The directors present their strategic report for the year ended 31 March 2023.
The principal activity of SQIB Limited during the year was that of a group holding company. The principal activities of subsidiaries of SQIB Limited are as follows: property development, investment property management, private jet aircraft investment and charter aircraft service, along with the provision of hotel accommodation, leisure facilities, venue hire and food and beverage.
The results for the year are set out on page 11 and show a loss before taxation for the year of £17,438,175 (2022: £3,641,277). The directors have not recommended a dividend.
The parent company results for the year show a loss before taxation of £3,292,786 (2022: £1,796,146).
The group results for the year are described below. The Group recognised a share of profit for the year of associated undertakings of £441,979 (2022: £640,370). The group’s total revenues have increased to £31,845,047 from £31,631,854 in the prior year. Gross profit margins have decreased slightly to 26% (2022: 30%).
The group’s continues to make losses and reports a loss before tax of £17,438,175 (2022: £3,641,277). Results include a fair value unrealised loss on investment properties of £3,027,920 (2022: gain of £623,258). The investment properties have been impaired to reflect their tenancies as at the date of signing this report. It is management’s intention to maximise the return on sale of any investment properties and sell with vacant possession. The vacant possession value is £47,000,000, which would result in a revaluation gain of £2,075,000. Whilst turnover has remained steady year on year, the increase in cost has resulted in an increased of losses in the current year.
Management continue to review the group’s cost bases and monitor where processes, centralisation and synergies can be utilised to generate cost savings. Jet Aircraft Limited and Zenith Aircraft Limited reported foreign exchange losses on translation of the US Dollar aircraft loans of £254,635 and £389,992 respectively. Management are exploring hedging techniques to mitigate the risk of the volatile USD exchange rates.
The group total comprehensive loss for the year was £13,529,488 (2022: £4,812,967) taking into account a gain of £3,249,952 (2022: loss £1,087,185) as a movement in equity, due to revaluation uplift on tangible fixed assets. As a result the group is showing a shareholders deficit of £60,484,674 (2022: £46,955,186) at 31 March 2023.
Going concern
The group's business activities, together with the factors likely to affect its future development, performance and position are set out in this Strategic Report, which also makes reference to the group's financial risk management objectives, including exposure to liquidity risk. The group meets its day to day working capital requirements through the support of its shareholders and external borrowing.
During the year, the Company was in breach of its loan covenants regarding a bank loan of £68,621,716 and this has resulted in the loan being reclassified from non-current to current at the balance sheet reporting date. Subsequent to the year end, the breaches have not been enforced by the lender. Despite the Company continuing to be in breach of the loan covenants, following discussions with the lender the shareholders are confident the loan will not be recalled in the foreseeable future.
The financial statements have been prepared on the going concern basis as the director and majority shareholder K R Spencer has undertaken to provide financial support, as required, to enable the group to continue to trade for a period of at least 12 months from the date of approval of these statements. This represents a material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern should the support be withdrawn or not materialise.
Should the group be unable to meet its liabilities as they fall due, adjustments would have to be made to restate fixed assets as current assets and reduce the value of assets to their recoverable amounts and to provide for any further liabilities as they arise.
The process of risk acceptance and risk management is addressed through a framework of procedures and internal controls which are subject to Board approval and ongoing review by management and risk management. Compliance with regulation, legal and ethical standards is a high priority for the company and group and the compliance team and finance department take on an important oversight role in this regard. The Board is responsible for satisfying itself that a proper internal control framework exists to manage financial risks and that controls operate effectively.
The principal risks to the group are factors that affect property valuations and rental income streams such as high inflation and the cost of living crisis mentioned below. This would have an impact on Bewl Events & Waterpark Limited, Bishops UK Limited, Connect Centre Limited, Goswell Properties Limited and 55VS No 2 Limited and could affect revenue within Integra Property Management Limited. Increase in local competition to provide hotel accommodation, venue and room hire, as well as the cost of living crisis, would affect the revenue achievable within Salomons UK Limited. Increase in global fuel prices, which are being exacerbated by high inflation and the war in Ukraine, would lead to a reduction in gross profit margin for Zenith Aviation Limited and rising utility costs across the group.
