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Registered number: 02892920










CLOUSTON GROUP LIMITED










ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

 
CLOUSTON GROUP LIMITED
 
 
COMPANY INFORMATION


Directors
P F Clouston 
R D Clouston 
W D Clouston 




Company secretary
W D Clouston



Registered number
02892920



Registered office
20 South Street
Stephenson Quarter

Newcastle Upon Tyne

NE1 3PE




Independent auditors
Haysmacintyre LLP

10 Queen Street Place

London

EC4R 1AG





 
CLOUSTON GROUP LIMITED
 

CONTENTS



Page
Group Strategic Report
 
1 - 4
Directors' Report
 
5 - 7
Independent Auditors' Report
 
8 - 11
Consolidated Statement of Comprehensive Income
 
12
Consolidated Statement of Financial Position
 
13
Company Statement of Financial Position
 
14
Consolidated Statement of Changes in Equity
 
15
Company Statement of Changes in Equity
 
16
Consolidated Statement of Cash Flows
 
17
Consolidated Analysis of Net Debt
 
18
Notes to the Financial Statements
 
19 - 40


 
CLOUSTON GROUP LIMITED
 
 
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022

Introduction
 
The Directors present their annual report on the affairs of Clouston Group Limited (the "Company") and its subsidiaries (the "Group") for the year ended 31 December 2022.

Business review
 
Clouston Group Limited (the “Company”) is the parent company for a group whose main activity is the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne. The Company acts as a holding company and its three trading subsidiaries are Stephenson Hotel Limited, Stephenson Quarter Developments Limited and Stephenson Rocket Limited. To date the Group has completed construction of a Crowne Plaza branded hotel, refurbished the Boiler Shop events venue and has constructed a 357 space multi-storey car park adjoining the Stephenson Quarter, all of which are now operated by the Group through its trading subsidiaries. Further development proposals for this area, which are yet to come into fruition, include residential apartments, commercial offices, exhibition and event space, retail and restaurant facilities.
The Group's EBITDA in the current year was £1.4m (2021 as restated: £4.7m EBITDA loss) with a net loss of £1.2m (2021 as restated: £7.2m loss). The development, performance and position of the Group's trading subsidiaries during the year are summarised below, with further detail provided in each entity's own annual report.
Stephenson Hotel Limited (“SHL”)
The construction of the 251 bed Crowne Plaza hotel within the Stephenson Quarter area of Newcastle upon Tyne was completed in August 2015. This hotel forms part of a wider proposed development by the Clouston Group (the group headed by Clouston Group Limited, ‘the group’) of which the company is part. The group has also developed a multi storey car park and office block, an exhibition and event venue and the UniversityTechnical College building in the area. Further development proposals for this area include residential apartments, commercial offices, exhibition and event space, retail and restaurant facilities.
In March 2019 the company terminated the IHG Hotel Management Agreement and appointed a new management company, Interstate, under a franchise agreement, to improve trading performance and hotel value whilst retaining the Crowne Plaza brand.
Over the following 12 months the directors and Interstate achieved a strong performance trajectory, with increasing revenue and Revenue Generation Index ('RGI'), as detailed in the 2019 annual report, which should have led to a stabilisation by 2024. Unfortunately, that progress was arrested in March 2020 by the COVID-19 pandemic and the introduction of government restrictions which, understandably, had a major detrimental impact on the business. Faced with lockdown measures, travel restrictions and reduced demand the directors acted swiftly to mitigate operational losses insofar as possible by implementing furlough, redundancies, salary reductions, termination of non-necessary services and other similar measures. The directors also agreed a deferral of ground lease payments in respect of the hotel.
Whilst not yet back to previously achieved levels, the business also saw significant gross margin improvement, from £2.9m in 2021 to £5.6m in the current year and the company generated an operating profit, before financing costs, of £1.7m (2021: £0.6m). After finance charges of £2.2m (2021: £2.2m), the company reported a net loss of £0.3m (2021: £1.4m). At the balance sheet date the company had net current liabilities of £44.2m (2021: £42.9m) and net liabilities of £29.8m (2021: £29.6m) which includes £38.7m (2021: £38.0m) due to Newcastle City Council (‘NCC’) in respect of term loan facilities and £2.1m (2021: £2.3m) in respect of a deferred hotel funding contribution, further details of which are provided in note 15 to the financial statements.


 
Page 1

 
CLOUSTON GROUP LIMITED
 

GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022


To provide additional support over the period of lockdown restrictions, the Term Facilities Agreement with NCC was amended in 2020 and additional funding of £1m (Facility D) was agreed, with £0.4m drawn down in the year (2021: £0.6m). Due to UK lockdowns lasting far longer than was first anticipated, the directors have since sought to reschedule repayment terms under the Facilities Agreement and, having had constructive discussions with NCC in this regard, anticipate a viable repayment schedule will be agreed which will defer the recommencement of interest then capital repayments, as well as extend the term of the loan facilities, thereby enabling the company to re-establish a positive trading performance and meet its liabilities as they fall due for the foreseeable future.
Throughout 2022 the hotel has remained open and COVID-19 restrictions have significantly reduced, allowing the hotel to operate normally again toward the end of the year. Occupancy rates rose to 79.5% in 2022 (2021: 45.9%) and with strong RGI and Average Daily Rate (‘ADR’) the directors anticipate a net profit in the coming year.
Given the quality of the operational management, the outstanding support of our hotel consultants, Hamilton Hotel Partners, the strength of the brand and the support of Newcastle City Council, we are confident that the hotel can continue to recover from the impact of COVID-19 and that performance will continue to improve over the next five years as the economy stabilises.
Stephenson Quarter Development Limited (“SQDL”)
The company's main activity is to oversee the successful redevelopment of the Stephenson Quarter area in Newcastle by the Clouston Group, the group headed by Clouston Group Limited.
In 2017 the company started construction on the North East Futures University Technical College ("UTC") on behalf of the Education and Skills Funding Agency, which was completed in the autumn of 2018. The company also worked on the design and refurbishment of the Boiler Shop which commenced in 2016 and the scheme achieved the Lord Mayors Design Award Conservation Prize in 2018. Since its restoration, the company has operated the Boiler Shop as a cultural events venue and intends to expand the range and volume of events held there over the coming years.
The business suffered a significant reduction in revenue during the prior year as the Boiler Shop was closed in March 2020 due to government restrictions on mass gatherings as a consequence of the COVID-19 global pandemic, which continued into the current year. The venue reopened for socially distanced events when lockdown restrictions were relaxed in May 2021 and operated with a reduced capacity until restrictions were lifted on 19 July 2021, with the Boiler Shop having been fully open since that date. Trading performance to the end of the year was encouraging although inflationary pressures have arisen since the year end which persist at the date of approval of these financial statements and which present further potential challenges for the business as the Boiler Shop relies: for part of its income on bar sales, which could be impacted by the current cost of living crisis. However, because this is an arts and meetings venue it does not appear to be adversely affected to the extent that bars and pubs are reporting. The venue operates ticketed events and to date the directors have not seen a fall off in sales. In addition to the arts, it will now start to build the daytime meetings and events business working with its sister company, Stephenson Hotel Limited, to add value to both businesses.
To assist with funding refurbishment of the Boiler Shop, the company secured a loan from NELEP Investment Fund Regional Growth Fund ("LEP") which was renegotiated and extended during 2021 following a deferment of interest charges and capital repayments in 2020 to provide support during the pandemic. Additional loan funding of £268,945 was provided in 2021 to support the company’s recovery from the pandemic and the loan maturity date was extended to 31 March 2025.
At the year end the company had net current liabilities of £11,365,916 (2021: £11,051,837) and net liabilities of £10,230,135 (2021: £9,819,234) which included £9,411,346 (2021: £9,390,152) owing to group undertakings and £1,915,821 (2021: £1,958,440) in respect of the RGF loan that has been extended.
 
