Company registration number 02419013 (England and Wales)
DOWN HALL HOTEL LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
DOWN HALL HOTEL LIMITED
COMPANY INFORMATION
Directors
Mr S K Gulhati
Mr S Gulhati
Secretary
Mrs S Gulhati
Company number
02419013
Registered office
7-12 Half Moon Street
Mayfair
London
W1J 7BH
Auditor
PK Audit LLP
1 Parkshot
Richmond
Surrey
TW9 2RD
DOWN HALL HOTEL LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 8
Profit and loss account
9
Statement of comprehensive income
10
Balance sheet
11
Statement of changes in equity
12
Notes to the financial statements
13 - 25
DOWN HALL HOTEL LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 1 -
The directors present the strategic report for the year ended 31 December 2021.
Fair Review of the Business
The company owns Down Hall Hotel, one of England’s most established country house hotels located in Hatfield Heath, near Bishop’s Stortford on the Hertfordshire and Essex border.
In common with other UK hotels, Down Hall Hotel was forced to close during certain times of the year due to the COVID-19 pandemic and this severely impacted turnover and profitability for the year although the damage was mitigated by taking advantage of appropriate government support and payment schemes. Revenue increased from £2,963,907 to £4,324,627, resulting in an operating profit of £110,920 (2020: operating loss £681,480).
The company made a profit after taxation of £39,813 for the year ended 31 December 2021 (2020: loss after taxation of £820,036). Net current liabilities at 31 December 2021 were £17,068,381 (2020: £17,036,322) and net liabilities at 31 December 2021 were £1,436,268 (2020: net liabilities £1,476,081). Such amounts include loans from the parent company, which has pledged its continuing support.
The directors consider the company's financial position and future prospects at 31 December 2021 to be in line with expectations.
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the company are considered to relate to the fact that the company operates in a very competitive market.
As the company has significant borrowings, credit and liquidity risks are particularly important. The current facility is available to the company until December 2022. The directors have sufficient expertise to manage these risks. All financial covenants have been complied with and it is expected that facilities will continue to remain available.
The directors maintain strong internal policies and procedures to ensure that liquidity risk is suitably managed. Monthly performance reports, forecasts and cash flows are reviewed and action taken where appropriate.
Having reviewed the company’s exposure to credit risk, liquidity risk and cash flow risk, the directors are of the view that these are manageable notwithstanding adverse market conditions.
Key Performance Indicators
The directors receive monthly divisional updates in order to track and assess key performance indicators (“KPIs”) against targets set every year. The KPIs monitored include gross profit and operating profit.
Gross (loss)/profit £847,625 (2020: (£108,395))
Gross (loss)/profit percentage 19.60% (2020: (3.66%))
Operating (loss)/profit £110,920 (2020: (£681,480))
Operating (loss)/profit percentage 2.56% (2020: (22.99%))
Future Developments
The directors are cautiously optimistic about the company’s future prospects and will continue to prioritise investment in its people to enable it to deliver excellent guest service, continue the renovation work and further development of the hotel.
Going Concern
The global COVID-19 pandemic has severely impacted the company’s revenue and cash flows and the directors have taken a number of steps to mitigate the effects of the downturn including taking advantage of appropriate government support and payment schemes. The war in Ukraine and its resulting energy crisis, cost of living crisis and inflation will have an impact on operations in the short term. However, the directors will continue to review its impact on the business to implement a range of support measures, tailored to the current situation, to continue to operate the business as a going concern.
On the basis of the parent company’s support and the anticipated ongoing availability of bank loan facilities, the directors are of the opinion that the company will continue to possess the ability to meet its financial obligations as they fall due and therefore consider it appropriate to adopt the going concern basis of preparing the financial statements.
DOWN HALL HOTEL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 2 -
Mr S K Gulhati
Director
27 July 2022
DOWN HALL HOTEL LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2021.
Principal activities
The company's principal activity is that of a hotelier.
The business review, future developments, financial risk and going concern are included in the strategic report.
Results and dividends
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year up to the date of the signature of the financial statements were as follows:
Mr S K Gulhati
Mr S Gulhati
Financial instruments
The directors manage the credit, liquidity, interest and foreign currency risks associated with the company’s activities.
