The directors present the strategic report for the year ended 31 December 2022.
The group has continued to make progress in 2022, with overall improvements in the provisions of quality of care in all our care homes and a steady increase in occupancy following the impact of the COVID-19 pandemic and despite the economic pressures that all businesses are now facing.
We have been able to continue with our long-term plan to grow through excellence, by investing in care quality, maintenance of our current homes and in the development of new homes. In October 2022 we introduced Grove Park Healthcare Group Limited into the group. Grove Park is an 80 bedded, state-of-the-art, startup hospital in Brighton, and increases the number of homes within the group to five.
We are grateful all our staff, who worked tirelessly to support residents and their families as well as each other through some immensely challenging periods in 2022.
Results and Performance
The financial result for 2022 shows a group reported loss before tax for the year of £1.6m that arises due to a number of accounting factors:
Costs association with the introduction of Grove Park Healthcare Limited into the group;
Costs associated with restructuring of all Group finances with just one bank, and;
Incorporation of the start-up trading costs of Grove Park.
In 2022, the trading results for all the care homes saw an increase in occupancy, revenue and profits and as benefited from a full year of trading from Wellington that opened in May 2021.
The group continues its strategy to invest in enhancing and improving the quality and care in all our care homes and investing in our operating systems and IT infrastructure.
Principal risks and uncertainties
Business Risk
The board has overall responsibility for the group’s approach to assessing risk and recognises that creating value is the reward for taking and accepting risk. Management implements the board’s policies on risk and control and oversee compliance of these policies. They are responsible for maintaining appropriate control environments.
COVID-19
We continue to take steps to manage the recovery from the pandemic, remaining vigilant to the continuing risks that COVID-19 presents to our residents and staff.
Key metrics continue to be monitored closely and evidence of our increased occupancy points to a sustained recovery, however we continue to closely monitor:
home level outbreaks;
test results and vaccination coverage;
occupancy, and;
staffing levels and COVID-19 related sickness.
The benefits of the COVID-19 vaccination program and annual booster have provided a level of assurance and protection and we find ourselves in a much stronger position to address any possible outbreaks that may lie ahead.
Occupancy risk
Lower than expected occupancy rates and a fall in bed rates, would cause a drop in revenue and hence resultant pressure on cash flow. The group continues to manage a number of block bed contracts with local authorities, short and long term that help mitigate this risk. Historically we have a track record of high occupancy, built upon our reputation for the provision of excellent nursing care, together with a strong and flexible management team.
The group mitigates this risk by developing a sales and marketing strategy that ensures adequate management time and resources are devoted to its implementation with a continued focus in 2022 to building a stronger online presence and paying attention to consumer needs, their expectations and changes in regulatorily requirements.
Wage Rate
Government policy in setting the rate of the National Living Wage (“NLW”) will have a significant impact on labour costs for the group and our ability to recover these costs through fee increases is uncertain. Failure to recover such costs would have a negative impact on margins. In providing a high level of care we mitigate this risk by carefully controlling costs, negotiating fees and regularly reviewing our fees in light of market conditions.
Interest rate risk
The group’s interest rate risk arises from borrowings issued at variable rates that exposes the group to interest rate cash flow risk. Covenants apply to this borrowing which could limit operating and financial flexibility if the Group defaults under these covenants. Increases in interest rates in the future could significantly increase costs, reduce cash flow and funding for the development of new homes or redevelopment of existing homes, may not be available on acceptable terms.
To mitigate this risk, we maintain strong working relationships with our bank to facilitate the regular provision of compliance reporting, providing detailed management reports and oversight of key issues impacting the business. In addition, prudent liquidity management policies are applied that include the preparation of regular detailed cash flow forecasts to monitor liquidity and compliance with the covenants.
Legislative & regulatory risk
The group operates in a highly regulated environment and is subject to licensing and inspection from many third parties that includes the Care Quality Commission (CQC) and local authorities. There is continual pressure on achieving a high standard of regulatory compliance rating, failure of which would curtail admission, impacting on the group’s turnover and profitability.
In recognising this obligation and requirement to achieve the highest CQC rating, we are confident that our highly trained, experienced management team have the necessary skills and oversight to ensure strict implementation of our internal processes, procedures and controls that ensures ongoing compliance throughout all the changes in the regulatory landscape.
