Company registration number 08132730 (England and Wales)
A KHAN RESTAURANTS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
A KHAN RESTAURANTS LIMITED
COMPANY INFORMATION
Director
A A H Khan
Company number
08132730
Registered office
2nd Floor, Bradburn House
64-68 Northumberland Street
Newcastle upon Tyne
NE1 7DF
Auditor
Sumer Auditco Limited
The Beehive, Beehive Ring Road
London Gatwick Airport
Gatwick
United Kingdom
RH6 0PA
Bankers
HSBC Bank Plc
110 Grey Street
Newcastle upon Tyne
NE1 6JG
A KHAN RESTAURANTS LIMITED
CONTENTS
Page
Strategic report
1 - 2
Director's report
3 - 4
Independent auditor's report
5 - 7
Profit and loss account
8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 26
A KHAN RESTAURANTS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 AUGUST 2023
- 1 -

The director presents the strategic report for the year ended 31 August 2023.

Review of the business

The company operates 3 stores, employing close to 250 staff throughout the North East.

 

Difficult economic conditions have resulted in inflationary rises in food, packaging, energy and labour costs. All of which has led to a decrease in both gross margin and EBITDA.

 

Despite the ongoing cost of living crisis and the other challenges in the hospitality sector, the Company reported an increase in turnover of 16%*, a profit after tax of £180,579 and has a healthy net asset position at the year-end of £752,041.

Principal risks and uncertainties

The management of the business and the execution of the company's strategy are subject to a number of risks. The board reviews these risks and puts in place policies to mitigate them. The key business and financial risks are:

 

Employees

The company's performance depends largely on its employees and the loss of key employees could potentially adversely effect the business. Employees are encouraged to stay by having a competitive pay and conditions package.

 

Environment, health and safety incidents

Appropriate measures are implemented to ensure the risk of any environmental and health and safety issues are minimised.

 

Interest rate risk

The company monitors interest rate risk and considers that its current policy meets its objectives of managing its exposure.

 

Liquidity risk

The director regularly monitors the financial information to ensure that any risks in this area are considered on a timely basis.

Key performance indicators

The director considers turnover, gross profit, EBITDA and shareholder's funds to be the key measures of the company's performance:

 

 

2023

2022

Increase / (decrease) *

Turnover

12,983,049

16,840,218

16%

Gross profit margin

64.8%

69.5%

(4.7%)

EBITDA

992,505

2,556,962

(42%)

Profit after tax

180,579

627,073

(57%)

Shareholder's funds

752,041

965,462

(22%)

 

 

 

 

 

*2022 was an 18 month period, therefore the percentage increase/decrease have been calculated on a pro-rata basis.

 

The director considers the results of the company to be satisfactory for the year ended 31 August 2023 given the current economic climate.

A KHAN RESTAURANTS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 2 -

On behalf of the board

A A H Khan
Director
16 February 2024
A KHAN RESTAURANTS LIMITED
DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 AUGUST 2023
- 3 -

The director presents his annual report and financial statements for the year ended 31 August 2023.

Principal activities

The principal activity of the company continued to be that of a fast food restaurateur.

Results and dividends

The results for the year are set out on page 8.

Ordinary dividends were paid amounting to £394,000. The director does not recommend payment of a final dividend.

Director

The director who held office during the year and up to the date of signature of the financial statements was as follows:

A A H Khan
Future developments

The director is optimistic about the long term prospects for the continued profitability of the business. In addition, there are plans to refurbish one of the existing sites in the next 2 - 3 years.

Auditor

In accordance with the company's articles, a resolution proposing that Sumer Auditco Limited be reappointed as auditor of the company will be put at a General Meeting.

Statement of director's responsibilities

The director is responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is 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 director is required to:

 

 

The director is 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. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditors are unaware. Additionally, the director individually has taken all the necessary steps that they ought to have taken as a director in order to make themself aware of all relevant audit information and to establish that the company’s auditors are aware of that information.