Economic conditions
The Consumer Prices Index (CPI) was reported to have risen by 2.7% in the 12 months to March 2023. The high inflation and rising costs of living are having a significant impact on spending habits in the UK and across the World. The war in Ukraine is also having a further impact on global fuel prices.
Management are monitoring inflation alongside the cost of living and energy crises.
Following the governments lifting of the travel restrictions, as a result of Covid-19, the aviation division have seen Chartering’s volume and revenue recover to almost pre-pandemic levels as we see both leisure and business travellers now looking to book flights considerably more frequently. However, rising global fuel prices are having an impact on the aviation division’s gross profit margins. Management are monitoring this closely and reviewing sales pricing techniques and are focused on maximising charter in the company’s typical low-season through the Winter. The aircraft maintenance department is continuing to perform well and has seen fewer negative impacts from the current economic conditions.
The leisure division, which includes Salomons UK Limited and the trade at Bewl Water, has been impacted by rising energy prices and high inflation. With weddings and other events booked far in advance, price increases can then have a short term impact on profits. However renewed focus on core revenue generating streams has seen a surge in customers rebooking weddings, events and conferences with higher attendance numbers, along with food, beverage and hotel room occupancy also increasing.
Income of the property division is protected by legally enforceable lease agreements, but short term cash flows can be affected by lease deferrals. Working practices and demand for commercial office space is still changing as a result of the Covid-19 pandemic, and there is medium to long term uncertainty and risk in the commercial and residential property markets as to valuations and sustainable rental values.
Management have taken several steps to mitigate the impact of the current economic conditions, including reviewing cost bases, centralising support functions and renegotiating third party loan terms. Management also monitor and forecast both short term and long-term cash flows and plan to generate significant net proceeds into the Group by way of several capital events. Despite the ongoing uncertainty around the war in Ukraine and cost of living crisis, the directors are confident that the capital events and long-term plans will be realised. In the unlikely event that not all of the capital events come into fruition this will have some adverse effect on the Group’s cash and its ability to service the interest payments on the debt. Therefore, the shareholders are committed to supporting all the SQIB subsidiary companies and this is expected to continue for the foreseeable future.
Interest rates and exchange rates
SQIB subsidiary companies have a number of bank and other loans to help finance previous acquisitions of companies and properties. These bank loans and other loans are subject to interest charges and the group is at risk to any increases in either the base rate and/or the LIBOR. The Aviation loans, entered into to finance the acquisition of aircraft, are USD denominated. The businesses’ cash flows and loan values are exposed to currency fluctuations due to a strengthening U.S. Dollar or weaker Pound. Management are mitigating this risk using exchange rate hedging techniques when deemed necessary.
The group closely monitors its performance against a series of measures on a monthly and year to date basis. These cover key aspects of the business operations including debtors, creditors, expenses and cash flow. Expenses are monitored monthly by expense type and cash flow is monitored daily.
The group also monitors turnover, gross profit margin and operating profit/(loss). For the subsidiary company that provides hotel accommodation, its key performance indicator is to monitor occupancy as well as KPIs on number of customers in its restaurants and bars. For the subsidiary that provides charter flights, its key performance indicator is the number of charters and number of non-flying days. In addition, for the seven subsidiaries that invest and develop property they monitor the investment property valuations for capital growth.
|
| 2023 | 2022 | ||||
|
| £ | £ | ||||
Group Turnover |
| 31,845,047 | 31,631,854 | ||||
Group Gross Profit |
| 8,396,169 | 9,427,403 | ||||
|
|
|
| ||||
|
|
|
|
For the year ended 31 March 2023, the group’s gross profit percentage was 26% (2022: 30%).
|
| 2022 | 2021 |
|
| £ | £ |
Group Net Current Liabilities |
| (112,366,385) | (102,265,082) |
Group Net Liabilities |
| (60,484,674) | (46,955,186) |
The group’s net liabilities have increased from the prior year by £13,529,488. Losses incurred across the group have contributed to the deterioration of the net balance sheet position.
For each of the subsidiary companies within the group, the level of trade debtors is monitored on a regular basis and each review examines the ageing of the debt to ensure that the debtor days does not exceed an excessive level. Management also monitors the level of trade creditors on a regular basis with the aim to maximise the level of credit available to the group within normal credit terms offered to it by suppliers.
Financial risk management objectives
The group is exposed to financial risk through its financial assets and financial liabilities. In particular, the key financial risk is that the proceeds from financial assets are not sufficient to fund obligations as they fall due.
Credit risk - Credit risk is that the customer will be unable to pay amounts in full when due. The group manages this risk by reviewing suitable credit terms for each new customer and after suitable checks have been performed.
Cash flow risk - Cash flow risk is that the group will not have sufficient cash resources to meet its obligations as they fall due, in particular, interest charges and loan repayments. The group manages this risk through efficient working capital management and monitors its bank balances daily.
Interest rate risk – Interest rate risk is the risk that the group’s borrowing costs will increase significantly and as a result the group will not be able to meet its obligations on its bank and other loans. The group manages this risk by regularly reforecasting cash flows using the latest interest rates.
Foreign exchange risk – Foreign exchange risk is the risk that the group will not have sufficient resources to meet its foreign currency payment obligations due to the volatile exchange rate. Management are mitigating this risk using exchange rate hedging techniques.
Non-financial key performance indicators
The Strategic report does not include any non-financial key performance indicators as the directors consider it is not necessary for an understanding of the development, performance or position of the group's business.
The company will continue to be a holding company for all its subsidiaries. No acquisitions of companies are planned at the time of publishing these financial statements.
The maintenance department within the Aviation division, comprising Zenith Aviation Limited, Jet Aircraft Limited and Zenith Aircraft Limited, is expected to continue to generate healthy profits. Charter results for the year-ended 31 March 23 suffered because of two aircraft in its fleet being temporarily grounded during Summer high season due needing essential repairs. Charter results are expected to improve as management renew focus on sales pricing techniques. New customers are entering the market, which will support both future charter and engineering revenue.
Management continues to focus on maximising revenue in Salomons UK Limited by increasing the volume of wedding bookings, event bookings, and restaurant/bar sales. In addition, management are continuing to review fixed costs to achieve cost savings and efficiencies wherever possible. Management is also continuing to market the site as a country getaway, with several short term lets available. Management have reviewed any loss-making parts of each operation and in most cases removed them. There has been additional focus on squeezing value from existing assets to maximise profits without additional capital expenditure. Management is also focused on expanding the trade at Bewl Water to make it a profitable venture all year round, including a new Christmas event in 2024.
Integra property management limited (“IPM”) (trading as Presence & Co) profits are continuing to grow. IPM Residential and Commercial Lettings Limited was incorporated during the year as a subsidiary of SQIB Limited. The new entity supports IPM business by managing the existing property portfolio in house, reducing fees and utilising IPM specialist, departmental knowledge across facilities, finance and health and safety.
Management is investing in modernising the website of E.J. Markham & Son Limited (“EJM”), which will be upgraded in two phases. Phase 1 is complete and allows customers to view all items for sale online, prior to visiting the store. Phase 2 will include the buy and pawn online functionality and will significantly expand EJM’s customer base.
Businesses across the Group are continuing the good discipline and cost cutting that was necessary following the Covid-19 lockdowns, and into the uncertain economic climate, to operate more efficiently.
Post balance sheet events
A group subsidiary, Jet Aircraft Limited sold its only aircraft after the year end on 12 December 2023 for consideration of $7.9m. As a result, the company has plans to cease trading and the directors have resolved that they do not consider the company to be a going concern.
On the 12 July 2023, the group sold 100% of its share holding in Goswell Properties Limited.
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 (2022: nil). The directors do not recommend payment of a further dividend (2022: nil).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Consultation with employees or their representatives has continued at all levels, with the aim of ensuring that views are taken into account when decisions are made that are likely to affect their interests. Information about the financial and economic performance of their business units and of the SQIB group as a whole are communicated to employees through the in-house newsletters and briefing groups.
The auditor, Mercer & Hole LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Matters required by Schedule 7 of the large and medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 have been included in the separate Strategic Report in accordance with section 414c(11) of the Companies Act 2006.
We have audited the financial statements of SQIB Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 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, 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.
Material uncertainty related to going concern
We draw attention to note 1.4 on page 20 of the financial statements concerning the group’s and the company’s ability to continue as a going concern.
The group made a loss before taxation of £17,438,175 (2022: £3,641,277) during the year ended 31 March 2023. At 31 March 2023 the group had net current liabilities of £112,366,385 (2022: £102,265,082) and net liabilities of £60,484,674 (2022: £46,955,186).
The group and the company will rely on the ongoing support of third party lenders, related parties and shareholders to continue to trade and meet its liabilities as they fall due. This support includes the loans not being recalled and the successful completion of a number of capital events to meet debt repayments which fall due for repayment within 12 months of the date these accounts are approved or have fallen due for repayment before the accounts are approved. Ongoing support from existing lenders is dependent on the group and the company remaining in good standing with third party lenders where loan covenants may have been breached, but not enforced, notwithstanding refinancing with the same lenders after the year end.
As stated in note 1.4 on page 20, these events or conditions, along with the other matters explained in the represent a material uncertainty exists that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. Our opinion is not qualified in respect of this matter.
Notwithstanding the above, 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.
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 gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates and considered the risk of acts by the company that were contrary to applicable laws and regulations, including fraud. These included, but were not limited to, the Companies Act 2006 and tax legislation.
We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements and the financial report (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate entries including journals to overstate revenue or understate expenditure and management bias in accounting estimates.
Audit procedures performed by the engagement team included:
discussions with management, including considerations of known or suspected instances of non- compliance with laws and regulations and fraud;
gaining an understanding of management's controls designed to prevent and detect irregularities; and
identifying and testing high risk journal entries.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non- compliance and cannot be expected to detect non-compliance with all laws and regulations.
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 relating to medium-sized groups.
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 £3,292,786 (2022 - £1,796,146 loss).
SQIB Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.
The group consists of SQIB Limited and all of its subsidiaries. The principal activities of the company and its subsidiaries (the group) and the nature of the group's operations are set out in the Strategic Report.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include investment properties at fair value. The principal accounting policies adopted are set out below.
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 SQIB 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 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 group made a loss before taxation of £17,438,175 (2022: £3,641,277) during the year ended 31 March 2023. At 31 March 2023 the group had net current liabilities of £112,366,385 (2022: £102,265,082) and net liabilities of £60,484,674 (2022: £46,955,186) including amounts due from the parent undertaking and other related parties of £46,594,928 (2022: £60,614,722) of which £18,233,204 (2022: £33,049,099) was due after more than one year. At 31 March 2023, the group owed £87,496,415 (2022: £87,701,728) to other related parties which is repayable on demand and £68,621,715 due for repayment to an external bank in full on the 16 December 2024.
At 31 March 2023, the company had net current liabilities of £24,108,428 (2022: £20,811,964) including £81,348,983 (2022: £74,716,498) due from group companies and related parties, £41,240,094 (2022: £57,812,248) of which was due after more than one year. At 31 March 2023 the company owed £36,636,452 (2022: £30,182,148) to group companies and other related parties.
Despite the Group continuing to be in breach of loan covenants in respect of the external bank loan of £68,621,715, following discussions with the lender, the shareholders are confident the loan will not be recalled in the foreseeable future as the group are currently in final stage negotiations to change the repayment structure of the loan and, Heads of Terms have been signed by both all parties. The group also has a balance of £39,806,948 due to a related party which management have significant influence over classified as repayable on demand. This loan is back-to-back with another related party, subsequent to the year end, this loan has been extended, and is under new terms, the loan is repayable in full in July 2029, although the loan includes a repayable on demand clause which is not expected to be exercised given the unique nature of the related party lending agreement. Management are also confident that amounts owed by the parent undertaking and other related parties are fully recoverable. Management have considered the impact of growing inflation alongside the current cost of living and energy crises in the United Kingdom, which are having an impact on the short-term performance of the group as detailed in the strategic report on page 2 and have taken a number of cost cutting measures to improve profitability. The group and company have however forecasted to make continuing losses for the foreseeable future.
Included within some of the loan agreements are repayment schedules which will require capital events in order to meet repayments. The directors are confident that the capital events and long-term plans will be realised. In the event that not all of the capital events come into fruition this will have an adverse effect on the Group’s cash and its ability to service the interest and capital repayments on the debt. Therefore, the shareholders have committed to supporting all the SQIB subsidiary companies and this is expected to continue for the foreseeable future.
The financial statements have been prepared on a going concern basis, which assumes that the group and the company will be able to continue in operational existence for at least twelve months from the date of approval of these financial statements. This is dependent on the group and the company continuing to meet its day-to-day working capital requirements . The majority shareholders have confirmed that they will provide continuing financial support to the group and the company for a period of at least 12 months from the date these financial statements are approved such that the group and the company will continue to be able to meet their obligations as they fall due. Should this support be withdrawn or not materialise, the group and company may not be able to pay its debts as they fall due.
Whilst the availability of these funds is not certain, the directors firmly believe that adequate funds will be available as required to enable the group and company to meet its liabilities. Should debt funding not become available, the Company would need to seek funding from alternative sources, and this could be difficult to achieve in a short timescale. Therefore, as at the signing date, these circumstances represent a material uncertainty that may cast significant doubt upon the Group and Company's ability to continue as a going concern. At this time, should debt funding not be secured, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. Nevertheless, the Directors have a reasonable expectation that the company will obtain new funding and continue in operation for the foreseeable future and that the shareholders will provide support as required. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial statements and the financial statements do not contain any adjustments that would result if the Company was unbale to continue as a going concern.
The turnover shown in the profit and loss account is exclusive of Value Added Tax and represents amounts receivable in respect of rental income, property management fees, hotel accommodation, food and beverage sales, venue hire and aircraft leasing services provided during the period. Revenue is recognised when the amount of revenue can be reliably measured at the point when goods and services have been provided.
Aircraft leasing services revenue is recognised at the point when charter flights services have been provided.
Income derived from hotel accommodation is recognised in the period when the customers stay, with any advanced bookings being deferred.
Income derived from food and beverage sales and leisure activities is recognised in the period at the point of sale except for any advanced bookings being deferred.
Income derived from venue hire is recognised in the period when the venue is provided, with any advanced bookings being deferred.
Rental income is recognised on a straight line basis over the period of the lease.
Property management fees are recognised in the period the service has been provided,
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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
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.
Loans and receivables
Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
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 and loans from fellow group companies 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.
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.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
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 key accounting estimate in preparing these financial statements relates to the carrying value of the investment properties which are stated at fair value. The group uses lease terms, market conditions and sales prices based upon known market transactions for similar properties as a basis for determining the directors' estimation of the fair value of the investment properties. However, the valuation of the group's investment properties is inherently subjective, as it is made on the basis of valuation assumptions which may in future not prove to be accurate. In addition, the deferred tax liabilities recognised in respect of the fair value gains and losses on these investment properties are assessed on the basis of assumptions regarding the future, the likelihood that assets will be realised and liabilities will be settled, and estimates as to the timing of these future events and as to the future tax rates that will be applicable.
The directors consider the amounts due to the company from other group companies and related parties to be fully recoverable based on the support provided by the group and its controlling shareholders.
The directors consider the amounts due from other debtors to be fully recoverable.
The recoverable amount of goodwill and investments in subsidiaries is based on value in use which requires estimates in respect of the allocation of goodwill to cash generating units within each subsidiary undertaking and associated forecast income and expenditure. Management prepare regular forecasts and utilise these to determine the presence of impairment factors which would impact the carrying value of goodwill or investments in subsidiaries.
The group’s turnover is generated solely from its activities in the United Kingdom.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
During the year the directors received no remuneration in respect of qualifying services (2022: none).
During the year, the UK main rate of corporation tax was 19%.
An increase in the UK corporation tax rate from 19% to 25% (Effective 1 April 2023) was substantively enacted on 10 June 2021. The increase in the rate will apply to companies with profits over £250k.
Deferred tax assets not recognised relating to trading losses brought forward in currently loss making subsidiary entities.These losses total £18,617,435.
The actual (credit)/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:
The historical cost of the freehold land and building is £3,249,220 (2022: £3,249,220).
During the year the group undertook improvement work across various investment properties within the UK. The cost of additions was £22,920 (2022: £1,149,732).
During the year, Avison Young performed Red Book valuations on £16,210,000 of the investment property portfolio. Carter Jonas performed desktop valuations on £28,715,000 of the investment properties. The valuations are based on the existing tenancies at the balance sheet date.
The directors have represented that they have historically sold properties on a vacant possession basis and will continue to do so in the future. If the property was valued on a vacant possession basis it would be valued at £47,000,000 to an uplift of £2,075,000 to the value of the property with a corresponding unrealised gain recognised in the income statement.
Overall this resulted in an overall fair value loss of £3,027,920 (2022: £623,258 gain) in the year.
The group holds a 30% interest in RQ Capital Limited (303 ordinary shares of 10p each), an entity registered in the UK that provides property development and bridging loans.
Overall the group owns 18% of Rothbury Road Limited from their 100% holding of the 35,747 ordinary C shares of 0.1p (acquired for consideration of £36). Rothbury Road Limited is an entity registered in the UK that provides property development services.
Overall the group owns 20% of 32/34 Eagle Wharf Road Limited from their 100% ownership of the 40,000 Ordinary C shares of £0.001 each (acquired for consideration of £40). 32/34 Eagle Wharf Road Limited is an entity registered in the UK that provides property development services
Details of the company's subsidiaries at 31 March 2023 are as follows:
All the subsidiaries disclosed above have the same registered office as the company.
Details of associates at 31 March 2023 are as follows:
The company is incorporated in the United Kingdom and has its registered office at Bawdeswell Hall, Bawdeswell, Dereham, NR20 4SA.
The group also has significant holdings in undertakings which are not consolidated:
The group holds 20% of the nominal value of ordinary shares issued by 32/34 Eagle Wharf Road Limited and 18% of the shares issued by Rothbury Road Limited. These companies are not accounted for as an associated undertaking because the group is not in a position to exercise significant influence. The registered office of both entities is 1st Floor, Kirkdale House, 7 Kirkdale Road, Leytonstone, London, E11 1HP.
As permitted by the reduced disclosure framework within FRS 102, the company has taken advantage of the exemption from disclosing the carrying amount of certain classes of financial instruments, denoted by 'n/a' above.
The directors consider that the carrying amounts of financial assets and liabilities carried at amortised cost in the financial statements are approximate to their fair values.
On 29 March 2019 the company made a loan to Bishops U.K. Limited totalling £12,150,000 which was repayable on 29 March 2022 and remains outstanding. The loan was secured with a legal charge over David Salomons House, Tunbridge Wells. Interest is being charged at 5% per annum.
Included in other debtors, due within one year and falling due after more than one year are amounts of £43.040,280 (2022: £45,746,026) owed to related parties. They are companies related by virtue of being under common control of the directors or within the Armatire Group.
Included within other creditors are loans of £5,950,000 (2022: £5,950,000) which were due for repayment on 30 November 2013 but have not been recalled at the date of approval of these financial statements.
Included within other creditors is £39,806,948 to Lustrum Investments Limited, a company under common control, of which management have identified the steps required to meet the repayment instalments. However, some of these are contingent on other events. Any of the steps not occurring as anticipated could result in repayments not being made on time unless alternative funds are identified. Included within other creditors is a further loan to the company of £19,470,760 (2022: £14,753,030) which is repayable on demand.
Included within bank loans is a loan falling due within one year held by SQIB Limited of £68,621,715 (2022: £66,247,402) that is due to be repaid in by 31 December 2029. Interest is charged at the Bank Rate plus 4% per annum and is repayable in quarterly instalments. The bank loan is secured by fixed and floating charges over the assets of the company and the group and is subject to loan covenants which were breached during the year.
Included in bank loans at the year end was an amount due to Paragon Business Finance Plc of £3,389,146 (2022 £3,785,943). Monthly capital repayments of £48,865 are due. There are registered charges over the plant and machinery. As part of the term for this loan, K R Spencer has provided a personal guarantee.
On 26 July 2021, a loan facility was acquired from Hampshire Trust Bank PLC totaling £4,386,000 and attracts a fixed rate of interest of 3.25%. At the year end £3,503,938 remained outstanding.
On May 2018 a loan facility was acquired from Investec Bank Plc for £8,871,000. As a result, a registered charge exists over the Oriel Cottage Tunbridge Wells property: Charges are also held over the company's shares in Bishops Investments Ltd and the cash held by the business. Interest is being charged at 2.75%.
Post year end the Oriel Cottage property was sold and the Investec loan repaid in full.
Included in bank loans as at 31 March 2023 was an amount due to Lombard North Central Plc of £4,535,664 (2022: £2,462,276). Zenith Aircraft Limited is committed to repay the aggregate of US LIBOR plus 2%, per quarter, on the outstanding loan value. There is a registered charge over the plant and machinery held by Zenith Aircraft Limited in favour of Lombard North Central Plc.
Included within bank loans is a loan falling due after more than one year held by 55VS No2 Limited of £15,235,000 (2022: £15,235,000) repayable by December 2024. Under the terms of this loan, certain directors have each guaranteed a principal amount of £2,285,250. The loan attracts interest at 2.75% per annum and is secured over the properties held by 55VS No2 Limited.
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.
For each class of share, they do not have the right to fixed income, each share type carries the right to one vote at general meetings of the company.
Profit and loss account - This reserve records retained earnings and accumulated losses.
Revaluation reserve – this records the value of investment property and tangible fixed asset fair value movements recognised in the profit and loss account to distinguish between distributable and non-distributable reserves. This is shown net of deferred tax where recognised.
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:
The operating leases represent leases of investment property to third parties.
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
A group subsidiary, Jet Aircraft Limited sold its only aircraft after the year end on 12 December 2023 for consideration of $7.9m.
As a result, the company has plans to cease trading and the directors have resolved that they do not consider the company to be a going concern.
On the 12 July 2023, the group sold 100% of its share holding in Goswell Properties Limited.
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
An amount of £5,519,541 (2022: £5,688,601) was included in bank loans owing by Zenith Aircraft Limited at the year ended 31 March 2022. As part of the terms of this bank loan, K R Spencer has provided a personal guarantee. An amount of £3,389,147 (2022: £3,785,943) was included in bank loans owing by Jet Aircraft Limited at the year ended 31 March 2022. As part of the terms of this bank loan, K R Spencer has provided a personal guarantee.
An amount of £15,235,000 was included in bank loans owing by 55VS No2 Limited. As part of the terms for these bank loans, the directors each guaranteed a principal amount of £2,285,250.
Impairments of £2,874,402 (2022: £116,224) have been recognised in respect of amounts owed by related parties.
The amounts outstanding are unsecured, non-interest bearing and will be settled in cash. No guarantees have been given or received.