The company is exposed to fair value interest rate risk on fixed rate borrowings and cash flow interest rate risk on floating rate deposits, bank overdrafts and loans. No derivative instruments were used during the year.
The company manages its cash and borrowings in order to minimise net interest costs whilst ensuring that it has sufficient liquid resources.
Foreign currency risk is considered to be low as the principal currency is sterling.
Customers wishing to trade on credit terms are subject to credit verification checks, trade debtors are monitored and provisions for doubtful debts are made where appropriate.
Having reviewed the company’s exposure to credit, liquidity, interest and foreign currency risks, the directors are of the view that these are manageable notwithstanding adverse market conditions.
The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.
The company is exposed to fair value interest rate risk on its fixed rate borrowings and cash flow interest rate risk on floating rate deposits, bank overdrafts and loans. The company permits to use interest rate derivatives to manage the mix of fixed and variable rate debt so as to reduce its exposure to changes in interest rates. No such derivatives were used during the year ended 31 December 2021.
The board of directors has the expertise to manage this risk and to structure long term borrowing to enable the company to make sufficient investment returns.
The company’s principal currency is sterling therefore the risk exposure is low.
Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which must fulfil credit rating criteria approved by the board.
All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.
DOWN HALL HOTEL LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 4 -
Research and development
The company continues to develop new processes and services to improve and enhance its customer service and customer experience.
Post reporting date events
There are no post reporting events.
Auditor
The auditor, PK Audit LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
Mr S K Gulhati
Director
27 July 2022
DOWN HALL HOTEL LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF DOWN HALL HOTEL LIMITED
- 5 -
Opinion
We have audited the financial statements of Down Hall Hotel Limited (the 'company') for the year ended 31 December 2021 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2021 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
DOWN HALL HOTEL LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DOWN HALL HOTEL LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with the directors and from our commercial knowledge and experience of the sector; we focused on those laws and regulations which we considered may have a direct material effect on the financial statements or the company's operations, including the Companies Act 2006, taxation legislation, data protection, anti-bribery, employment, environmental and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through enquiries of management;
we enquired of the company's solicitor as to whether there have been any litigation and claims;
identified laws and regulations were communicated within the audit team who remained alert to instances of non-compliance throughout the audit;
we assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by making enquiries of management as to where they considered there was susceptibility to fraud and their knowledge of actual, suspected and alleged fraud; and
we considered the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
DOWN HALL HOTEL LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DOWN HALL HOTEL LIMITED
- 7 -
Based on our understanding of the company and industry, and through discussion with the directors and other management, we identified that the principal risks were in relation to:
management bias in relation to the risk of management override of controls and the associated risk in accounting transactions;
management assumptions in the accounting estimates associated with property impairment and the depreciation of those assets;
the risk of not identifying related party transactions and the performance of transactions outside the normal course of business;
the risk of not complying with bank covenants and the associated risk of going concern;
revenue recognition;
accuracy of fixed assets classification and capital allowance claims; and
the accuracy of furlough claims to support the business during COVID-19 trading restrictions.
In response to the risk of irregularities, including fraud and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
performing analytical procedures to identify any unusual or unexpected relationships and transactions;
auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business;
assessing whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias;
agreeing disclosures within the financial statements to underlying supporting documentation;
requesting minutes of meetings of those charged with governance;
enquiring of management, those charged with governance and the entity’s solicitors around actual and potential litigation and claims;
for an appropriate sample of transactions, identifying the revenue recognition point for the provision of services and testing for completeness by ensuring the transactions were properly recorded in the sales nominal ledger account;
for an appropriate sample of transactions checking the accuracy of the assets' classification and accuracy of associated capital allowance claims;
identifying the terms and conditions of loans and assessing whether their covenants were met;
enquiring of the entity's staff involved in the tax and compliance functions to identify any instances of non-compliance with laws and regulations;
reviewing the accuracy of grant claims and agreeing to supporting documentation;
reviewing correspondence with HM Revenue and Customs, bankers and the company’s relevant costs; and
discussing the existence of related parties with management and obtaining confirmation of inter-company balances.
