EPWORTH BUILDING LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Company Registration No. 12270739 (England and Wales)
EPWORTH BUILDING LIMITED
COMPANY INFORMATION
Directors
R. Greenbaum
E. Agmon
Company number
12270739
Registered office
Elm Park House
Elm Park Court
Pinner
Middlesex
HA5 3NN
Auditor
Sears Morgan Accountancy Limited
Elm Park House
Elm Park Court
Pinner
Middlesex
HA5 3NN
EPWORTH BUILDING LIMITED
CONTENTS
Page
Directors' report
1 - 2
Independent auditor's report
3 - 5
Income statement
6
Statement of financial position
7
Statement of changes in equity
8
Statement of cash flows
9
Notes to the financial statements
10 - 23
EPWORTH BUILDING LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The directors present their annual report and financial statements for the year ended 31 December 2023.
Principal activities
The principal activity of the company continued to be that of letting and operating commercial real estate.
Results and dividends
The directors were satisfied with the trading results for the year which were inline with expectations relevant to the existing rental leases.
The results for the year are set out on page 6.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
R. Greenbaum
E. Agmon
Auditor
In accordance with the company's articles, a resolution proposing that Sears Morgan Accountancy Limited be reappointed as auditor of the company will be put at a General Meeting.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the 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 International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom. 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 of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
make an assessment of the company's ability to continue as a going concern.
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 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.
EPWORTH BUILDING LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Statement of disclosure to auditor
Each director in office at the date of approval of this annual report confirms that:
so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware, and
the director has taken all the steps that he / she ought to have taken as a director in order to make himself / herself aware of any relevant audit information and to establish that the company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
Small companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
On behalf of the board
E. Agmon
Director
11 September 2024
EPWORTH BUILDING LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF EPWORTH BUILDING LIMITED
- 3 -
Opinion
We have audited the financial statements of Epworth Building Limited (the 'company') for the year ended 31 December 2023 which comprise the income statement, the statement of financial position, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its loss for the year then ended;
have been properly prepared in accordance with UK adopted international accounting standards; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the 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.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the directors' report has been prepared in accordance with applicable legal requirements.
EPWORTH BUILDING LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF EPWORTH BUILDING LIMITED
- 4 -
Matters on which we are required to report by exception
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 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, or returns adequate for our audit have not been received from branches not visited by us; or
the 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; or
the directors were not entitled to take advantage of the small companies exemption from the requirement to prepare a strategic report.
Responsibilities of directors
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.
Auditor's 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 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.
The extent to which the audit was considered capable of detecting irregularities, including fraud
We considered the nature of the company's industry and its control environment, and enquired of their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management about their own identification and assessment of the risks of irregularities.
We obtained an understanding of the legal and regulatory framework that the company operates in, and identified the key laws and regulations that:
had a direct effect on the determination of material amounts and disclosures in the financial statements. These included the UK Companies Act and tax legislation; and
do not have a direct effect on the financial statements but compliance with which may be fundamental to the company's ability to operate or to avoid a material penalty.
We discussed among the audit engagement team regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might occur in the financial statements.
EPWORTH BUILDING LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF EPWORTH BUILDING LIMITED
- 5 -
Audit repsonse to risk indentified
As a result of performing the above, we identified the greatest potential for fraud in the following areas, and our specific procedures performed to address them are described below:
Completeness of revenue: proof in numbers testing to underlying rental lease agreements
Fair value of property: corroborating the property value with market expectations and third party valuations
Going concern: reviewing the disclosures included in the financial statements in order to assess the completeness and appropriateness of disclosures.
In addition we also performed general procedures as follows;
Reviewing financial statement disclosures by testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
Reviewing legal and professional fees for any evidence of non-compliance with laws and regulations
Reviewing correspondence with HMRC.
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.
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.
N. Kerr FCCA (Senior Statutory Auditor)
For and on behalf of Sears Morgan Accountancy Limited
13 September 2024
Chartered Certified Accountants
Statutory Auditor
Elm Park House
Elm Park Court
Pinner
Middlesex
HA5 3NN
EPWORTH BUILDING LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
2023
2022
Notes
£
£
Revenue
3
4,803,896
4,712,425
Gross profit
4,803,896
4,712,425
Other operating expenses
(14,278)
14,278
Administrative expenses
(1,305,547)
(1,106,649)
Operating profit
4
3,484,071
3,620,054
Investment revenues
6
2,177
225
Finance costs
7
(4,854,168)
(2,563,877)
Other gains and losses
8
(10,761,376)
(5,661,375)
Loss before taxation
(12,129,296)
(4,604,973)
Income tax expense
9
(320,011)
(264,488)
Loss and total comprehensive income for the year
(12,449,307)
(4,869,461)
The income statement has been prepared on the basis that all operations are continuing operations.
