The directors present the strategic report for the period ended 30 June 2022.
Fair review of the business
The results for the period for the group and the financial position of the group and the company are shown in the the annexed financial statements.
The companies in The Stepping Stone Group continued to keep residents safe and supported throughout the Covid pandemic which was still prevalent for most of 2021/22. In common with the rest of the residential Care sector the group suffered in the post Covid period (2022/23) from reduced occupancy at its Care Home.
Whilst the Group continued to pursue the planning applications for sites in Nynehead and Somerton, its sales and development of existing Close Care properties were adversely affected. This increased the development costs particularly for Close Care Homes in Somerton and increased the loss for the Courthouse Mews Development. The retail properties in Somerton had to be supported through this period but all units are now fully let. The directors are pleased that all the residential properties in Somerton are also fully occupied and a successful retirement community has been established.
Throughout the period the group has been supported by the strong trading performance of Nynehead Care Limited.
At the date of this report the group is in the process of agreeing terms from a new specialist development funder to replace its secured debt and assist with further Group funding arrangements. At the date of this report these arrangements were not complete but the directors expect the new funding to be in place within a few weeks. This longer term funding is essential for planned development by the Group of high quality Retirement Housing with Care facilities and in providing long-term certainty for the remaining trade of the group.
The key performance indicators of the group are summarised as follows:
2022 2021
£ £
Turnover 2,875,396 3,669,984
Gross profit 877,579 800,213
Gross profit % 30.5% 21.8%
Profit before tax 66,694 18,604
Net profit % 2.3% 0.5%
Net assets 2,039,447 1,972,753
The significant areas on the review of the business in respect of the individual companies within the group were as follows:
On behalf of the board
The directors present their annual report and financial statements for the period ended 30 June 2022.
The results for the period are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
The Stepping Stone Group
The company is continuing to manage and provide support to its subsidiary companies as required.
Nynehead Care Limited
Nynehead Care has continued to achieve a “Good Rating” from the Care Quality Commission and despite a drop in financial performance during 2023 has since seen further improvements in EBITDA following year end. The directors remain optimistic that following extensive planning and development consultations the company will be able to build additional Close Care homes at Nynehead Court which will provide further assisted living facilities to residents who can live more independently.
Nynehead Court Farm Limited
The directors remain optimistic that following extensive planning and development consultations that the company will be able to build additional Close Care homes at Nynehead Court which will provide further assisted living facilities to residents who are able to live more independently.
Close Care Homes Limited
The company is continuing to market its site which originally consisted of nine residential units and two garages for sale in Somerton as well as refurbishing five commercial units for rental, also in Somerton, with the majority of units now sold.
Close Care Homes (Somerton) Limited
The company is planning to continue developing its site in Somerton and is exploring additional sources of finance in order to commence the next stage of the development works.
We have audited the financial statements of The Stepping Stone Group Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 30 June 2022 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 period 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.
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.
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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and 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 accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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 £598,374 (2021 - £77,624 loss).
The Stepping Stone Group Limited is a private limited company limited by shares incorporated in England and Wales. The registered office of the group is Lime Court, Pathfields Business Park, South Molton, Devon, EX36 3LH.
The group consists of The Stepping Stone Group Limited and 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 and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 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 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 financial statements incorporate those of The Stepping Stone Group Limited and all of its subsidiaries (ie 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.
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.
Minority interest is that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned directly or indirectly by the group. It is measured at the minorities' share of the fair value of the subsidiaries' identifiable assets and liabilities at the date of acquisition by the group and the minorities' share of changes in equity since the date of acquisition, except when the losses applicable to the minority in a subsidiary exceed the minority interest in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minority are attributed to the equity holders of the company, unless the minority has a binding obligation to, and is able to, make good the losses. When that subsidiary subsequently reports profits, the profits attributable to the minority are attributed to the equity holders of the company until the minority's share of losses previously absorbed by the equity holders of the company has been recovered.
At the balance sheet date the group had net current liabilities of £776,975 (2021: £342,193 net current assets). In accordance with their responsibilities as directors, the directors have considered the appropriateness of the going concern basis for the preparation of the financial statements. The financial statements have been prepared on the basis that the company and group is a going concern, and that it will be in a position to continue to trade and to meet its obligations for a period of at least twelve months from the date of the directors approval of these financial statements.
The directors have reviewed the results of the company and group during the period since the balance sheet date and consider that there have been no additional material post balance sheet events that would have affected the results and financial position at the balance sheet date.