There are inherent limitations in the audit procedures described above. The more removed laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
DOWN HALL HOTEL LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DOWN HALL HOTEL LIMITED
- 8 -
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
David Truscott (Senior Statutory Auditor)
For and on behalf of PK Audit LLP
27 July 2022
Chartered Accountants
Statutory Auditors
1 Parkshot
Richmond
Surrey
TW9 2RD
DOWN HALL HOTEL LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 9 -
2021
2020
Notes
£
£
Turnover
3
4,324,627
2,963,907
Cost of sales
(3,477,002)
(3,072,302)
Gross profit/(loss)
847,625
(108,395)
Administrative expenses
(1,189,179)
(1,318,825)
Other operating income
452,474
745,740
Operating profit/(loss)
4
110,920
(681,480)
Interest receivable and similar income
7
62
11
Interest payable and similar expenses
8
(253,491)
(254,439)
Loss before taxation
(142,509)
(935,908)
Tax on loss
9
182,322
115,872
Profit/(loss) for the financial year
39,813
(820,036)
The Profit And Loss Account has been prepared on the basis that all operations are continuing operations.
DOWN HALL HOTEL LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
- 10 -
2021
2020
£
£
Profit/(loss) for the year
39,813
(820,036)
Other comprehensive income
-
-
Total comprehensive income for the year
39,813
(820,036)
DOWN HALL HOTEL LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2021
31 December 2021
- 11 -
2021
2020
Notes
£
£
£
£
Fixed assets
Tangible assets
10
16,638,363
16,614,653
Current assets
Stocks
11
65,930
35,823
Debtors
12
298,812
94,105
Cash at bank and in hand
1,004,917
844,127
1,369,659
974,055
Creditors: amounts falling due within one year
13
(18,438,040)
(18,010,377)
Net current liabilities
(17,068,381)
(17,036,322)
Total assets less current liabilities
(430,018)
(421,669)
Creditors: amounts falling due after more than one year
14
(1,006,250)
(950,000)
Provisions for liabilities
Deferred tax liability
16
104,412
-
(104,412)
Net liabilities
(1,436,268)
(1,476,081)
Capital and reserves
Called up share capital
18
100
100
Profit and loss reserves
(1,436,368)
(1,476,181)
Total equity
(1,436,268)
(1,476,081)
The financial statements were approved by the board of directors and authorised for issue on 27 July 2022 and are signed on its behalf by:
Mr S K Gulhati
Director
Company Registration No. 02419013
DOWN HALL HOTEL LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
- 12 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 January 2020
100
(656,145)
(656,045)
Year ended 31 December 2020:
Loss and total comprehensive income for the year
-
(820,036)
(820,036)
Balance at 31 December 2020
100
(1,476,181)
(1,476,081)
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
39,813
39,813
Balance at 31 December 2021
100
(1,436,368)
(1,436,268)
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
- 13 -
1
Accounting policies
Company information
Down Hall Hotel Limited is a company limited by shares incorporated in England and Wales. The registered office address is at 7-12 Half Moon Street, Mayfair, London, W1J 7BH. The company's trading address is Matching Road, Hatfield Heath, Bishop's Stortford, CM22 7AS.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £1.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’ – Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Veladail Hotels Ltd. These consolidated financial statements are available from Companies House.
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 14 -
1.2
Going concern
The company has net liabilities of £true1,436,268 (2020: £1,476,081) as at 31 December 2021. As at 31 December 2021, net current liabilities had increased to £17,068,381 (2020: £17,036,322), principally because of a bank loan now falling due within one year of the balance sheet date.
The company's parent undertaking, Veladail Hotels Limited, has pledged its continuing support to the company. As at the balance sheet date, the company owed its parent £8,948,000 (2020: £8,898,000), all of which is included within current liabilities.
The company's bank loan facility amounting to £7,806,000 (2020: £7,978,000) continues until December 2022 and is presented in current liabilities. The company is in the process of renewing this facility. The bank covenants were waived during the period 1 January 2021 to and including 31 December 2021, and there are ongoing discussions to waive the bank covenants for the year ending 31 December 2022.
The company's Coronavirus Bounce Back loan facility amounted to £1,275,000 (2020: £1,000,000) and it repayable within six years. The amount of £268,750 (2020: £50,000) is included as part of current liabilities.
The directors continue to monitor the current economic environment which is contributing to market uncertainty and have taken steps to mitigate the adverse effects of the severe recession caused by the COVID-19 pandemic and events in Ukraine.
