The directors present the strategic report for the year ended 31 March 2023.
The performance in the year is in line with expectations and reflects the maturing nature of the Group’s Care homes and the impact of new care home management contracts entered into during the year. Turnover for the year was £197.3m with a gross margin of 46.1%. The Group recorded an operating loss of £4.3m before exceptional costs. Exceptional costs of £2.2m primarily relate to one-off acquisition related costs, exceptional professional fees and the accounting treatment for guaranteed rental increases in future years of £2.2m. This latter accounting adjustment has no cash impact. The former are considered exceptional on the basis that they do not arise from the day-to-day operation of our care homes but are related primarily to significant planned or aborted transactions or developments during the year and as such may distort the commercial trading reality of the group as whole.
UK Accounting Standards require a treatment of long-term lease financing which the Directors consider presents the performance of the Company in a way which understates the underlying level of performance by overstating lease costs in the year. It is this non-cash additional rent cost which is shown in exceptional costs. Interest payable in the year was £5.1m.
The Group is currently in the process of refurbishing and repositioning a number of care homes and continues to focus on growing the business organically and through selective acquisitions.
It is worth outlining our relationship with Welltower Inc who are one of the most respected and longest established Real Estate Investment Trusts (REITs) in the USA. Welltower always seeks to partner with best in class operators and this led to them selecting Avery Healthcare to work with as their principal partner in the UK.
The Directors of the Company are of the opinion that it has adequate facilities in place to meet its external liabilities as they fall due.
The financial risk management within the Group is governed by policies set by the board of directors and senior management. These policies cover interest rate risk and other areas, such as cash management.
Credit risk
The Group operates in a competitive market and there is a continuing risk that the group could lose its residents due to another economic downturn, however, the group monitors the housing market and pensions, enabling an assessment of service user’s ability to pay for care services. In order to manage its credit risk, the covenant strength of potential residents is assessed on a case by case basis and, as a standard policy, security is obtained in the form of a deposit or guarantee. Existing residents are reviewed on a regular basis to monitor payment and trading patterns.
Interest rate risk
The Group's long term debt is priced at a fixed rate which enables the Group to know what interest amounts are payable with no risk attributable to changes in base rates. The Group regularly reviews detailed financial forecasts to ensure that there is sufficient cash available to meet its quarterly interest and principal repayments.
Foreign exchange risk
The Group is not exposed to foreign exchange risk as all of its income is derived from activities undertaken in the UK and all of its trade and other suppliers invoice in sterling.
Regulatory risk
The Group's operations are subject to an increasingly high level of regulation and scrutiny by the CQC across the UK. Management place a high focus on quality and safety within each of its care homes in order to be compliant with these requirements and to support the group in providing a high quality of care to each of its residents.
The Group monitors the performance of the business using measures such as EBITDA as a key performance indicator (KPI). This allows the group to monitor the performance of its financial model as well as its wider responsibilities to its shareholders.
Other indicators are occupancy levels, average weekly fee rates and the proportion of turnover contributed by self-funding clients who are attracted to homes of a high standard – the Group is one of the few which has predominately 100% single rooms with ensuite facilities. This accounts for above average fee levels.
The Group has achieved 81% (2022: 79%) average occupancy in its mature care homes and retirement living facilities and expects the more recently opened homes to achieve a similar level of average occupancy once they reach maturity. During the year 68% of turnover was contributed by self-funding clients (2022: 76%). The Group also attracts a high calibre of staff due to its training and support programmes. The Group is considered to be an employer of choice in the sector.
Our people are central to our aim to establish a group of care homes and retirement living facilities, all of which will be of the highest quality from both an environmental and care delivery perspective, where the resident is at the centre of all our activities. We recruit, train and remunerate to attract the best professionals to enhance organisational performance. Our people are provided with a career path and include administration personnel that are key to supporting the operational and management team.
Section 172 of the Companies Act 2006 requires a director of a company to act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
• The likely consequence of any decision in the long term;
• The interests of the company’s employees;
• The need to foster the company’s business relationships with suppliers, customers and others;
• The impact of the company’s operations on the community and the environment;
• The desirability of the company maintaining a reputation for high standards of business conduct; and
• The need to act fairly as between members of the company.
In discharging these duties, the Directors undertake and encourage regular engagement with stakeholders including our residents, colleagues, property owners and investors.
With regard to our residents and staff, an example of some of the initiatives the directors have put in place are as follows:
• Encourage Home Managers and Regional Managers to have open dialogue with staff, residents and residents’ families;
• Provision of resident feedback cards in our homes, reviewed and followed up by Regional Managers on home review visits;
• Provision of a confidential concerns hotline for staff, residents and their families;
• Annual staff and resident surveys; and
• Annual performance reviews for all staff.
For our property owners and investors, the directors circulate financial data on a monthly basis and hold regular meetings to discuss the performance of the business.
Future developments and post balance sheet events
The group continues to focus on the expansion of the business through new management contracts and the development of new care homes and retirement living facilities, and has a number of potential sites under active review.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2023.
The results for the year are set out on page 11.
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:
The Group has a well-established policy of providing employees with information about the Group through internal media methods in which employees have also been encouraged to present their suggestions and views on the Group's performance. Regular meetings are held between local management and employees to allow a free flow of information and ideas.
In accordance with the company's articles, a resolution proposing that Gerald Edelman LLP be reappointed as auditor of the group will be put at a General Meeting.
The reporting period is 1st April 2022 to 31st March 2023, aligning with the company’s financial year.
The UK Government’s environmental reporting guidance on how to measure and report greenhouse gas emissions has been used, along with the provided greenhouse gas reporting figures for the relevant year . The financial control approach has been used to define the scope boundary.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per number of beds. This will allow comparison and benchmarking with similar sites and organisations and still drives energy reduction goals.
The company is a holding company and measures taken to improve energy efficiently are disclosed in the accounts of the subsidiary undertaking Avery Healthcare Holdings Limited.
Details on how the group has fostered relationships with suppliers, customers and others can be found within the Section 172 statement in the Strategic Report
The financial statements have been prepared on a going concern basis which the directors believe to be appropriate for the following reasons.
The group meets its day to day working capital requirements through operating cash flows and debt financing. The directors have prepared cash flow forecasts for the period to 31 March 2025. These forecasts show that the group and company will have sufficient cash to continue to operate, whilst servicing its debt interest and settling all liabilities that become due for the next 12 months from the date of the approval of these financial statements.
The directors are, at the time of approving the financial statements, confident that the group and company has adequate resources to continue in operational existence for the foreseeable future and will have sufficient liquidity to meet its commitments as and when the liabilities fall due for the next 12 months from the date of the approval of these financial statements and have therefore prepared these financial statements on a going concern basis. This is notwithstanding that at the balance sheet date the company had net current liabilities and net liabilities. The majority shareholders of the group have agreed to continue to provide the necessary financial support and working capital for at least one year from the date of the approval of these financial statements to allow the group and the parent company to meet its liabilities as they fall due.
The group continues to focus on the expansion of the business through new management contracts and the development of new care homes and retirement living facilities, and has a number of potential sites under active review.
We have audited the financial statements of Veilchenblau Estates Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We planned our audit so that we have a reasonable expectation of detecting material misstatements in the financial statements resulting from irregularities, fraud or non-compliance with law or regulations.
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:
The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
Enquiring of management of whether they are aware of any non-compliance with laws and regulations.
Enquiring of management whether they have knowledge of any actual, suspected or alleged fraud.
Enquiring of management their internal controls established to mitigate risk related to fraud or non-compliance with laws and regulations.
Discussions amongst the engagement team on how and where fraud might occur in the financial statements and any potential indicators of fraud. As part of this discussion, we identified potential for fraud in the following areas; posting of unusual journals.
Obtaining understanding of the legal and regulatory framework the company operates in focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations. The key laws and regulations we considered in this context included Care Quality Commission (‘’CQC’’) compliance, UK Companies Act, tax legislation,data protection, anti-bribery, employment and health and safety.
To address the risk of fraud through management bias and override of controls, we:
Performed analytical procedures to identify any unusual or unexpected relationships.
Audited the risk of management override of controls, including through testing journal entries for appropriateness
Assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and
Investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non compliance with laws and regulations, we designed procedures which included, but are not limited to:
Agreeing financial statements disclosures to underlying supporting documentation.
Reviewing minutes of meetings of those charged with governance.
Enquiring of management as to actual and potential litigation claims.
Reviewing correspondence with HMRC.
Inspection of regulatory documentation for compliance with CQC requirements and making enquires with management regarding communication with the CQC.
The test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, mean that there is an unavoidable risk that even some material misstatements in respect of irregularities may remain undiscovered even though the audit is properly planned and performed in accordance with ISAs (UK). Furthermore, the more removed that laws and regulations are from financial transactions, the less likely that we would become aware of non-compliance.
Our examination should therefore not be relied upon to disclose all such material misstatements or frauds, errors or instances of non-compliance that might exist. The responsibility for safeguarding the assets of the company and for the prevention and detection of fraud, error and non-compliance with law or regulations rests with the directors.
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.
Other matters which we are required to address
In accordance with ISA (UK) 706, we are required to draw users’ attention to any matter or matters other than those presented or disclosed in the financial statements that are relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
In this regard, we report to you that the prior year’s financial statements are unaudited. We have nothing further to report to you on other matters.
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 profit for the year was £38,193 (2022 - £0 profit).
Veilchenblau Estates Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 4th Floor, Millbank Tower, 21-24 Millbank, London, SW1P 4QP.
The group consists of Veilchenblau Estates Ltd 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. 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 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Veilchenblau Estates Ltd together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 March 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The financial statements have been prepared on a going concern basis which the directors believe to be appropriate for the following reasons.
