The directors present the strategic report for the year ended 30 November 2021.
The group made a pre-tax profit of £3,009,591 (2020: £2,460,313) for the year on a turnover of £6,673,020 (2020: £6,394,228). At 30 November 2021 the group had net assets of £24,910,094 (2020: £23,059,551). Both the level of business and the year end financial position were as expected in the light of current trading conditions and the directors do not anticipate any material changes in the present level of activity.
The directors recognise that within the business there are a number of risks which may affect the performance of the group. These risks are subject to regular review and, where appropriate, processes are established to minimise the level of exposure.
Regulatory - the group's nursing home business is regulated by the Care Quality Commission and is exposed to adverse findings that the Commission may raise. The group ensures that the nursing home is run to a high standard and to-date no such adverse findings have been reported.
Financial risk - the company is exposed to financial risk through its assets and liabilities. The key financial risk is that, in the current climate, the proceeds from its assets may not be sufficient to fund the obligations from liabilities as they fall due. The most important components of financial risk are:
1) Credit risk - the group continues to minimise commercial credit risk and has not suffered unduly from bad debts.
2) Interest rate risk - the group's borrowings are on a variable rate basis and the group is exposed to potential increases in interest rates. The group continues to monitor its interest obligations and its investment portfolio to ensure that future increases in interest rates will not unduly affect the performance of the business.
1) Investment property
In the opinion of the directors, individual property rentals are considered the key performance indicator when assessing business performance, which are reviewed monthly by the management team and have remained in line with the directors' expectations, in the current climate.
2) Care home
In the opinion of the directors, occupancy percentage and average fee per resident are considered key performance indicators when assessing business performance and are reviewed monthly by the management team, with both having remained in line with the directors' expectations, in the current climate.
EBITDA is also considered a key performance indicator and is reviewed on a monthly basis, by the management team.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 November 2021.
The results for the year are set out on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
We have audited the financial statements of Macneil Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 November 2021 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
As part of our planning process:
We enquired of management the systems and controls the company has in place, the areas of the financial statements that are mostly susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. The company did not inform us of any known, suspected or alleged fraud.
We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: FRS 102, Companies Act 2006 and CQC compliance.
We considered the incentives and opportunities that exist in the company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.
Using our knowledge of the company, together with the discussions held with the company at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.
Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.
Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, in particular in relation to property valuations.
Assessing the extent of compliance, or lack of, with the relevant laws and regulations.
Testing key revenue lines, in particular cut-off, for evidence of management bias.
Verifying the existence of key assets.
Obtaining third-party confirmation of material bank and loan balances.
Documenting and verifying all significant related party balances and transactions.
Testing all material consolidation adjustments.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements even though we have properly planned and performed our audit in accordance with auditing standards. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s 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.
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,097,275 (2020 - £535,234 profit).
Macneil Limited (“the company”) is a private limited company incorporated by shares in England and Wales. The registered office is 1st Floor, Macneil House, 407 Nether Street, Finchley Central, London, N3 1QG
The group consists of Macneil Limited and all of its subsidiaries.
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 £.
The financial statements have been prepared on the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties at fair value. The principal accounting policies adopted are set out below.
The 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 for parent company information presented within the consolidated financial statements:
- 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’: 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated financial statements incorporate those of Macneil Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 30 November 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The directors have considered the effect of the Covid-19 pandemic. As the group operates in the care and investment property sectors, the pandemic has caused some disruption to the group's business. However with tighter operational controls, including rent holidays, accompanied by various government grants and financial assistance, the directors have been able to mitigate the Covid-19 impact on the business such that it has continued to trade and generate positive cash flows.
Accordingly, the directors have a reasonable expectation that the group has adequate resources to continue in operation for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes,where relevant.
Revenue for the provision of nursing home services is recognised by reference to the occupation and use of the facilities of the nursing home.
Revenue from rental receipts is recognised on an accruals basis and arises from the group's investment properties.
The excess depreciation between revalued land and buildings and historical cost is transferred between the profit and loss reserve and revaluation reserve.
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 recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible 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.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred 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 group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no commitment to sell the assets. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
The costs of short-term employee benefits are recognised as a liability and an expense.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The group carries its property used in the business at fair value, with changes in fair value being recognised through other comprehensive income. The group has consulted with external valuers to ascertain the fair value of the land and buildings. The valuation of the group’s land and buildings is inherently subjective due to, among other factors, the individual nature, location and condition of the nursing home premises. The land element of the land and buildings is also a subjective judgement. As a result the valuation is subject to a degree of uncertainty.
The most recent valuation took place in January 2021 and is reflected in the prior financial statements. At 30 November 2021 the directors believe that the carrying amount of land and buildings correctly reflect their fair value. As the directors believe that the care home valuation would be materially in line with the market value at the year-end date.
Deferred tax has been recognised on revalued property, based on the estimated fair value at the year end date.
