H & S Restaurants Ltd 05968294 false 2022-01-01 2022-12-31 2022-12-31 The principal activity of the company is an operator of a group of McDonald's restaurants. 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Registration number: 05968294

H & S Restaurants Ltd

Annual Report and Financial Statements

for the Year Ended 31 December 2022

 

H & S Restaurants Ltd

Contents

Company Information

1

Strategic Report

2 to 6

Directors' Report

7 to 8

Statement of Directors' Responsibilities

9

Independent Auditor's Report

10 to 12

Income Statement

13

Statement of Financial Position

14

Statement of Changes in Equity

15

Statement of Cash Flows

16

Notes to the Financial Statements

17 to 26

 

H & S Restaurants Ltd

Company Information

Directors

L M Dunnington

N C Dunnington

Company secretary

L M Dunnington

Registered office

McDonalds Restaurant Capitol Centre
Walton-Le-Dale
Preston
PR5 4AW

Accountants

Munslows Accountants Ltd
Chartered Certified Accountants
32 High Street
Wall Heath
Kingswinford
West Midlands
DY6 0HB

Auditors

Manex Accountants Ltd
Chartered Accountants and Statutory Auditors
9 Castle Court 2
Castlegate Way
Dudley
West Midlands
DY1 4RD

 

H & S Restaurants Ltd

Strategic Report for the Year Ended 31 December 2022

The directors present their strategic report for the year ended 31 December 2022.

Principal activity

The principal activity of the company is an operator of a group of McDonald's restaurants.

Fair review of the business

The results for the year and the financial position at the end of the year are shown in the annexed financial statements.

As a franchisee operator of a group of McDonald's restaurants the directors consider the company's key performance indicators to be turnover and gross profit. Turnover for the year increased by 6.8%, although due to increases in food and paper costs, gross profit fell by 7.1% compared to the previous year. In common with many other similar businesses and industries, labour and utility costs also increased considerably during the year, along with other overheads, resulting in a reduced profit before tax for the year of £1,730,718 compared to a profit of £7,815,686 in the previous year.

The directors believe that the trading environment in which the company operates will continue to be challenging but remain optimistic regarding future trading and are committed to increasing both future turnover and profitability and to continuing the company’s reinvestment program. The company has continued to invest in the business and in the development and training of its employees, as well as continued investment in IT and store equipment.

 

H & S Restaurants Ltd

Strategic Report for the Year Ended 31 December 2022

Principal risks and uncertainties

The company operates in a highly competitive market with high levels of price sensitivity. Consumer behaviour can impact the company's turnover and profitability. The company continually assesses these risks and mitigates them by adopting a policy of constantly reviewing its pricing strategy with ongoing market research.

The company remains exposed to periods of food cost inflation together with the variability of commodity prices, both of which impact on profitability. In addition, the effects of Brexit continue to have the possibility of impacting the business in terms of the access to and costs of both food and labour. The company continually assesses any risks identified, with the aim of mitigating the threats these may have on the company's operations and profitability. The company's supply chain is closely overseen and supported by McDonald's, who endeavour to negotiate effectively on behalf of all franchisees to ensure better purchasing terms. This helps as much as possible to protect the company from risks associated with fluctuating food costs.

The company is also inherently exposed to pressures within the labour market and to wage cost inflation. The company mitigates this risk by a policy of adopting remuneration and benefits packages designed to be competitive within the market as well as ensuring full compliance with labour market regulations, with employment policies to allow fulfilling career opportunities for all employees.

The company’s operations demand a high level of compliance within a wide range of regulatory requirements. In particular –
- health and safety
- hygiene procedures
- employment laws
- licensing

The above, in common with various other areas, are monitored in detail by McDonald’s with assistance being given to all franchisees to help meet the various requirements.

By its very nature, the fast-food market is extremely competitive, with large numbers of companies operating in the sector. In order to remain at the forefront of the industry, McDonald’s have dedicated teams whose focus is on ensuring they remain the leading brand in the market.

