Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
COMPANY INFORMATION
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STEPHENSON HOTEL LIMITED
CONTENTS
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STEPHENSON HOTEL LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their annual report on the affairs of Stephenson Hotel Limited (the "company") together with the audited financial statements and independent auditor's report for the year ended 31 December 2022.
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: £38.04m) 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. 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.
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STEPHENSON HOTEL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
The company's activities expose it to a number of financial risks including cash flow risk, credit risk and liquidity tisk.
Cash flow risk In addition to the risks associated with trading performance, as highlighted in this report, the company's activities expose it to the financial risks associated with fluctuations in interest rates. The company 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 company has refinanced 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 company's principal financial assets are its cash and bank balances together with trade and other debtors. The company'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 where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The company 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 company uses a mixture of long term and short term finance. Further details regarding liquidity risk and the impact on going concern can be found in the directors’ report.
The company's other principal risks and uncertainties are in relation to property values and property yields. The Crowne Plaza Hotel is, as expected, yet to reach a stabilised basis of trading. Should trading fall below managements current forecasts, the carrying value of the development in the balance sheet may be reduced.
Delays in the regeneration of the Stephenson Quarter, and their ultimate design and content, as has been noted previously, has created some uncertainty over the hotel's ability to achieve its full potential. These risks are heightened by the current economic environment, with an inflation driven cost of living crisis following closely behind the impact of COVID-19 on the company's ability to operate the hotel to achieve its full potential.
The Crowne Plaza hotel continues to grow with occupancy in July 2024 at 93%.
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.
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STEPHENSON HOTEL LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
This report was approved by the board and signed on its behalf.
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STEPHENSON HOTEL 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.
The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company'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 Company 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 to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £252,611 (2021 - loss £1,387,365).
The directors can not recommend the payment of a dividend (2021: £nil).
The directors who served during the year were:
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STEPHENSON HOTEL LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
The following information, which would otherwise be 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
The financial statements of Stephenson Hotel Limited for the year ended 31 December 2022 have been prepared on a going concern basis, which assumes it can continue to meet its liabilities as they fall due in the normal course of business for at least the twelve months following their approval. However, as the repayment date of its loan has expired, the directors believe there to be a material uncertainty that casts significant doubt upon the company's ability to continue as a going concern.
At 31 December the Company had net liabilities of £30,696,904 with amounts totalling £30,730,817 owing to Newcastle City Council. At the year end, the Company was in breach of its covenants and the loan expired in full on 25 October 2023, prior to approval of these financial statements. The Crowne Plaza Newcastle is a great North East success story. It is one of the highest-performing hotels in the UK four-star market, sharing joint first place in its comparative set, with exceptional guest satisfaction scores and occupancy levels. It is multi award winning and every year it attracts tens of thousands of delegates and guests from across the globe. Indeed, results in Nov 2022 show its best trading since opening in 2015 with strong RGI, ADR and occupancy. The meetings and events business has performed well. Moreover, a recent hotel industry report by PWC, demonstrates that the CPH is predicted to outperform its competitors nationally. In levels of occupancy, CPH continues to grow in a declining market. Stephenson Hotel Ltd expected a workshop in early 2023 with the landowner to consider a range of complimentary ‘meanwhile uses’ to the current derelict land on the Stephenson Quarter, which has the potential to increase sales and thereby add value to the Crowne Plaza hotel. The Company continues to request this workshop and for measures to be taken on the dereliction that is impacting the property value and the business’s ability to achieve its potential. Stephenson Hotel Limited is continuing to repay NCC, its lender, on a monthly basis. Negotiations with them started in early 2023 and continue to be on-going to agree appropriate repayment terms, as they require adjustment. Because of the impact on the property’s value noted within the principle risks and uncertainties section, the Company is unable to look at other funding options and is therefore reliant on a favourable conclusion to these negotiations, which Stephenson Hotel Limited expects to resolve in the next 6 months. The Directors will continue to operate the hotel and build on the positive trading performance until such time as a revised repayment schedule can be formalised. Whilst the directors acknowledge that the hotel industry is volatile in the current economic climate, they believe it will achieve improved financial performance and have prepared forecasts which indicate that with the
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STEPHENSON HOTEL LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
continuing support of its lender, it will be able to meet its liabilities as they fall due.