The directors have carried out a detailed review of the company’s financial position including a review of cash flows and forecasts. Within this review, the directors have considered the increasingly broad effects of COVID-19 and its impact on the global economy and the company's trading position. At the time of approving the financial statements, the directors are of the opinion that the company will continue to be able to meet its financial obligations as they fall due and to continue in operational existence for at least the next twelve months from the date of approval of the accounts.
Therefore the directors consider it is appropriate to prepare the financial statements on the going concern basis.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.
Revenue from the sale of goods and services is recognised when it is probable that the economic benefits associated with the transaction will flow to the entity and the revenue can be measured reliably.
The company supplies hotel rooms, conference and event facilities to businesses and private customers. Sales of rooms, conference and events facilities are recognised on the date of the stay or event. Deposits received in advance are not recognised as revenue until the day of the stay or event.
The hotel operates the restaurant, bar and spa. Sales of goods are recognised when the hotel restaurant, spa or bar sells a product to a customer.
Interest income is recognised when it is probable that the economic benefits will flow to the company and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 15 -
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Freehold property
over 50 years core building, 15-30 years non core building (land is not depreciated)
Plant, machinery, fixtures & fittings, computer equipment
over 5-30 years straight line
Motor vehicles
over 5 years straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
1.5
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
1.6
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell.
Stock is calculated using the weighted average method.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.7
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 16 -
1.8
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 17 -
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.9
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.10
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.11
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 18 -
1.13
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
1.14
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Critical judgements and estimates
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Impairment of the asstes
Assets are valued at the lower cost and net realisable value. Calculation of net realisable value in use requires judgements to be made, which include estimated future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate the present value of future cash flows.
The carrying amount of the fixed assets at 31 December 2021 was £16,638,363 (2020: £16,614,653) after a total impairment loss of £Nil (2020: £Nil).
Deferred tax assets
The deferred tax assets in respect of unrelieved tax losses are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits in the company or the group. By its very nature, the recognition and measurement of deferred tax requires assumptions to be made about the future. The company estimates that, as at 31 December 2021, the deferred tax asset in respect of unrelieved tax losses amounted to £645,946 (2020: £300,565).
Residual value of the freehold property
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives. The residual value of the freehold property is calculated as a sum of the value of the land and 60% of the core building. As at 31 December 2021 the estimated residual value of the freehold amounted to £10.6 million (2020: £10.6 million).
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 19 -
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2021
2020
£
£
Turnover analysed by class of business
Hotelier trade
4,324,627
2,963,907
2021
2020
£
£
Other revenue
Interest income
62
11
Grants received
452,474
745,740
4
Operating profit/(loss)
2021
2020
Operating profit/(loss) for the year is stated after charging/(crediting):
£
£
Government grants
(452,474)
(745,740)
Depreciation of owned tangible fixed assets
681,772
658,820
Profit on disposal of tangible fixed assets
(200)
5
Auditor's remuneration
2021
2020
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
14,775
13,800
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2021
2020
Number
Number
Hotel
79
134
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
6
Employees
(Continued)
- 20 -
Their aggregate remuneration comprised:
2021
2020
£
£
Wages and salaries
1,758,431
1,962,441
Social security costs
123,071
139,473
Pension costs
28,008
33,352
1,909,510
2,135,266
7
Interest receivable and similar income
2021
2020
£
£
Interest income
Interest on bank deposits
62
11
8
Interest payable and similar expenses
2021
2020
£
£
Interest on bank overdrafts and loans
253,491
250,893
Other interest
3,546
253,491
254,439
9
Taxation
2021
2020
£
£
Deferred tax
