Introduction
The directors present their Annual Report, consisting of the Group Strategic Report and Directors’ Report, and the Consolidated Financial Statements of Artfarm Group Limited ("the company") for the year ended 31 December 2023. References to “group” or "Artfarm" refer to the consolidated group, being the company and its subsidiary undertakings, a list of which can be found in Note 14 to these financial statements.
2023 was a successful year in the evolution of Artfarm, with remarkable pace of change and growth in sales year-on-year and the opening of two new outlets: Fish Shop, a restaurant and fishmonger in Ballater, Scotland and Farm Shop in Mayfair, London. 2023 was also a year of foundational work in preparation for further growth and openings in 2024, 2025 and beyond. Artfarm’s current profitability is limited by the significant growth centred around our ambition to redefine what culturally-led development can achieve. By its nature, driven by ambitious expansion plans, Artfarm is currently resource and capital-intensive, both of which act as a significant brake on profitability.
The Artfarm model is to find unique sites and locations with a history or story to tell. Artfarm then invites both leading Hauser & Wirth artists and local craftspeople and artisans to interpret those stories with commissions and site-specific installations. Artfarm believes that art has a unique power to inspire, and through this passion for art, coupled with a commitment to community, education and learning, people and place, its ground-breaking hospitality offer can be defined.
In April 2023 the Group opened Fish Shop in Scotland. Located in the heart of Ballater, Fish Shop restaurant and its adjoining fishmonger celebrate the heritage and traditions of fishing in Scotland, serving ethically sourced fish, as well as creel-caught and hand-dived crustacea. This modern and relaxed restaurant has a menu focused on shellfish and day boat fish, with the addition of select game, meat and vegetables from surrounding farms and estates. The fishmonger is open to the public and supplies fresh seafood to other notable venues, including our hotel in Braemar, the Fife Arms. The venue has received many favourable critic and press reviews, including being listed as one of The Michelin Inspectors’ Favourite New Restaurants and Condé Nast Traveller’s UK Best New Restaurant Awards.
In December 2023, the Group opened Farm Shop in London. Bringing fresh and seasonal products to the heart of Mayfair, Farm Shop features the same award-winning products as our Somerset Farm Shop at Durslade Farm in Bruton, with meat and many ingredients coming from our estate. A hyper-seasonal wild food range can be found alongside a wide selection of cheese, wine and condiments, rubs and sauces made in our kitchen. From January 2024, customers can head downstairs for a taste of Farm Shop in our new wine bar, where they can enjoy cheese, charcuterie and daily specials made in our kitchen, with a glass, carafe or bottle of classic or exploratory wine from around the world.
The Audley in London has established itself as an enormous hospitality success. It is a mix of pub, restaurant, and private event spaces located in Mayfair. The Audley is a beautifully restored building with contemporary art and sculpture on floors, walls, and ceilings. The venue has received many favourable critic and press reviews - Mount St. Restaurant was recognised by LUX Life Magazine, which awarded the restaurant “Best Contemporary Dining Restaurant – 2023”. After only one year of opening, the Audley Public House won “Best Pub” in the National Pub and Bar Awards for Greater London. The venue opened in late 2022 so 2023 represents the first full year of trading.
The Fife Arms continues to enjoy success, achieving occupancy of 73% (up from 2022’s 70%) and delivering sales up 16% year on year and positive EBITDA of £2m. The hotel continues to deliver high guest satisfaction and significant press and PR coverage including being in the Top 50 Boutique Hotels List and The Times’ ‘Best Places to Stay 2024’ list. The Sunday Times’ annual feature ‘The UK’s 100 Best Hotels’ named the hotel as one of the best countryside hotels in the UK. The Clunie Dining Room has been recognised for its wine programme with a ‘Best of Award of Excellence’ in this year’s Wine Spectator Restaurant Awards.
Manuela restaurant in Los Angeles has gone from strength to strength, growing sales by 15% year on year. Two further restaurants in the US are currently under development. A second Manuela is due to open in New York in Autumn 2024 and our second Fish Shop restaurant will open in Washington DC in early 2025. This, together with the group’s other construction projects builds on the existing portfolio.