 

H & S Restaurants Ltd

Strategic Report for the Year Ended 31 December 2022

Section 172(1) statement

The success of the Company is the driving factor behind all decisions made by the Director. Decision making processes are structured to enable the Director to evaluate the merit of proposed business activities and the likely consequences of decisions taken over the short, medium and long term. The director remains mindful that any strategic decisions taken can have long term implications for the business and its stakeholders, and these implications are carefully assessed. An example of this is in decisions taken relating to capital investment in terms of possible new store acquisitions and equipment upgrades.

Our people are fundamental to our success. We continually endeavour to create opportunities for all our people, regardless of gender, age, or life stage that enhance their work experience. Understanding how our employees feel about McDonald’s is vital. The director takes active steps to ensure that the suggestions, views and interests of the workforce are incorporated and considered as part of any decision-making process, helping to ensure that our employees are given the right support to help achieve their potential. We have developed various employee communication channels such as the “Big Conversation”, “MyStuff” and “Love to Listen”, together with regular performance reviews, employee assistance programs and providing a means for employees to share ideas and feedback. We also conduct regular surveys into our employee’s job satisfaction and how they feel about their role in the company. We encourage and provide access to online learning and development, as well as providing our people with a mobile friendly platform to manage their own data, holidays, time off and access to view their wage slips.

Our customers are the reason for our existence and we therefore strive to provide high quality food with superior service in a clean and welcoming environment, all at an exceptional value. McDonald’s have set high standards globally and it is our obligation and desire to maintain these high standards with regular customer feedback through operating and monitoring an external customer satisfaction programme “Food for Thought” that collects customer comments.

The director carefully considers the impact of the business on communities and the environments in which the company operates. We arrange regular litter collections in the local area around our restaurants. Recycling units are installed around our restaurants and our paper cups are sent to specialist recycling centres in the UK. We endeavour to help our customers build communities, support charitable organisations, and use our size, scope and resources to help make local communities and the environment a better place.

In all our activities the director requires that employees and suppliers conduct business with the highest ethical and professional standards by adhering to our Standards of Business Conduct set by McDonald’s Corporation.

All of the company’s members are directors of the company and exercise day to day control over the company. The members meet regularly to express and discuss their views.

 

H & S Restaurants Ltd

Strategic Report for the Year Ended 31 December 2022

Non-financial and sustainability information

Environmental report

We have considered the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) when preparing this report. These recommendations encourage businesses to increase disclosure of climate-related information, with an emphasis on financial disclosure. H & S Restaurants Ltd supports these recommendations and are committed to disclosing the relevant information which can be found below.

Streamlined Energy and Carbon Reporting

Reporting period – Emissions are reported against the accounting period 1st January 2022 to 31st December 2022.

Reporting Boundary – Financial Control Approach – The company reports any emissions from its operations for which it has the ability to directly influence financial and operating policies in order to gain economic benefit. This is focussed on energy consumed in buildings the company occupies and/or are the bill payer, including vacant units where the company pay the bill until it is reoccupied or disposed of. This is restricted to the UK where we have full control over our operations.

Greenhouse gases reported – All greenhouse gas emissions are reported in tonnes of carbon dioxide equivalent (TCO2e) to account for all six of the Kyoto Protocol GHG’s.

Emissions factors – Government’s Greenhouse gas reporting factors for 2021 and 2022.

Baseline Year – Covers the period 1st January 2020 to 31st December 2020, as this is the first year required to report emissions under the SECR (Streamlined Energy & Carbon Reporting) legislation.

Strategy – For major emissions, primary data is sourced from AMR readings, utility bills and expenses claims. Emissions data is collated centrally by Mitie Energy’s Sustainability team who have overall responsibility for ensuring the calculations and methodologies are correct.

Intensity Ratio – The company uses annual turnover (tCO2e/£) to normalise and compare its emissions over time. McDonald’s also uses an average cheque per site for an intensity metric figure.

