I am pleased to report on another strong set of results that reflect our selective investment strategy, despite the latest macro-economic inflation pressures coming through.
Our gross rental income reflects a fully let position, targeted upon the lower end of market range on individual properties adding to the security of income position. Our void position reflects also the lower end of the market average.
Whilst there is still a little lag from the 'Covid' downturn, the primary cost arises through financing. Our exposure to rate rises is partly mitigated by our hedging policy which is constantly under review.
In summary
Rental income £ 2.65m (2022: £ 2.52m)
Net cash £ 1.33m (2022: £ 2.98m)
Gross investment assets £ 61.89m (2022: £ 61.81m)
As previously reported, we adopt a conservative funding policy, our bank leveraged exposure is 38% of asset value at the balance sheet date. The bank loans underpinning the assets at the year-end stands at £23.4m (2022: £21.79m).
We continue to look for further sound investment opportunities that will provide long term investment growth for the business.
The Directors present the strategic report for the year ended 30 April 2023.
The business has continued with its investment strategy during the year. The investment portfolio now stands at £61.9m (2022: £61.8m).
The underlying results for the year are as follows and are more fully set out in the Financial Report:
| 2023 | 2022 |
| £ m | £ m |
Operating pre Tax Profit | 1.96 | 1.75 |
Purchase & Revaluations | 0.33 | 7.54 |
Net Asset Value of Group | 28.80 | 27.80 |
The Directors have restated the Group’s investment portfolio, having due regard to open market values achievable on its PRS stock, whilst it has used Lambert Hampton Smith guide values on its commercial portfolio.
The company maintains a strategy to mitigate key risks in freehold and long-leasehold property and the perceived financial risks are:
Consumer confidence and macro-economic issues: We continually re-appraise our investment strategies
Impact of Covid-19: The risk impact is reducing consequent due to the vaccine roll outs, making the risk of further Government lock downs remote.
Lack of liquidity: Mitigated by a strategy to hold a strong cash position
Funding cost exposure: Use of hedging strategies and strong cash holding.
Finance
The macro-economic impacts from oil price rises, global shortage of goods (due to the pandemic and Brexit) and latterly the war in Ukraine, are now feeding through into the UK economy with inflationary impacts leading to rising bank of England base rates.
The company took advantage of extending its loan deal with Lloyds at a reduced margin, which together with new hedging, should insulate the business in part from interest risks.
By order of the board
The Directors present their annual report and financial statements for the year ended 30 April 2023.
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
No ordinary dividends were paid. The Directors do not recommend payment of a further dividend.
HJS (Reading) Limited were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Small companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
We have audited the financial statements of Kitewood Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 April 2023 which comprise 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 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 Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Directors' report has been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we have not identified material misstatements in 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; or
the Directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption in preparing the Directors' report and from the requirement to prepare a strategic report.
As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of noncompliance with laws and regulations related to breaches of UK regulatory principles, such as those governed by the relevant Landlord/tenancy regulations within the UK. We also considered the laws and regulations which have a direct impact on the financial statements such as the Companies Act 2006.
We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to management bias in accounting estimates and judgemental areas of the financial statements.
Audit procedures performed by the audit engagement team included:
Discussions with senior management, including consideration of known or suspected instances of noncompliance with laws and regulation or instances of fraud;
Identifying and testing journal entries based on risk criteria;
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
Testing transactions entered into outside of the normal course of the company's business;
Reviewing any potential litigation or claims against the entity which indicate any potential noncompliance issues.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, 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 deliberate concealment by, for example, forgery or intentional misrepresentations, or though collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
These financial statements have been prepared in accordance with the provisions applicable to groups and companies subject to the small companies regime.
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 £48,660 (2022 - £20,710 loss).
Kitewood Holdings Limited is a private company limited by shares incorporated in England and Wales. The registered office is 7 Dacre Street, London, England, SW1H 0DJ.
The group consists of Kitewood Holdings 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 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
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 investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Kitewood Holdings Limited 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 30 April 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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
In the parent company financial statements, investments in subsidiaries, are held at cost less accumulated impairment.
At each reporting period end date, the group assesses whether there is any indication of impairment of its fixed assets. If such indication exists, the recoverable of the asset is estimated in order to determine the extent of the impairment loss (if any).
The recoverable amount is the higher of fair value less costs to sell and value in use. 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.
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 and an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's 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 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. The financial liabilities are subsequently measured at amortised cost using the effective interest rate method.
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.
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.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Cash flow hedges are used to cover the group's exposure to variability in cash flows that is attributable to particular risks associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income through the hedging reserve in equity, whilst the ineffective portion is recognised in profit or loss.
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.
Deferred tax arising in respect of revaluation gains and losses of investment properties is transferred to or from Other reserves respectively.
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.
The average monthly number of persons (excluding directors) employed by the group and company during the year was:
The company is operated by the directors who are remunerated in Kitewood Estates Limited.
Investment property comprises of property interests held for their rental income, and capital appreciation. The investment property has been valued on an open market basis on the 26 January 2022 by Lambert Smith Hampton which makes reference to market evidence of transaction prices for similar properties. The valuation was made on behalf of the group's funders. The directors consider the valuation of the investment property to be higher than the valuation provided by Lambert Smith Hampton and therefore the revaluation of investment property has been increased accordingly.
Details of the company's subsidiaries at 30 April 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The following companies have taken exemption from audit under the Companies Act 2006, Section 479A:
Company Name | Company No: |
Greenwich Heights Limited | 06180433 |
Greenwich 1 Limited | 08230380 |
Greenwich 2 Limited | 07718748 |
Clapham Park Road Limited | 05034160 |
Yiewsley Limited | 06212345 |
Altira Business Park II Limited | 06225143 |
Mary Developments Limited | 06326740 |
Kitewood (Southbury) Limited | 08123891 |
Kitewood Property Investments Limited | 08005170 |
Tavistock Investment 2 Limited | 11861168 |
Kitewood (St James) Limited | 13676690 |
The bank loans are secured by fixed and floating charges over the assets of Kitewood Investment Holdings Limited and subsidiary entities.
The other loans are unsecured and are considered to be repayable on demand.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
In accordance with the Finance Bill 2021, Deferred tax has been calculated at 25% in line with the rise to the corporation tax rates.
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
The above companies are considered related parties by virtue of common control.