The director presents the strategic report for the year ended 31 December 2022.
2022 saw a continuation of increasing costs due to the War in Ukraine pushing energy costs upwards. Continued supply chain issues also saw significant inflationary pressures and by extension interest rate increases. However due to Strathmore Hotels historic strategy of only operating units within key tourist and conference locations the group was, and is, always placed well to recover swiftly from any forced restriction on trade. In turn, the group has always maintained prudence and risk aversion in terms of borrowing so low Loan to Value ("LTV") have always been maintained. This, coupled with shift away in 2014 in relying on fossil fuels as it’s primary energy source, means that, although the group has experienced significant increases in costs – the group is as well placed as any other to cope, and absorb, such increasing cost pressures.
Operating Climate
The director regards the group as having a strong and stable customer base. The majority of the customers are UK and European based. Guest demographic and strong location of the hotels maintains a demand that the directors believe assures the group’s core business. The principle risk in the medium term is the continuing economic climate.
Interest Rate risk
The group finances it operations through a mixture of retained profits and bank borrowings. It is the group’s policy to undertake borrowings on the basis of variable interest rate facilities. The performance of the group during the pandemic and its consequential lack of requirement of extra borrowing, government assistance (i.e CBILS loan etc) , coupled with its long term strategy of minimising (LTV), means the directors are confident that the overall resources of the group are sufficient to enable it absorb any potential adverse change in interest rate.
Energy Costs
The war in Ukraine, coupled with a sharp increase of post pandemic demand for Oil and Gas has resulted in record high prices of fossil fuel. In 2014 the directors decided to convert the hotels primary energy source from Gas to sustainable Biomass. This conversion has been extremely successful and has been operating well for several years. As a result, the directors are confident that the group is well placed to avoid extreme energy costs due to its lack of reliance on Gas. 2023 saw the completion of installation and certification of a new Biomass system at the Ben Wyvis Hotel in Strathpeffer, replacing the aging Oil Heating system that was in situ. This new system, in addition to being sustainable, will see a significant decrease in energy costs at the site.
An analysis of the group's key performance indicators are as follows:
| 2022 | 2021 |
| £m | £m |
Turnover | 17.6 | 13.2 |
Gross profit | 7.1 | 5.3 |
Operating profit | 2.3 | 2.9 |
Profit before tax | 1.8 | 2.5 |
Interest cover | 4.5 | 7.3 |
Net assets | 9.9 | 8.1 |
Bed Occupancy | 62% | 35% |
The director will continue with current management policies which have resulted in the group’s growth in current years.
The likely consequences of any decision in the long term
The director is fully committed to the long-term sustainability of the group. This is evidenced by recent hotel additions and the continuing refurbishment of the hotel portfolio. All strategic decisions are made with a long term focus in mind.
The interests of the group’s employees
The director recognises the role the employees play in delivering customer service to guests through not only customer-facing roles, but also in back-office administration and maintenance of the buildings and grounds.
The group are active in training and motivating our workforce to retain our employees and provide the level of service that we pride ourselves in.
The impact of the group’s operations on the community and the environment
The group are committed to supporting the communities in which they are based in and being environmentally responsible.
The importance of the group’s business relationships with suppliers, customers and others
The group aim to give a high level of service to our customers. Guest feedback is sought by way of satisfaction questionnaires and KPIs.
There are a number of key suppliers that maintain engagement with the individual hotels. The group work closely with our regular suppliers and maintain regular contact by phone and email.
The desirability of the group maintaining a reputation for high standards of business conduct
The director is determined to ensure that the business operates to the highest standards possible. The director reviews performance regularly to ensure that the business is able to meet these standards.
The need to act fairly between members of the group
The director and members work closely together to ensure that all relevant parties are consulted when determining a course of action for the business.
The director presents his annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 11.
No ordinary dividends were paid. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
The group has chosen in accordance with the Companies Act 2006, s. 414C(11) to set out in the group's Strategic Report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch 7 to be contained in the Directors' Report. It has done so in respect of future developments and financial risk management objectives and policies (as applicable).
The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The director recognises that the group has a responsibility to the environment and endeavours to be as environmentally friendly as possible in carrying out the group's business activities.
Scope 1 emissions are direct emissions from sources that are owned or controlled by the group (e.g. hotels). Scope 2 emissions are indirect emissions from sources that are not owned or controlled by the group (e.g. purchased electricity).
The environmental impact of our operations
We have taken steps to mitigate the impact of our operations on climate change where possible.