The directors, being suitably knowledgeable and experienced, consider that the company and group will be able to continue in its operations for a period of at least twelve months from the date of the approval of these financial statements. In arriving at this opinion, the directors have considered the current economic climate, specific conditions affecting the industry, the availability of future loan and bank funding facilities and level of required support to group entities.
Bank loans of £3,604,086 in place at the balance sheet date have since been extended to July 2024. Bank loans of £841,347 in place at the balance sheet date have since been extended to April 2024. Bank loans of £440,444 in place at the balance sheet date have since been refinanced and extended to May 2023.
The current bank loan facilities are due to be repaid imminently as part of a consolidation of group finance facilities, with all facilities due to be retained up to the date oif this refinance and as such the directors do not consider this to impair the company's ability to continue as a going concern. An experienced broker has been used as part of this refinance, with a strong expectation that the refinance shall shortly complete. However, alternative options are also available if the refinance does not proceed as expected.
With the support of the directors, all companies in the group, bankers and other finance providers, the directors consider that the going concern basis is appropriate for the preparation of the financial statements. The directors have no reason to believe that this support will not continue and have a reasonable expectation that the group has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of these financial statements.
The financial statements are presented for the period from 30 June 2021 to 30 June 2022.
Turnover represents net invoiced sales of contracts & other services, fees in respect of the provision of residential care and the sale of developed property sites, excluding value added tax, and are all derived from the principal activities of the group.
Rendering of fees and services
Revenue is recognised in respect of the weekly provision of residential care and the receipt of service charges from developed close care units in the grounds of the residential care home. Income is adjusted for accrued/deferred income as appropriate.
Sale of property
Revenue from the sale pf property is recognised when the significant risks and rewards of ownership of the property have passed to the buyer, usually on legal exchange, and the amount of revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the group and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Other revenue and Interest income
Revenue is recognised as interest accrues using the effective interest rate method and other income as it is due or received.
Rental income
Revenue from rental income is recognised in respect of the rental income accrued.
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 loss previously recognised in a profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and losses are recognised in profit or loss.
An amount equal to the excess of the annual depreciation charge on revalued assets over the notional historical cost depreciation charge on those assets is transferred annually from the revaluation reserve to retained earnings where appropriate.
The fixed asset investments in this company's balance sheet are stated at cost.
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.
Other investments are initially measured at cost. At each reporting period, an assessment is made of the fair value of all investment balances, with the corresponding movement recognised within profit or loss.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
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 group 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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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 when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
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 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.
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.
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.
Related party exemption
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.
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 judgements, estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Freehold property is carried at fair value, with changes in fair value being recognised in the revaluation reserve. The group engaged independent valuation specialists to determine the property valuation, and this has been reflected fully in the accounts as at 30 June 2022. The valuer used a valuation technique based on an existing use value model. The determined fair value of freehold property is sensitive to the estimated yield as well as the group's EBITDA. Further independent valuations have been obtained since the Balance Sheet date each on a similar basis to prior valuations, with these supporting the value recognised. .
The directors have reviewed the valuation assumptions and variables as at 30 June 2022, consequently, a pre-tax gain of £Nil (2021: £Nil) was recognised in other comprehensive income. No impairment has been noted as a result of Covid-19.
The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful lives and residual values of the assets held. The useful lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets.
Rates of depreciation are considered on a line by line basis and disclosed with the accounting policy for tangible fixed assets.
See the tangible fixed asset note for the carrying amount of each class of asset.
Investment properties are reviewed annually for their fair value, where this valuation materially differs to carrying value, adjustments are made to revalue these assets. This movement is recognised in profit or loss.
Independent valuations are obtained from suitably qualified professionals. These are conducted on a periodic basis in order to prevent material misstatement.
The fair value of investment properties was reassessed at 30 June 2022 to be £587,000 (2021: £592,937). Consequently, a loss of £5,937 (2021: £Nil) has been recognised in other comprehensive income.
The group establishes a reliable estimate of the useful life of goodwill arising on business combinations. This estimate is based on a variety of factors such as the expected use of the acquired business, the expected useful life of the cash generating units to which goodwill is attributed, any legal, regulatory or contractual provisions that can limit useful life and assumptions that market participants would consider in respect of the business.
Bad debts
The group recognises bad debts as soon as it is known the sum in debtors will not be recovered. Any amounts provided for are recognised in the profit and loss account.
Grants received in the year related to the Infection Control Fund of £35,192 (2021: £87,654), Social Care retention grants of £34,700 (2021: Nil), and Job Retention Scheme of £Nil (2021: £8,715).