Page 2

 
CLOUSTON GROUP LIMITED
 

GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022


Stephenson Rocket Limited (“SRL”)
The construction of a 357 space multi-story car park (‘MSCP’) with offices above was completed in August 2015 during the initial phase of the redevelopment of the Stephenson Quarter area of Newcastle upon Tyne.
The company operates the car park with rent payable to Newcastle City Council (‘NCC’).
The car park was designed as a facility to service the fully developed Stephenson Quarter, as well as to meet parking demand for the nearby train station. The as yet incomplete development on the adjoining Stephenson Square site and a lack of the previously expected access improvements from the train station have contributed to the car park failing to achieve the anticipated utilisation levels and, as such, not being able to generate revenue at the levels initially predicted. Financial performance has been further impeded since March 2020 due to the impact of the COVID-19 global pandemic, ensuing lockdowns and reduced demand having a significant adverse impact on revenue. As a consequence, the company has incurred successive losses and has not been able to meet its rental and other obligations to NCC.
In order to secure a sustainable future, the directors sought to introduce a specialist operator to take over management of the car park through which they were confident sufficient revenues would be generated to meet all other operating costs. However, NCC have entered into an agreement to develop the remaining areas of the Stephenson Quarter and require full control of the car park to support the development of offices and reduce building costs.
Therefore, the company’s sub lease of the car park was terminated in November 2022. The directors welcome this and agreed to continue operating the MSCP until 28 June 2023 to allow for a smooth handover to NCC.
Trading has now ceased, and the directors expect to complete a consensual agreement with NCC to clear arrears within the next 6 months. As the directors do not intend for the company to acquire or commence a replacement trade they no longer consider the company to be a going concern therefore, once this has been completed, the company will be wound up.

Principal risks and uncertainties
 
The delays in the regeneration of the Stephenson Quarter, and their ultimate design and content, as noted in the “business review" section above has created some uncertainty over the Group’s ability to optimise trading performance of its operating assets. As noted in this report, these risks have been exacerbated by the impact of COVID-19 on the group's ability to operate each of the businesses and achieve their potential.
The Group's other principal risks and uncertainties include property values and property yields. The Crowne Plaza Hotel and the Boiler Shop are, as expected, yet to reach a stabilised basis of trading. Should trading fall below managements current forecasts, the carrying value of these assets in the balance sheet may be further impaired.

Page 3

 
CLOUSTON GROUP LIMITED
 

GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022

Financial risk management objectives and policies
 
The Group’s activities expose it to a number of financial risks including cash flow risk, credit risk and liquidity risk.
Cash flow risk
In addition to the risks associated with trading performance, as highlighted in this report, the Group's activities expose it to the financial risks associated with fluctuations in interest rates. The Group monitors changes in interest rates and the likely interest payments. Despite recent increases, interest rates remain at historically low levels and, as noted above, the group has refinanced a large proportion of its loan facilities in such a way as to significantly reduce the cash cost of its annual finance charges during the term of the facilities.
Credit risk
The Group's principal financial assets are cash and bank balances together with trade and other debtors. The group's credit risk is primarily attributable to its trade debtors. The amounts presented in the balance sheet are net of allowances for doubtful debtors. An allowance for impairment is made when there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cashflows. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
Liquidity risk
In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the group uses a mixture of long-term and short-term debt finance.
Further details regarding liquidity risk and the impact on going concern can be found in the directors’ report.

Other key performance indicators
 
The Crowne Plaza hotel continues to grow with occupancy in July 2024 at 93%.

Future developments

Given the quality of our management, the strength of the Crowne Plaza brand , and the outstanding support of
our hotel consultants, Hamilton Pyramid we agreed to renew the Management Agreement with Aimbridge
(previously Interstate) for a further five years.
The Directors will continue to work with its lender to agree suitable and sustainable repayment terms for its loan.


This report was approved by the board and signed on its behalf.



W D Clouston
Director

Date: 15 August 2024

Page 4

 
CLOUSTON GROUP LIMITED
 
 
 
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022

The directors present their report and the financial statements for the year ended 31 December 2022.

Directors' responsibilities statement

The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
 
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.

 In preparing these financial statements, the directors are required to:


select suitable accounting policies for the Group's financial statements and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Principal activity

The Group's principal activity is the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne.

Results and dividends

The loss for the year, after taxation, amounted to £1,149,868 (2021 - loss (as restated) £7,189,163).

The directors do not recommend the payment of a final dividend (2021: £nil)

Directors

The directors who served during the year were:

P F Clouston 
R D Clouston 
W D Clouston 

Page 5

 
CLOUSTON GROUP LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022

Matters covered in the Group Strategic Report

The following information, which would otherwise have been disclosed in the directors' report, is instead disclosed in the strategic report, as permitted by section 414c(11) of the Companies Act 2006:
- financial risk management objectives and policies
- future developments

Disclosure of information to auditors

Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
 
so far as the director is aware, there is no relevant audit information of which the Company and the Group's auditors are unaware, and

the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company and the Group's auditors are aware of that information.

