The directors present the strategic report for the year ended 31 December 2022.
During the year ended 31 December 2022 the group recorded a net loss of £125,845 (2021: loss of £412,421) on a turnover of £15,549,097 (2021: £10,043,968). Included in the loss for the year relates to £192,057 on the disposal of subsidiary detailed in note 25 of these financial statements.
The group has net current liabilities of £1,354,558 (2021:£1,501,688) but overall net assets of £390,042 (2021: £518,395)
Included in creditors falling due within one year is a long-term Recovery Loan Scheme (RLS) bank loan of £611,743 (2021: £750,000) which has been reclassified to creditors due within one year due to a covenant breach at the year ended 31 December 2022. Post year end, the bank had informed the company that they are aware of potential future covenant breaches based on current and forecast trading performance. 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. This has been disclosed in note 27 of the financial statements.
Included in amounts falling due within one year is £75,915 due to Toridoll Holdings Corporation, the Japanese parent company of Toridoll Holding Limited (a shareholder of Shoryu Holdings Limited) relating to loans for expansion purposes (total loan received: £840,000) which are repayable by 2026.
The directors are pleased to report that overall the group traded satisfactorily in 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, Shoryu’s like for like sales rose 66.3% compared to the previous year, showing a strong rebound from the pandemic. Whilst mature locations (Regent Street, Denman Street, Carnaby Street, Liverpool Street and Stratford) recorded a sales increase of 57.1% the emerging sites Covent Garden and Shoreditch recorded an increase of 95.3% and the out of London locations, Manchester and Oxford City recorded a 76.3% increase. Shoryu New Oxford Street site permanently closed on 5th of October 2021 and surrendered its lease on 3rd of March 2022. Like for like sales were 8.7% behind compared to pre-pandemic year 2019. Whist 2023 is forecasting to be 3.4% behind 2019 level, like for like sales Shoryu is on course to surpass pre-pandemic baseline sales in 2024.
The directors have taken into consideration post pandemic changes to city centre working, future trade union strike action, warmer than usual summer weather which are changing the footfall patterns. With the opening of Shoryu’s first franchise site in Kensington High Street (October 2022), Shoryu plans to expand both owned and franchising sites bringing high quality ramen, creating unique and engaging experiences to its’ growing customer base.
At the time of approval of these financial statements all Shoryu sites are open and trading except for New Oxford Street site which surrendered the lease to the landlord on 3 March 2022.
The group's key financial and other performance indicators during the year were as follows:
| Unit | 2022 | 2021 |
Turnover | £ | 15,549,097 | 10,043,968 |
Gross Profit | £ | 7,814,256 | 4,931,867 |
Gross Margin | % | 50 | 49 |
Profit/(loss) after tax | £ | (125,854) | (412,421) |
The directors recognise that within the businesses there is a number of risks which may affect the performance of the group. 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.
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.
The group is exposed to financial risk through its financial assets and liabilities. The most important component of financial risk affecting the group is the liquidity risk. Tight working capital control together with detailed cash flow monitoring mitigate the liquidity risk.
Included in amounts falling due within one year is £75,915 due to Toridoll Holdings Corporation, the Japanese parent company of Toridoll Holding Limited (a shareholder of Shoryu Holdings Limited) relating to loans for expansion purposes (total loan received: £840,000) which are repayable by 2026.
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.
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 1.3 of the accounting policies.
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 group would need to seek financial support from its major 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 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 group'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 group being a going concern are set out in the accounting policies (Note 1.3).
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 10.
No ordinary interim dividends were paid. The directors do not recommend payment of a dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In 2023, due to a covenant breach of the 5 year RLS loan noted off at the year ended 31 December 2022 the company's bankers issued a letter of comfort for the financial year ended 31 December 2022 stating that the bank does not intend to take any potential action as a result of current or potential breaches.
Further details are included in Note 28.
The auditor, Sobell Rhodes Audit Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Shoryu Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 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 Financial Reporting Standard 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 group 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 1.3 to the financial statements concerning the group’s and 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 group’s going concern analysis.
The directors have modelled the impact of reduced sales and also mitigating actions available to the group to reduce costs. The projections reviewed indicates the group 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 1.3 may impact upon the group’s projected cashflows, a material uncertainty exists that may cast a significant doubt on the group 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 group or company were unable to continue as a going concern.
In auditing the financial statements for the company and the group, 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.
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 their 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 group and 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 group or the parent 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.
We enquired of Management to obtain an understanding of the legal and regulatory frameworks that are applicable to the group and company. The most significant that are relevant to the group and 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 group and 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 group and 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 group and company have established to address the risk that prevents, deter, and detect fraud.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risks of override of controls).