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
Group
The total carrying amount of tangible fixed assets held by the group are pledged as security for the bank borrowings of certain group companies under fixed and floating charges.
Land and buildings were revalued in a prior year by Knight Frank LLP, independent valuers not connected with the group on the basis of market value. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties. The directors do not consider there to be any evidence with regards to the diminution in value of this amount, at the balance sheet date. The value recognised is consistent with subsequent valuations obtained since the Balance Sheet date and known wider conditions in the market.
If revalued assets were stated on a historical cost basis rather than fair value basis, the total amounts included would have been £1,984,334 (2021: £1,984,334). If depreciation was calculated on historical cost basis, depreciation would have been £422,506 (2021: £398,200) for the year at 2%.
Included in cost of freehold land and buildings is freehold land of £769,000, no depreciation is charged on freehold land.
Company
The total carrying amount of tangible fixed assets are pledged as security for the bank borrowings of the company under fixed and floating charges.
The fair value of the investment property has been based on the assumptions of the directors of the fair value of investment property based on their rental values at the balance sheet date. The property valuation has been based on an independent valuation carried out by Savills and observable market information. The directors do not consider the fair value of the investment property to be materially misstated.
The total carrying amount of investment properties are pledged as security for the bank borrowings of a group company under fixed and floating charges.
The group and company
Investments with a carrying amount of £25,000 are pledged as security for the bank borrowings of the parent company under fixed and floating charges
The company
The total carrying amount of investments are pledged as security for the bank borrowings of the company under fixed and floating charges
Details of the company's subsidiaries at 30 June 2022 are as follows:
Group
The total carrying amount of stocks for the group are pledged as security for the bank borrowings of certain group companies under fixed and floating charges
The carrying value of stock for the group includes capitalised borrowing costs of £1,053,267 (2021: £974,268).
The carrying value of stock for the group includes an impairment of £440,557 (2021: £343,952).
Group
Debtors with a carrying value of £299,373 (2021: £863,204) are pledged as security for the bank borrowings of certain group companies under fixed and floating charges.
Company
Amounts due from group undertakings are repayable on demand and interest is charged at 4% over base per annum in accordance with inter-group loan arrangements. Amounts are recognised net of impairments of £2,146,409 (2021: £1,588,951).
The total carrying amount of debtors for the company are pledged as security for the bank borrowings of the company under fixed and floating charges.
Company
Amounts due to group undertakings are repayable on demand and interest is charged at 4% over base per annum in accordance with inter-group loan arrangements.
Group
Bank loans of £3,604,086 (2021: £3,784,185) are secured by a debenture over all the company assets, a first legal charge over the freehold properties, and an unlimited inter-company guarantee granted by the company and The Stepping Stone Group Limited. The loan is subject to monthly repayments of £24,442 inclusive of interest, with the remaining balance all due by July 2023. The loan has since been extended to July 2024.
Bank loans includes an amount of £39,691 (2021: £49,167) in relation to a Business Bounce Back Loan, with
monthly repayments due until April 2026 and interest charged at 2.5%. Bank loans includes the company bank loan that is repayable by monthly instalments, with the remaining balance due by May 2026, interest is charged at 2.28% over the Bank of England Base rate of interest.
Bank loans of £841,347 are secured by fixed and floating charges over all the assets of the company and by a legal mortgage over certain properties in work in progress. The bank loan is repayable by the sales of certain properties held in work in progress, with the loan facility available till 30 November 2023. The facility has since been extended to 30 April 2024.
Bank loans of £440,444 are secured by a legal mortgage over a property held in work in progress, with interest payable at 9% per annum. The loan was refinanced in September 2022.Additional security has been provided for this loan balance in relation to a personal guarantee by a director.
Bank loans of £15,674 relates to a Business Bounce Back Loan, with monthly repayments due until May 2026.
Other loans of £185,657 (2021: £210,000) are unsecured and payable by monthly repayments all due by
June 2027, with interest charged rate rates of 10.2%.
Other loans of £38,207 (2021: £10,000) are unsecured and payable by monthly repayments of at least 10%,
with interest charged at rates ranging from Bank of England base rate plus 2.16% to Bank of England base rate plus 2.82%.
Company and group
Other loans includes an amount of £200,000 due within one year that is unsecured. Interest is charged at 5% and final repayment is due July 2022. This loan has since been extended to 31 March 2025.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A rate of 25% (2021: 25%) was used for purposes of considering the effects of deferred taxation in the current period, as the increase in the main rate of UK Corporation Tax intended to take effect from 1 April 2023 had been enacted at the Balance Sheet date.