On this basis the directors consider it appropriate to prepare these financial statements on a going concern basis, however, the directors of Stephenson Hotel Limited acknowledge that should either trading performance not reach the requisite levels on a timely basis or should suitable terms in respect of its funding facilities not be agreed or lenders withdraw their support, the quantum and timing of future cash flows may be insufficient to enable it to meet its 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 to continue as a going concern for the foreseeable future.
There have been no significant events affecting the Company since the year end.
The auditors, Haysmacintyre LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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STEPHENSON HOTEL LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF STEPHENSON HOTEL LIMITED
We have audited the financial statements of Stephenson Hotel Limited (the 'Company') for the year ended 31 December 2022, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity and the related notes, including a summary of 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).
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 Company 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.
We draw attention to note 2.2 in the financial statements, which sets out that the Company's ability to continue as going concern is dependent on negotiations with its principal lender in respect of its loan which is due for repayment. 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 Company'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.
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STEPHENSON HOTEL LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF STEPHENSON HOTEL LIMITED (CONTINUED)
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 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.
In our opinion, based on the work undertaken in the course of the 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 Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
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STEPHENSON HOTEL LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF STEPHENSON HOTEL LIMITED (CONTINUED)
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 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 Company and industry, we identified that the principal risks of non-compliance with laws and regulations related to compliance with the company law, licensing, health and safety and minimum wage 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 and sales tax. We evaluated management's incentives and opportunities or 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 judgements 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.
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STEPHENSON HOTEL LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF STEPHENSON HOTEL LIMITED (CONTINUED)
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 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.
for and on behalf of
Statutory Auditors
10 Queen Street Place
EC4R 1AG
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STEPHENSON HOTEL LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
REGISTERED NUMBER: 08179783
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 29 form part of these financial statements.
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STEPHENSON HOTEL LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Stephenson Hotel Limited (‘the company’) is a private company, limited by shares, incorporated in the United Kingdom and registered in England and Wales. The address of the registered office is given in the company information page appended to this annual report. The nature of the company's operations and its principal activities are set out in the director's report.
2.Accounting policies
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 management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The financial statements of Stephenson Hotel Limited for the year ended 31 December 2022 have been prepared on a going concern basis, which assumes it can continue to meet its liabilities as they fall due in the normal course of business for at least the twelve months following their approval. However, as the repayment date of its loan has expired, the directors believe there to be a material uncertainty that casts significant doubt upon the company's ability to continue as a going concern.
At 31 December the Company had net liabilities of £30,696,904 with amounts totalling £30,730,817 owing to Newcastle City Council. At the year end, the Company was in breach of its covenants and the loan expired in full on 25 October 2023, prior to approval of these financial statements. The Crowne Plaza Newcastle is a great North East success story. It is one of the highest-performing hotels in the UK four-star market, sharing joint first place in its comparative set, with exceptional guest satisfaction scores and occupancy levels. It is multi award winning and every year it attracts tens of thousands of delegates and guests from across the globe. Indeed, results in Nov 2022 show its best trading since opening in 2015 with strong RGI, ADR and occupancy. The meetings and events business has performed well. Moreover, a recent hotel industry report by PWC, demonstrates that the CPH is predicted to outperform its competitors nationally. In levels of occupancy, CPH continues to grow in a declining market. Stephenson Hotel Ltd expected a workshop in early 2023 with the landowner to consider a range of complimentary ‘meanwhile uses’ to the current derelict land on the Stephenson Quarter, which has the potential to increase sales and thereby add value to the Crowne Plaza hotel. The Company continues to request this workshop and for measures to be taken on the dereliction that is impacting the property value and the business’s ability to achieve its potential. Stephenson Hotel Limited is continuing to repay NCC, its lender, on a monthly basis. Negotiations with them started in early 2023 and continue to be on-going to agree appropriate repayment terms, as they require adjustment. Because of the impact on the property’s value noted within the principle risks and uncertainties section, the Company is unable to look at other funding options and is therefore reliant on a favourable conclusion to these negotiations, which Stephenson Hotel Limited expects to resolve in the next 6 months. The Directors will continue to operate the hotel and build on
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
the positive trading performance until such time as a revised repayment schedule can be formalised.