A KHAN RESTAURANTS LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 4 -
On behalf of the board
A A H Khan
Director
16 February 2024
A KHAN RESTAURANTS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF A KHAN RESTAURANTS LIMITED
- 5 -
Opinion

We have audited the financial statements of A Khan Restaurants Limited (the 'company') for the year ended 31 August 2023 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the 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 financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the director 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 director is 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:

A KHAN RESTAURANTS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF A KHAN RESTAURANTS LIMITED
- 6 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the director's 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:

Responsibilities of director

As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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

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

A KHAN RESTAURANTS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF A KHAN RESTAURANTS LIMITED
- 7 -
Capability of the audit in detecting irregularities, including fraud

Discussions with and enquiries of management and those charged with governance were held with a view to identifying those laws and regulations that could be expected to have a material impact on the financial statements. During the engagement team briefing, the outcomes of these discussions and enquiries were shared with the team, as well as consideration as to where and how fraud may occur in the entity.

 

The following laws and regulations were identified as being of significance to the entity:

 

 

 

Audit procedures undertaken in response to the potential risks relating to irregularities (which include fraud and non-compliance with laws and regulations) comprised of: inquiries of management and those charged with governance as to whether the entity complies with such laws and regulations; enquiries with the same concerning any actual or potential litigation or claims; testing the appropriateness of journal entries; and the performance of analytical review to identify unexpected movements in account balances which may be indicative of fraud.

 

No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity's controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. As explained above, there is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with ISAs (UK).

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 member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.

Paul Gainford
Senior Statutory Auditor
For and on behalf of Sumer Auditco Limited
Statutory Auditor
The Beehive, Beehive Ring Road
London Gatwick Airport
Gatwick
United Kingdom
RH6 0PA
16 February 2024
A KHAN RESTAURANTS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 AUGUST 2023
- 8 -
Year
Period
ended
ended
31 August
31 August
2023
2022
Notes
£
£
Turnover
3
12,983,049
16,840,218
Cost of sales
(4,568,557)
(5,141,283)
Gross profit
8,414,492
11,698,935
Administrative expenses
(8,012,210)
(11,642,718)
Other operating income
21,930
1,022,872
Operating profit
4
424,212
1,079,089
Interest receivable and similar income
1,536
-
0
Interest payable and similar expenses
7
(137,901)
(71,890)
Profit before taxation
287,847
1,007,199
Tax on profit
8
(107,268)
(380,126)
Profit for the financial year
180,579
627,073

The profit and loss account has been prepared on the basis that all operations are continuing operations.

A KHAN RESTAURANTS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2023
- 9 -
Year
Period
ended
ended
31 August
31 August
2023
2022
£
£
Profit for the year
180,579
627,073
Other comprehensive income
-
-
Total comprehensive income for the year
180,579
627,073
A KHAN RESTAURANTS LIMITED
BALANCE SHEET
AS AT
31 AUGUST 2023
31 August 2023
- 10 -
2023
2022
Notes
£
£
£
£
Fixed assets
Goodwill
10
738,036
820,036
Other intangible assets
10
72,565
83,417
Total intangible assets
810,601
903,453
Tangible assets
11
1,807,574
1,927,712
Investment property
12
45,000
45,000
Investments
13
3,750
3,750
2,666,925
2,879,915
Current assets
Stocks
14
70,993
73,234
Debtors
15
371,640
725,559
Cash at bank and in hand
227,710
318,907
670,343
1,117,700
Creditors: amounts falling due within one year
16
(2,243,223)
(2,085,024)
Net current liabilities
(1,572,880)
(967,324)
Total assets less current liabilities
1,094,045
1,912,591
Creditors: amounts falling due after more than one year
17
(79,656)
(722,835)
Provisions for liabilities
Deferred tax liability
19
262,348
224,294
(262,348)
(224,294)
Net assets
752,041
965,462
Capital and reserves
Called up share capital
22
100
100
Profit and loss reserves
751,941
965,362
Total equity
752,041
965,462
The financial statements were approved and signed by the director and authorised for issue on 16 February 2024
A A H Khan
Director
Company registration number 08132730 (England and Wales)
A KHAN RESTAURANTS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2023
- 11 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 March 2021
100
379,289
379,389
Period ended 31 August 2022:
Profit and total comprehensive income
-
627,073
627,073
Dividends
9
-
(41,000)
(41,000)
Balance at 31 August 2022
100
965,362
965,462
Year ended 31 August 2023:
Profit and total comprehensive income
-
180,579
180,579
Dividends
9
-
(394,000)
(394,000)
Balance at 31 August 2023
100
751,941
752,041
A KHAN RESTAURANTS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2023
- 12 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
26
1,489,433
2,497,912
Interest paid
(137,901)
(71,890)
Income taxes paid
(371,382)
(60,460)
Net cash inflow from operating activities
980,150
2,365,562
Investing activities
Purchase of tangible fixed assets
(355,303)
(84,128)
Proceeds from disposal of tangible fixed assets
-
0
130,358
Proceeds from disposal of investments
-
0
1,250
Interest received
1,536
-
0
Net cash (used in)/generated from investing activities
(353,767)
47,480
Financing activities
Movement of other borrowings
242,692
(401,487)
Proceeds from new bank loans
955,947
1,671,000
Repayment of bank loans
(1,522,219)
(2,889,069)
Dividends paid
(394,000)
(41,000)
Net cash used in financing activities
(717,580)
(1,660,556)
Net (decrease)/increase in cash and cash equivalents
(91,197)
752,486
Cash and cash equivalents at beginning of year
318,907
(433,579)
Cash and cash equivalents at end of year
227,710
318,907
A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
- 13 -
1
Accounting policies
Company information