EPWORTH BUILDING LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2023
31 December 2023
- 7 -
2023
2022
Notes
£
£
Non-current assets
Investment property
10
60,300,000
70,513,185
Other receivables
12
6,389
67,754
Deferred tax asset
18
359,475
220,422
60,665,864
70,801,361
Current assets
Trade and other receivables
12
308,660
268,320
Cash and cash equivalents
3,543,115
1,598,157
3,851,775
1,866,477
Current liabilities
Trade and other payables
17
2,212,371
2,293,076
Current tax liabilities
95,694
Borrowings
13
1,076,436
3,384,501
2,293,076
Net current assets/(liabilities)
467,274
(426,599)
Non-current liabilities
Borrowings
13
76,983,707
73,776,024
Net liabilities
(15,850,569)
(3,401,262)
Equity
Called up share capital
19
100
100
Retained earnings
(15,850,669)
(3,401,362)
Total equity
(15,850,569)
(3,401,262)
These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements were approved by the board of directors and authorised for issue on 11 September 2024 and are signed on its behalf by:
E. Agmon
Director
Company registration number 12270739 (England and Wales)
EPWORTH BUILDING LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
Share capital
Retained earnings
Total
£
£
£
Balance at 1 January 2022
100
1,468,099
1,468,199
Year ended 31 December 2022:
Loss and total comprehensive income
-
(4,869,461)
(4,869,461)
Balance at 31 December 2022
100
(3,401,362)
(3,401,262)
Year ended 31 December 2023:
Loss and total comprehensive income
-
(12,449,307)
(12,449,307)
Balance at 31 December 2023
100
(15,850,669)
(15,850,569)
EPWORTH BUILDING LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 9 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
23
2,876,200
2,951,278
Interest paid
(2,876,168)
(1,647,791)
Net cash inflow from operating activities
32
1,303,487
Investing activities
Interest received
2,177
225
Net cash generated from investing activities
2,177
225
Financing activities
Proceeds from borrowings
2,617,750
Repayment of borrowings
(675,001)
(1,415,102)
Net cash generated from/(used in) financing activities
1,942,749
(1,415,102)
Net increase/(decrease) in cash and cash equivalents
1,944,958
(111,390)
Cash and cash equivalents at beginning of year
1,598,157
1,709,547
Cash and cash equivalents at end of year
3,543,115
1,598,157
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
1
Accounting policies
Company information
Epworth Building Limited is a private company limited by shares incorporated in England and Wales. The registered office is Elm Park House, Elm Park Court Pinner, Middlesex, HA5 3NN. The principal place of business is 8-10 Hallam Street, London, W1W 6NS.
1.1
Accounting convention
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, except as otherwise stated.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, except for the revaluation of investment properties. The principal accounting policies adopted are set out below.
1.2
Going concern
In assessing going concern the directors have given due regard to the bank loan covenantstrue, the ordinary bank loan repayment date together with the advanced agreement in principle to extend the ordinary bank loan repayment date by a year to 6 February 2026 and the predication of the UK interest level base rates. They have also considered the current contracted rental income and ongoing expenditure levels, including any potential effects of interest rate predictions, for a period of at least twelve months from the date of approval of the financial statements.
The company's going concern basis is heavily dependent on continued group support and the directors have no reason to believe that this support will be withdrawn in the short-term future.
The directors have at the time of approving the financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Revenue
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognises revenue when it transfers control of a product or service to a customer.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
The company recognises revenue from the following major sources:
Rental income
Service charge income
The nature, timing of satisfaction of performance obligations and significant payment terms of the company's major sources of revenue are as follows:
Rental income
Rental income, including any lease incentives granted, is recognised in the profit and loss on a straight-line basis over the term of the lease. Rental income is receivable quarterly in advance.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 11 -
Service charge income
Service charge income is recognised in the profit and loss in the period to which the correlating service charge expenses have been incurred. The income is recognised on a gross basis when the company can direct the service transferred to the customer, in other cases where the company cannot direct the service and acts as an agent the revenue is recognised on a net basis. Service charge income that is directable by the company is receivable quarterly in advance and non-directable service charge income is receivable upon issuing of the payment demand.