Origination and reversal of timing differences
(74,772)
(109,083)
Changes in tax rates
(107,550)
(6,789)
Total deferred tax
(182,322)
(115,872)
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
9
Taxation
(Continued)
- 21 -
The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
2021
2020
£
£
Loss before taxation
(142,509)
(935,908)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2020: 19.00%)
(27,077)
(177,823)
Tax effect of expenses that are not deductible in determining taxable profit
638
1,293
Unutilised tax losses carried forward
61,799
197,242
Change in unrecognised deferred tax assets
(632,686)
(130,102)
Effect of change in corporation tax rate
(107,550)
(6,788)
Group relief
53,004
Permanent capital allowances in excess of depreciation
522,554
53,118
Other permanent differences
(53,004)
(52,812)
Taxation credit for the year
(182,322)
(115,872)
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 22 -
10
Tangible fixed assets
Freehold property
Assets under construction
Plant, machinery, fixtures & fittings, computer equipment
Motor vehicles
Total
£
£
£
£
£
Cost
At 1 January 2021
15,047,429
29,325
6,636,164
1,953
21,714,871
Additions
250,511
454,971
705,482
Disposals
(1,953)
(1,953)
Transfers
29,325
(29,325)
At 31 December 2021
15,327,265
7,091,135
22,418,400
Depreciation and impairment
At 1 January 2021
2,471,929
2,626,336
1,953
5,100,218
Depreciation charged in the year
113,908
567,864
681,772
Eliminated in respect of disposals
(1,953)
(1,953)
At 31 December 2021
2,585,837
3,194,200
5,780,037
Carrying amount
At 31 December 2021
12,741,428
3,896,935
16,638,363
At 31 December 2020
12,575,500
29,325
4,009,828
16,614,653
11
Stocks
2021
2020
£
£
Finished goods and goods for resale
65,930
35,823
12
Debtors
2021
2020
Amounts falling due within one year:
£
£
Trade debtors
88,803
11,688
Other debtors
69,749
15,186
Prepayments and accrued income
62,350
67,231
220,902
94,105
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
12
Debtors
(Continued)
- 23 -
2021
2020
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 16)
77,910
Total debtors
298,812
94,105
13
Creditors: amounts falling due within one year
2021
2020
Notes
£
£
Bank loans and overdrafts
15
8,203,023
8,028,000
Trade creditors
606,964
331,595
Amounts owed to group undertakings
8,948,000
8,898,297
Taxation and social security
60,157
135,284
Other creditors
44,260
46,211
Accruals and deferred income
575,636
570,990
18,438,040
18,010,377
14
Creditors: amounts falling due after more than one year
2021
2020
Notes
£
£
Bank loans and overdrafts
15
1,006,250
950,000
15
Loans and overdrafts
2021
2020
£
£
Bank loans
9,081,000
8,978,000
Bank overdrafts
128,273
9,209,273
8,978,000
Payable within one year
8,203,023
8,028,000
Payable after one year
1,006,250
950,000
The bank loan is secured by a fixed and floating charge over the assets of the company. Interest is charged at 2.50% over LIBOR. The facility is available to the company until December 2022.
The Coronavirus Business Interruption Loan is guaranteed by the government and provided for a duration of six years with an interest rate of 3.99% over the Bank of England base rate.
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
15
Loans and overdrafts
(Continued)
- 24 -
16
Deferred taxation
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Liabilities
Liabilities
Assets
Assets
2021
2020
2021
2020
Balances:
£
£
£
£
Accelerated Capital Allowance
-
404,976
(554,776)
-
Tax losses
-
(300,564)
632,686
-
-
104,412
77,910
-
2021
Movements in the year:
£
Liability at 1 January 2021
104,412
Credit to profit or loss
(74,772)
Effect of change in tax rate - profit or loss
(107,550)
Asset at 31 December 2021
(77,910)
The deferred tax provision is calculated using a corporation tax rate of 25% (2020: 19%). Future changes to corporate tax laws that affect the prevailing rate may in turn affect the deferred tax assets and liabilities. Any movements in the assets and liabilities resulting from such changes will be reflected as part of the tax charge included in the financial statements for future periods.
17
Retirement benefit schemes
2021
2020
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
28,008
33,352
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
DOWN HALL HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 25 -
18
Share capital
2021
2020
£
£
Ordinary share capital
Issued and fully paid
100 Ordinary shares of £1 each
100
100
The company has one class of ordinary shares which carry full voting rights.
19
Events after the reporting date
The company is closely monitoring the impact of COVID-19 and events in Ukraine on the business and continues to implement a range of business support measures, tailored to the current situation, to continue to operate the business as a going concern.
20
Ultimate controlling party
The immediate parent company is Veladail Hotels Limited, a company registered in England and Wales.
Veladail Hotels Limited prepares group financial statements and copies can be obtained from 7-12 Half Moon Street, London W1J 7BH.
The ultimate holding company is Arrow Trading & Investment Est. 1920, a company incorporated in Vaduz.
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