A Khan Restaurants Limited is a private company limited by shares incorporated in England and Wales. The registered office is 2nd Floor, Bradburn House, 64-68 Northumberland Street, Newcastle upon Tyne, NE1 7DF.

1.1
Reporting period

The prior reporting period was extended to 31 August 2022 for commercial reasons. The prior period presents the financial statements of the company for the 18 months from 1 March 2021 to 31 August 2022 and as such the current year financial statements (including related notes) for the year ended 31 August 2023 are not entirely comparable.

1.2
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The 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 investment properties at fair value. The principal accounting policies adopted are set out below.

1.3
Going concern

The financial statements have been prepared on the going concern basis. The director has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The director has concluded that the going concern assumption is appropriate in preparing these financial statements.true

1.4
Turnover

Revenue is recognised on the sale of food and drinks to customers, excluding value added tax and arose wholly within the United Kingdom. Revenue is measured at fair value of the consideration received or receivable and represent amounts for the sale of food and beverages.

1.5
Intangible fixed assets - goodwill

Goodwill representing the excess of the purchase price of the sole trader business over the fair value of the net assets of undertakings is capitalised on the balance sheet and is amortised by equal annual instalments over the expected useful economic life of 20 years.

1.6
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date if the fair value can be measured reliably.

 

Other intangible assets comprise of franchise rights, franchise fees and leasehold property fees. These are shown in the financial statements at cost. Other intangible assets are amortised through the profit and loss account in equal annual instalments over the estimated useful life of the asset.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Other intangibles
14 - 20 years straight line
A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
1
Accounting policies
(Continued)
- 14 -
1.7
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Fixtures, fittings & equipment
5% to 20% straight line
Motor vehicles
14% reducing balance and 10% straight line

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.

1.8
Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. The surplus or deficit on revaluation is recognised in the profit and loss account.

1.9
Impairment of fixed assets

At each reporting period end date, the company 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).

1.10
Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials of food and beverages.

1.11
Financial instruments

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include trade and other 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.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
1
Accounting policies
(Continued)
- 15 -
Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including trade and other creditors, bank loans and overdrafts, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest.

 

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. Creditors are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

 

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
1
Accounting policies
(Continued)
- 16 -
1.12
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

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.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.13
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received, if considered material to the financial statements.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.14
Retirement benefits

The company provides a defined contribution pension scheme, the assets of which are held separately from those of the company in an independently administered fund. Contributions payable to the company's pension scheme are charged to the profit and loss account in the period to which they relate.

1.15
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

1.16
Government grants

During the year, the company utilised Government support schemes; job retention scheme grants, local authority grants and kickstart scheme grants. The amounts received are reported under other operating income as per note 3 and are recognised in the period to which the relief relates to.

A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
1
Accounting policies
(Continued)
- 17 -
1.17
Foreign exchange

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.

1.18

Deferred income

Capital contributions provided by McDonalds in relation to refurbishments of restaurants are recognised as deferred income and released to the profit and loss in line with depreciation.

2
Judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Assessing indicators of impairment

In assessing whether there have been any indicators of impairment of assets, the directors have considered both external and internal sources of information such as market conditions and experience of recoverability. There have been no indicators of impairments identified during the current financial year.

A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
2
Judgements and key sources of estimation uncertainty
(Continued)
- 18 -
Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Determining residual values and useful economic lives of tangible fixed assets

The company depreciates tangible fixed assets over their estimated useful lives. The estimation of the useful lives of assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied by management. The actual lives of these assets can vary depending on a variety of factors, including technological innovation, product life cycles and maintenance programmes.