The directors have assessed the fair value of investment properties at year end. In determining the fair value of the investment properties, the directors made use of historical and current market data, as well as existing lease agreements and third party valuations. The valuation of the company’s investment properties is inherently subjective due to, among other factors, the individual nature, location and condition of the properties. As a result the valuation is subject to a degree of uncertainty.
Included in the accounts are amounts due from companies under the control of Mr N J Lukka and members of his close family. The directors have considered the quality and performance of the underlying assets and deemed these amounts to be recoverable and not impaired.
An analysis of the group's turnover is as follows:
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
The carrying value of land and buildings was revalued as at 30 November 2020. The revaluation is based on a valuation report prepared on 7 January 2021 by a third party RICS certified property consultant. Their valuation is based on the special assumption that the land and buildings are fully equipped as operational entities and valued having regard to trading potential, as at the date of valuation. As at 30 November 2021 the directors believe that the carrying amount of land and buildings correctly reflect their fair value.
If revalued assets were stated on an historical cost basis rather than a fair value basis, the total amounts included would have been: £4,090,710 (2020: £4,069,325), being cost of £5,130,883 (2020: £5,013,832) and depreciation of £1,040,173 (2020: £944,507).
At 30 November 2021, the comparable historic cost of investment properties included at valuation was £21,280,988 (2020: £22,574,429).
The directors have assessed the fair value of investment properties at year end. In determining the fair value of the investment properties, the directors made use of historical and current market data, as well as existing lease agreements and third party valuations by a third party RICS certified property consultant. .
Details of the company's subsidiaries at 30 November 2021 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The outstanding liabilities at the balance sheet date of Macneil Properties Ltd, one of the company's subsidiary undertakings, have been guaranteed by Macneil Limited pursuant to s479A to s479C of the Companies Act 2006.
Included within bank loans is £842,546 repayable on a monthly basis and subject to interest of base rate + 3%; £193,339 repayable on a monthly basis and subject to interest of base rate + 2.75%; £38,203 repayable on a monthly basis and subject to interest of base rate + 1.25%; £216,079 repayable on a monthly basis and subject to interest of base rate + 1.4%; £2,918,154 repayable on a monthly basis and subject to interest of LIBOR rate + 1.87%; £2,735,112 repayable on a monthly basis and subject to interest of base rate + 2.25%; and £45,843 repayable on a monthly basis and subject to interest of 2.5%.
Bank loans are secured by a legal charge over the assets of the company, as well as by a cross-guarantee given by the other companies under common control of the shareholders amounting to £9,461,794 along with a guarantee of £600,000 from N J Lukka.
There is a second tier fixed and floating charge over the assets of the company.
Deferred tax assets and liabilities are offset where the group or 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:
Deferred tax is based on the future expected rate of corporation tax of 25% (2019: 19%)
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Profit and loss reserves include £2,991,130 (2020: £2,900,373) in respect of unrealised gains arising on investment properties.
At the reporting end date the group and the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The group's operating leasing arrangements as a lessor arise in respect of its investment properties which are held for rental purposes.
At the reporting end date the group and the company had contracted with tenants for the following minimum lease payments:
Post year end the company sold an investment property for £1,350,000.
At 30 November 2021 the group was owed £1,374,306, by companies under common control (2020: £202,552). During the year, the group charged interest of £nil on this balance (2020: £752).
At 30 November 2021 the group owed £16,748,819 to companies under common control (2020: £14,796,842). During the year, the group was charged interest of £nil on this balance (2020: £nil).
All of the above companies are related parties by virtue of the significant interest in the share capital of each by Mr N J Lukka and members of his close family, and the balances arose from loans made to/received from the above companies.
The assets of the group are subject to a cross-guarantee given in relation to the borrowings of other companies under the control of the shareholders.
At 30 November 2021 the group was owed £nil (2020: £836) by a close family member of Mr N J Lukka. During the year, the group received interest of £798 (2020: £836) from the close family member.
During the year the company made payments of £6,416 (2020: £11,666) on behalf of Mr N J Lukka which was repaid from available credits on his loan account.
At the year end the group owed £10,974 to Mr N J Lukka (2020: £17,390).
At the year end the group was owed £2,910,050 (2020: £1,610,050) by BNJ Investments Limited, a company owned by Mr B N Lukka, a director of the company. The group charged no interest on this loan in the current period.
At the year end the group was owed £2,810,000 (2020: £2,100,000) by RZV Group Limited, a company jointly owned by Mrs S N Vithlani, daughter of Mr N J Lukka, and her spouse Mr J Vithlani. The group charged no interest on this loan in the current period. During the year, an investment property was sold to RZV Group Limited at market value of £725,000.
At the year end the group was owed £920,088 (2020: £920,088) by Radia Estates Limited, a company over which Mr N J Lukka is a director. No interest was charged on this balance.