Financial key performance indicators
The group tracks its performance against a number of key performance indicators which are aligned to our strategic vision. The key drivers are
Revenue: measured by monitoring average occupancy rates and weekly fees.
Direct wages: measured by addressing staff turnover rates, wage rates/cost control, training and performance evaluation.
Operating overheads: cost control by evaluating and negotiating better supplier terms.
Profit margins (EBITDA) based on all of the above.
As part of our internal reporting processes, we compare our results to national standards and find that we are operating within the industry norm.
Prospect for 2023
Although future revenue growth is expected in 2023 with 12 months of trading from Grove Park, the board recognises that COVID-19 Infection rates remains a significant risk. We are currently experiencing economic uncertainty arising from increases in fuel prices, interest rates and wage costs, and therefore it is necessary that we continue to closely monitor costs whilst actively considering new opportunities that will create value and grow the business. We will continue to apply measures to help with the challenges that lie ahead. Our strategic objectives remain unchanged, we will continue to prioritise the delivery of good quality care to all our residents to a standard we are proud of.
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 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Details of principal risks, including financial instrument risks, are detailed in the Strategic Report.
The directors have disclosed any future developments in the Strategic Report.
The auditor, Carpenter Box, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Ashton Healthcare Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group statement of total comprehensive income, the group statement of financial position, the company statement of financial position, 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 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the 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.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:
Obtaining an understanding of the legal and regulatory framework that the company operates in, focusing on those laws and regulations that had a direct effect on the financial statements and operations;
Obtaining an understanding of the company’s policies and procedures on fraud risks, including knowledge of any actual, suspected or alleged fraud; and
Discussing among the engagement team how and where fraud might occur in the financial statements and any potential indicators of fraud through our knowledge and understanding of the company and our sector-specific experience.
As a result of these procedures, we considered the opportunities and incentives that may exist within the company for fraud. We are also required to perform specific procedures to respond to the risk of management override. As a result of performing the above, we identified the following areas as those most likely to have an impact on the financial statements: health & safety, employment law, and compliance with the UK Companies Act.
In addition to the above, our procedures to respond to risks identified included the following:
Making enquiries of management about any known or suspected instances of non-compliance with laws and regulations and fraud;
Reviewing correspondence with regulators;
Challenging assumptions and judgements made by management in their significant accounting estimates, including property, plant and equipment at fair value; and
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.
Due to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The group statement of total comprehensive income has been prepared on the basis that all operations are continuing operations.
These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.
As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company's loss for the year was £7,796,600 (2021 - £282,462 loss)
Ashton Healthcare Group Limited (“the company”) is a limited company domiciled and incorporated in England and Wales. The registered office is 13 Oathall Road, Haywards Heath, West Sussex, RH16 3EG.
The group consists of Ashton Healthcare Group Limited and all of its subsidiaries as disclosed at note 13.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The financial statements have been prepared on a going concern basis. The directors have considered relevant information, including the annual budget, forecast future cash flows and the impact of subsequent events in making their assessment. The COVID-19 pandemic has had a profound effect on the care sector as a whole, and a significant impact on the group’s operations. The group implemented tight controls and provided personal protective equipment to its staff in order to reduce the spread of the virus in its nursing homes. In response to the COVID-19 pandemic, the directors have performed a robust analysis of forecast future cash flows taking into account the potential impact on the business of possible future scenarios arising from the impact of COVID-19. This analysis also considers the effectiveness of available measures to assist in mitigating the impact.
The company has net liabilities in relation to the bank loan in the company, any instalments or other amounts due will be paid from future trading of the group’s subsidiaries and the directors confirm that these will be settled as they fall due. The directors have also confirmed that, if required, they will provide financial support to the group and company.
Based on these assessments and having regard to the resources available to the group, the directors have concluded that there is no material uncertainty in relation to the appropriateness of continuing to adopt the going concern basis in preparing the annual report and accounts.
Revenue is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, is shown net of VAT and on an accruals basis.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Properties whose fair value can be measured reliably are held under the revaluation model and are carried at a revalued amount, being their fair value at the date of valuation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value of the land and buildings is usually considered to be their market value.