 

Judgement is applied by management when determining the residual values for tangible fixed assets. When determining the residual value management aim to assess the amount that the company would currently obtain for the disposal of the asset, if it were already of the condition expected at the end of its useful economic life. Where possible this is done with reference to external market prices. The carrying amount of tangible fixed assets at the reporting end date was £1,807,574 (2022 - £1,927,712).

Goodwill and intangible assets

The company establishes a reliable estimate of the useful life of goodwill and intangible assets arising on business combinations. This estimate is based on a variety of factors such as the expected use of the incorporated business, the expected use of the franchise fees and licenses and any legal, regulatory or contractual provisions that can limit useful life and assumptions that market participants would consider in respect of similar businesses. The carrying amount of goodwill and intangible assets at the reporting end date was £810,601 (2022 - £903,453).

3
Turnover and other revenue

An analysis of the company's turnover is as follows:

2023
2022
£
£
Turnover analysed by class of business
Food and beverages
12,983,049
16,840,218
2023
2022
£
£
Other revenue
Interest income
1,536
-
Grants received
-
919,417

Turnover and grants received have arisen wholly within the UK.

Grant income includes amounts of £nil (2022 - £407,989) receivable in relation to the Coronavirus Job Retention Scheme, £nil (2022 - £113,277) received in relation to Local Authority grant funding and £nil (2022 - £108,634) in relation to Government Kickstart Scheme Grants.

A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 19 -
4
Operating profit
2023
2022
Operating profit for the year is stated after charging:
£
£
Fees payable to the company's auditor for the audit of the company's financial statements
7,200
6,500
Depreciation of owned tangible fixed assets
475,441
798,041
(Profit)/loss on disposal of tangible fixed assets
-
526,756
Amortisation of intangible assets
92,852
139,826
(Profit)/loss on disposal of intangible assets
-
13,250
Operating lease charges
1,672,024
2,226,957
5
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
Office and management
10
11
Restaurant crews
234
250
Total
244
261

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
2,675,153
4,182,556
Social security costs
125,156
202,647
Pension costs
54,348
97,669
2,854,657
4,482,872
6
Director's remuneration
2023
2022
£
£
Remuneration for qualifying services
8,591
12,887
7
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
137,901
71,890
A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 20 -
8
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
69,214
371,382
Adjustments in respect of prior periods
-
0
863
Total current tax
69,214
372,245
Deferred tax
Origination and reversal of timing differences
38,054
7,881
Total tax charge
107,268
380,126

The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
Profit before taxation
287,847
1,007,199
Expected tax charge based on the standard rate of corporation tax in the UK of 21.52% (2022: 19.00%)
61,945
191,368
Tax effect of expenses that are not deductible in determining taxable profit
2,376
23,299
Tax effect of income not taxable in determining taxable profit
(5,373)
(23,105)
Under/(over) provided in prior years
-
0
863
Deferred tax adjustments in respect of prior years
-
0
60,460
Tax rate changes
5,305
53,830
Permanent differences
43,015
73,411
Taxation charge for the year
107,268
380,126
9
Dividends
2023
2022
£
£
Interim paid
394,000
41,000
A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 21 -
10
Intangible fixed assets
Goodwill
Other intangibles
Total
£
£
£
Cost
At 1 September 2022 and 31 August 2023
1,640,000
197,921
1,837,921
Amortisation and impairment
At 1 September 2022
819,964
114,504
934,468
Amortisation charged for the year
82,000
10,852
92,852
At 31 August 2023
901,964
125,356
1,027,320
Carrying amount
At 31 August 2023
738,036
72,565
810,601
At 31 August 2022
820,036
83,417
903,453

 

11
Tangible fixed assets
Fixtures, fittings & equipment
Motor vehicles
Total
£
£
£
Cost
At 1 September 2022
5,036,959
19,115
5,056,074
Additions
355,303
-
0
355,303
At 31 August 2023
5,392,262
19,115
5,411,377
Depreciation and impairment
At 1 September 2022
3,121,315
7,047
3,128,362
Depreciation charged in the year
474,106
1,335
475,441
At 31 August 2023
3,595,421
8,382
3,603,803
Carrying amount
At 31 August 2023
1,796,841
10,733
1,807,574
At 31 August 2022
1,915,644
12,068
1,927,712
A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 22 -
12
Investment property
2023
£
Fair value
At 1 September 2022 and 31 August 2023
45,000

The property was acquired by the company on 18 March 2016 to support a local school and their enterprise scheme. The director considers the value per the financial statements to reflect the fair value as at the year end.