The group meets its day to day working capital requirements through operating cash flows and debt financing. The directors have prepared cash flow forecasts for the period to 31 March 2025. These forecasts show that the group and company will have sufficient cash to continue to operate, whilst servicing its debt interest and settling all liabilities that become due for the next 12 months from the date of the approval of these financial statements. Additionally, a letter of support has þeen obtained from the parent company.
The directors are, at the time of approving the financial statements, confident that the group and company has adequate resources to continue in operational existence for the foreseeable future and will have sufficient liquidity to meet its commitments as and when the liabilities fall due for the next 12 months from the date of the approval of these financial statements and have therefore prepared these financial statements on a going concern basis. This is notwithstanding that at the balance sheet date the company had net current liabilities and net liabilities. The majority shareholders of the group have agreed to continue to provide the necessary financial support and working capital for at least one year from the date of the approval of these financial statements to allow the group and the parent company to meet its liabilities as they fall due.
Turnover represents fee income relating to the provision of care services, net of value added tax, if applicable and the sale of properties acquired or developed by the Company where a forward sales agreement is in place. Fee income comprises care fees which are recognised when the delivery of the service is completed. Fees invoiced in advance are included as deferred income until the service is completed.
Sale of care homes that the Group has developed, under a contract with a customer, are recognised on legal completion.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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 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.
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 profit or loss, 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 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, 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.
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 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.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
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.
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 balance sheet 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 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 leased 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.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The Group considers whether work in progress is impaired. Where an indication of impairment is identified the estimation of recoverable value requires estimation of expected costs to complete development and comparison with agreed forecast revenues upon sale.
The Group considers whether goodwill is impaired. Where an indication of impairment is identified the estimates of recoverable value of the cash generating units (CGU's) are assessed. This requires estimation of the future cash flows from the CGUs and also selection of appropriate discount rates in order to calculate the net present value of those cashflows.
The group's reported figures for the comparative year is from the date of acquisition, 9 March 2022, to 31 March 2022.
Exceptional professional fees and other transaction related costs arise in respect of abortive transaction costs, preopening costs incurred by care homes, exceptional legal fees and acquisition costs. These are considered exceptional on the basis that they do not arise from the day-to-day operation of our care homes but are related primarily to significant planned or aborted transactions or developments during the year and as such may distort the commercial trading reality of the group as whole.
The average monthly number of persons (including directors) employed by the group during the year was:
The company had no employees and the numbers presented above represents the full year disclosure in the subsidiary of the company.
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 March 2023 are as follows:
All the companies listed above are registered at 3 Cygnet Drive, Swan Valley, Northampton, NN4 9BS.
Details of associates at 31 March 2023 are as follows:
Capitalised care home development costs are classified as work in progress where the Group has a care home development agreement in place with a third party. Where there is no such agreement, development costs capitalised are classified as tangible fixed assets, assets in construction.
In 2022, Work in progress was included within Other Debtors in the financial statements.
The amounts owed by associate undertakings are interest free loans which are due in 5 years from the date of the agreements. The loans have been discounted.
The amount owed to parent undertaking is unsecured, interest free and repayable on demand.
Accruals are for future property rental increases that have arisen from spreading guaranteed future rent increases over the lease term.
As at 31 March 2023, the other loans were term facilities provided to group entities by Hightower Finance Limited. Interest calculated is based on the bank of England base rate with a margin of 5.5%, subject to a cap of 10% in its first year and a floor of 8% annually, and after the first year the cap is removed. The debt is repayable as a bullet payment in March 2025. Subsequent to the year-end the facilities were refinanced with the applicable nominal interest rates and years of maturity following refinancing disclosed in the table below.
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. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund. As at 31 March 2023 the company had no post-employment benefits.
The company's subsidiary, Avery Healthcare Holdings Limited together with a number of its fellow subsidiary undertakings, has entered into a cross collaterised security arrangement to secure the Group’s operating property leases with Welltower Inc of Toledo USA.
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:
Total compensation of key management personnel (including directors) was £923k (2022: £1,541k), with £758k (2022: £527k) being paid as remuneration and £165k (2022: £1,014k) being billed by other related party entities controlled by key management personnel.
At year end there is £nil (2022: £17K due to) due to key management personnel of the subsidiary.
During the year the group entered into the following transactions with related parties:
Transactions with Welltower Inc
The Group has debt funding and a number of long term leases with Welltower Inc for the lease of care home and retirement living facilities. Other transactions with Welltower Inc in the year are as follows:
During the year, the company paid £78,218 (2022: £155,500) rent to Xanadu Investments Limited.
Rent of £2,973 (2022: £85,000) was paid to one of the directors.
Included in other debtors is an amount of £23,764 (2022: £107,963) in respect of balances owed by companies owned by one of the directors with significant control at the time of the transaction.