Energy Use and Greenhouse Gas Emission
Category | Results | Results |
| 2022 | 2021 |
Purchased electricity consumption (kWh) | 2,544,227 | 1,892,182 |
Gas consumption (kWh) | 2,234,684 | 670,777 |
Biomass (kWh) | 4,786,855 | 4,720,106 |
Oil (kWh) | 409,299 | 324,809 |
Total Energy Consumption used to calculate emissions (kWh) | 9,975,065 | 7,607,874 |
|
|
|
Emissions from combustion of gas (Scope 1) (tCO2kg) | 430 | 123 |
Emissions from purchased electricity (Scope 2) (tCO2kg) | 541 | 402 |
Emissions from Biomass (Scope 1) (tCO2kg) | 72 | 71 |
Emissions from Oil (Scope 1)(tCO2kg) | 110 | 87 |
Total Gross CO2kg based on above (tCO2kg) | 1,153 | 683 |
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|
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Methodology
Our Scope 1 and Scope 2 energy use and greenhouse gas emissions data for 2022 has been produced by the director from information maintained by the group.
To calculate the footprint, data was collated from across the group and from our suppliers to identify the amount of energy used in our operations. The group uses the most robust and accurate data source available for each component of its energy use and carbon emission calculations. Assumptions and estimations are only used when strictly necessary by means of the most robust data and assumptions available.
Full data from both suppliers for energy, gas and gas oil supplies.
Our market-based data conversion factors are taken directly from each supplier’s Annual fuel mix disclosure statement as illustrated below.
Other conversion factors are taken from the UK Government’s conversion factors 2021.
Greenhouse gas (GHG) emissions are calculated in line with GHG Reporting Protocol – Corporate standard and reported in line with the UK Government’s Guidance on Streamlined Energy and Carbon Reporting and mandatory GHG reporting guidance.
We have audited the financial statements of Strathmore Leisure Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 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 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:
the information given in the strategic report and the director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
In the light of our knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the 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:
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 director's responsibilities statement set out on page 6, 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 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 director either intends to liquidate the company or to cease operations, or has 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and the parent company and the sector in which they operate, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
Companies Act 2006;
UK Tax legislation;
Alcohol licensing legislation;
Health and Safety legislation;
VAT legislation; and
UK Generally Accepted Accounting Practice.
We gained an understanding of how the group and the parent company are complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns, external inspections, and relevant correspondence with regulatory bodies.
We assessed the susceptibility of the group’s and parent company’s financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk. We identified a heightened fraud risk in relation to:
Management override of controls; and
Revenue recognition.
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing the level of and reasoning behind the group’s and parent company’s procurement of legal and professional services
Performing audit procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Performing sales cutoff testing ensuring transactions were recorded in the appropriate accounting;
Completion of appropriate checklists and use of our experience to assess the group’s and parent company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £89,596 (2021 - £42,595 loss).
Strathmore Hotels Leisure Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is 116 Strathmore House, East Kilbride, Scotland, G74 1LF.
The group consists of Strathmore Hotels Leisure Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
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. 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 (where applicable):
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated financial statements incorporate those of Strathmore Leisure Limited and all of its subsidiaries (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the Group and Parent Company have adequate funding facilities from external lenders and expect to have continued access to those facilities, allowing the Group and Parent Company to continue in operational existence and meet their financial liabilities as they fall due for a period of at least 12 months from the date of approval of these financial statements. The directors have prepared cash flow projections which allow them to form this judgement.
Based on the above factors the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the provision of accommodation and ancillary supplies, excluding discounts, rebates, value added tax and other sales taxes.
Room revenue is recognised at the point at which the rooms are occupied, whilst food and beverage sales are recognised at the point of sale.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
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.
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 the profit and loss account or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and loss are recognised in the profit and loss account.
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 (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit and loss account, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit and loss account, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include certain debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets 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 the profit and loss account.
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 in the profit and loss account.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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.
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 group after deducting all of its liabilities.
Basic financial liabilities, including certain creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
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 if, and only if, there is 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.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to income 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 lease asset are consumed.
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.
Government grants are recognised in accordance with the accruals model. Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
Job retention scheme amounts 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 the profit and loss account.
In the application of the group’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.
The following judgements have had the most significant effect on amounts recognised in the financial statements.
Individual freehold and leasehold properties are carried at fair value at the balance sheet date. A full valuation is obtained on a regular basis, and in any year where it is likely that there has been a material change in value. In years where no valuation is performed an assessment of valuation is carried out by the directors in light of current market conditions.
The carrying value of tangible fixed assets carried at valuation is outlined at note 11.
The estimates and assumptions made to determine asset lives require judgements to be made as regards useful lives and residual values. The useful lives and residual values of the group's fixed assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets. Historically, changes in useful lives have not resulted in material changes to the group's depreciation charge.
The depreciation charge in the year is outlined at note 11.
Negative goodwill is written off over the period from which the group's non-monetary assets are recovered. As the non-monetary assets exceeded the amount of negative goodwill at the point of acquisition judgement is required in determining which of the non-monetary assets the negative goodwill should be matched against. The director has applied those assets with the shortest useful lives in arriving at an estimated average period of five years.
The carrying value of negative goodwill at the reporting date is outlined at note 10.
The company holds an investment in subsidiary which is initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The directors reviews the investment on an annual basis for any indicators of impairment.