Whilst the directors acknowledge that the hotel industry is volatile in the current economic climate, they believe it will achieve improved financial performance and have prepared forecasts which indicate that with the continuing support of its lender, it will be able to meet its liabilities as they fall due. On this basis the directors consider it appropriate to prepare these financial statements on a going concern basis, however, the directors of Stephenson Hotel Limited acknowledge that should either trading performance not reach the requisite levels on a timely basis or should suitable terms in respect of its funding facilities not be agreed or lenders withdraw their support, the quantum and timing of future cash flows may be insufficient to enable it to meet its 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 to continue as a going concern for the foreseeable future.
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
∙the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Clouston Group Limited as at 31 December 2022 and these financial statements may be obtained from Companies House.
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Grants of a revenue nature are recognised in the Statement of Comprehensive Income in the same period as the related expenditure.
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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:
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.
The Company has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Financial instruments are recognised in the Company's Statement of Financial Position when the Company 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 Company's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.
Other financial assets
Other financial assets, which includes investments in equity instruments which are not classified as subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the recognised transaction price. Such assets are subsequently measured at fair value with the changes in fair value being recognised in the profit or loss. Where other financial assets are not publicly traded, hence their fair value cannot be measured reliably, they are measured at cost less impairment.
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 Company after the deduction of all its liabilities.
Basic financial liabilities, which include trade and other payables, bank loans and other loans 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
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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.
Other financial instruments
Derivatives, including forward exchange contracts, futures contracts and interest rate swaps, are not classified as basic financial instruments. These are initially recognised at fair value on the date the derivative contract is entered into, with costs being charged to the profit or loss. They are subsequently measured at fair value with changes in the profit or loss.
Debt instruments that do not meet the conditions as set out in FRS 102 paragraph 11.9 are subsequently measured at fair value through the profit or loss. This recognition and measurement would also apply to financial instruments where the performance is evaluated on a fair value basis as with a documented risk management or investment strategy.
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 Company 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 Company 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 Company's contractual obligations expire or are discharged or cancelled.
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Critical accounting judgments and key sources of estimation uncertainty are set out below: Tangible fixed 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. The company 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.
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
At the balance sheet date the company had unrecognised deferred tax assets totalling approximately £4,600,122 (2021: £5,274,217) principally in respect of unrelieved trading losses. The directors have not recognised these assets until such time as their recovery can be assessed with reasonable certainty.
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Profit and loss account
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Restatement of hotel land and buildings classified as stock in error
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 company’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 company 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 company's hotel assets and have concluded that, as the company 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 £39,147 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 £524,267.
The company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund and amounted to £47,082 (2021 - £26,621). Contributions totalling £17,376 (2021 - £6,237) were payable to the fund at the reporting date and are included in creditors.
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STEPHENSON HOTEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
The immediate parent company is Stephenson Hotel Enterprise Limited, a company incorporated in the United Kingdom with registered office of Boiler Shop, 20 South Street, Newcastle upon Tyne, NE1 3PE.
The ultimate parent company is Clouston Group Ltd, a company incorporated in the United Kingdom. Clouston Group Ltd is the parent to the smallest and largest group to which consolidated financial tatements are prepared. Copies of the consolidated financial statements of Clouston Group Ltd are available from Companies House, Crown Way, Cardiff, CF4 3UZ. The registered office of the ultimate parent company is the same as that of the company. The ultimate controlling party of the group is W D Clouston.
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