Company registration number 07567429 (England and Wales)
SHORYU RAMEN LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
SHORYU RAMEN LIMITED
COMPANY INFORMATION
Directors
K Tokumine
K Furukawa
Company number
07567429
Registered office
Unit B
Premier Park Road
Park Royal
Middlesex
United Kingdom
NW10 7NZ
Auditor
Sobell Rhodes Audit Limited
The Kinetic Centre
Theobald Street
Elstree
Borehamwood
Hertfordshire
United Kingdom
WD6 4PJ
SHORYU RAMEN LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 8
Statement of income and retained earnings
9
Balance sheet
10
Statement of cash flows
11
Notes to the financial statements
12 - 25
Detailed profit and loss account
SHORYU RAMEN LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -
The directors present the strategic report for the year ended 31 December 2022.
Fair review of the business
During the year ended 31 December 2022 the company recorded a net profit of £122,719 (2021: loss of £444,796) on a turnover of £10,879,032 (2021: £6,431,244).
The directors are pleased to report that overall, the company traded satisfactorily during 2022.
With the end of UK Government Covid Plan B restrictions in January 2022 followed by the removal of all legal restrictions in February marked the first full year of operations since the outbreak of the pandemic in March 2020. However the war in Ukraine (February 2022) resulting in downgrading of global growth, followed by supply shortages, tightening of Bank of England monetary policy in response to soaring inflation, series of industrial strike action, and high and volatile energy prices has led to a shallow recession, erosion of real disposable household income, low consumer confidence, and a rising cost burden for businesses which has generally set back the momentum of economic recovery from the pandemic.
In the year under review, notwithstanding the challenges presented post the pandemic, the company’s like for like sales rose 89.3% compared to the previous year, showing a strong rebound from the pandemic. Whilst London locations (Regent Street, Denman Street, Covent Garden and Shoreditch) recorded a sales increase of 98.7% the out of London Sites (Manchester and Oxford City) recorded an increase of 76.3%. Like for like sales were 5.7% behind compared to pre-pandemic year 2019. Whist 2023 is forecasting to break even with 2019 level, like for like sales are on course to surpass pre-pandemic baseline sales in 2024.
At the time of approval of these financial statements all Shoryu restaurants operated by Shoryu Ramen Limited are open and trading.
The company’s key financial and other performance indicators during the year were as follows:
Principal Risks and Uncertainties
The directors recognise that within the business there are a number of risks which may affect the performance of the company. These risks are subject to regular review and, where appropriate, processes established to minimise the level of exposure.
Whilst a series of post pandemic crisis events including energy crisis, inflation crisis, war in Ukraine have slowed down the recovery from the pandemic both domestically and internationally, the major uncertainty feeders; Covid-19 pandemic, Brexit, and UK recession are losing their momentum as the markets become resilient and adopt to the new normal in the post pandemic era. The World Health Organisation in May 2023 announced that Covid-19 is now an established and ongoing health issue which no longer constitutes a public health emergency of international concern and there are welcome signs of global economic recovery, and International Monetary Fund announcement that Britain is or no longer is heading for recession this year, the directors are in the view that the certainty levels are rapidly retuning within acceptable business and market risk levels.
As applicable to the hospitality sector, the company is exposed to the effects of both Brexit, post pandemic and macro-economic challenges facing the business. The directors are confident that the group is able to trade through any future downturn in the economy by regularly monitoring performance and continuous contingency planning on the back of its strong customer loyalty, reputation of the brand, the strategic locations of the trading outlets, and shareholders’ commitment.
SHORYU RAMEN LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Market conditions
With the expansion and consolidation of the UK ramen market in the years prior to the pandemic, and steady growth and popularity the group has successfully benefited from its competitive edge maintaining its focus on ingredients and ability to cater to a diverse customer profile. This has enabled maintaining a balanced sales spread during the day and week. The majority of sales continue to be dominated by dine-in customers.
Going concern
The company is exposed to financial risk through its financial assets and liabilities. The most important component of financial risk affecting the company is liquidity risk. Tight working capital control together with detailed cash flow monitoring mitigates the liquidity risk.
The group has prepared a cash flow forecast until December 2024 under the current uncertain conditions. It is based on the key assumptions as set out in note 1.2 of the accounting policies.
Furthermore, at the year ended 31 December 2022, a covenant breach was noted off for the 5 year RLS bank loan which resulted in the loan being reclassified to creditors due within one year in the parent company's balance sheet. Post year end, the bank had issued a letter of comfort as a result. The letter of comfort provided for the year ended 31 December 2022 states the bank does not intend to take any immediate action as a result of the identified or potential future breach. However, in the letter, the bank reserves its rights in relation to the covenants.
In the event the restaurants were to severely disrupted in the future, the UK economy falls into a deep recession, further macro-economic disruptions, all of the financial support measures as noted were not agreed, then the company and therefore the group would need to seek financial support from its group shareholder, Toridoll Holdings Limited. Whilst there are no binding agreements, the shareholders of Toridoll Holdings Limited have historically been supportive of the group..
The directors are confident regarding the company and therefore the group’s long-term prospects and profitability. It is however difficult to assess the impact of any other unexpected disruptions which may also result in further loan covenant breaches and potential changes to the loan terms and financial support available to the group. Given the associated uncertainty within the forecast, a material uncertainty exists that may cast a significant doubt on the company's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the group were unable to continue as a going concern. The directors conclusion on the company being a going concern are set out in the accounting policies (Note 1.2).
K Tokumine
Director
13 October 2023
SHORYU RAMEN LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2022.
Principal activities
The principal activity of the company continued to be that of operation of restaurants
Results and dividends
The results for the year are set out on page 9.
No interim ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
K Tokumine
K Furukawa
Auditor
The auditor, Sobell Rhodes Audit Limited, 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.
SHORYU RAMEN LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
On behalf of the board
K Tokumine
Director
13 October 2023
SHORYU RAMEN LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SHORYU RAMEN LIMITED
- 5 -
Opinion
We have audited the financial statements of Shoryu Ramen Limited (the 'company') for the year ended 31 December 2022 which comprise the statement of income and retained earnings, the balance sheet, the 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 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 2022 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.
Material uncertainty relating to going concern
In forming our opinion on the financial statements which is not modified, we have considered the adequacy of the disclosure in note 1.2 to the financial statements concerning the company’s ability to continue as a going concern. The directors have considered the impact of the recent post pandemic related issues together with the rise in inflationary pressures and all the macro-economic factors impacting the UK as part of the company’s going concern analysis.
The directors have modelled the impact of reduced sales and also mitigating actions available to the company via the parent and fellow subsidiary companies ('the group') to reduce costs. The projections reviewed indicates 'the group' and therefore the company has adequate resources to continue in operational existence for a period of at least 12 months following the signing of the financial statements.
Due to the uncertainty as to how the factors disclosed in note 1.2 may impact upon the group's and therefore the company’s projected cashflows, a material uncertainty exists that may cast a significant doubt on the company’s ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the company were unable to continue as a 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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
SHORYU RAMEN LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SHORYU RAMEN LIMITED
- 6 -
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.
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.
SHORYU RAMEN LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SHORYU RAMEN LIMITED
- 7 -
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.
We enquired of Management to obtain an understanding of the legal and regulatory frameworks that are applicable to the company. The most significant that are relevant to the company are Data protection, Health and safety regulations, United Kingdom Generally Accepted Accounting Practice, the Companies Act 2006 and the tax legislation in respect of corporation tax, VAT and PAYE. We understood how the company complies with these through enquiries of management and asked of any instances of non-compliance in these areas.
We assessed the susceptibility of the company’s financial statements to material misstatements, including how fraud might occur through enquiries of management and to understand where they considered there was susceptibility to fraud. We obtained an understanding of the controls that the company has established to address the risk that prevents, deter, and detect fraud.
We considered the programmes and controls that the company has established to address risks identified, or that otherwise prevent, deter, and detect fraud, and how senior management monitors those programmes and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk.
Based on this understanding we designed our audit procedures to detect irregularities including fraud which primarily consisted of the following:
Identifying and testing of journal entries including large and unusual transactions to understand their rationale to review any instances of management override.
For management override relating to revenue recognition we obtained an understanding of the control environment relating to sales, the EPOS systems and the accounting systems, the cash reconciliation and recording of sales journals and also enquired with those charged with governance on instances any known fraud.
Enquiries of management and those charged with governance on instances any known fraud around actual and potential litigation claims and/or breaches in food and hygiene regulations.
Enquiries of the tax engagement team that are independent of the audit team for instances of non-compliance.
The senior statutory auditor reviewed the experience and expertise of the audit engagement team to ensure that they had the appropriate competence and capabilities to identify any instances of fraud and non-compliance with the relevant laws and regulations.
The objective of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risk of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
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.
SHORYU RAMEN LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SHORYU RAMEN 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.
Trusha Bhanderi FCCA (Senior Statutory Auditor)
For and on behalf of Sobell Rhodes Audit Limited
Statutory Auditor
The Kinetic Centre
Theobald Street
Elstree
United Kingdom
WD6 4PJ
13 October 2023
SHORYU RAMEN LIMITED
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
2022
2021
Notes
£
£
Turnover
2
10,879,032
6,431,244
Cost of sales
(5,947,557)
(3,619,240)
Gross profit
4,931,475
2,812,004
Administrative expenses
(4,873,248)
(3,560,505)
Other operating income
135,692
482,632
Operating profit/(loss)
4
193,919
(265,869)
Interest payable and similar expenses
8
(16,633)
(21,657)
Amounts written off investments
9
(21,226)
(193,529)
Profit/(loss) before taxation
156,060
(481,055)
Tax on profit/(loss)
10
(33,341)
36,259
Profit/(loss) for the financial year
122,719
(444,796)
Retained earnings brought forward
(642,800)
(198,004)
Retained earnings carried forward
(520,081)
(642,800)
The profit and loss account has been prepared on the basis that all operations are continuing operations.
SHORYU RAMEN LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 10 -
2022
2021
Notes
£
£
£
£
Fixed assets
Tangible assets
11
2,583,000
2,916,006
Current assets
Stocks
12
99,731
94,870
Debtors
13
1,576,838
1,070,905
Cash at bank and in hand
348,249
242,990
2,024,818
1,408,765
Creditors: amounts falling due within one year
14
(5,059,923)
(4,892,315)
Net current liabilities
(3,035,105)
(3,483,550)
Total assets less current liabilities
(452,105)
(567,544)
Creditors: amounts falling due after more than one year
15
(8,688)
Provisions for liabilities
Deferred tax liability
17
27,796
26,388
(27,796)
(26,388)
Net liabilities
(479,901)
(602,620)
Capital and reserves
Called up share capital
19
200
200
Share premium account
39,980
39,980
Profit and loss reserves
(520,081)
(642,800)
Total equity
(479,901)
(602,620)
The financial statements were approved by the board of directors and authorised for issue on 13 October 2023 and are signed on its behalf by:
K Tokumine
Director
Company Registration No. 07567429
SHORYU RAMEN LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 11 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
24
333,310
529,938
Interest paid
(16,633)
(21,657)
Income taxes paid
(17,487)
(35,551)
Net cash inflow from operating activities
299,190
472,730
Investing activities
Purchase of tangible fixed assets
(75,975)
(111,024)
Proceeds from disposal of tangible fixed assets
26,779
7,369
Repayment of loans
(21,226)
(193,529)
Net cash used in investing activities
(70,422)
(297,184)
Financing activities
Payment of finance leases obligations
(123,509)
(192,312)
Net cash used in financing activities
(123,509)
(192,312)
Net increase/(decrease) in cash and cash equivalents
105,259
(16,766)
Cash and cash equivalents at beginning of year
242,990
259,756
Cash and cash equivalents at end of year
348,249
242,990
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
1
Accounting policies
Company information
Shoryu Ramen Limited is a private company limited by shares incorporated in England and Wales. The registered office is Unit B, Premier Park Road, Park Royal, Middlesex, United Kingdom, NW10 7NZ.
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 company has taken advantage of exemptions from the following disclosure requirements:
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 under the historical cost convention, modified to include certain financial instruments at fair value. The significant accounting policies applied in the preparation of these financial statements are set out below.
1.2
Material uncertainty relating to going concern
The financial statements have been prepared on a going concern basis. The directors have a reasonable expectation that the company will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the company's ability to continue as a going concern.
The company has net current liabilities £3,035,105 (2021: £3,483,550) and has made a net profit of £122,719 (2022: loss of £444,796).
Included in amounts falling due within one year is £3,330,006 (2021: £2,994,972) due to its fellow subsidiary companies (which are also wholly owned by the parent company). The fellow subsidiary companies have provided assurance via letters of support that they will not seek repayment of the amounts owed at least on or after 12 months from the audit report date or when the company is in a position to repay the liabilities as this is in the best interest of the group as a whole.
Furthermore, included in the current liabilities is a trade debt owed to a group undertaking with a common director and shareholder of £173,084 (2021: £174,059) which is a key broker for the group. The directors are confident the company is able to repay the trade debt and has the ability to purchase the stocks directly from suppliers if need be.
The company reported in their management accounts for the period to July 2023 draft EBITDA profit of £59,000, and a net loss of £132,000.
In common with similar businesses in the hospitality sector, challenging trading environment presented by unforeseen post pandemic events such as the energy crisis, interest rate crisis, change in city working patterns, warmer than usual temperatures etc. have significant impact on footfall and customer spend levels, which in turn has an impact on the overall group results. Whilst it is difficult to predict the longevity and future such occurrences, the directors have implemented measures for the business to mitigate their impact, adopt and sustain profitability and growth in the medium to long term.
The company is a subsidiary of Shoryu Holdings Limited. The group has prepared cash flow forecast until December 2024, under the current economic conditions and based on the key assumption that the restaurants will remain open for the foreseeable future.
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 13 -
The forecasts incorporate profit improvement measures including controlling energy costs and securing favourable fixed prices, general cost efficiencies, and marketing campaigns to drive footfall.
In 2021, the parent company secured a 5 year CBILS (£1,000,000) and RLS (£750,000) bank loans under the government recovery loan schemes during the pandemic disruption period. At the year ended 31 December 2022, a covenant breach was noted off for the RLS bank loan which resulted in the loan being reclassified to creditors due within one year. Post year end, the bank had issued a letter of comfort for the year ended 31 December 2022. The comfort letter stated that the bank does not intend to take any immediate action as a result of any actual or potential breaches and that the bank currently expects but does not guarantee, to continue to provide the facility to the parent company as per the facility agreement.
In the event the restaurants were to severely disrupted in the future, the UK economy falls into a deep recession, all of the financial support measures as noted were not agreed, then the group would need to seek financial support from the shareholders'. The unexpected disruptions may result in further loan covenant breaches and potential call back of the RLS loan and or changes to the loan terms and financial support available to the group.
The directors are confident regarding the company’s and group's long-term prospects and profitability. It is however difficult to assess the impact of any other unexpected disruptions which may also result in further loan covenant breaches and potential changes to the loan terms and financial support available to the group.
Given the associated uncertainty above and therefore within the group's forecast, a material uncertainty exists that may cast a significant doubt on the group's and therefore the company's ability to continue as a going concern
The financial statements do not include the adjustments that would result if the company or group were unable to continue as a going concern.
1.3
Turnover
Turnover represents net invoiced sales of food and drinks, excluding value added tax and tips. Turnover is recognised when payment is rendered at the time of sale, and is all recognised in the United Kingdom.
1.4
Tangible fixed assets
Tangible assets are stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
The cost of tangible assets includes directly attributable incremental costs incurred in their acquisition and installation.
Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives as follows:
Short leasehold land and buildings
Over the remaining period of the lease
Fixtures and fittings
25% reducing balance
Motor vehicles
25% reducing balance
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.
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
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.
1.6
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the stocks to their present location and condition. Cost is calculated using the first-in, first-out formula. Provision is made for damaged, obsolete and slow-moving stock where appropriate.
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.
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.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -
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.
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.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -
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. Tax is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.
Current tax
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the company operates and generates taxable income.
Deferred tax
Deferred tax is recognised in respect of all timing differences between taxable profits and profits reported in the financial statements. Unrelieved tax losses and other deferred tax assets are recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply to the reversal of timing differences.
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.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.12
Retirement benefits
A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the company has no legal or constructive obligation to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
Contributions to defined contribution plans are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as a prepayment.
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
1.13
Leases
Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
Assets held under finance leases are recognised at the lower of their fair value at inception of the lease and the present value of the minimum lease payments. These assets are depreciated on a straight-line basis over the shorter of the useful life of the asset and the lease term. The corresponding liability to the lessor is included in the Balance Sheet as a finance lease obligation.
Lease payments are apportioned between finance costs in the Profit and Loss Account and reduction of the lease obligation so as to achieve a constant periodic rate of interest on the remaining balance of the liability.
In line with the recent amendments to FRS 102, the company has early adopted the amendments affecting accounting periods commencing on or after 1 January 2021 and recognised any changes in lease payments, arising from qualifying rent concessions, through the income statement on a systematic basis over the periods the change in lease payments is intended to compensate.
1.14
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.
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.