1.4
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is initially measured at cost and subsequently measured using the fair value model and stated at its fair value at the reporting end date. Changes in fair value are recognised in profit or loss.
1.5
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.6
Financial assets
Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.
At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.
Financial assets at fair value through profit or loss
Financial assets are classified as at FVTPL when the financial asset is held for trading. This is the case if:
the asset has been acquired principally for the purpose of selling in the near term, or
on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or
it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Interest and dividends are included in 'Investment income' and gains and losses on remeasurement included in 'other gains and losses' in the statement of comprehensive income.
Financial assets held at amortised cost
Financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity are classified as held to maturity investments.
Held to maturity investments are measured at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 12 -
Trade Receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
Financial assets at fair value through other comprehensive income
Debt instruments are classified as financial assets measured at fair value through other comprehensive income where the financial assets are held within the company’s business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to profit or loss when the debt instrument is derecognised.
Financial assets classified as available for sale are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income. Where an AFS financial asset is disposed of or determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income is reclassified to profit or loss.
Dividends and interest earned on AFS financial assets are included in the investment income line item in the statement of comprehensive income.
Impairment of financial assets
Financial assets carried at amortised cost and fair value through profit or loss are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
1.7
Financial liabilities
The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 13 -
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as measured at fair value through profit or loss when the financial liability is held for trading. A financial liability is classified as held for trading if:
it has been incurred principally for the purpose of repurchasing it in the near term, or
on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or
it is a derivative that is not designated and effective hedging instrument.
Financial liabilities at fair value through profit or loss are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss.
Other financial liabilities
Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
1.8
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.9
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 14 -
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.10
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
2
Critical accounting estimates and judgements
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, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.
Fair value of investment property
Principal assumptions
The expected yield and income on the investment property asset.
Possible effects
Gain or loss from a change in the fair value of investment property.
Determination of fair value
Investment property is presented at fair value as determined in the valuations performed by independent external appraisers who possess relevant professional qualifications and extensive expertise in the field. The independent valuation is carried out using the comparative and investment methods. In undertaking the valuation of the property, the assessment is undertaken on the basis of a collation and analysis of appropriate comparable investment and rental transactions, together with evidence of demand within the vicinity of the subject property. With the benefit of such transactions the independent values then apply these to the property, taking into account size, location, terms, covenant and other material factors. The valuation is then internally reviewed by the groups property consultant.
The fair value of investment property as at the balance sheet date is £60,300,000 (2022: £70,513,185).
3
Revenue
2023
2022
£
£
Revenue analysed by class of business
Rental income receivable
3,737,213
3,737,213
Service charges receivable
1,066,683
975,212
4,803,896
4,712,425
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Fees payable to the company's auditor for the audit of the company's financial statements
6,500
6,500
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 16 -
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Total
6
Investment income
2023
2022
£
£
Interest income
Financial instruments measured at amortised cost:
Bank deposits
2,177
225
Income above relates to assets held at amortised cost, unless stated otherwise.
7
Finance costs
2023
2022
£
£
Interest on bank overdrafts and loans
2,874,719
1,464,698
Bank charges
870
1,008
Other interest payable
1,978,579
1,098,171
Total interest expense
4,854,168
2,563,877
Included within bank loan interest and non-bank loan interest are loan arrangement fees totalling £61,365 (2022: £61,365) and £21,900 (2022: £21,900) respectively.
8
Other gains and losses
2023
2022
£
£
Changes in the fair value of investment properties and rent free periods
(10,761,376)
(5,661,375)
9
Income tax expense
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
95,694
Adjustments in respect of prior periods
(81,491)
Other tax reliefs
363,370
318,227
Total UK current tax
459,064
236,736
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
9
Income tax expense
2023
2022
£
£
(Continued)
- 17 -
Deferred tax
Origination and reversal of temporary differences
(139,053)
27,752
Total tax charge
320,011
264,488
The charge for the year can be reconciled to the loss per the income statement as follows:
2023
2022
£
£
Loss before taxation
(12,129,296)
(4,604,973)
Expected tax credit based on a corporation tax rate of 23.50% (2022: 19.00%)
(2,850,385)
(874,945)
Fair value adjustments
2,490,189
1,075,661
Deferred tax movement
(139,052)
27,752
Corporate interest restriction
819,259
36,020
Taxation charge for the year
320,011
264,488
The main rate of corporation tax increased to 25% from 19% with effect from 1 April 2023.