Exclusions – The company does not currently report fugitive emissions (refrigerant leakage) from refrigeration and air conditioning systems in leased properties or fleet. This is due to the difficulty in obtaining centralized data on refrigerant top-ups and the fact most of our buildings are out of scope as franchisees manage the HVAC systems. Given the size and types of emission sources, fugitive emissions are expected to be a very small proportion of total emissions and are therefore considered immaterial.

 

H & S Restaurants Ltd

Strategic Report for the Year Ended 31 December 2022

Emissions and energy consumption

Summary of greenhouse gas emissions and energy consumption for the year ended 31 December 2022:

Emissions source

1st January -
31st December 2020

1st January -
31st December 2021

1st January -
31st December 2022

Change V's
Previous Year

Direct Emissions from Stationery Combustion -

Natural Gas Consumption

219

261

227

-34

Total Scope 1 (tCO2e)

219

261

227

-34

Indirect Emmissions from Purchased Electricity

1249

1609

1626

17

Total Scope 2 (tCO2e) - Location Based

1249

1609

1626

17

Total Scope 1 & 2 (tCO2e) - Location Based

1468

1870

1854

-16

Fuel Consumed by personal vehicles used

for Business Activities - Grey fleet

2

2

2

0

Total scope3 (tCO2e)

2

2

2

0

Total Scope 1, 2 & 3 (tCO2e)

1470

1872

1856

-16

Intensity Metrics

Annual Turnover £M

44

72

77

5

Scope 1 & 2 emissions per unit (tCO2e/£m Turnover)

£33

£26

£24

-£2

Energy Consumption by Source (kWh)

Electricity

5,355,792

7,577,754

8,410,742

832,988

Gas

1,190,297

1,416,002

1,245,913

-170,089

Grey vehicle fleet

8,132

8,491

8,181

-310

Total

6,554,221

9,002,247

9,664,836

662,589

         

Approved and authorised by the Board on 15 November 2023 and signed on its behalf by:
 

.........................................
N C Dunnington
Director

 

H & S Restaurants Ltd

Directors' Report for the Year Ended 31 December 2022

The directors present their report and the financial statements for the year ended 31 December 2022.

Directors of the company

The directors who held office during the year were as follows:

L M Dunnington - Company secretary and director

N C Dunnington

Financial instruments

Objectives and policies

The company’s principle financial instruments comprise bank balances, trade creditors and bank loans. The main purpose of these instruments is to finance the company’s operations and to ensure the smooth running of the company’s operations.

Due to the nature of the financial instruments used by the company there is no exposure to price risk.

In respect of bank balances, the liquidity risk is managed by maintaining a balance to ensure the continuity of trading, through the use of detailed cash flow analysis, forecasts and projections which are regularly updated. In addition, the company has access to overdraft facilities from its bankers which are repayable on demand, should the business require them.

In respect of bank loans, these are provided by financial institutions. The interest rate on these loans is variable, although usually the monthly repayments are fixed. The company manages the liquidity risk by ensuring that there are sufficient funds to meet the payments through the constant review and updating of cashflow forecasts. The interest rate is managed through regular reviews of current and expected future interest rates.

Trade creditor liquidity risk is managed by ensuring sufficient funds are available to meet amounts due.

Price risk, credit risk, liquidity risk and cash flow risk

The main risks arising from the company’s financial instruments are interest risk and liquidity risk. The board reviews and agrees policies for managing each of these risks as summarised below –

Interest rate risk – the company’s exposure to market risk for changes in interest rates is limited to bank loans. Additional requirements for medium to long term debt are reviewed by the directors based on the company’s forecast requirements

Liquidity risk – the company’s objective is to maintain a balance between continuity of funding and flexibility, by the utilisation of cash and bank loans.

Employment of disabled persons

The company operates an equal opportunities policy in all areas of recruitment and seeks to offer suitable work and training wherever practicable to persons with disabilities. The policy of the company is to ensure that disabled applicants are given full and fair consideration having regards to their personal aptitudes and abilities. Existing disabled employees are given equal access to appropriate training, career development and promotion opportunities within the company. In the event of employees becoming disabled while in the employment of the company, all reasonable means are explored to achieve retention in employment in the same or an alternative capacity.

 

H & S Restaurants Ltd

Directors' Report for the Year Ended 31 December 2022

Employee involvement

The company aims to promote a working environment free from harassment, victimisation, bullying and discrimination. The company regards all employees as members of a team, where opinions are valued, and everyone is regarded as equal in status and treated with fairness and respect.

The company's recruitment procedures are intended to ensure that employees are selected, promoted, and treated according to their ability and that everyone has an equal opportunity to receive training and development. The company communicates regularly with all employees on matters relating to its performance, with employees encouraged to contribute to the decision-making process through regular staff meetings. In addition, there is a bulletin board in each restaurant where memoranda relating to company policy are displayed. There is also an online portal known as Our Lounge, which contains news and information for McDonald's employees.

Disclosure of information to the auditors

Each director has taken steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company's auditors are aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditors are unaware.

Reappointment of auditors

The auditors Manex Accountants Ltd are deemed to be reappointed under section 487(2) of the Companies Act 2006.

Approved and authorised by the Board on 15 November 2023 and signed on its behalf by:
 

.........................................
N C Dunnington
Director

 

H & S Restaurants Ltd

Statement of Directors' Responsibilities

The directors acknowledge their responsibilities 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 apply them consistently;

make judgements and accounting estimates that are reasonable and prudent;

state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

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 and in accordance with FRS 102. 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.

 

H & S Restaurants Ltd

Independent Auditor's Report to the Members of H & S Restaurants Ltd

Opinion

We have audited the financial statements of H & S Restaurants Ltd (the 'company') for the year ended 31 December 2022, which comprise the Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows, and Notes to the Financial Statements, including a summary of 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.

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 responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the original financial statements were authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.

 

H & S Restaurants Ltd

Independent Auditor's Report to the Members of H & S Restaurants Ltd

Opinion on other matter prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

the Strategic Report and 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 our 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 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, 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 directors' 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 Statement of Directors' Responsibilities [set out on page 9], 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 Responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

 

H & S Restaurants Ltd

Independent Auditor's Report to the Members of H & S Restaurants Ltd

We obtained an understanding of the legal and regulatory frameworks applicable to the company and the industry in which it operates. We determined that the following laws and regulations were most significant: The Companies Act 2006/FRS 102, Employment Law and Waste, Health and Safety. We enquired of management and those responsible for legal and compliance procedures to obtain an understanding of how the company is complying with those legal and regulatory frameworks and whether they had any knowledge of actual or suspected fraud. We corroborated the results of our enquiries through our discussions with the directors and management. We did not identify any matters relating to non-compliance with laws and regulations or matters in relation to fraud.

In assessing the potential risks of material misstatements, we obtained an understanding of the company’s operations, including its objectives and strategies to understand the expected financial statement disclosures and business risks that may result in risks of material misstatement;

In assessing the appropriateness of the collective competence and capabilities of the engagement team the engagement partner considered the engagement team’s :
 Understanding of, and practical experience with, audit engagements of a similar nature and complexity through appropriate training and participation,
 The specialist skills required and
 Knowledge of the industry in which the client operates.

We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
 Assessing the design effectiveness of controls management has in place to prevent and detect fraud;
 Challenging assumptions and judgements made by management in its significant accounting estimates;
 Identifying and testing journal entries, in particular manual journal entries made at year end for financial statement preparation; and
 Assessing the extent of compliance with the relevant laws and regulations as part of our procedures on the related financial statement item.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: 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.