Going concern

Clouston Group Limited is the parent company for a group whose recent activity included the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne.  The company acts as a holding company and its two trading subsidiaries are Stephenson Hotel Limited, Stephenson Quarter Developments Limited, including the Boiler Shop and non-trading subsidiary Stephenson Rocket Limited. The company is reliant on the performance of the subsidiaries of the group in order to continue to operate as a going concern. 
The Group's principal risks and uncertainties include property values and property yields caused primarily by the delays in the regeneration of the Stephenson Quarter, which is owned by its lender, and its ultimate design and content. This has also created uncertainty over the Group's ability to optimise trading performance of its operating assets. Following the effects of COVID-19 these risks were heightened by the impact of the energy and cost of living crises on the group's ability to operate each of the businesses and achieve their potential.
The board remain confident there are simple inexpensive landscaping ‘meanwhile uses’ which could be affected immediately to improve the environment, trading performance and capital values of Group companies.
The director’s hotel consultants, Hamilton Pyramid and its operational managers opine that the construction of a 100-bedroom annexe on freehold land the Group owns next to the hotel could increase its gross operating profit substantially and they are in the process of completing a proposal.
As a preferred alternative, the directors advocate they facilitate the development of the site owned by the Council next to the hotel with an office block the Group has designed, costed and programmed, which would incorporate the 100-bedroom annexe and additional convention space, which would add still further value.  
The Group is in negotiations with its principle lender, NCC, which started in early 2023 and continue to be on-going to agree appropriate repayment terms, as the loan has expired.  This will form part of a consensual agreement to resolve the liabilities in all Group companies which relate to this lender. 
The Directors are pleased they and their advisors are in active discussions with NCC’s advisors PWC to resolve the dereliction of the surrounding land by the Council’s Joint Venture Company to regenerate the rest of Stephenson Quarter.  The Council and JVC expect the regeneration to complete in the next four years.

The Group’s trading performance has been encouraging with financial performance at initial projections and a positive trajectory continuing through 2023.  The Directors are looking at the current mix of events in one subsidiary and is continuing to build on the daytime meetings and events business to help support other areas
Page 6

 
CLOUSTON GROUP LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022

of the event calendar, such as, grassroots music.  However, as there is a cost of living crisis that could impact income, the directors acknowledge that there is a risk that the quantum and timing of future cash flows may be insufficient to permit the company to meet its obligations as they fall due in the normal course of business. 
As part of negotiations, The Group may pass ownership of freehold land it owns to enable NCC to marry it with their land and enable their proposals for Stephenson Quarter. The true value can be assessed when the ‘meanwhile uses’ have been established and/or the economy stabilises. The Directors believe it will provide sufficient working capital for the Group’s needs.
Within other creditors, includes a significant historical balance held which relates to amounts owed to two former members of the group as further explained in note 25. The Directors are satisfied that they are taking suitable steps in order to rectify the position and that this liability will no longer exist moving forwards.
Nevertheless, after making enquiries and considering the uncertainties described above, the directors have a reasonable expectation that the company and its group will have adequate resources to continue in operational existence for the foreseeable future. This is supported by the expected improvement in financial performance of the trading subsidiaries and the continuing support of the group’s lenders, which the directors believe will continue to be provided. For these reasons the financial statements continue to be prepared on a going concern basis.

Post balance sheet events

There have been no significant events affecting the Group since the year end.

Auditors

Under section 487(2) of the Companies Act 2006Haysmacintyre LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.

This report was approved by the board and signed on its behalf.
 





W D Clouston
Director

Date: 15 August 2024

Page 7

 
CLOUSTON GROUP LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED
 

Opinion


We have audited the financial statements of Clouston Group Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2022, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policiesThe 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).


In our opinion the financial statements:


give a true and fair view of the state of the Group's and of the parent Company's affairs as at 31 December 2022 and of the Group's loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.


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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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 2.2 in the financial statements, which explains that the Group is reliant on the performance of it's subsidiaries in order to continue as a going concern and indicates that there is risk as going concern is dependent on negotiations with its principal lender in respect of its loan which is due for repayment as well as the the quantum and timing of future cashflows that may be insufficient to permit the Group to meet its obligations as and when they fall due. As stated in note 2.2, these events or conditions, along with the other matters as set forth in note 2.2, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.


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.


Page 8

 
CLOUSTON GROUP LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED (CONTINUED)


Other information


The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual ReportOur 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.


Opinion on other matters prescribed by the Companies Act 2006
 

In our opinion, based on the work undertaken in the course of the audit:


the information given in the Group 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 Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.


Matters on which we are required to report by exception
 

In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group 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.


Responsibilities of directors
 

As explained more fully in the Directors' Responsibilities Statement set out on page 5, 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 Group's and 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 Group or the 
Page 9

 
CLOUSTON GROUP LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED (CONTINUED)


parent Company or to cease operations, or have no realistic alternative but to do so.


Auditors' responsibilities for the audit of the financial statements
 

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 Auditors' 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 Group financial statements.


Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to regulatory requirements and trade regulations, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, income tax, payroll tax and sales tax.
We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to posting inappropriate journal entries to revenue and management bias in accounting estimates. Audit procedures performed by the engagement team included:
 
inspecting correspondence with regulators and tax authorities;
discussions with management including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;
evaluating management's controls designed to prevent and detect irregularities;
identifying and testing journals, in particular journal entries posted with unusual account combinations, postings by unusual users or with unusual descriptions; and
challenging assumptions and judgments made by management in their critical accounting estimates.


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 is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.


A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.


Page 10

 
CLOUSTON GROUP LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED (CONTINUED)


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 2006Our 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 Auditors' 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.





Emma Bernardez (Senior Statutory Auditor)
for and on behalf of
Haysmacintyre LLP
Statutory Auditors
10 Queen Street Place
London
EC4R 1AG

15 August 2024
Page 11

 
CLOUSTON GROUP LIMITED
 
 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022

Continuing operations
Discontin'd operations
Total
Continuing operations
Discontinued operations
Total
As restated
As restated
As restated
2022
2022
2022
2021
2021
2021
Note
£
£
£
£
£
£

  

Turnover
 4 
13,284,403
-
13,284,403
7,628,699
-
7,628,699

Cost of sales
  
(7,304,832)
-
(7,304,832)
(4,508,767)
-
(4,508,767)

Gross profit
  
5,979,571
-
5,979,571
3,119,932
-
3,119,932

Administrative expenses
  
(5,036,426)
-
(5,036,426)
(3,980,489)
-
(3,980,489)

Other operating income
 5 
193,750
-
193,750
1,268,340
-
1,268,340

Operating profit
 6 
1,136,895
-
1,136,895
407,783
-
407,783

Loss on disposal of subsidiaries
 25 
-
-
-
-
(5,444,142)
(5,444,142)

Interest receivable and similar income
  
162,162
-
162,162
162,162
-
162,162

Interest payable and similar expenses
 11 
(2,448,925)
-
(2,448,925)
(2,314,966)
-
(2,314,966)

Loss before taxation
  
(1,149,868)
-
(1,149,868)
(1,745,021)
(5,444,142)
(7,189,163)

Tax on loss
 12 
-
-
-
-
-
-

Loss for the financial year
  
(1,149,868)
-
(1,149,868)
(1,745,021)
(5,444,142)
(7,189,163)

  

Total comprehensive income for the year
  
(1,149,868)
(7,189,163)

(Loss) for the year attributable to:
  

Owners of the parent Company
  
(1,149,868)
-
(1,149,868)
(7,189,163)
-
(7,189,163)

  
(1,149,868)
-
(1,149,868)
(7,189,163)
-
(7,189,163)

The notes on pages 19 to 40 form part of these financial statements.

Page 12

 
CLOUSTON GROUP LIMITED
REGISTERED NUMBER: 02892920

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022

As restated
2022
2021
Note
£
£

Fixed assets
  

Tangible assets
 14 
34,667,604
34,577,918

  
34,667,604
34,577,918

Current assets
  

Stocks
 16 
70,855
74,520

Debtors: amounts falling due within one year
 17 
1,348,164
1,058,380

Cash at bank and in hand
  
2,179,901
2,111,515

  
3,598,920
3,244,415

Creditors: amounts falling due within one year
 19 
(56,612,731)
(54,097,348)

Net current liabilities
  
 
 
(53,013,811)
 
 
(50,852,933)

Total assets less current liabilities
  
(18,346,207)
(16,275,015)

Creditors: amounts falling due after more than one year
 20 
(19,131,824)
(20,053,148)

Provisions for liabilities
  

Net liabilities
  
(37,478,031)
(36,328,163)


Capital and reserves
  

Called up share capital 
 23 
102
102

Capital redemption reserve
 24 
18
18

Profit and loss account
 24 
(37,478,151)
(36,328,283)

  
(37,478,031)
(36,328,163)


The financial statements were approved and authorised for issue by the board and were signed on its behalf on 15 August 2024.




W D Clouston
Director

The notes on pages 19 to 40 form part of these financial statements.

Page 13

 
CLOUSTON GROUP LIMITED
REGISTERED NUMBER: 02892920

COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022

2022
2021
Note
£
£

Fixed assets
  

Investments
 15 
2
2

  
2
2

Current assets
  

Debtors: amounts falling due within one year
 17 
158,000
115,114

Cash at bank and in hand
  
30,180
10,617

  
188,180
125,731

Creditors: amounts falling due within one year
 19 
(8,284,810)
(8,250,728)

Net current liabilities
  
 
 
(8,096,630)
 
 
(8,124,997)

Total assets less current liabilities
  
(8,096,628)
(8,124,995)

  

  

Net liabilities
  
(8,096,628)
(8,124,995)


Capital and reserves
  

Called up share capital 
 23 
102
102

Capital redemption reserve
 24 
18
18

Profit and loss account brought forward
  
(8,125,115)
(7,766,467)

Profit/(loss) for the year
  
28,367
(358,648)

Profit and loss account carried forward
  
(8,096,748)
(8,125,115)

  
(8,096,628)
(8,124,995)


The financial statements were approved and authorised for issue by the board and were signed on its behalf on 15 August 2024.


W D Clouston
Director

The notes on pages 19 to 40 form part of these financial statements.

Page 14

 
CLOUSTON GROUP LIMITED
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022


Called up share capital
Capital redemption reserve
Profit and loss account
Equity attributable to owners of parent Company
Total equity

£
£
£
£
£

At 1 January 2022 (as previously stated)
102
18
(30,359,875)
(30,359,755)
(30,359,755)

Prior year adjustment - correction of error (note 26)
-
-
(5,968,408)
(5,968,408)
(5,968,408)

At 1 January 2022 (as restated)
102
18
(36,328,283)
(36,328,163)
(36,328,163)



Loss for the year
-
-
(1,149,868)
(1,149,868)
(1,149,868)


At 31 December 2022
102
18
(37,478,151)
(37,478,031)
(37,478,031)


The notes on pages 19 to 40 form part of these financial statements.


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021


Called up share capital
Capital redemption reserve
Profit and loss account
Total equity

£
£
£
£

At 1 January 2021 (as previously stated)
102
18
(28,654,000)
(28,653,880)

Prior year adjustment - correction of error (note 26)
-
-
(485,120)
(485,120)

At 1 January 2021 (as restated)
102
18
(29,139,120)
(29,139,000)



Loss for the year (as restated)
-
-
(7,189,163)
(7,189,163)


At 31 December 2021
102
18
(36,328,283)
(36,328,163)


The notes on pages 19 to 40 form part of these financial statements.

Page 15

 
CLOUSTON GROUP LIMITED
 

COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022


Called up share capital
Capital redemption reserve
Profit and loss account
Total equity

£
£
£
£

At 1 January 2022
102
18
(8,125,115)
(8,124,995)


Comprehensive income for the year

Profit for the year
-
-
28,367
28,367


At 31 December 2022
102
18
(8,096,748)
(8,096,628)


The notes on pages 19 to 40 form part of these financial statements.


COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021


Called up share capital
Capital redemption reserve
Profit and loss account
Total equity

£
£
£
£

At 1 January 2021
102
18
(7,766,467)
(7,766,347)


Comprehensive income for the year

Loss for the year
-
-
(358,648)
(358,648)


At 31 December 2021
102
18
(8,125,115)
(8,124,995)


The notes on pages 19 to 40 form part of these financial statements.

Page 16

 
CLOUSTON GROUP LIMITED
 

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022

As restated
2022
2021
£
£

Cash flows from operating activities

Loss for the financial year
(1,149,868)
(7,189,163)

Adjustments for:

Depreciation of tangible assets
483,237
270,576

Impairment reversal of fixed assets
(193,750)
-

Interest paid
2,448,925
2,314,966

Interest received
(162,162)
(162,162)

Decrease in stocks
3,665
40,093

(Increase) in debtors
(289,784)
(284,856)

Increase in creditors
529,316
694,382

Loss on disposal of subsidiary
-
5,444,142

Net cash generated from operating activities

1,669,579
1,127,978


Cash flows from investing activities

Purchase of tangible fixed assets
(379,171)
(25,679)

HP interest paid
-
(291,501)

Net cash from investing activities

(379,171)
(317,180)

Cash flows from financing activities

New secured loans
23,652
868,945

Repayment of loans
(76,340)
(142,673)

Repayment of finance leases
(399,324)
(42,919)

Interest paid
(770,010)
-

Net cash used in financing activities
(1,222,022)
683,353

Net increase in cash and cash equivalents
68,386
1,494,151

Cash and cash equivalents at beginning of year
2,111,515
617,364

Cash and cash equivalents at the end of year
2,179,901
2,111,515


Cash and cash equivalents at the end of year comprise:

Cash at bank and in hand
2,179,901
2,111,515

2,179,901
2,111,515


The notes on pages 19 to 40 form part of these financial statements.

Page 17

 
CLOUSTON GROUP LIMITED
 

CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2022





At 1 January 2022
Cash flows
Other non-cash changes
At 31 December 2022
£

£

£

£

Cash at bank and in hand

2,111,515

68,386

-

2,179,901

Debt due after 1 year

(1,808,567)

-

78,587

(1,729,980)

Debt due within 1 year

(40,518,862)

206,252

(763,985)

(41,076,595)

Finance leases

(18,977,543)

1,015,770

(616,446)

(18,578,219)


(59,193,457)
1,290,408
(1,301,844)
(59,204,893)

The notes on pages 19 to 40 form part of these financial statements.

Page 18

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

1.


General information

Clouston Group Limited (‘the Company’) and its subsidiaries (together ‘the Group’) remain focused on the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne.
The Company is a private company, limited by shares, incorporated and domiciled in the United Kingdom and registered in England and Wales. The address of the registered office is given in the company information page of this annual report.

2.Accounting policies

 
2.1

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.

The following principal accounting policies have been applied:

  
2.2

Going concern

Clouston Group Limited is the parent company for a group whose recent activity included the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne.  The company acts as a holding company and its two trading subsidiaries are Stephenson Hotel Limited, Stephenson Quarter Developments Limited, including the Boiler Shop and non-trading subsidiary Stephenson Rocket Limited. The company is reliant on the performance of the subsidiaries of the group in order to continue to operate as a going concern. 
The Group's principal risks and uncertainties include property values and property yields caused primarily by the delays in the regeneration of the Stephenson Quarter, which is owned by its lender, and its ultimate design and content. This has also created uncertainty over the Group's ability to optimise trading performance of its operating assets. Following the effects of COVID-19 these risks were heightened by the impact of the energy and cost of living crises on the group's ability to operate each of the businesses and achieve their potential.
The board remain confident there are simple inexpensive landscaping ‘meanwhile uses’ which could be affected immediately to improve the environment, trading performance and capital values of Group companies.
The director’s hotel consultants, Hamilton Pyramid and its operational managers opine that the construction of a 100-bedroom annexe on freehold land the Group owns next to the hotel could increase its gross operating profit substantially and they are in the process of completing a proposal.
As a preferred alternative, the directors advocate they facilitate the development of the site owned by the Council next to the hotel with an office block the Group has designed, costed and programmed, which would incorporate the 100-bedroom annexe and additional convention space, which would add still further value.  
 
Page 19

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

2.Accounting policies (continued)


The Group is in negotiations with its principle lender, NCC, which started in early 2023 and continue to be on-going to agree appropriate repayment terms, as the loan has expired.  This will form part of a consensual agreement to resolve the liabilities in all Group companies which relate to this lender. 
The Directors are pleased they and their advisors are in active discussions with NCC’s advisors PWC to resolve the dereliction of the surrounding land by the Council’s Joint Venture Company to regenerate the rest of Stephenson Quarter.  The Council and JVC expect the regeneration to complete in the next four years.
The Group’s trading performance has been encouraging with financial performance at initial projections and a positive trajectory continuing through 2023.  The Directors are looking at the current mix of events in one subsidiary and is continuing to build on the daytime meetings and events business to help support other areas of the event calendar, such as, grassroots music.  However, as there is a cost of living crisis that could impact income, the directors acknowledge that there is a risk that the quantum and timing of future cash flows may be insufficient to permit the company to meet its obligations as they fall due in the normal course of business. 
As part of negotiations, The Group may pass ownership of freehold land it owns to enable NCC to marry it with their land and enable their proposals for Stephenson Quarter. The true value can be assessed when the ‘meanwhile uses’ have been established and/or the economy stabilises. The Directors believe it will provide sufficient working capital for the Group’s needs.
Within other creditors, includes a significant historical balance held which relates to amounts owed to two former members of the group as further explained in note 25. The Directors are satisfied that they are taking suitable steps in order to rectify the position and that this liability will no longer exist moving forwards.
On this basis the directors consider it appropriate to prepare these financial statements on a going concern basis, however, the directors of Clouston Group Limited acknowledge that should either trading performance not reach the requisite levels on a timely basis or should lenders withdraw their support, the quantum and timing of future cash flows may be insufficient to enable the Company and Group to meet their obligations in the normal course of business and therefore such material uncertainties mean that these may cast significant doubt on the ability of the Company and Group to continue as a going concern for the foreseeable future.

  
2.3

Turnover

Turnover consists of the income received for the provision of services and sale of goods at the hotel, car park and Boiler Shop, net of VAT and other sales related taxes. Turnover for services is recognised at the point in time the services are delivered and sale of goods is recognised on transfer of legal title to the customer. All turnover originated in the United Kingdom.

Page 20

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

2.Accounting policies (continued)

 
2.4

Basis of consolidation

The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.

 
2.5

Operating leases: the Group as lessee

Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.

 
2.6

Government grants

Grants are accounted under the accruals model as permitted by FRS 102. Grants relating to expenditure on tangible fixed assets are credited to profit or loss at the same rate as the depreciation on the assets to which the grant relates. The deferred element of grants is included in creditors as deferred income.
Grants of a revenue nature are recognised in the Consolidated Statement of Comprehensive Income in the same period as the related expenditure.

 
2.7

Interest income

Interest income is recognised in profit or loss using the effective interest method.

 
2.8

Finance costs

Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

 
2.9

Borrowing costs

All borrowing costs are recognised in profit or loss in the year in which they are incurred.

Page 21

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

2.Accounting policies (continued)

 
2.10

Pensions

Defined contribution pension plan

The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.

The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Group in independently administered funds.

 
2.11

Tangible fixed assets

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.

Depreciation is provided on the following basis:

Long-term leasehold property
-
Over life of the lease
Plant and machinery
-
15% staight line
Fixtures and fittings
-
15% staight line
Computer equipment
-
33% straight line

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

 
2.12

Valuation of investments

Investments in subsidiaries are measured at cost less accumulated impairment.

 
2.13

Stocks

Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis. Work in progress and finished goods include labour and attributable overheads.

At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.

Page 22

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

2.Accounting policies (continued)

 
2.14

Debtors

Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.

 
2.15

Cash and cash equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Consolidated Statement of Cash Flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Group's cash management.

 
2.16

Creditors

Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

 
2.17

Financial instruments

The Group has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the Group's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with 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

Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, 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.

Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.



 
Page 23

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

2.Accounting policies (continued)


2.17
Financial instruments (continued)


Impairment of financial assets

Financial assets are assessed for indicators of impairment at each reporting date. 

Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.

If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.

Financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Group after the deduction of all its liabilities.

Basic financial liabilities, which include trade and other payables, bank loans, other loans and loans due to fellow group companies are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.

Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.

Derecognition of financial instruments

Derecognition of financial assets

Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Group transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Group will continue to recognise the value of the portion of the risks and rewards retained.

Derecognition of financial liabilities

Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.

Page 24

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

3.


Judgments in applying accounting policies and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in Note 2, the Directors are required to make judgments, estimates and assumptions about the carrying amounts 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the current and future periods.
Significant judgments in applying the Group's accounting policies and key sources of estimation uncertainty.
Useful lives of tangible assets
Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on the number of factors. In re-assessing asset lives, factors, such as technological innovation and maintenance are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
Impairment of tangible assets
The Group is required to evaluate the carrying values of tangible fixed assets for impairment whenever circumstances indicate, in management's judgment, that the carrying value of such assets may not be recoverable. An impairment review requires management to make subjective judgments concerning the cash flows, growth rates and discount rates of the cash generating units under review. Management have reviewed the tangible fixed assets and reversed a historic impairment in the current year. 
Recoverability of intercompany debtors
Management evaluate intercompany debtors for impairment whenever circumstances indicate, in management’s judgment, that the carrying value may not be recoverable. An impairment review requires management to make subjective judgments concerning the future trading prospects and cash flows of the group companies under review. Where actual cash flows in subsequent years differs to those forecast as part of the management’s impairment review this may result in additional impairments or conversely reversals of existing impairments recognised in future years. Historic impairments exist within intercompany debtors for the company and management concluded that these impairments should continue to exist in the current year. 

4.


Turnover

The whole of the turnover is attributable to the Group's principal activities.

All turnover arose within the United Kingdom.

Page 25

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

5.


Other operating income

2022
2021
£
£

Government grants receivable
-
1,268,340

Reversal of impairment of tangible assets
193,750
-

193,750
1,268,340



6.


Operating profit

The operating profit is stated after charging:

2022
2021
£
£

Other operating lease rentals
643,695
673,944

Depreciation
483,237
270,573


7.


Auditors' remuneration

During the year, the Group obtained the following services from their auditors:


2022
2021
£
£

Fees payable to the 's auditors for the audit of the consolidated and parent Company's financial statements
17,000
16,000

Fees payable to the 's auditors in respect of:

Audit of the subsidiaries annual financial statements
57,000
42,000

Taxation compliance services
21,750
12,650

All assurance services not included above
6,150
-

Page 26

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

8.


Employees

Staff costs, including directors' remuneration, were as follows:


Group
Group
Company
Company
2022
2021
2022
2021
£
£
£
£


Wages and salaries
4,017,713
2,715,226
256,103
445,025

Social security costs
218,127
159,219
11,098
43,561

Cost of defined contribution scheme
65,193
33,687
6,036
7,066

4,301,033
2,908,132
273,237
495,652


The average monthly number of employees, including the directors, during the year was as follows:



Group
Group
Company
Company
        2022
        2021
        2022
        2021
            No.
            No.
            No.
            No.









Hotel
153
118
-
-



Head office and administration
2
2
2
2



Boiler shop
7
7
7
7

162
127
9
9


9.


Directors' remuneration

2022
2021
£
£

Directors' emoluments
208,640
157,896

Group contributions to defined contribution pension schemes
-
1,319

208,640
159,215


During the year retirement benefits were accruing to no directors (2021 - 1) in respect of defined contribution pension schemes.

The highest paid director received remuneration of £48,622 (2021 - £45,924).

The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £NIL (2021 - £NIL).

Page 27

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

10.


Interest receivable

2022
2021
£
£


Other interest receivable
162,162
162,162

162,162
162,162

Other interest receivable 2022: £162,162 (2021: £162,162) relates to the amortisation of key monies received from IHG. On entering into the hotel operating agreement, the group received funding from the hotel operator. As part of the transfer to a franchise agreement with another party in 2019, an unsecured interest free loan of £2.5m from the operator, put in place as part of the original finance to build the hotel, is being amortised on a straight-line basis from 30 August 2020 over the life of the franchise agreement. See Note 19 for further details.


11.


Interest payable and similar expenses

2022
2021
£
£


Bank interest payable
237,868
838,500

Other loan interest payable
1,594,611
901,719

Finance leases and hire purchase contracts
616,446
574,747

2,448,925
2,314,966


12.


Taxation


2022
2021
£
£



Total current tax
-
-

Deferred tax

Total deferred tax
-
-


Tax on loss
-
-
Page 28

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
 
12.Taxation (continued)


Factors affecting tax charge for the year

The tax assessed for the year is higher than (2021 - higher than) the standard rate of corporation tax in the UK of 19% (2021 - 19%). The differences are explained below:

As restated
2022
2021
£
£


Loss on ordinary activities before tax
(1,149,869)
(7,189,163)


Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2021 - 19%)
(218,475)
(1,365,941)

Effects of:


Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
(9,630)
15,440

Short-term timing difference leading to an increase (decrease) in taxation
(28,981)
-

Non-taxable income
(5,776)
-

Remeasurement of deferred tax for changes in tax rates
(134,990)
-

Other differences leading to an increase (decrease) in the tax charge
(3)
-

Movement in unrecognised deferred tax
397,855
1,350,501

Total tax charge for the year
-
-


Factors that may affect future tax charges

At the balance sheet date the Group has unrecognised deferred tax assets totalling £8,622,715 (2021: £9,103,000) principally in respect of unrelieved trading losses. The Directors have not recognised these assets as their recovery cannot be assessed with reasonable certainty. 
In March 2021 a change to the future corporation tax was substantively enacted to increase from 19% to 25% from 1 April 2023. Accordingly, the rate used to calculate the deferred tax balances at 31 December 2022 is 25% as the timing of the release of this asset is materially expected to be after this date.


13.


Parent company profit for the year

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The profit after tax of the parent Company for the year was £28,367 (2021 - loss £358,648).

Page 29

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

14.


Tangible fixed assets

Group






Land and Buildings (as restated)
Plant and machinery
Fixtures and fittings
Computer equipment
Total

£
£
£
£
£



Cost or valuation


At 1 January 2022
43,640,505
35,999
1,331,975
79,091
45,087,570


Additions
-
310,634
52,694
15,843
379,171



At 31 December 2022

43,640,505
346,633
1,384,669
94,934
45,466,741



Depreciation


At 1 January 2022
9,815,171
6,577
652,829
35,073
10,509,650


Charge for the year on owned assets
271,569
24,647
161,729
25,292
483,237


Impairment losses written back
(193,750)
-
-
-
(193,750)



At 31 December 2022

9,892,990
31,224
814,558
60,365
10,799,137



Net book value



At 31 December 2022
33,747,515
315,409
570,111
34,569
34,667,604



At 31 December 2021
33,825,333
29,422
679,145
44,018
34,577,918

The hotel development asset comprises the company's long leasehold interest in the Crowne Plaza branded hotel, of £13,600,000 (2021: £13,500,000), together with an asset of £17,687,104 (2021 as restated: £17,810,871) recognised in respect of the sale and finance leaseback of the freehold land on which the hotel is situated.
In considering the carrying value of the hotel development asset the directors have had regard for an independent valuation of the company's long leasehold interest which was performed in 2020 by Cushman & Wakefield Debenham Tie Leung Limited, together with an updated valuation undertaken in 2022 by Jones Lang La Salle Limited resulting in impairment losses written back of £193,750.

Page 30

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

           14.Tangible fixed assets (continued)


Company






Fixtures and fittings

£

Cost or valuation


At 1 January 2022
122,735



At 31 December 2022

122,735



Depreciation


At 1 January 2022
122,735



At 31 December 2022

122,735



Net book value



At 31 December 2022
-



At 31 December 2021
-






Page 31

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

15.


Fixed asset investments

Company





Investments in subsidiary companies

£



Cost or valuation


At 1 January 2022
50,002



At 31 December 2022

50,002



Impairment


At 1 January 2022
50,000



At 31 December 2022

50,000



Net book value



At 31 December 2022
2



At 31 December 2021
2

Page 32

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

Subsidiary undertakings


The following were subsidiary undertakings of the Company:

Name

Registered office

Principal activity

Class of shares

Holding

Silverlink Properties Limited
20 South Street,
 Stephenson Quarter,
Newcastle Upon Tyne,
England, NE1 3PE
Dormant
Ordinary
100%
Stephenson Quarter
    Developments Limited*
20 South Street, Stephenson Quarter,
Newcastle Upon Tyne,
England, NE1 3PE
Property development and hospitality
Ordinary
100%
Silverlink Stephenson Limited
20 South Street, Stephenson Quarter,
Newcastle Upon Tyne,
England, NE1 3PE
Intermediate holding company
Ordinary
100%
Stephenson Hotel Enterprise Limited*
20 South Street,
Stephenson Quarter,
Newcastle Upon Tyne,
England, NE1 3PE
Intermediate holding company
Ordinary
100%
Stephenson Hotel Limited*
20 South Street,
Stephenson Quarter,
Newcastle Upon Tyne,
England, NE1 3PE
Hotel operator
Ordinary
100%
Stephenson Rocket Limited*
20 South Street,
Stephenson Quarter,
Newcastle Upon Tyne,
England, NE1 3PE
Car park operator
Ordinary
100%
Trinity Gardens Developments pic
20 South Street,
Stephenson Quarter,
Newcastle Upon Tyne,
England, NE1 3PE
Dormant
Ordinary
100%

*Held indirectly


16.


Stocks

Group

Group
As restated
2022
2021
£
£

Food and beverage
70,855
74,520

70,855
74,520



17.


Debtors

Group
Group
Company
Company
2022
2021
2022
2021
Page 33

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

17.Debtors (continued)

£
£
£
£


Trade debtors
365,216
158,486
5,220
-

Amounts owed by group undertakings
-
-
20,099
-

Other debtors
617,056
597,142
132,681
115,114

Prepayments and accrued income
359,822
302,752
-
-

Tax recoverable
6,070
-
-
-

1,348,164
1,058,380
158,000
115,114



18.


Cash and cash equivalents

Group
Group
Company
Company
2022
2021
2022
2021
£
£
£
£


Bank and cash balances
2,179,901
2,111,515
30,180
10,617

2,179,901
2,111,515
30,180
10,617


19.


Creditors: Amounts falling due within one year

Group

Group
As restated
Company

Company
As restated
2022
2021
2022
2021
£
£
£
£

Loans
38,740,817
38,049,878
-
-

Other Loans
2,333,295
2,468,984
-
-

Trade creditors
3,307,111
965,733
1,037
3,963

Amounts owed to group undertakings
-
-
4,331,866
4,261,417

Other taxation and social security
308,143
401,592
-
14,866

Obligations under finance lease and hire purchase contracts
1,176,375
732,962
-
-

Other creditors
6,020,062
5,892,652
3,924,057
3,921,576

Accruals and deferred income
4,726,928
5,585,547
27,850
48,906

56,612,731
54,097,348
8,284,810
8,250,728


Page 34

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

.Creditors: Amounts falling due within one year (continued)

Other Loans
In 2019 the company transferred the IHG Hotel Management Agreement to a franchise agreement and appointed a new management company, Interstate, to improve trading performance and hotel value. As part of the transfer, the hotel funding liability of £2.5m from IHG, being a capital contribution put in place as part of the original finance to build the hotel, is to be amortised on a straight line basis from 30 August 2020 over the remaining life of the franchise agreement. Amortisation of £162,162 (2021: £162,162) during the year has been classified as finance income in the profit and loss account.
Other loans due within one year comprise £211,674 (2021: £185,200) in respect of an RGF loan. The RGF loan is detailed within Note 20. 
Loans
In October 2019, the group completed the refinancing in of its bank and other loans with Newcastle City Council (‘NCC’) under a new Term Facilities Agreement with NCC. The new facility is secured against the business and assets of the company and those Stephenson Hotel Enterprise Limited, as well as other group undertakings. The bank loan of £14.8m was replaced by a four-year term loan (Facility A), subject to interest at 4.5% per annum and repayable at £125,000 per quarter commencing 31 December 2019 with a balancing repayment due on termination.
Facilities B and C, for £12.9m and £8m respectively, were used to refinance the existing NCC loans and accrued interest totalling £20.9m at the date of refinancing and are repayable in full on 25 October 2023, subject to the other terms and conditions contained in the facilities agreement. Facilities B and C do not bear interest although Facility B, which refinanced the capital element of amounts previously due to NCC, is subject to an exit fee which accrues at a rate of 6.5% per annum.
Whilst the initial quarterly repayment of £125,000 was made, a diminished trading performance in 2020 due to COVID-19, which continued to impact trading performance in 2021, has resulted in subsequent repayments not being met. NCC have continued to provide financial support to the company and, in August 2020, amended the 2019 Term Facilities Agreement to defer recommencement of Facility A repayments to March 2024 and provide additional funding (Facility D) of up to £1,000,000, of which £1,000,000 (2021: £1,000,000) had been drawn down at the balance sheet date. Facility D is subject to interest at 4.5% per annum and was repayable monthly between June 2021 and March 2022, although repayments have been deferred.
The group was in breach of the Term Facilities Agreement at the balance sheet date, consequently these loans were repayable on demand and are classified accordingly. As noted in the strategic report, the directors have held constructive discussions with its lenders and anticipate agreement will be reached to defer recommencement of interest and capital repayments and extend the term of the loan facilities.

Page 35

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

20.


Creditors: Amounts falling due after more than one year

Group
Group
2022
2021
£
£

Bank Loans
25,833
35,327

Other loans
1,704,147
1,773,240

Net obligations under finance leases and hire purchase contracts
17,401,844
18,244,581

19,131,824
20,053,148


Bank Loans
Loans comprise an unsecured bank loan of £50,000 which is repayable in monthly installments over 5 years, commencing August 2021.
Other loans
The RGF loan to Stephenson Quarter Developments Limited was provided by the North East Local Enterprise Partnership and is repayable by 31 March 2025, which capital repayments commencing from July 2022. The loan balance includes accrued interest, which accrues at 4.5% per annum and is secured on the Boiler Shop property included within fixed assets, together with a guarantee provided by Clouston Group Limited. The total balance owed at the year end (across both short and long-term creditors) was £1,915,821 (2021: £1,958,440).



Page 36

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

21.


Loans


Analysis of the maturity of loans is given below:


Group
Group
2022
2021
£
£

Amounts falling due within one year

Loans
38,740,817
38,049,878

Other loans
2,333,295
2,468,984


41,074,112
40,518,862

Amounts falling due 1-2 years

Bank Loans
25,833
35,327

Other loans
1,704,147
1,773,240


1,729,980
1,808,567



42,804,092
42,327,429



22.


Hire purchase and finance leases


Minimum lease payments under hire purchase fall due as follows:

Group
Group
2022
2021
£
£

Within one year
1,176,375
1,298,139

Between 1-5 years
2,727,786
2,622,871

Over 5 years
40,243,055
38,915,460

Less: future finance charges
(25,598,309)
(23,858,927)

18,548,907
18,977,543

In 2016, Stephenson Hotel Limited sold the freehold land beneath the Crowne Plaza hotel to BBC Pension Trust Limited, and entered into a lease back arrangement (sale and lease back) which was recognised as a finance lease. The BBC pension trust own the freehold on the land and all buildings on the land will revert to their control at the end of the 150 year lease.
Future minimum lease payments exclude the effect of future inflationary increases in respect of underlying lease costs, which are index linked subject to a minimum uplift of 1% per annum and a cap of 4% per annum.

Page 37

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

23.


Share capital

2022
2021
£
£
Allotted, called up and fully paid



102 (2021 - 102) Ordinary shares of £1.00 each
102
102



24.


Reserves

Capital redemption reserve

The capital redemption reserve arose on redemption of the company's own shares in prior years.

Profit and loss account

The profit and loss account reserve represents cumulative profits and losses, net of dividends paid and other adjustments.


25.


Prior year adjustment

Within the group the following prior year adjustments have been made.
Restatement of hotel land and buildings classified as stock in error within the group
In 2015 construction of the hotel was completed and within the financial year ended 31 March 2016 the site has traded operationally as a hotel. The groups’s interest in the leasehold land and buildings has historically been classified as stock in the financial statements. This classification was originally adopted on the basis that the long-term aim of the group was to build and operate the hotel until such a time where the value of the hotel increased through regeneration of the area where the hotel operates, at which point, the hotel would be sold. FRS 102 sets out that fixed assets are those assets which are intended for use on a continuing basis in a company's activities.  The directors have assessed the classification of the groups's hotel assets and have concluded that, as the group has utilised the hotel in its core operating activities of the provision of services directly to hotel guests, and that the primary source of income from the property is revenue generated from occupancy of hotel rooms and usage of hotel facilities, it did not meet the criteria to be classified as stock and should have been classified and accounted for as tangible fixed assets within the financial statements.  This represents a material error in prior financial statements and therefore has been corrected by way of prior period adjustment. The impact on the comparative Statement of Financial Position, brought forward reserves and the Statement of Comprehensive Income is as follows:
• Stock has reduced by £31,835,137.
• Land and buildings included within tangible fixed assets have increased by £31,310,871.
• The profit and loss account as at 1 January 2021 has reduced by £485,120.
• Administrative expenses increased by £39,146 which has decreased operating profit and increased the loss before tax reported in the previous period by the same amount.
• The profit and loss account carried forward as at 31 December 2021 has decreased by £524,266.

 

Page 38

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

25.Prior year adjustment (continued)

Recognition of voluntary dissolution of wholly owned subsidiary undertakings in December 2021
One Trinity Gardens Limited and Maudon Limited were private limited companies who were wholly owned subsidiary undertakings of Clouston Group Limited.  Both companies were dormant throughout 2021 and their sole assets consisted of intercompany debt due from the parent company of £3,921,576 and from the group of £5,444,142.
In December 2021 both companies were dissolved via voluntary strike-off.  At such point the sole assets held by the companies were deemed to be bona vacantia and have transferred to the Crown.  Therefore at this point, the control over these companies was no longer held by Clouston Group Limited and in effect, this represented a disposal of both companies by the group.
No adjustments were made in the 2021 accounts to account for the disposal of One Trinity Gardens or Maudon Limited.  This meant that the intercompany balances continued to be eliminated on consolidation in the consolidated financial statements, and the amounts owed to these companies continued to be classified as amounts owed to group undertakings in the parent company financial statements. This represents a material error in the prior year financial statements and therefore this has been corrected by way of prior period adjustment.  
The following adjustments have been made in the parent company financial statements of Clouston Group Limited:
•Amounts owed to group undertakings has been decreased by £3,921,576.
•Other Creditors has been increased by £3,921,576.
There was no change to the parent company result for the comparative period.
The following adjustments have been made in the consolidated financial statements of Clouston Group Limited:
•Other Creditors has been increased by £5,444,142.
•Loss on disposal of operations has been increased by £5,444,142 which has increased the loss before tax reported in the previous period by the same amount.
•As a result, the profit and loss account account carried forward as at 31 December 2021 has decreased by £5,444,142.


26.


Pension commitments

The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group  in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £65,193 (2021: £33,687). Contributions totalling £17,376 (2021: £6,237) were payable to the fund at the reporting date and are included in creditors.

Page 39

 
CLOUSTON GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

27.


Commitments under operating leases

At 31 December 2022 the Group and the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:


Group
Group
2022
2021
£
£

Not later than 1 year
522,312
522,312

Later than 1 year and not later than 5 years
2,062,983
2,085,495

Later than 5 years
13,994,400
14,494,200

16,579,695
17,102,007

28.


Related party transactions

During the year the company received repayments from W D Clouston of £Nil (2021: £9,000). The outstanding balance at the year end was £175,094 (2021: £175,094) with provision against the balance of £175,094 (2021: £175,094). Payments were made by W D Clouston during the year on behalf of the business and the amount owed to W D Clouston at year end was £2,482.24.
During the year the company made loans to R D Clouston of £18,678 (2021: £nil). The outstanding balance at year end was £18,678 (2021: £nil).


29.


Controlling party

The ultimate controlling party is W D Clouston by virtue of his interest in the company.

Page 40