In computing the corporation tax provision for the financial year an estimation of the corporate interest restriction to be applied to the company has been made based on the initial draft results of the group of companies to which the entity is part of. A prudent approach of using the fixed rate ratio method of 30% (2022: 30%), the highest the ratio could be, has been applied in order to ensure that the potential for under provision of estimated tax charges are minimised, which are finalised after all group companies financial statements are authorised for issue.
10
Investment property
2023
2022
£
£
Fair value
At 1 January 2023
77,095,596
76,310,069
Fair value adjustment
(16,795,596)
(5,796,884)
At 31 December 2023
60,300,000
77,095,596
Investment property comprises a commercial building in central London. The fair value of the investment property has been arrived at on the basis of a valuation carried out at the balance sheet date by CRBE Limited property advisors and chartered surveyors, who are not connected with the company. together with unamortised advanced top-up rent of £nil (2022: £513,185) that would transfer with the property at value.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
10
Investment property
(Continued)
- 18 -
Rental income of £4,789,618 (2022: £4,712,425) and direct operating expenses of £1,305,546 (2022: £1,106.649) are recognised in the profit and loss account arising in respect of investment property that generated rental income in the year under review.
11
Credit risk
Trade receivables
Investment property is charaterised by tenants in various sectors. The company customarily enters into medium-term rent agreements with its customers for periods of several years. Rental and service charge income is collected in advance for periods of 1-3 months, all in accordance with the rental agreements between the parties.
The collaterals that are mostly received by the company from tenants are cash rent deposits and/or guarantees.
The company is exposed due to having only two tenants and therefore ensures trade receivables are reviewed regularly and any credit default highlighted to senior management immediately, particularly if this amounts to more than the value of the rent deposit held. It has further mitigated some of this risk by obtaining a guarantee from its higher rent value tenant to cover a maximum of 5 years rent should the tenant default.
The director considers that the carrying amount of trade and other receivables is approximately equal to their fair value.
Maximum credit risk
2023
2022
£
£
Cash and cash equivalents
3,543,115
1,598,157
Trade receivables
224,307
124,748
Other receivables
100
100
Prepayments
64,253
143,472
12
Trade and other receivables
Current
Non-current
2023
2022
2023
2022
£
£
£
£
Trade receivables
192,410
124,748
-
-
Other receivables
100
100
-
-
Prepayments
116,150
143,472
6,389
67,754
308,660
268,320
6,389
67,754
Non-current prepayments relate to a bank loan arrangement fee. It has not been discounted and is being amortised evenly over the life of the loan.
The director considers that the carrying amount of trade and other receivables is approximately equal to their fair value.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
13
Borrowings
Current
Non-current
2023
2022
2023
2022
£
£
£
£
Borrowings held at amortised cost:
Bank loans
-
-
44,638,750
44,638,750
Loans from related parties
1,076,436
-
32,344,957
29,137,274
1,076,436
76,983,707
73,776,024
2023
2022
£
£
Secured borrowings included above:
Bank loans
44,638,750
44,638,750
Security
Bank borrowings are secured by fixed and floating charges over the assets of the company including a debenture. legal mortgage over the property and charges over rental income and accounts.
The bank loan (measured at amortised cost) is a 5 year interest only loan which is ordinarily due for repayment 6 February 2025, however it has been agreed in principle to extend this repayment date by a year to 6 February 2026 and the legal formalities are being finalised as at the date of approval of the financial statements. Interest is charged at SONIA Term Rate plus 1.65% per annum.
Loans from related parties (measured at amortised cost) have no set repayment date, are interest bearing and unsecured. Interest rates are variable and loans are currently attracting an average for the year of approximately 7.7% (2022: 3.9%) per annum which is accrued. The directors have received assurances from the related parties that they will not be seeking any repayments within 12 months of the balance sheet date and only then if cash flows permit.
Breaches
Bank loans with a carrying value of £44,638,750 as at the balance sheet did not meet bank covenants in the period under review. These historic covenants breaches were waived by the bank and cured via a part loan repayments of £5,443,750 and the opening of a cure deposit account in the sum of £896,750 after date. As the bank had not demanded any repayment of the bank loan as at 31 December 2023, and the company exercised its cure rights, the bank loan has remained in long term liabilities based on it normal repayment date.
14
Fair value of financial liabilities
The directors consider that the carrying amounts of financial liabilities carried at amortised cost in the financial statements approximate to their fair values.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
15
Liquidity risk
The following table details the remaining contractual maturity for the company's financial liabilities with agreed repayment periods. The contractual maturity is based on the earliest date on which the company may be required to pay.