......................................
Clinton Meehan BSc FCA (Senior Statutory Auditor)
For and on behalf of Manex Accountants Ltd, Statutory Auditor

9 Castle Court 2
Castlegate Way
Dudley
West Midlands
DY1 4RD

15 November 2023

 

H & S Restaurants Ltd

Income Statement for the Year Ended 31 December 2022

Note

2022
£

2021
£

Turnover

3

77,053,809

72,125,206

Cost of sales

 

(43,990,124)

(36,523,454)

Gross profit

 

33,063,685

35,601,752

Administrative expenses

 

(31,283,469)

(28,020,438)

Other operating income

4

-

280,091

Operating profit

6

1,780,216

7,861,405

Other interest receivable and similar income

8

14,406

9,361

Interest payable and similar expenses

9

(63,904)

(55,080)

   

(49,498)

(45,719)

Profit before tax

 

1,730,718

7,815,686

Tax on profit

13

(457,261)

(1,715,171)

Profit for the financial year

 

1,273,457

6,100,515

The above results were derived from continuing operations.

The company has no recognised gains or losses for the year other than the results above.

 

H & S Restaurants Ltd

(Registration number: 05968294)
Statement of Financial Position as at 31 December 2022

Note

2022
£

2021
£

Fixed assets

 

Intangible assets

14

792,120

1,454,972

Tangible assets

15

5,222,320

5,814,243

Other financial assets

16

21,250

21,250

 

6,035,690

7,290,465

Current assets

 

Stocks

17

404,003

290,538

Debtors

18

1,131,962

683,871

Cash at bank and in hand

 

9,027,680

8,701,546

 

10,563,645

9,675,955

Creditors: Amounts falling due within one year

20

(7,493,062)

(6,631,649)

Net current assets

 

3,070,583

3,044,306

Total assets less current liabilities

 

9,106,273

10,334,771

Creditors: Amounts falling due after more than one year

20

(42,575)

(1,498,348)

Provisions for liabilities

21

(674,076)

(720,258)

Net assets

 

8,389,622

8,116,165

Capital and reserves

 

Called up share capital

100

100

Retained earnings

8,389,522

8,116,065

Shareholders' funds

 

8,389,622

8,116,165

Approved and authorised by the Board on 15 November 2023 and signed on its behalf by:
 

.........................................
N C Dunnington
Director

 

H & S Restaurants Ltd

Statement of Changes in Equity for the Year Ended 31 December 2022

Share capital
£

Retained earnings
£

Total
£

At 1 January 2022

100

8,116,065

8,116,165

Profit for the year

-

1,273,457

1,273,457

Dividends

-

(1,000,000)

(1,000,000)

At 31 December 2022

100

8,389,522

8,389,622

Share capital
£

Retained earnings
£

Total
£

At 1 January 2021

100

2,715,550

2,715,650

Profit for the year

-

6,100,515

6,100,515

Dividends

-

(700,000)

(700,000)

At 31 December 2021

100

8,116,065

8,116,165

 

H & S Restaurants Ltd

Statement of Cash Flows for the Year Ended 31 December 2022

Note

2022
£

2021
£

Cash flows from operating activities

Profit for the year

 

1,273,457

6,100,515

Adjustments to cash flows from non-cash items

 

Depreciation and amortisation

6

2,422,218

2,514,236

Profit on disposal of tangible assets

5

(20,772)

(20,620)

Finance income

8

(14,406)

(9,361)

Finance costs

9

63,904

55,080

Income tax expense

13

457,261

1,715,171

 

4,181,662

10,355,021

Working capital adjustments

 

Increase in stocks

17

(113,465)

(60,550)

(Increase)/decrease in trade debtors

18

(192,225)

754,200

Increase/(decrease) in trade creditors

20

2,096,347

(415,102)

Cash generated from operations

 

5,972,319

10,633,569

Income taxes paid

13

(1,746,745)

(863,979)

Net cash flow from operating activities

 

4,225,574

9,769,590

Cash flows from investing activities

 

Interest received

8

14,406

9,361

Acquisitions of tangible assets

(1,200,289)

(2,126,513)

Proceeds from sale of tangible assets

 

55,368

129,909

Acquisition of intangible assets

14

(1,750)

(54,491)

Financial assets at cost less impairment additions

 

-

(1,250)

Net cash flows from investing activities

 

(1,132,265)

(2,042,984)

Cash flows from financing activities

 

Interest paid

9

(63,904)

(55,080)

Repayment of bank borrowing

 

(1,702,397)

(1,698,393)

Payments to finance lease creditors

 

(874)

(10,360)

Dividends paid

26

(1,000,000)

(700,000)

Net cash flows from financing activities

 

(2,767,175)

(2,463,833)

Net increase in cash and cash equivalents

 

326,134

5,262,773

Cash and cash equivalents at 1 January

 

8,701,546

3,438,773

Cash and cash equivalents at 31 December

 

9,027,680

8,701,546

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

1

General information

The company is a private company limited by share capital, incorporated in England.

The address of its registered office is:
McDonalds Restaurant Capitol Centre
Walton-Le-Dale
Preston
PR5 4AW

These financial statements were authorised for issue by the Board on 15 November 2023.

2

Accounting policies

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Statement of compliance

These financial statements were prepared in accordance with Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland and the Companies Act 2006'.

Basis of preparation

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.

Going concern

The financial statements have been prepared on a going concern basis.

Revenue recognition

Turnover comprises the fair value of the consideration received or receivable for the sale of goods and provision of services in the ordinary course of the company’s activities. Turnover is shown net of sales/value added tax, returns, rebates and discounts.

The company recognises revenue when:
The amount of revenue can be reliably measured;
it is probable that future economic benefits will flow to the entity;
and specific criteria have been met for each of the company's activities.

Tax

The tax expense for the period comprises current 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.

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.

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

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 reporting date and that are expected to apply to the reversal of the timing difference.

Tangible 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

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:

Asset class

Depreciation method and rate

Plant and equipment

between 3 and 15 years straight line

Office equipment

3 years straight line

Motor vehicles

5 years straight line

Goodwill

Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is held in the currency of the acquired entity and revalued to the closing rate at each reporting period date. Goodwill is amortised over its useful life, which shall not exceed five years if a reliable estimate of the useful life cannot be made.

Intangible assets

Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is held in the currency of the acquired entity and revalued to the closing rate at each reporting period date.

Licence fees have a finite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses.

Amortisation

Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their useful life as follows:

Asset class

Amortisation method and rate

Goodwill

5 years straight line

Licence fees

straight line over the remaining life of the licence

Stamp duty

straight line over the shorter of the remaining life of the asset or 20 years

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

Stocks

Stocks are stated at the lower of average cost and net realisable value. Net realisable value is based on estimated selling price less further costs expected to be incurred prior to completion and disposal.

Trade creditors

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the company does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities.

Trade creditors are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method.

Borrowings

Interest-bearing borrowings are initially recorded at fair value, net of transaction costs. Interest-bearing borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the income statement over the period of the relevant borrowing.

Interest expense is recognised on the basis of the effective interest method and is included in interest payable and similar charges.

Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Leases

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 statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance costs in the income statement and reduction of the lease obligation so as to achieve a constant periodic rate of interest on the remaining balance of the liability.

Share capital

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 a present value basis.

Dividends

Dividend distribution to the company’s shareholders is recognised as a liability in the financial statements in the reporting period in which the dividends are declared.

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

Defined contribution pension obligation

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.

3

Turnover

The analysis of the company's revenue for the year from continuing operations is as follows:

2022
 £

2021
 £

Sale of goods

77,053,809

72,125,206

4

Other operating income

The analysis of the company's other operating income for the year is as follows:

2022
£

2021
£

Government grants

-

280,091

5

Other gains and losses

The analysis of the company's other gains and losses for the year is as follows:

2022
£

2021
£

Gain on disposal of tangible assets

20,772

20,620

6

Operating profit

Arrived at after charging/(crediting)

2022
£

2021
£

Depreciation expense

1,757,616

1,754,930

Amortisation expense

664,602

759,306

Profit on disposal of property, plant and equipment

(20,772)

(20,620)

7

Government grants

Grants recognised in the financial statements relate to government grants in respect of the Coronavirus Job Retention Scheme and the Retail, Hospitality and Leisure Grants in response to the Covid-19 pandemic.