Revaluations are made with sufficient regularity to ensure that the carrying amount in the financial statements does not differ materially from that which would be determined using the fair value at the end of the reporting period.
Revaluation gains and losses are recognised in other comprehensive income and accumulated in equity, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and losses are recognised in profit or loss.
In the parent company financial statements investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
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 statement of financial position when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
The group enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans from banks and loans from related parties.
Debt instruments like loans and other accounts receivable and payable are initially measured at the transaction price (including transaction costs) and subsequently at amortised cost using the effective interest method; debt instruments that are payable or receivable within one year are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity. Financial liabilities are derecognised when, and only when, the group’s obligations are discharged, cancelled, or they expire.
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.
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.
The costs of short-term employee benefits are recognised as a liability and an expense.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit and loss on a straight line basis over the term of the relevant lease.
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.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The directors' valuation relating to the fair value of property, plant and equipment across the group is based on their use of the professional valuations carried out on behalf of the company's lenders in May 2022 at an aggregate of £48.28 million (for Adelaide Healthcare Limited, Birchgrove Healthcare (Sussex) Limited and Grove Park Healthcare Group Limited, all group subsidiaries). These valuations were carried out in accordance with The Royal Institution of Chartered Surveyors, undertaken by BNP Paribas, an independent firm of Chartered Surveyors with a recognised and relevant professional qualification and with recent experience in the location and category of the property, plant and equipment being valued. The valuations were both made on the basis of existing use as a fully-equipped operational entity having regard to trading potential in line with Section 27 of FRS 102.
The company operates one principal activity, that of the rendering of services, which is wholly undertaken in the United Kingdom. Revenue is therefore made up 100% by the fees in relation to the supply of these services.
The average monthly number of persons employed by the group and company during the year (excluding directors) was:
Their aggregate remuneration comprised:
The actual credit for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:
The group has estimated trading and capital losses of £5,465,000 (2021 - £1,677,000) and £36,000 (2021 - £36,000) respectively available for carry forward against future income.
The directors have valued property, plant and equipment as disclosed in note 2.
There are fixed and floating charges held over the freehold land and buildings by the group's bankers.
If revalued assets were stated on an historical cost basis rather than a fair value basis, the total amounts included would have been as follows:
Details of the company's subsidiaries at 31 December 2022 are as follows:
Registered office addresses
a) 13 Oathall Road, Haywards Heath, West Sussex, RH16 3EG.
Included within the company debtors falling due after more than one year, a discounting charge totalling £686,940 has been applied to this balance as no interest is charged on this balance. There has been an equal and opposite increase in the investment in this subsidiary as a result of this adjustment.
The going concern conclusions as disclosed in note 1.3 have therefore been arrived at on the basis that this balance will not be received within 12 months of the signing of the audit report.
The bank loans are fully repayable within 5 years. The rate of interest payable is between 3.5% and 3.9% plus the Bank of England's base rate. No capital repayments are due on the bank loans until November 2023.
The bank loans are secured by a cross guarantee and debenture in favour of the bank granted by members of the group, including Adelaide Healthcare Limited, Birchgrove Healthcare (Sussex) Limited and Grove Park Healthcare Limited dated 28 October 2022. The bank also holds fixed and floating charges over all assets of the group. The controlling parties Mr A S Shookhye and Mrs M B Shookhye have also provided personal guarantees totalling £5.200,000.
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 four years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances for financial reporting purposes:
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.
All shares carry equal voting rights, equal rights to a dividend entitlement, equal rights to a distribution on winding up and there is no likelihood of redemption.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel, is as follows.
Company
At the previous year-end, a balance totalling £3,685,203, included within other receivables, was due from two connected companies under common ownership.
During the current year, following a group reconstruction, these companies are now 100% owned subsidiaries of the same group and therefore no disclosure of transactions or balances with them is required.
Included within the group other payables in current and non-current liabilities are directors' loan balances which total £2,081,475 (2021 - £2,812,263). No interest is charged on these balances.
Included within the company other payables in current and non-current liabilities are directors' loan balances which total £866,883 (2021 - £1,521,636). No interest is charged on these balances.
The company is controlled by Mr A S Shookhye and Mrs M B Shookhye,