1 – 5 years
£
At 31 December 2022
Bank loans
44,638,750
Loans from related parties
28,424,208
73,062,958
At 31 December 2023
Bank loans
44,638,750
Loans from related parties
32,344,958
76,983,708
Liquidity risk management
As at the balance sheet date the company had net current assets of £467,274 (2022: £426,559 net current liabilities) and a small positive cash inflow from operating activities of £32 (2022: £1,303,487).
The directors and the ultimate parent company's board of directors have both determined that the above is not indicative of any potential operating liquidity problem in the company, taking into account projected positive cash flows from operating activities in the next twelve months, continued financial support from group companies and the advance stage of agreeing an extension to the bank loan repayment date.
16
Market risk
Market risk management
Interest rate risk
The carrying amounts of financial liabilities which expose the company to cash flow interest rate risk are as follows:
2023
2022
£
£
Bank loans
44,638,750
44,638,750
Loans from related parties
27,793,648
25,850,898
72,432,398
70,489,648
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
16
Market risk
(Continued)
- 21 -
Variable interest rate risk sensitivity analysis
The company takes steps to ensure minimal exposure to cash flow interest rate risk however changes in interest rates will have an impact on profit.
The effect of a 2% (2022: 5%) increase/decrease in the base rate of interest at the reporting date, on the variable rate debt carried at that date would with all other variables being held constant, would have resulted in a decrease/increase of the company's pre-tax profit for the year of £1,448,648 (2022: £3,524,482). The sensitivity analysis has been based on current base rate interest rate predictions, that over the next 5 years are predicted to fall and stay between 3%-4% (2022: increases were forecast), the interest rate as at the balance sheet date was 5.25% (2022: 3.5%).
17
Trade and other payables
2023
2022
£
£
Trade payables
471,274
477,358
Accruals
1,491,865
1,593,397
Social security and other taxation
249,232
222,321
2,212,371
2,293,076
18
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
Rent free period
£
Asset at 1 January 2022
(248,174)
Deferred tax movements in prior year
Charge/(credit) to profit or loss
27,752
Asset at 1 January 2023
(220,422)
Deferred tax movements in current year
Charge/(credit) to profit or loss
(139,053)
Asset at 31 December 2023
(359,475)
Deferred tax assets and liabilities are offset in the financial statements only where the company has a legally enforceable right to do so.
Deferred tax is computed at a rate of 25%.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Authorised
Ordinary shares of £1 each
100
100
100
100
Issued and fully paid
Ordinary shares of £1 each
100
100
100
100
The company has one class of ordinary shares which carry full voting, dividend and capital distribution rights including on winding up and do not confer any rights of redemption.
20
Capital risk management
The company is not subject to any externally imposed capital requirements.
21
Related party transactions
During the year the company entered into the following transactions with related parties:
Interest and loan charges
Management Fees
2023
2022
2023
2022
£
£
£
£
Ultimate parent company
334,525
188,811
-
-
Immediate parent company
1,643,475
909,360
201,454
83,171
1,978,000
1,098,171
201,454
83,171
The following amounts were outstanding at the reporting end date:
2023
2022
Amounts due to related parties
£
£
Ultimate parent company
5,288,654
4,567,288
Immediate parent company
27,056,304
23,856,920
Associates
1,076,436
713,067
33,421,394
29,137,275
Other information
As at the balance sheet date the ultimate parent company has provided a guarantee for the company's external bank loan which is capped at £10,950,000.
EPWORTH BUILDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
22
Controlling party
The ultimate parent company is Alrov Properties and Lodgings Limited, a company incorporated in Israel, which is the largest group that the company is consolidated into.
The immediate parent company is P.I.H. Property Investment Holdings B.V., a company incorporated in the Netherlands, which is the smallest group that the company is consolidated into.
Consolidated accounts are produced by Alrov Properties and Lodgings Limited, and copies are available to the public by downloading from their website at alrov.co.il or at its registered address at; The Alrov Tower, 46 Rothschild Blvd, 66883 Tel-Aviv, Israel.
23
Cash generated from operations
2023
2022
£
£
Loss for the year before income tax
(12,129,296)
(4,604,973)
Adjustments for:
Finance costs
4,854,168
2,563,877
Investment income
(2,177)
(225)
Non-operating income treated as investing activity
(548,191)
135,509
Fair value loss on investment properties
10,761,376
5,661,375
Movements in working capital:
Decrease in trade and other receivables
21,025
3,651
Decrease in trade and other payables
(80,705)
(807,936)
Cash generated from operations
2,876,200
2,951,278
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