The carrying value of the company's investment at the reporting date is outlined at note 12.
Grants received in the prior reporting period represent monies received from the UK Government's Coronavirus Job Retention Scheme.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2021 - 1).
The actual (credit)/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:
A change in the future UK Corporation tax rate to 25% with effect from 1 April 2023 was announced in the March 2021 budget and substantively enacted on 24 May 2021. This change will have a consequential effect on the group's future tax charge in the UK and as the 25% tax rate was substantively enacted prior to the reporting date, deferred tax expected to unwind after 1 April 2023 has been calculated at 25% as opposed to the current tax rate of 19%.
Transfers during the year are in relation to properties which were previously held leasehold, but are now held freehold.
Included in freehold property is freehold land at a cost of £11,302,957 (2021 - £11,302,957).
As at 1 June 2021 the group's hotel properties and leasehold properties were valued by JLL, independent valuers and surveyors, on a fair value basis. The hotels were valued as fully equipped operational entities having regard to trading potential. Leasehold properties includes the Cairn Hotel valued on a leasehold interest basis. Valuations were undertaken in accordance with the RICS Appraisal and Valuation Manual. In assessing fair value of the group's hotels, multiples are applied to the maintainable operating profits for each hotel, with an adjustment made for capital expenditure. In making their fair value assessment at the reporting date, the directors have considered the June 2021 valuations and subsequent events and are satisfied that the carrying values stated above represent an appropriate fair value.
If the group's fixed assets carried at valuation were measured using an historic cost basis, the carrying amounts would have been:
Details of the company's subsidiaries at 31 December 2022 are as follows:
The registered office of all subsidiary undertakings is 116 Strathmore House, East Kilbride, G74 1LF.
JLC Estates Limited has taken the exemption available under section 479A of the Companies Act 2006 not to have their individual financial statements audited.
Included within other debtors is £393,062 (2021: £Nil) owed by connected companies.
Included within other creditors is £47,582 (2021: £47,582) owed to connected companies.
Details of security given for bank loans and overdrafts are included in note 18.
In September 2022, the group refinanced its bank borrowings to new £12.1m, 3 year facilities with interest payable at 2.7% above base rate. £2.9m of the loans are repayable in quarterly instalments, with the remaining £9.2m repayable at the maturity date.
The bank loans and overdrafts are secured by standard securities and debentures over the group's hotel properties, together with a bond and floating charge over the assets of the group.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The A and B preference shares carry a fixed cumulative preferential dividend at the rate of 1.25% per annum which is payable within 14 days of the company's financial year end. If the company is not lawfully permitted to pay the dividend as a result of insufficient profits, the amount unpaid will be a debt due by the company and will accrue interest at the rate of 2.5% above the base lending rate of Royal Bank of Scotland PLC. The C preference shares, to the extent that they have not been redeemed, carry a right to a fixed cumulative preferential dividend from 31 August 2025 at the rate of 1.25% per annum which is payable within 14 days of the company's financial year end. If the company is not lawfully permitted to pay the dividend as a result of insufficient profits, the amount unpaid will be a debt due by the company and will accrue interest at the rate of 2.5% above the base lending rate of Royal Bank of Scotland PLC.
On a winding up or sale, the holders of A, B and C Preference shares have priority before all other classes of shares to receive repayment of capital plus any arrears of dividends.
The A and C Preference shares have redemption rights, some of which are dependent on various events as detailed in the company's Articles of Association. No redemption notice can be served on the company prior to the repayment of certain directors loan balances. B Preference shares have an annual redemption entitlement up to a maximum of £300,000 per B Preference Shareholder. They are automatically redeemed on the 7th anniversary of issue or on the occurrence of various events as detailed in the company's Articles of Association.
During 2022, £220,000 of shares were redeemed by B Preference Shareholders.
The profit and loss account represents the accumulated profits and losses of the group less distributions made to shareholders.
Capital redemption reserve
The capital redemption reserve related to the preservation of fixed capital following the redemption of shares.
The company has provided guarantees in respect of bank borrowings of its subsidiary companies, Strathmore Hotels (Scotland) Limited and Strathmore Hotels Limited. The amount outstanding in respect of these guarantees at 31 December 2022 was £11,275,937 (2021 - £12,884,263).
At 31 December 2022 the group had a lease for the Cairn Hotel, Harrogate. The period remaining is 79 years and the total amount payable is £8,967,118 (2021 - £9,082,118). The repayment profile of the lease is a payment of £115,000 per annum.
The company has taken advantage of the exemption in FRS 102 not to disclose transactions transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
Included within amounts owed to group undertakings within note 16 is £1,659,230 (2021 - £1,221,711) owed by the company to group undertakings which are not wholly owned.
Details of amounts owed from or to connected undertakings have also been outlined within notes 15 and 16 respectively.
The director had an interest free loan during the year. The loan is repayable on demand. The amounts repayable to the group at the balance sheet date was as follows: