24 938 32 237 24 938 32 237 Accrued liabilities for goods received 206 701 122 979 428 605 12 4 351 Total 926 978 706 929 1 118 973 648 928 Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Non-current portion: Deferred revenue from European Union fund co-financing 279 154 281 374 279 154 281 374 Total non-current portion 279 154 281 374 279 154 281 374 Current portion: Deferred revenue from European Union fund co-financing 55 260 54 084 55 260 54 084 Deferred revenue from the loyalty program 16 815 - 16 815 - Total current portion 72 075 54 084 72 075 54 084 Total 351 229 335 458 351 229 335 458 ( 24 ) OTHER LIABILITIES ( 26 ) ACCRUED LIABILITIES ( 25 ) DEFERRED REVENUE AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Value added tax (incl. OSS) 279 253 244 764 279 253 227 515 Mandatory state social insurance contributions 129 722 129 139 120 206 114 675 Personal income tax 67 545 64 327 63 050 57 353 Corporate income tax 876 5 169 876 5 169 Other taxes and duties (Italy, United Kingdom, France) 30 872 34 047 30 850 17 661 Total 508 268 477 446 494 235 422 373 ( 23 ) TAXES AND MANDATORY STATE SOCIAL INSURANCE CONTRIBUTIONS Group 31.12.2024 / EUR Group 31.12.2023 / EUR Company 31.12.2024 / EUR Company 31.12.2023 / EUR Cash in bank accounts 1 062 668 2 794 152 774 050 1 853 844 Short-term deposits in a commercial bank 7 538 352 2 692 563 7 383 562 2 692 563 Total 8 601 020 5 486 715 8 157 612 4 546 407 ( 21 ) CASH AND CASH EQUIVALENTS
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Group 2024 Group 2023 Company 2024 Company 2023 Average number of employees in the year, including: 207 215 183 176 Members of the Board 4 6 4 4 Members of the Council 5 5 5 5 ( 28 ) NUMBER OF EMPLOYEES 31 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia ( 29 ) INFORMATION ON THE REMUNERATION OF MEMBERS OF THE COUNCIL AND THE BOARD Group 2024 Group 2023 Company 2024 Company 2023 Board members remuneration for the work at the Board 393 273 341 768 393 273 332 870 Council members remuneration for the work at the Council 6 681 4 680 6 681 4 680 Total 399 954 346 448 399 954 337 550 ( 27 ) TRANSACTIONS OF THE PARENT COMPANY WITH SUBSIDIARIES AND GROUP TRANSACTIONS WITH RELATED PARTIES DURING THE REPORTING YEAR Goods sale and provision of services / EUR Purchased goods and receipt of services / EUR Cosmetics NORD SIA** 868 183 8 048 MC PROPERTIES SIA 960 240 383 KALVI SIA - 26 085 SLFNMD SIA*** 200 000 - Transmeri Group Ab Oy* 6 794 060 157 4 3 0 Total 7 863 203 431 946 Goods sale and provision of services / EUR Purchased goods and receipt of services / EUR MADARA Retail SIA**** 513 628 923 Cosmetics NORD SIA** 5 73 113 18 959 Madara Cosmetics LTD**** 22 941 - Madara Cosmetics Inc**** 205 256 - Total 1 314 938 19 882 Group transactions with related parties during the reporting year: Parent Company transactions with subsidiaries: *Including the sale of the "MOSSA" brand, see Note 6 to the financial statements. **For the period 01.07.2024-31.12.2024. See Note 6 to the financial statements. ***Disposal of shares into subsidiary. See Note 6 to the financial statements. ****Trade receivables of these parties included in the balance sheet item "Trade receivables from subsidiaries" (Note 19).
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( 30 ) Off-balance sheet liabilities and contingent liabilities (a) Operating lease agreements On 17 March 2015, the Parent Company entered into a premises rent agreement with MC PROPERTIES SIA, Reg. No 40103872324, for leasing production and office premises in Marupe, 131 Zeltinu Street. The agreement matures in 2030. The Parent Company of the Group has concluded an agreement on lease of office premises with Kalvi SIA at 20A Balozu Street, the term of the agreement is 2026. Group has concluded lease agreements for rent of premises in four shopping centers in Riga: “Galerija Centrs”, “Spice”, “AKROPOLE Alfa” and “Galerija Rīga”. The long-term lease agreement for warehouse and office space at 6 Kauguru street, Riga, has been terminated, and the Parent Company has concluded new long-term lease agreement for warehouse and office space at Lielmani, Marupe. Maturity of these agreements – up to the years 2028–2030 with a possibility to prolong. (b) Issued guarantees On 15 March 2015, a mortgage agreement was signed between SWEDBANK A/S and Group's Parent Company's lessor MC PROPERTIES SIA on pledged item – real estate on 131 Zeltinu Street, Marupe. Real estate is pledged in favour of SWEDBANK A/S and the Group's Parent Company is the guarantor for the MC PROPERTIES SIA obtained borrowings; the amount of the guarantee, in accordance with the terms of the contract, is the amount of the outstanding liabilities. As of 31 December 2024, the outstanding amount of MC PROPERTIES SIA loan to A/S SWEDBANK was 650 640 EUR (31 December 2023: EUR 770 758). The Group's management has assessed the need to make provisions for the above guarantee and is of the opinion that no such provision is required as at 31 December 2024. (c) Legal Risk The Company and the Group are subject to various foreign laws, including taxation laws, as the Group's activities related to the supply of goods to individuals and legal entities take place in various foreign markets. The period of supervision by the tax authorities of the relevant countries may vary from country to country, generally between 3 and 5 years from the time of incurring or declaring the tax liability. The Group and the Company are exposed to legal risks related to possible actions by the tax authorities of these countries, including tax liabilities that could arise for periods in which the limitation period has not yet expired as at 31 December 2024 and the date of signing the annual report. The Group's management has considered all known circumstances that have arisen up to the date of signing the annual report and believes that the provision for possible tax liabilities arising from the supervision of these foreign tax administrations is not material and therefore no provision is made as at 31 December 2024. ( 31 ) Financial risk management The Group's and the Company's activities are exposed to a variety of financial risks: foreign currency risk, interest rate risk, credit risk and liquidity risk. - Foreign currency risk Foreign currency risk is the risk of financial losses incurred by the Group due to adverse fluctuations in foreign currency exchange rates. This risk arises when financial assets denominated in a foreign currency do no match financial liabilities in that currency, which results in open currency positions. The Group companies do not hold any material balances of financial assets and liabilities denominated in other currencies. Therefore, during the reporting year, the Group's exposure to foreign currency risk was not significant. The Group does not undertake measures to mitigate the risk. - Credit risk Credit risk is the risk that the Group will incur a financial loss as a result of the counterparty being unable to meet its obligations to the Group's entities. Credit risk arises principally from cash at banks, trade receivables and/or long-term and short-term borrowings. In order to reduce this risk, the Group monitors trade receivables on a regular basis and, if necessary, takes additional debt recovery measures. The Group has no significant concentration of credit risk with respect to any single counterparty or group of similar counterparties Certain trade receivables of the Parent Company are insured. - Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its obligations in full and on time. Liquidity risk arises when the maturities of financial assets and liabilities do not coincide. The Group's liquidity risk management objective is to maintain adequate cash and cash equivalents and to ensure adequate funding through bank credit facilities to enable the Group to meet its obligations as they fall due. As at 31 December 2024, the Group has no active credit facility agreements. As of 31 December 2024, the Group's current assets exceeds current liabilities. The Parent Company of the Group regularly assesses the matching of financial assets and liabilities by maturity and the stability of funding sources for long-term investments ( 32 ) Events after the reporting date During the period from the last day of the reporting year until the date of the signing of this financial statement, there have been no events that should result in adjustments or be reflected in this financial statement. ( 33 ) Proposal for profit distribution The Management Board of the Parent Company proposes distributing a portion of the 2024 profit as dividends – EUR 3 480 345.28, or EUR 0.92 per share (based on the number of shares as of the date of approval of the financial statements: 3 782 984) – with the remaining part of the 2024 profit to be transferred to retained earnings for further development. 22 May 2025 3433 AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia AS “MADARA COSMETICS” 2024 STANDALONE AND CONSOLIDATED ANNUAL REPORT Registration No 40003844254, 131 Zeltinu Street, Marupe, LV-2167, Latvia Lote Tisenkopfa - Iltnere Chairman of the Board Tatjana Nagle Member of the Board Uldis Iltners Member of the Board Gunta Šulte Member of the Board The Annual report approved by: Dace Reinsone Chief accountant The Annual Report prepared by:
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36 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their re lated entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is li able only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited („DTTL“), its global netwo rk of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, render ing professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever aris ing directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities. © 2025. For information, contact Deloitte Latvia. ID: 1B14F4D304E6EAB79C059E8BBBD81206 SIA Deloitte Audits Latvia Republikas laukums 2a Riga LV-1010 Latvia Latvia@deloittece.com www2.deloitte.com/lv/en.html Independent Auditor’s Report To the shareholders of MADARA Cosmetics AS Our Opinion on the Separate and Consolidated Financial Statements We have audited the accompanying separate financial statements of MADARA Cosmetics AS (“the Company”) and accompanying consolidated financial statements of the Company and its subsidiaries (“the Group”) set out on pages 8 to 34 of the accompanying separate and consolidated annual report, which comprise: • the separate and consolidated balance sheet as at 31 December 2024, • the separate and consolidated profit and loss statement for the year then ended, • the separate and consolidated statement of changes in equity for the year then ended, • the separate and consolidated statement of cash flows for the year then ended, and • the notes to the separate and consolidated financial statements, which include a summary of significant accounting policies and other explanatory notes. In our opinion, the accompanying separate and consolidated financial statements give a true and fair view of the separate and consolidated financial position of the Company and the Group, respectively, as at 31 December 2024, and of their separate and consolidated financial performance and their separate and consolidated cash flows for the year then ended in accordance with the ‘Law On the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia. Basis for Opinion In accordance with the Law on Audit Services of the Republic of Latvia we conducted our audit in accordance with International Standards on Auditing adopted in the Republic of Latvia (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the separate and consolidated Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and independence requirements included in the Law on Audit Services of the Republic of Latvia that are relevant to our audit of the separate and consolidated financial statements in the Republic of Latvia. We have also fulfilled our other professional ethi cs responsibilities and o bjectivity requirements in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) and Law on Audit Services of the Republic of Latvia. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters We have not determined any key audit matters to be communicated in our report of the separate and consolidated financial statements of the current period.
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ID: 1B14F4D304E6EAB79C059E8BBBD81206 Reporting on Other Information The Company’s management is responsible for the other information. The other information comprises: • Information about the Group, as set out on page 3 of the accompanying consolidated Annual Report, • the Management Report, as set out on page 5 and 6 of the accompanying consolidated Annual Report. Our opinion on the separate and consolidated financial statements does not cover the other information included in the separate and consolidated Annual Report, and we do not express any form of assurance conclusion thereon, except as described in the Other reporting responsibilities in accordance with the legislation of the Republic of Latvia section of our report. In connection with our audit of the separate and consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the separate and consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed and in light of the knowledge and understanding of the Company and the Group and their environment obtained in the course of our audit, 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. Other reporting responsibilities in accordance with the legislation of the Republic of Latvia In addition, in accordance with the Law on Audit Services of the Republic of Latvia with respect to the Management Report, our responsibility is to consider whether the Management Report is prepared in accordance with the requirements of the ‘Law On the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia. Based solely on the work required to be undertaken in the course of our audit, in our opinion: • the information given in the Management Report for the financial year for which the separate and consolidated financial statements are prepared is consistent with the separate and consolidated financial statements; and • the Management Report has been prepared in accordance with the requirements of the ‘Law On the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia. Responsibilities of Management and Those Charged with Governance for the Separate and Consolidated Financial Statements Management is responsible for the preparation of the separate and consolidated financial statements that give a true and fair view in accordance with the ‘Law On the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia and for such internal control as management determines is necessary to enable the preparation of separate and consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate and consolidated financial statements, management is responsible for assessing the Company’s and Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going conce rn basis of accounting unless management either intends to liquidate the Company and Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s and Group’s financial reporting process. Auditor’s Responsibility for the Audit of the Separate and Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the separate and consolidated 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. Re asonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs 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 separate and consolidated financial statements. ID: 1B14F4D304E6EAB79C059E8BBBD81206 As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the separate and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s a nd Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate and consolidated financial statements or, if such dis closures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the separate and consolidated financial statements, including the disclosures, and whether the separate and consolidated financial statements represent the underlying transactions and events in a manner that achieves a fair presentation. • Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are respo nsible for the direction, supervision and review of the audit work performed for the purpose of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Deloitte Audits Latvia SIA Licence no. 43 Inguna Stasa Member of the Board Certified auditor Certificate no. 145 Riga, Latvia 22 May 2025
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MADARACOSMETICS.COM INVESTORS.MADARACOSMETICS.COM