The Pig Hotel Midco Limited is an intermediary holding company within The Pig Hotel Holdco Limited Group and has the same principal activities, risks and uncertainties. Therefore the same strategic report is presented below.
The directors present the strategic report together with the audited financial statements for the year ended 31 December 2023.
The group is ultimately majority owned and operated by investment funds managed by KSL Capital Partners. KSL is a private equity firm specialising in travel and leisure enterprises in five primary sectors: hospitality, recreation, clubs, real estate, and travel services. KSL is one of the world’s largest investors in hospitality and leisure. This was the first full year the group was owned by KSL following their majority investment in March 2022.
The directors consider turnover, EBITDA, occupancy and daily covers to be the key performance indicators (KPIs) as they are the most effective measure of performance against the group's objectives.
As a group we had turnover of £49.9m (2022: £40.1m for the period since acquisition) and an EBITDA of £4.7m for the year (2022: £5.2m for the period since acquisition). On a full year basis, group turnover was £1.5m below 2022 which was still benefiting from the pent-up demand for domestic travel post Covid. 2023, however, saw increases in both average daily room rate and spend per cover which offset the impact of lower occupancy in the hotels and lower average daily covers in the restaurants.
The reduction in EBITDA was primarily a result of increased indirect costs. As well as inflationary pressures on cost (especially in utilities), which the group did not fully pass onto guests, additional cost was incurred in head office post-acquisition to prepare for future growth.
As a group we have an average occupancy of 82% (2022: 91%) and average daily restaurant covers of 1,283 (2022: 1,683) for the year to 31 December 2023. In 2022, the hospitality industry in the UK experienced significant uplift as a result of Covid restrictions being lifted. The group benefited from this in 2022 but the industry saw a softening of demand in 2023 which resulted in lower occupancy and average daily restaurant covers.
Financial ratios improved during the year, with the group current ratio (current assets / current liabilities) reaching 1.4 (2022: 0.9). Net cash flow was an increased by £5.6m (2022: £8.4m) during the year.
The directors are expanding the portfolio, with the purchase of Groombridge Place in March 2023, and a post year end purchase of Barnsley House in January 2024.
The principal risks and uncertainties facing the company are broadly grouped as liquidity risk, interest rate risk, credit risk and price risk. Further details are included in the directors' report.
The board of directors of Home Grown Hotels Limited consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1)(a)-(f) of the Act) in the decisions taken during the year ended 31 December 2023.
To assist them in discharging their duty under s172 Companies Act 2006, the directors engage with employees, customers and suppliers to reflect their insights and views when making decisions on strategy; delivering operational effectiveness, driving initiatives; and committing to deliver outcomes that enhance social value. Below are examples of how the directors engage with stakeholders:
Employees: The involvement and engagement of employees is vital to our business. We aim to be a responsible employer in our approach to the pay and benefits our team members receive. The health, safety and well-being of our team members is one of our primary factors in the way we do business.
Guests: The directors place considerable value on the engagement and treatment of our guests. Our aim is to deliver a fantastic experience and gain their desire to return. We treat our guests' safety as one of our top priorities.
Suppliers: Suppliers are not decided purely based on price but also their quality, impact on the environment and local community and how they conduct business.
Community: In operating our Hotels, we took into account the impact of the group's operations on the community and environment and our wider social responsibilities, and in particular how we comply with legislation and react promptly to local community concerns.
As the board of directors, our intention is to behave responsibly and ensure that the management operate the business in a responsible manner, operating within the high standards of business conduct and good governance expected for a business such as ours. The intention is to nurture our reputation, through both the construction and delivery of our vision, that reflects our responsible behaviour.
The above, along with the narratives in the Report of the Directors, help highlight how the directors have observed the principles of s172 and engaged with stakeholders in decision making and in promoting the long-term success of the company.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company operates a centralised treasury function which is responsible for managing the liquidity, interest and foreign currency risks associated with the company's activities.
The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the businesses. The company uses two major banks, both rated A with the major rating agencies, to finance its operations.
The company is exposed to fair value interest rate risk on any fixed rate borrowings and cash flow interest rate risk on floating rate deposits, bank overdrafts and loans. The company uses a combination of fixed and variable rate debt so as to reduce its exposure to changes in interest rates.
Investments of cash surpluses and borrowings are made through banks and companies which must fulfil credit rating criteria approved by the Board.
All customers who wish to trade on long credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary. However, the group has no significant concentration of credit risk. In common with hotel and restaurant operations, services are provided in relatively small transactions with immediate settlement.
The directors consider that the company faces the usual pricing risk of any other company operating in a competitive, commercial environment.
Details of engagement with suppliers, customers and others in a business relationship can be found in the section 172 statement in the strategic report.
The recent purchase of one new Pig site supports our vision of the continued growth of the number of hotels within The Pig Group.
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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 company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience.
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation, data protection, employment, environmental and health and safety legislation.
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud.
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships.
tested journal entries to identify unusual transactions.
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation.
enquiring of management as to actual and potential litigation and claims.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The Pig Hotel Midco Limited is a private company limited by shares incorporated in England and Wales. The registered office is 3rd Floor, 63 St James's Street, London, England, SW1A 1LY.
The current financial statements are for the 12 months to 31 December 2023. The comparative financial statements of The Pig Hotel Midco Limited are for the period from 15 February 2022 to 31 December 2022. As a result, the comparatives are not entirely comparable.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
There are not considered to be any key sources of estimation uncertainty.
There are
On the 1 April 2023 the rate of UK Corporation Tax increased from 19% to 25% for companies with profits over £250,000. For profits between £50,000 and £250,000 a marginal rate of tax is applied
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The bank loans are secured over the properties and assets held by the group.
On 23 March 2023 a new loan was drawn totalling £3.5m with a second draw down of £11.5m on 20 December 2023. The term of the loans are 13 months from the date it was drawn, at which point any outstanding balances are repayable. It attracts interest at a rate of 2.00% above SONIA rate. Interest charged on bank loans is shown under interest payable within the statement of comprehensive income
On 19 December 2023, 2,735,268 ordinary shares of £1 each were issued.
All shares in issue have the same rights, preferences and restrictions attached to them.
The company has provided fixed charge and negative pledge over its shares and related assets as security against bank borrowing facilities entered into by The Pig Hotel Group Limited.
The company has taken advantage of the exemption available in Section 33.1A of FRS 102 whereby it has not disclosed transactions with the ultimate parent company or any wholly owned subsidiary undertaking of the group.