Called up share capital represents the nominal value of shares that have been issued.
Ordinary shares carry the right of the holder to one vote per share.
A Ordinary shares do not carry any right of the holder to participate in votes. A Ordinary shares do not entitle the holders to receive any dividend or distribution declared.
This is the difference between the nominal share price and the actual price paid for the shares
Revaluation reserve includes all current and prior period revaluations of fixed assets, less amounts capitalised as part of a bonus share issue in 2015. Transfers are in relation to amounts transferred to retained earnings in the year due to deferred tax movements in relation to revaluation gains capitalised as part of the 2015 bonus share issue.
This is the reserve for the amounts transferred when a group companies own shares were purchased or redeemed out of distributable profits
Profit and loss reserves includes all current and prior period retained profits and losses. Transfers are in relation to amounts transferred from the revaluation reserve.
Movements in non-distributable retained earnings below are in relation to movements in the valuation of investment property via profit or loss, or associated movements in relation to taxation.
One of the group's subsidiaries, Close Care Homes Limited, has a minority interest shareholder of 20% of the issued share capital in that company.
Group
As at 30 June 2022, there were commitments with regards to operating leases of £67,739 (2021: £38,166). The operating lease commitment note provides further detail.
As at 30 June 2022, the group had contingent liabilities of £450,000 (2021: £450,000) with regards to a share buyback agreement, for which conditions are yet to be met.
Company
As at 30 June 2022, the company had total guarantees and commitments of £4,445,433 (2021: £4,983,554) in respect of group companies.
As at 30 June 2022, the company had contingent liabilities of £450,000 (2021: £450,000) with regards to a share buyback agreement, for which conditions are yet to be met.
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:
Company
At the balance sheet date, the company was owed £1,360,790 (2021: £1,385,068) by a non-100% owned subsidiary company. This debt has subsequently had a bad debt provision recognised of £1,298,469 (2021: £1,234,759). Interest has been charged on this balance at 4% above the Bank of England base rate, with a subsequent charge of £58,868 (2021: £56,949) receivable for the year.
During the year, the company has performed management service charges for a non-100% owned subsidiary company of £17,152 (2021: £16,514).
Company and group
At the balance sheet date, £432,134 (2021: £12,271) was owed to directors of the company.
At the balance sheet date, the company was owed £Nil (2021: £580,320) by a director of the company. Interest has been charged on this balance at 2.5% for the year, with a subsequent charge of £15,862 (2021: £9,123) receivable for the year. As at 30 June 2022, an amount of £17,991 (2021: £2,129) is recognised within other debtors in relation to unpaid interest.
During the year, management service charges have been received from the spouse of a director of £36,025 (2021; £36,000).
At the balance sheet date, accruals of £503,600 (2021: £503,600) have been recognised with a shareholder. These amounts include £500,000 in relation to a provision for a redemption of shares. Further amounts have been recognised with a shareholder within other debtors of £33,543 (2021: £33,543) and other creditors of £Nil (2021: £50,000), all due in less than one year.
During the year, £Nil (2021: £10,500) of rental income was received from a charity, for which a director of the company is a trustee. During the year, £9,000 (2021: £3,250) was donated to this charity.
Group
During the year, rent of £Nil (2021: £7,200) has been received from a director.
At the balance sheet date, the group owed £Nil (2021: £1,000,000) to a shareholder of the group. Interest has been charged on this balance at 12%, with a subsequent charge of £60,000 (2021: £120,000) payable for the year. An amount of £452,548 (2021: £392,548) is held in accruals in relation to unpaid interest. During the year, the amount previously owed to a shareholder of £1,000,000 was settled by a director and thus re-assigned to the director.
At the balance sheet date, the group was owed an amount of £Nil (2021 £7,337) from a family member of a director, with this balance recognised within trade debtors.
During the year, the company received rent from a relative of a director of the company amounting to £4,321 (2021 £3,820).
During the year, management service charges have been received from a director of £4,500 (2021; £Nil).
The following advances and credits subsisted during the year ended 30 June 2022 for the group.
These amounts are unsecured and repayable on demand.
Interest is charged at 2.5%. During the year, interest has been charged of £15,862 (2021: £9,172).
During the period a loan balance of £1,000,000 was settled by a director of the company. Accordingly the debt has been re-assigned to the director and has been included within transfers below.
During the period a loan balance of £1,000,000 was settled by a director of the company. Accordingly the debt has been re-assigned to the director.