The amount of grants recognised in the financial statements was £Nil (2021 - £280,091).

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

8

Other interest receivable and similar income

2022
£

2021
£

Other finance income

14,406

9,361

9

Interest payable and similar expenses

2022
£

2021
£

Interest on bank overdrafts and borrowings

56,409

53,004

Interest on obligations under finance leases and hire purchase contracts

2,527

1,773

Interest expense on other finance liabilities

4,968

303

63,904

55,080

10

Staff costs

The aggregate payroll costs (including directors' remuneration) were as follows:

2022
£

2021
£

Wages and salaries

18,609,763

16,054,745

Social security costs

757,026

688,529

Other short-term employee benefits

5,360

5,360

Pension costs, defined contribution scheme

179,402

182,342

Other employee expense

155,840

149,656

19,707,391

17,080,632

The average number of persons employed by the company (including directors) during the year, analysed by category was as follows:

2022
No.

2021
No.

Crew labour

1,878

1,856

Management labour

60

60

1,938

1,916

11

Directors' remuneration

The directors' remuneration for the year was as follows:

2022
£

2021
£

Remuneration

12,500

12,500

Contributions paid to money purchase schemes

-

40,000

12,500

52,500

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

12

Auditors' remuneration

2022
£

2021
£

Audit of the financial statements

3,850

3,250


 

13

Taxation

Tax charged/(credited) in the income statement

2022
£

2021
£

Current taxation

UK corporation tax

487,661

1,357,436

UK corporation tax adjustment to prior periods

15,782

(12,748)

503,443

1,344,688

Deferred taxation

Arising from origination and reversal of timing differences

(46,182)

370,483

Tax expense in the income statement

457,261

1,715,171

The tax on profit before tax for the year is lower than the standard rate of corporation tax in the UK (2021 - lower than the standard rate of corporation tax in the UK) of 19% (2021 - 19%).

The differences are reconciled below:

2022
£

2021
£

Profit before tax

1,730,718

7,815,686

Corporation tax at standard rate

328,836

1,484,980

Effect of expense not deductible in determining taxable profit (tax loss)

131,802

146,125

Increase/(decrease) in UK and foreign current tax from adjustment for prior periods

15,783

(12,748)

Tax (decrease)/increase from effect of capital allowances and depreciation

(19,160)

96,814

Total tax charge

457,261

1,715,171

Deferred tax

Deferred tax assets and liabilities

2022

Asset
£

Liability
£

Accelerated capital allowances

-

674,076

-

674,076

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

2021

Asset
£

Liability
£

Accelerated capital allowances

-

720,258

-

720,258

14

Intangible assets

Goodwill
 £

Licence fees
 £

Stamp duty
 £

Total
£

Cost or valuation

At 1 January 2022

4,416,455

510,000

172,041

5,098,496

Additions acquired separately

-

-

1,750

1,750

At 31 December 2022

4,416,455

510,000

173,791

5,100,246

Amortisation

At 1 January 2022

3,345,230

227,000

71,294

3,643,524

Amortisation charge

630,648

25,500

8,454

664,602

At 31 December 2022

3,975,878

252,500

79,748

4,308,126

Carrying amount

At 31 December 2022

440,577

257,500

94,043

792,120

At 31 December 2021

1,071,225

283,000

100,747

1,454,972

15

Tangible assets

Plant and equipment
£

Office equipment
£

Motor vehicles
 £

Total
£

Cost or valuation

At 1 January 2022

13,916,180

4,858

90,250

14,011,288

Additions

1,125,299

-

74,990

1,200,289

Disposals

(8,120)