The Groucho Club was acquired towards the end of 2022. The famed Soho private members' club has acted as a hub for the creative community in London for the past 4 decades. The club is a natural fit for Artfarm and shares a common long-term vision for growth. 2023 was a period of change for the club as we embarked on an ambitious upgrade path, starting with all key technology systems and the Main Bar refurbishment. Further exciting upgrades are planned over the coming years.
In Somerset, Roth Bar and Grill closed at the end of 2023 for major refurbishment works. Roth Bar re-opened in May 2024 and a stunning new Italian-inspired restaurant, Da Costa, will open in Autumn 2024.
Given these developments - both current and future - and building on the existing portfolio, Artfarm believes it is uniquely placed to take advantage of what its customers clearly tell us is a truly inspiring proposition.
Results
Overall, Artfarm Group sales increased by 48% to £42.3m. Strong underlying growth at The Fife Arms and Manuela LA, together with a full year’s sales in 2023 at The Audley and Groucho Club and new openings in 2023 at Fish Shop and Farm Shop, drove the increase. EBITDA (excluding items of a one-off nature) for the Group amounted to -£2.5m (2022 -£1.1m). The EBITDA for the year is considered by the directors to be satisfactory given that the group is currently in its development phase.
Foreign exchange risk
The group is exposed to movement in foreign exchange rates as a result of transactions within the group, with its parent undertaking, and with suppliers. The company manages these risks by maintaining foreign currency bank accounts.
Credit risk
The directors do not consider the group to have significant credit risk. The group has implemented policies and arrangements with its clients to minimise the potential credit risk.
Liquidity risk
The group manages the liquidity position with the objective of maintaining the ability to fund commitments and repay liabilities in accordance with suppliers' payment terms. The group relies on the continuing support of the company’s parent undertaking.
Interest rate risk
The group's operating activities are currently funded through equity investments from the parent company and third-party loan financing. Accordingly, while the group is exposed to interest rate risk, this is mitigated by the short-term nature of the third-party loan financing and the parent company financing, which is equity in nature.
Cost of living
Interest rates, inflationary pressures and cost-of-living increases impacted the Group in 2023 and will continue to do so in 2024. Energy prices and wage inflation across the estate have significantly impacted costs in 2023/24. The board anticipates that inflationary pressures and interest rates should ease in 2024 and that the group will benefit from a mild economic recovery.
In acknowledgement that the group is in its growth phase, the directors consider the financial KPIs of the group are as follows:
| 2023 | 2022 |
|
|
|
Turnover EBITDA | 42.3m £(2.5)m | £28.6m |
Gross assets | £122.1m | £107.9m |
Net Assets | £72.2m | £62.0m |
Staff numbers | 655 | 417 |
Occupancy rates | 73% | 70% |
EBITDA is stated excluding items of a one-off nature.
Post balance sheet events
On 17 May 2024, the group entered into a refinancing agreement for two loans outstanding at 31 December 2023. As part of the arrangement, two loans totalling £7,340,000 were repaid and a new facility totalling £7,340,000 agreed with the lender. The loan is repayable in May 2027 and has a variable commercial rate of interest.
Artfarm Group’s core values are Art, Community and Sustainability. The group's long-term strategy is to develop sustainable and creative developments that weave together art, community, learning, people and place.
This is achieved by:
• Adapting and reinventing unique sites that come with great stories.
• Weaving together exceptional design with local history, landscape and community engagement.
• Inviting artists to celebrate the stories of the place with site specific commissions.
• Curating programmes that animate our destinations and inspire learning
The directors and their executive team monitor these on an ongoing basis to identify potential threats and implement strategic changes where necessary.
Artfarm is committed to providing a high level of service to guests, customers and neighbours. Regular feedback is requested and discussions take place to ensure expectations are not only met but exceeded. The following paragraphs summarise how the directors fulfil these duties:
Art
Art is at the heart of everything we do. We believe in its power to inspire and transform both individuals and communities. Not only does art inform the design of all our properties, but it also drives our community programmes. Each Artfarm property hosts a dynamic learning programme with a strong focus on art and craftsmanship. These range from Q&As and masterclasses to projects with local primary schools and community groups. The Fife Arms also supports an artist residency programme in Braemar whereby artists are invited to stay in the village and are provided with a studio, materials and accommodation over a period of time.