13
Fixed asset investments
2023
2022
£
£
Unlisted investments
3,750
3,750
14
Stocks
2023
2022
£
£
Raw materials and consumables
70,993
73,234
15
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
8,128
8,128
Other debtors
273,396
547,517
Prepayments and accrued income
90,116
169,914
371,640
725,559
16
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Bank loans
18
797,122
742,145
Trade creditors
570,912
464,851
Corporation tax
69,214
371,382
Other taxation and social security
353,520
274,542
Deferred income
20
21,930
21,930
Other creditors
358,836
168,847
Accruals and deferred income
71,689
41,327
2,243,223
2,085,024
A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 23 -
17
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Bank loans
18
32,007
653,256
Deferred income
20
47,649
69,579
79,656
722,835
18
Loans and overdrafts
2023
2022
£
£
Bank loans
829,129
1,395,401
Payable within one year
797,122
742,145
Payable after one year
32,007
653,256

In March 2022 the existing bank loans were refinanced with HSBC bank. The loans are repayable in monthly instalments until September 2024 and interest is charged at 1.6% above the bank of England base rate.

 

In June 2023, the Company obtained an additional loan with You Lend. The loan is repayable in monthly instalments until November 2023 and interest is charged at a fixed rate of 10%.

19
Deferred taxation

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

Liabilities
Liabilities
2023
2022
Balances:
£
£
Accelerated capital allowances
262,348
224,294
2023
Movements in the year:
£
Liability at 1 September 2022
224,294
Charge to profit or loss
38,054
Liability at 31 August 2023
262,348
A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 24 -
20
Deferred income
2023
2022
£
£
Other deferred income
69,579
91,509
Included in the financial statements as follows:
Current liabilities
21,930
21,930
Non-current liabilities
47,649
69,579
69,579
91,509
21
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
54,348
97,669

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

At the balance sheet date, contributions amounting to £11,805 (2022 - £2,680) were payable to the fund and included within creditors due within one year.

22
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
100
100
100
100

The company has one class of ordinary shares which carry no right to fixed income.

A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 25 -
23
Operating lease commitments
Lessee

Operating lease payments represent rentals payable by the company for its restaurants and offices in Newcastle and Gateshead. Leases are negotiated for an average term of 20 years and rentals are fixed with no option to extend further, although this may be renewed at the end of the rental term.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2023
2022
£
£
Within one year
524,868
524,868
Between two and five years
2,099,472
2,099,472
In over five years
699,824
1,224,692
3,324,164
3,849,032
24
Directors' transactions

Dividends totalling £394,000 (2022 - £41,000) were paid in the year in respect of shares held by the company's directors.

Advances or credits have been granted by the company to its directors as follows:

Description
% Rate
Opening balance
Amounts advanced
Amounts repaid
Closing balance
£
£
£
£
Loan account
-
393,415
151,308
(394,000)
150,723
25
Ultimate controlling party

The director, A A H Khan, is the controlling party by virtue of his interest in the issued share capital of the company.

 

The company was incorporated in England and Wales.

A KHAN RESTAURANTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
- 26 -
26
Cash generated from operations
2023
2022
£
£
Profit for the year after tax
180,579
627,073
Adjustments for:
Taxation charged
107,268
380,126
Finance costs
137,901
71,890
Investment income
(1,536)
-
0
(Gain)/loss on disposal of tangible fixed assets
-
526,756
(Gain)/loss on disposal of intangible assets
-
13,250
Amortisation and impairment of intangible assets
92,852
139,826
Depreciation and impairment of tangible fixed assets
475,441
798,041
Movements in working capital:
Decrease/(increase) in stocks
2,241
(44,080)
Decrease/(increase) in debtors
111,227
(199,467)
Increase in creditors
405,390
287,952
Decrease in deferred income
(21,930)
(103,455)
Cash generated from operations
1,489,433
2,497,912
27
Analysis of changes in net debt
1 September 2022
Cash flows
31 August 2023
£
£
£
Cash at bank and in hand
318,907
(91,197)
227,710
Borrowings excluding overdrafts
(1,395,401)
566,272
(829,129)
(1,076,494)
475,075
(601,419)
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