-

(90,250)

(98,370)

At 31 December 2022

15,033,359

4,858

74,990

15,113,207

Depreciation

At 1 January 2022

8,141,044

4,858

51,143

8,197,045

Charge for the year

1,741,855

-

15,761

1,757,616

Eliminated on disposal

(8,120)

-

(55,654)

(63,774)

At 31 December 2022

9,874,779

4,858

11,250

9,890,887

Carrying amount

At 31 December 2022

5,158,580

-

63,740

5,222,320

At 31 December 2021

5,775,136

-

39,107

5,814,243

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

16

Other financial assets (current and non-current)

2022
£

2021
£

Non-current financial assets

Financial assets at cost less impairment

21,250

21,250

17

Stocks

2022
 £

2021
 £

Closing stocks of food, paper and non-products

404,003

290,538

18

Debtors

Current

Note

2022
£

2021
£

Other debtors

 

450,236

469,551

Prepayments

 

425,860

214,320

Income tax asset

13

255,866

-

 

1,131,962

683,871

19

Cash and cash equivalents

2022
£

2021
£

Cash on hand

48,000

48,000

Cash at bank

8,979,680

8,653,546

9,027,680

8,701,546

20

Creditors

Note

2022
£

2021
£

Due within one year

 

Loans and borrowings

24

1,478,259

1,725,757

Trade creditors

 

2,411,943

1,922,608

Social security and other taxes

 

1,738,209

653,823

Other payables

 

4,884

4,679

Accruals

 

1,859,767

1,337,346

Income tax liability

13

-

987,436

 

7,493,062

6,631,649

Due after one year

 

Loans and borrowings

24

42,575

1,498,348

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

21

Provisions for liabilities

Deferred tax
£

Total
£

At 1 January 2022

720,258

720,258

Increase (decrease) in existing provisions

(46,182)

(46,182)

At 31 December 2022

674,076

674,076

22

Pension and other schemes

Defined contribution pension scheme

The company operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the company to the scheme and amounted to £179,402 (2021 - £182,342).

23

Share capital

Allotted, called up and fully paid shares

 

2022

2021

 

No.

£

No.

£

Ordinary A shares of £1 each

75

75

75

75

Ordinary B shares of £1 each

25

25

25

25

 

100

100

100

100

24

Loans and borrowings

2022
£

2021
£

Non-current loans and borrowings

Bank borrowings

-

1,456,048

Hire purchase contracts

42,575

42,300

42,575

1,498,348

2022
£

2021
£

Current loans and borrowings

Bank borrowings

1,469,048

1,715,397

Hire purchase contracts

9,211

10,360

1,478,259

1,725,757

 

H & S Restaurants Ltd

Notes to the Financial Statements for the Year Ended 31 December 2022

Bank borrowings

The bank loan is denominated in sterling with a nominal interest rate of 1.4% above base rate%, and the final instalment is due on 14 October 2025. The carrying amount at year end is £Nil (2021 - £Nil).

25

Obligations under leases and hire purchase contracts

Finance leases

The total of future minimum lease payments is as follows:

2022
£

2021
£

Not later than one year

10,360

10,360

Later than one year and not later than five years

39,713

42,303

50,073

52,663

Operating leases

The total of future minimum lease payments is as follows:

2022
£

2021
£

Not later than one year

2,444,544

2,454,192

Later than one year and not later than five years

9,332,083

9,779,965

Later than five years

18,730,839

20,765,247

30,507,466

32,999,404

The amount of non-cancellable operating lease payments recognised as an expense during the year was £9,718,895 (2021 - £9,163,827).

26

Dividends

Interim dividends paid

   

2022
£

 

2021
£

Interim dividend of £11,600.00 (2021 - £7,600.00) per each Ordinary A shares

 

870,000

 

570,000

Interim dividend of £5,200.00 per each Ordinary B shares

 

130,000

 

130,000

   

1,000,000

 

700,000