Community
Our commitment to community is unique in its depth and reach. Working in both rural and urban communities, the company hosts and engages with diverse audiences in sites which range from a Victorian coaching inn in the Scottish Highlands to a former flour mill in Downtown LA.
Alongside the creative learning programmes which are open to both guests and locals within a community, each of our sites are also at the forefront of specific local initiatives and events. In the past year this has included the construction of a public tennis court in Braemar, the curation and staging of the Braemar Literary Festival attended by her Majesty Queen Camilla, support of Street Smart – a charity raising funds for the homeless in London at Christmas and participation in the national farming celebration - Open Farm Sunday, showcasing the working farm at Durslade in Somerset.
Sustainability
We believe in economic, environmental and social sustainability. Our sites are constructed to protect the environment, invest in people and infrastructure, and support communities by sharing ways to connect both their heritage and future through art and community conservation. Communities are engaged in curated events such The Braemar Literary Festival and the Festival of Fashion which features scheduled activities by local groups, whilst the Fife Arms also champions local suppliers and services to our guests such as fishing in the nearby lochs. We support annual community events including the Highland Games and Braemar Mountain Festival in Scotland and the Mount St Garden Party in London and engage throughout the year with both children and parents at local schools whilst assisting with their fundraising initiatives.
We also recognise our responsibility to carry out all procurement activities in an environmentally and socially responsible manner, from encouraging healthy and sustainable food production and consumption by championing local suppliers who adhere to and share our values, to selecting suppliers and contractors who can illustrate their own commitment to minimising the negative environmental and social effects associated with the products and services they provide. At our farm at Durslade in Somerset, we breed grass-fed, outdoor-reared cows and sheep, which we then butcher and sell in our Farm Shops in Somerset and now Mayfair, as well as supplying our restaurants. Carcass balance is managed both through the menu at our restaurants and our ‘For Later’ frozen meals, while the Farm Shops also carry their own label products using ingredients from our Walled Garden at Roundhill, honey from our hives, tallow from our cows to make soap and kitchen waste in our Gin. We make white, rose and sparkling rose wine from our grapes grown at Durslade Vineyard and grow vegetables and breed chickens in the garden at Manuela, Los Angeles. Excess decorative pumpkins from our October Festival at Roth were turned into chutney.
Our People
Our People Team values are nurturing well-being, inspiring creativity and growth, and valuing individuals. We regard ourselves as an employer of choice and feel we have positively impacted the hospitality market.
We continue to support living standards across our estate and particularly in Scotland where we invest in property to support the local economy and provide considerable employment opportunities in rural areas.
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 12.
No ordinary dividends were paid. The directors do not recommend payment of a dividend.
No preference dividends were paid. The directors do not recommend payment of a dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
On 17 May 2024, the group entered into a refinancing agreement for two loans outstanding at 31 December 2023. As part of the arrangement, two loans totalling £7,340,000 were repaid and a new facility totalling £7,340,000 agreed with the lender. The loan is repayable in May 2027 and has a variable commercial rate of interest.
HW Fisher LLP were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2020 UK Government’s Conversion Factors for Company Reporting.
The group collaborated with The Consultus International Group who assisted us in collating the data for our emissions across various sites. The data collection process was a combination of raw data collated by the group and The Consultus International Group, where required this data has been extrapolated by The Consultus International Group. This data formed the basis of our SECR report for year end 31 December 2023.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £m Sales Revenue, the recommended ratio for the sector.
A large amount of properties in the Artfarm portfolio are listed buildings and have since been worked on and developed into energy efficient properties. Artfarm have signed up to the Net Zero Pathway with Consultus in 2023 and are currently progressing through the workshops.
The Groucho Club is an older building and is still working on becoming more energy efficient. For example, the lights have been changed to LED light bulbs.