We considered the programmes and controls that the group and company have 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.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £88,336 (2021 - £3,539 loss).
Shoryu Holdings Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is Unit B Premier Park, Premier Park Road, Park Royal, London, United Kingdom, NW10 7NZ.
The group consists of Shoryu Holdings 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.
These financial statements have been prepared using the historical cost convention except that as disclosed in the accounting policies certain items are shown at fair value. The financial statements are prepared in sterling, which is the functional currency of the company and rounded to the nearest £1.
In these financial statements, the company has applied the exemptions available under FRS102 in respect of the following disclosures:
Parent company’s profit and loss account – The company has taken advantage of the exemption in section 408 of the Companies Act from presenting its individual profit and loss account.
Related party transaction notes - The company only discloses transactions with related parties which are not wholly owned with the same group. It does not disclose transactions with its parent or with members of the same group that are wholly owned.
The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.
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 financial instruments not measured at fair value; 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 consolidated group financial statements consist of the financial statements of the parent company Shoryu Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2022. 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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the group's ability to continue as a going concern.
The group has net current liabilities of £1,354,558 (2021:£1,501,688) but overall net assets of £390,042 (2021: £518,395) and has made a net loss of £125,854 (2022: loss of £412,421). Included in the loss for the year relates to £192,057 on the disposal of subsidiary detailed in note 25 of these financial statements.
Included in creditors falling due within one year is a long-term Recovery Loan Scheme (RLS) bank loan of £611,743 (2021: £750,000) which has been reclassified to creditors due within one year due to a covenant breach at the year ended 31 December 2022. 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, as stated in the letter, the bank reserves its rights in relation to the covenants. This has been disclosed in note 28 of the financial statements.
Also included within creditors falling due within one year is a sum of £250,000 payable under CBILs loan (total loan received: £1,000,000).
Included in amounts falling due within one year is £75,915 due to Toridoll Holdings Corporation, the Japanese parent company of Toridoll Holding Limited (a shareholder of Shoryu Holdings Limited) relating to loans for expansion purposes (total loan received: £840,000) which are repayable by 2026.
Furthermore, included in the current liabilities is a trade debt owed to a connected party with a common director and shareholder of £343,449 (2021: £372,419) 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 remaining creditors falling due within one year also includes HMRC VAT sum of £730,500 which has been paid post year end.
The group reported on their management accounts for the period to July 2023 draft EBITDA profit of £140,500 and a net loss before tax of £133,500.
In common with other 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 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. The forecasts incorporate profit improvement measures including controlling energy costs and securing favourable fixed prices, general cost efficiencies, and marketing campaigns to drive footfall.
The directors are of the opinion that the group post pandemic trading results have stabilised and the business will continually adopt to the new challenges being presented. The long-term survival of the group is broadly dependent upon factors such as the effectiveness of the containment measures of future global health emergencies success of Bank of England monetary policy in controlling inflation and future economic growth.
In the eventuality of future disruptions that might result in further covenant breaches and if the banks’ support becomes unavailable, although the bank has been very supportive in the past and notwithstanding any presumptions, the company will consider options such as restructuring or refinancing the bank loans.
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 group would need to seek financial support from its major 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 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 forecast, a material uncertainty exists that may cast a significant doubt on the group's and the company's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the group and the company were unable to continue as a going concern.
Turnover includes revenues earned from the sale of food and drinks from the operations of restaurants and franchise fees.
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.
Franchise fees are provided in the normal course of business and is shown net of VAT and other sales related taxes. Franchise fees are generally calculated as a percentage of gross sales income and is recognised in line with the franchisee's product sales in accordance with the relevant agreement.
Trademarks, licenses and customer-related intangible assets have a finite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses.
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, associates and jointly controlled entities 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
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 carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
The group 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 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.
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.
Equity instruments issued by the group 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 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 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.
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.
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.
A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the group 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.
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.
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.
Comparatives
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
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.
As indicated in Note 1.3, it is the directors' assessment that the group continues to be a going concern, however, a material uncertainty does exist as a result of the impact of the future operations due post pandemic macro-economic factors.
Accordingly, the assets and liabilities have been valued on the basis that the group 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.
In assessing whether there have been any indicators of impairment of the group's assets, the directors have considered both external and internal sources of information such as market conditions and experience of recoverability.
The directors’ have determined whether there are indicators of impairment of the group’s tangible and intangible fixed assets and the company’s investment in subsidiaries and intercompany debtor balances.
Factors taken into consideration in reaching such a decision include economic viability and expected future financial performance of the group’s cash generating units (CGUs). Where there are indicators of impairment, the group estimates the value of the CGUs using discounted cash flows to calculate the CGUs’ value in use. Due the repercussions of post pandemic events there is significant uncertainty in estimating the group’s future cash flows and a change in the outcome of this estimation could have an impact on impairment adjustments required. There have been no material indicators of impairments identified during the current financial year.
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 establishes a provision for stocks in order to provide against obsolete, or damaged items and this is reviewed on an annual basis.
Operating lease rentals for the group are shown net of £Nil of rent concessions (2021: £365,454).
Included in the group amount for government grants, includes furlough claim amounting to £Nil (2021: £363,618) and small business grants amounting to £37,108 (2021: £362,006).
Included in the government grant for the group is Coronavirus Business Interruption loan interest of £Nil (2021: £9,180).
During the year, the group obtained business rates relief of £104,740 (2021: £342,591).
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/(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:
The net carrying value of tangible fixed assets for the group includes the following in respect of assets held under finance leases or hire purchase contracts.
Included within the net book value of land and buildings for the group above is £2,552,748 (2020: £2,872,487) in respect of short leasehold improvements on land and buildings.
Details of the company's subsidiaries at 31 December 2022 are as follows:
Registered office addresses for all the subsidiaries above is:
All of the above subsidiaries are included in the consolidation. Controls are established via share ownership by the Company, directly or indirectly through the subsidiaries,
Included in creditors falling due within one year is a long-term Recovery Loan Scheme (RLS) bank loan of £611,743 (2021: £750,000) which has been reclassified to creditors due within one year due to a covenant breach at the year ended 31 December 2022.
Group
Bank Borrowings
In 2021, the company borrowed £1,000,000 from its bankers through the Coronavirus Business Interruption Loan. The loan term is 4 years and is repayable in monthly installments. The loan attracts a nominal interest rate of 2.5% per annum.
In 2021, the company borrowed £750,000 from its bankers through the Recovery Loan Scheme. The loan term is 5 years and is repayable in monthly installments. The loan attracts a nominal interest rate of 4.4% per annum. At the year end, a covenant breach occurred which has resulted in the loan amount being reclassified to creditors due within one year.
The group 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. A limited guarantee has been given by two of the directors'. A personal guarantee has been given by one of the director's against the £750,000 loan. Limited guarantees have been given by Secretary of State for the Department for Business, Energy and Industrial Strate against the Coronavirus Business Interruption Loan and the Recovery Loan Scheme.
Company
Bank Borrowings
In 2021, the company borrowed £1,000,000 from its bankers through the Coronavirus Business Interruption Loan. The loan term is 4 years and is repayable in monthly installments. The loan attracts a nominal interest rate of 2.5% per annum.
In 2021, the company borrowed £750,000 from its bankers through the Recovery Loan Scheme. The loan term is 5 years and is repayable in monthly installments. The loan attracts a nominal interest rate of 4.4% per annum.
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. A limited guarantee has been given by two of the directors'. A personal guarantee has been given by one of the director's against the £750,000 loan. Limited guarantees have been given by Secretary of State for the Department for Business, Energy and Industrial Strate against the Coronavirus Business Interruption Loan and the Recovery Loan Scheme.
Finance lease payments represent rentals payable by the company or group 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.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
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.
On 1 January 2022 the group disposed off its 100% holding in Shoryu New Oxford Street Limited. Included in the financial statements is a loss of £192,057 arising from the disposal of the company's interests in Shoryu New Oxford Street Limited up to the date of its disposal and after its elimination from the consolidation.
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.
After the year end one of the the group's subsidiary company is in the process of surrendering its operating lease and therefore the lease commitments below have been amended to reflect the revised commitments.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating rental leases, which fall due as follows:
In 2023, due to a covenant breach of the RLS loan noted off at the year ended 31 December 2022 the company's bankers issued a letter of comfort for the financial year ended 31 December 2022 breach stating that the bank does not intend to take any immediate action as a result of the identified or potential future breach. However, as stated in the letter, the bank reserves its rights in relation to the covenants. This has been further detailed in the accounting policies note 1.3 of the financial statements.
The directors have determined that this event is an unadjusting subsequent event. Accordingly, the financial position and results of operations as of and for the year ended 31 December 2022 have not been adjusted to reflect it's impact.
The directors' conclusions on the group being a going concern are set out in the accounting policies (note 1.3).
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Limited guarantee has been given by the director on 13/07/2021 for £150,000. Another limited guarantee has been given by the director and one of the shareholder's of the company on 25/06/2015 for £100,000.