The company recognises an unconditional government grant related to Coronavirus Job Retention Scheme as other income when the grant becomes receivable. Such grants are recognised on an accrual basis in line with when the expenses would have been incurred.
The company recognises small business grants as other income when the grant becomes receivable.
1.15
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on present value basis.
2
Turnover and other revenue
2022
2021
£
£
Turnover analysed by class of business
Sales of goods
10,634,761
6,256,332
Shoryu kitchen recharges
244,271
174,912
10,879,032
6,431,244
2022
2021
£
£
Other revenue
Grants received
19,774
463,343
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 18 -
3
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
Going concern
As indicated in note 1.2 it is the directors' assessment that the company continues to be a going concern however a material uncertainty does exist as a result of the impact of the future operations due to the post pandemic macro-economic factors.
Accordingly the assets and liabilities have been valued on the basis that the company will continue in business.
If this presumption is proven to be mistaken the carrying value of assets and liabilities would need to be reappraised to reflect the impact of cessation.
Assessing indicators of impairment
The directors’ have determined whether there are indicators of impairment of the company’s intercompany debtor balances.
Factors taken into consideration in reaching such a decision include economic viability and expected future financial performance of the company's cash generating unit (CGU). Where there are indicators of impairment, the company estimates the value of the CGU using discounted cash flows to calculate the CGU's value in use. Due to the repercussions of the post pandemic events there is significant uncertainty in estimating the company’s future cash flows and a change in the outcome of this estimation could have an impact on impairment and adjustment required. There have been no material indicators of impairments identified during the current financial year.
Key sources of estimation uncertainty
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.
Valuation of stocks
The company establishes a provision for stocks in order to provide against potential obsolete, or damaged items and this is reviewed on an annual basis.
4
Operating profit/(loss)
2022
2021
Operating profit/(loss) for the year is stated after charging/(crediting):
£
£
Government grants
(19,774)
(463,343)
Depreciation of owned tangible fixed assets
366,698
345,994
Depreciation of tangible fixed assets held under finance leases
24,051
62,511
Profit on disposal of tangible fixed assets
(8,547)
(2,000)
Operating lease charges
843,456
692,239
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
4
Operating profit/(loss)
(Continued)
- 19 -
Included in the government grants, includes furlough claim amounting to £Nil (2021: £247,268 ) and small business grants amounting to £19,774 (2021: £216,075 ).
During the year, the company obtained business rates relief of £86,828.53 (2021: £197.817).
5
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
67,740
64,500
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Directors
2
2
Kitchen
68
50
Floor
72
51
Total
142
103
Their aggregate remuneration comprised:
2022
2021
£
£
Wages and salaries
3,078,994
2,113,970
Social security costs
319,476
182,036
Pension costs
51,249
35,819
3,449,719
2,331,825
7
Directors' remuneration
2022
2021
£
£
Remuneration for qualifying services
83,860
77,187
Company pension contributions to defined contribution schemes
1,321
1,319
85,181
78,506
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 20 -
8
Interest payable and similar expenses
2022
2021
£
£
Interest on financial liabilities measured at amortised cost:
Other interest on financial liabilities
2,137
Other finance costs:
Interest on finance leases and hire purchase contracts
14,496
21,657
16,633
21,657
9
Amounts written off investments
2022
2021
£
£
Amounts written off current loans
(21,226)
(193,529)
10
Taxation
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
31,933
Deferred tax
Origination and reversal of timing differences
1,408
(36,259)
Total tax charge/(credit)
33,341
(36,259)
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
2022
2021
£
£
Profit/(loss) before taxation
156,060
(481,055)
Expected tax charge/(credit) based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
29,651
(91,400)
Tax effect of expenses that are not deductible in determining taxable profit
3,412
32,679
Unutilised tax losses carried forward
25,525
Group relief
(50,562)
Permanent capital allowances in excess of depreciation
49,432
33,196
Other permanent differences
1,408
(36,259)
Taxation charge/(credit) for the year
33,341
(36,259)
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
11
Tangible fixed assets
Short leasehold land and buildings
Fixtures and fittings
Motor vehicles
Total
£
£
£
£
Cost
At 1 January 2022
3,862,393
1,638,415
57,566
5,558,374
Additions
2,255
73,720
75,975
Disposals
(29,087)
(53,538)
(82,625)
At 31 December 2022
3,864,648
1,683,048
4,028
5,551,724
Depreciation and impairment
At 1 January 2022
1,448,865
1,144,382
49,121
2,642,368
Depreciation charged in the year
256,168
133,132
1,449
390,749
Eliminated in respect of disposals
(17,472)
(46,921)
(64,393)
At 31 December 2022
1,705,033
1,260,042
3,649
2,968,724
Carrying amount
At 31 December 2022
2,159,615
423,006
379
2,583,000
At 31 December 2021
2,413,528
494,033
8,445
2,916,006
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
2022
2021
£
£
Fixtures and fittings
29,958
12,927
Short leasehold land and buildings
134,768
583,266
164,726
596,193
Included within the net book value of land and buildings above is £2,159,615 (2021: £2,413,528) in respect of short leasehold improvements on land and buildings.
12
Stocks
2022
2021
£
£
Finished goods and goods for resale
99,731
94,870
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
13
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
45,738
Amounts owed by group undertakings
704,770
509,110
Other debtors
654,741
466,782
Prepayments and accrued income
171,589
95,013
1,576,838
1,070,905
14
Creditors: amounts falling due within one year
2022
2021
Notes
£
£
Obligations under finance leases
16
35,753
150,574
Trade creditors
402,866
709,393
Amounts owed to group undertakings
3,503,090
3,169,031
Corporation tax
33,001
18,555
Other taxation and social security
537,816
374,508
Other creditors
11,454
10,396
Accruals and deferred income
535,943
459,858
5,059,923
4,892,315
15
Creditors: amounts falling due after more than one year
2022
2021
Notes
£
£
Obligations under finance leases
16
8,688
16
Finance lease obligations
2022
2021
Future minimum lease payments due under finance leases:
£
£
Within one year
35,753
150,574
In two to five years
8,688
35,753
159,262
Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 to 4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
17
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
2022
2021
Balances:
£
£
Accelerated capital allowances
27,796
26,388
2022
Movements in the year:
£
Liability at 1 January 2022
26,388
Charge to profit or loss
1,408
Liability at 31 December 2022
27,796
18
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
51,249
35,819
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.
19
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
200
200
200
200
20
Financial commitments, guarantees and contingent liabilities
The company was party to a multilateral cross guarantee and debenture dated 3 June 2015 given by subsidiary companies of Shoryu Holdings Limited to secure group borrowings.
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 24 -
21
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2022
2021
£
£
Within one year
903,525
803,295
Between two and five years
3,614,100
3,213,180
In over five years
4,083,025
4,489,827
8,600,650
8,506,302
In addition, the company had certain operating lease commitments to pay additional amounts based on performance.
22
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
Purchases
2022
2021
£
£
Entities with control, joint control or significant influence over the company
2,890,418
1,420,829
Management fees payable
Rent and other expenses
2022
2021
2022
2021
£
£
£
£
Entities with control, joint control or significant influence over the company
404,520
244,724
152,843
-
2022
2021
Amounts due to related parties
£
£
Entities with control, joint control or significant influence over the company
173,084
174,059
The following amounts were outstanding at the reporting end date:
2022
2021
Amounts due from related parties
£
£
Other related parties
65,081
36,560
SHORYU RAMEN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 25 -
23
Ultimate controlling party
The company's parent and ultimate parent is Shoryu Holdings Limited, incorporated in United Kingdom.
The parent of the largest group in which these financial statements are consolidated is Shoryu Holdings Limited, a company incorporated in England and Wales. A copy of the consolidated financial statements can be obtained from companies house using the company's registration number 08251749 or its registered office Unit B, Premier Park, Premier Park Road, London, United Kingdom, NW10 7NZ .
24
Cash generated from operations
2022
2021
£
£
Profit/(loss) for the year after tax
122,719
(444,796)
Adjustments for:
Taxation charged/(credited)
33,341
(36,259)
Finance costs
16,633
21,657
Gain on disposal of tangible fixed assets
(8,547)
(2,000)
Depreciation and impairment of tangible fixed assets
390,749
408,505
Other gains and losses
21,226
193,529
Movements in working capital:
Increase in stocks
(4,861)
(26,069)
Increase in debtors
(505,933)
(55,513)
Increase in creditors
267,983
470,884
Cash generated from operations
333,310
529,938
25
Analysis of changes in net funds
1 January 2022
Cash flows
31 December 2022
£
£
£
Cash at bank and in hand
242,990
105,259
348,249
Obligations under finance leases
(159,262)
123,509
(35,753)
83,728
228,768
312,496
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