The directors seek to promote strong mutually beneficial relationships with suppliers, customers and other stakeholders. Artfarm is committed to providing a high level of service to guests, customers and neighbours. Regular feedback is requested and discussions take place to ensure expectations are not only met but exceeded.
The group has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the groups's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of the information on and exposure to financial risk and future developments.
We have audited the financial statements of Artfarm Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 group's and parent 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
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
As part of our planning process:
We enquired of management the systems and controls the group and company has in place, the areas of the financial statements that are most susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud.
The group and company did not inform us of any known, suspected or alleged fraud.
We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: FRS 102, Companies Act 2006, health and safety laws, employment law, food standards and alcohol licensing.
We considered the incentives and opportunities that exist in the company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.
Using our knowledge of the group and company, together with the discussions held with the group and company at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.
Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.
Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, in particular in relation to depreciation policies applied to tangible fixed assets, valuation of fixed asset investments and valuation of goodwill.
Assessing the extent of compliance, or lack of, with the relevant laws and regulations.
Testing key revenue lines, in particular cut-off, for evidence of management bias.
Performing a physical verification of key assets.
Obtaining third-party confirmation of material bank, loan and stock balances.
Documenting and verifying all significant related party balances and transactions.
Reviewing documentation such as the company board minutes for discussions of irregularities including fraud.
Testing all material consolidation adjustments.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements even though we have properly planned and performed our audit in accordance with auditing standards. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors of the group and entity.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £
Artfarm Group Limited (“the company”) is a private limited company incorporated in England and Wales. The registered office is Stockwell House, 13 High Street, Bruton, Somerset, BA10 0AB.
The group consists of Artfarm Group Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
Exemptions for qualifying entities under FRS 102
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
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’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Artfarm Group Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates. Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes. All financial statements are made up to 31 December 2023.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
The group and company has the financial support of the ultimate parent company for a period of at least twelve months from the date of the approval of these financial statements. Accordingly, the directors have a reasonable expectation that the company has adequate resources to continue in operation for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is derived from hospitality, retail and related services.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Freehold land and buildings are not depreciated on the basis that the residual value is considered equal to the carrying value of the assets.
Included within fixtures and fittings are works of art, which are considered to be long life assets with a residual value which is aligned with the carrying value of the asset. As such, they are not depreciated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at cost less impairment.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and amounts owed to fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Exchange differences arising on the translation of the opening net assets of subsidiaries are also reported in the Statement of Comprehensive Income.
All other exchange differences are dealt with in the Statement of Comprehensive Income.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The group, due to the nature of operations, invests heavily in freehold land and buildings, property improvements and other fixtures and fittings at operational locations. This includes investments in works of art. As a result of this, is is necessary to make estimations of the useful lives of the capitalised assets. The estimation of the useful life of the asset is made based on historic trends and judgements relating to the timing of purchase of replacements and refurbishments and the expected residual value of assets. This is reviewed internally on a regular basis.
Freehold land and buildings, and works of art, are considered to be long life assets with a residual value which is aligned with the carrying value of the asset. They are therefore not depreciated.
Investments are held at the transaction price less impairment. The assessment of impairment requires judgements to be made, which include the assessment of the future performance of investments outside the control of the group. As at 31 December 2023, no impairments against investments had been recognised.
The group acquired 100% of the shareholding of Oval 2287 Limited and its subsidiaries in August 2022 from a third party. On acquisition the group recognised £12,006,682 of goodwill.
Based on the performance of the group acquired, the directors have not recognised any impairments on the goodwill balance.
All turnover is derived from hospitality, retail and related services.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 0 (2022 - 0).
The actual charge/(credit) for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
The prior year financial statements included a brand valued at £11,866,000. The brand should have been included in goodwill, the prior year financials have therefore been restated.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
In the financial statements for the year ended 31 December 2022 merchant receipts of £901,451 were recognised as part of other debtors. This balance has been recognised in trade debtors in the financial statements for the year ended 31 December 2023.
Other debtors includes loans due from Brood Hospitality Ltd totalling £534,406 (2022: £620,000). Interest accrues on the loan at a rate of 3.80% per annum and is repayable in instalments, and is secured over property owned by the borrower by way of first legal mortgage.
In the financial statements for the year ended 31 December 2022, a non current loan balance of £510,785 was recognised as part of other debtors falling due within one year. This balance has been recognised in current debtors falling due in more than one year in the financial statements for the year ended 31 December 2023.
In the financial statements for the year ended 31 December 2022, payroll accruals of £135,621, deposits from customers of £43,976 and payments taken in advance from customers of £904,693 were recognised in other creditors. These balances have been recognised as part of accruals and deferred income for the year ended 31 December 2023.
Bank loans are secured by a fixed and floating charge over certain property and undertakings of the group. Bank loans, included above, are also secured by a first legal charge over a freehold property held by the group, and include a negative pledge.
Bank Loans are on commercial terms with a combination of fixed and variable interest rates with margins of between 1.9% and 3.5% per annum above the bank’s variable base rate.
On 30 March 2023, the group entered into a refinancing agreement with C. Hoare & Co. for a £10,000,000 loan. The previous loan, also for £10,000,000 was repaid on 3 April 2023.
On the 27th June 2023, the group entered into a financing agreement with Santander for £10,000,000. A previous loan of £10,000,000 with another lender was repaid on the same day.
One of the bank loans is due to be repaid by instalments beginning on (and including) 30 June 2025. The termination date of this loan is 27 June 2026. Other bank loans are repayable between March 2024 and and April 2026.
A cross guarantee is in place between The Groucho Club Limited, The Groucho Club London Limited, Redpalm Limited, Kapital Ventures limited, Kapital Kars Limited and Oval (2288) Limited.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period. The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
During the year, 22,039,978 (2022: 44,495,000) preference shares were issued at par. Preference shares do not attract any coupon and are repayable at the sole discretion of the company. On liquidation or dissolution, Preference share holders are entitled to the return of their capital in preference to that of Ordinary shareholders. Preference shares do not confer on the holder the right to attend, speak or vote at general meeting of the company. In all other respects the shares rank equally.
As at 31 December 2023, personal guarantees were provided by directors for loans in the group totalling £20,940,000 (2022: £20,940,000). In addition to this, guarantees were provided by parent undertakings for loans in the company totalling £6,900,000 (2022: £6,900,000).
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts contracted for but not provided in the financial statements:
On 17 May 2024, the group entered into a refinancing agreement for two loans outstanding at 31 December 2023. As part of the arrangement, two loans totalling £7,340,000 were repaid and a new facility totalling £7,340,000 agreed with the lender. The loan is repayable in May 2027 and has a variable commercial rate of interest.
The above transactions relate to non-wholly owned group companies.
During 2023, loans and interest payable to the ultimate parent entity of £22,039,978 (2022 - £44,495,006) were converted into £1 preference shares at par.
During the year, the group owed £50,000 (2022 - was owed £450,218) to TG Acqusitions Limited, a company over which Elidalbo AG has significant influence. This balance is interest free and repayable on demand.
The group has taken advantage of the exemption provided by Section 33.1A of FRS102 as regards the disclosure of transactions between wholly owned group companies.
In the prior year, Artfarm Group Limited acquired 100% of the shares in Oval 2287 Limited and its subsidiaries. Following the transaction a number of intercompany debt write offs were effected. However, a 100% owned subsidiary was omitted from the consolidated financial statements. This resulted in a credit to Profit and Loss being recognised, with no equivalent debit, resulting in losses of £938,393 being excluded from the consolidated statement of profit and loss. The omission also resulted in goodwill being overstated by £938,393.
As noted in note 10, the prior year financial statements included a brand valued at £11,866,000. The brand did not meet the recognition criteria of an intangible asset and therefore the amount should have been included within goodwill. The impact of this adjustment has had no impact on the consolidated statement of comprehensive income.
In the prior year, staff costs of £2,142,453 relating to staff working on site were recognised in administrative expenses. The directors have chosen to reclassify these amounts to Cost of Sales in order to better reflect the nature of the expense.