Introduction
The directors present their strategic report on Economic Enterprises (Developments) Limited (“the company”) for the year ended 31 December 2023.
The business activity of the company during the year continued to be that of an investment company.
Business Review
The company continues to hold investments in Sharon Hotels Limited and M.N.S.R Hotels Limited, both of which operate hotels in Israel.
The first three quarters of 2023 saw a pickup in demand in the hotel and leisure sector in Israel compared to 2022. Unfortunately, due to the tragic events of 7 October 2023 and subsequent Israel- Gaza conflict quarter four performance was significantly below that achieved in 2022 for those businesses in which the company invests.
The refurbishment program planed for the hotel operated by Sharon Hotels Limited has been delayed as a result of the Israeli- Gaza conflict, and continues to trade as provider of short-term holiday apartment rentals during the year.
During the year the company received an amount of £787,998 (2022: £1,234,283) from M.N.S.R Hotels Limited in relation to the outstanding loan balances.
A review was carried out of the investments to consider if there was any indication of impairment, and it was concluded that in 2023 there was a reversal of £767,141 (2022: reversal of provision £1,173,506).
Principal risks and uncertainties
The company’s principal financial risk is the recoverability of its investments in its subsidiary and joint venture undertakings, including the related long-term intercompany loans. A further escalation in the Israel-Gaza conflict to other areas of Israel or the Middle East could also impact the recoverability of these investments. The directors regularly review the carrying value of the company’s investments and provisions are made where considered necessary.
Strategic Report - S172(1) Statement
The CP Holdings Group (the “group”) consisting of CP Holdings Limited, and its key operating subsidiaries including Economic Enterprises (Developments) Limited recognises the importance of delivering effective corporate governance in supporting the long-term success and sustainability of its business and operates under high standards of corporate governance.
The directors are collectively responsible for ensuring that they operate in a manner that best promotes the interests of the group with consideration to its wider group of stakeholders. Underlying this responsibility is an appropriate Corporate Governance framework. The group has decided not to follow a specific code and continues to develop and implement its own corporate governance framework (the “framework”). This framework will ensure that robust corporate governance procedures are in place to regulate the behaviour and activities of the boards and supports the application of Section 172 throughout the group.
Issues, Factors and Stakeholders
When making decisions, the directors of the company consult, where appropriate, with their finance, tax and legal teams, other third parties and stakeholders.
The directors are responsible for the corporate governance framework, including the likely long term consequences and the general conduct of the company’s affairs. The directors are continually reviewing their internal processes to strengthen the governance and compliance controls of the company enabling the sustainable growth of the business.
Strategy – Opportunities and risk
The company operates a framework which defines how risks and opportunities are reviewed and decisions are made. This framework adapts as risks and opportunities evolve. A periodic review is undertaken of the risks of the investments held by the company by its senior management, this is communicated with the company’s shareholder.
The directors have pursued a Strategy aimed at maximising the return on investments and ensuring the long term viability of the business of the investments in a period of instability and uncertainty, labour shortages, and rising interest rates.
The principal risks associated with Economic Enterprises (Developments) are detailed in the Strategic Report above. The board consider principal risks to be those that could cause the greatest damage if not effectively evaluated, understood and managed.
Information
Economic Enterprises (Developments) is a subsidiary of a diverse holding company. Economic Enterprises (Developments) is an investment holding company details of its performance can be found above in the Strategic Report.
The directors currently review financial and operational information when making their decisions. The governance process is constantly under review, processes are assessed for appropriateness and amended if deemed applicable.
Governance Policies and Process
Group-wide governance policies and processes are designed to complement and promote the group strategy. Policies are reviewed on an annual basis and updated as appropriate by the group board, all company directors are informed of any amendments. This is an iterative process, allowing for the policies to be adapted as the business grows and changes.
Principal Decisions
Generally, the principal decisions that the directors would consider are dividends, divestment or acquisition activity, significant capital investments, impairment of investments, capital gains and board composition. A principal decision tends to be one that is material to the company and those that are significant to any of the key stakeholder groups.
Following the terrorist events on 7th October 2023, in conjunction with the Ministry of Tourism a decision was made to offer out vacant rooms at the Israeli Hotels, to employees and their families that needed to relocate as a result of the war.
On the 20th April 2023, Yuval Nativ was appointed to the Board of Directors for The Sharon Hotel. The appointment to the board was to provide additional project management experience.
Engagement of Stakeholders
The company is proud to be part of a private, family-owned group, which is fully committed to maintaining its values and its relationships with its investments and shareholders. The company works with its stakeholders in an honest, respectful and responsible way and seeks to work with others who share the company’s commitments to safety, ethics and compliance.
The directors consider that the table below lays out the relationships with the key stakeholders :-
Who ? Stakeholder group | Why? Why is it important to engage | How ? How management and/or directors engaged | What ? What were the key topics of engagement | Outcomes and actions What was the impact of the engagement including any actions taken |
Regulators | Compliance with regulatory requirements is essential for the long term benefit of the group | Being open and transparent in any dealings with regulators Generation of carbon risk registers and energy usage collation by local company representatives
| Compliance record and impact on local community
Carbon reporting and energy utilisation | Improvements to processes and procedures
Appointment of designated individuals in the operating companies and training of these appointed individuals |
Shareholders | Engagement is essential for the owners to understand the state of the business and to ratify principal decisions | Provision of information for CP monthly board meetings | Monthly Accounts, budget, cashflows and risk registers | Monthly rolling cashflows and quarterly review of budgets |
Joint Venture Partners | Engagement is essential so everyone understands the long term plans for the property | Regular communication by senior management | Business matters, financial and property matters including proposed capex | Assessment of the impact on the stakeholders and continuous engagement
|
Investments | To understand how the investments are performing and the key decisions that they are making | Discussions with the boards of directors of the investments | Trading conditions and funding | Assessment of working capital requirements and capital expenditure |
The directors engage with its stakeholders on material issues relating to their business, taking into consideration current and future events, including its principal decisions. The engagement supports the directors to understand the impact of their decisions and identify any material issues. This aligns with the company’s purpose and strategy.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the sector in which the company operates;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and employment, environmental and health and safety legislation; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
reviewed the nominal ledger including testing journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC and relevant regulators.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
There are no items of comprehensive income for either the year or the prior year other than the profit for the year. Accordingly, no statement of other comprehensive income has been presented.
Economic Enterprises (Developments) Limited is a private company limited by shares incorporated in England and Wales. The registered office is CP House, Otterspool Way, Watford, Hertfordshire, WD25 8JJ.
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 preparation of financial statements in compliance with FRS102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the company's accounting policies (see note 2).
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 3 Financial Statement Presentation paragraph 3.17(d) (inclusion of statement of cash flows):
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
Economic Enterprises (Developments) Limited is a wholly owned subsidiary of CP Holdings Limited and the results of Economic Enterprises (Developments) Limited are included in the consolidated financial statements of CP Holdings Limited which are available from Companies House, Crown Way, Cardiff, CF14 3UZ.
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 for a similar debt instrument. Financial assets classified as receivable within one year are not amortised. Financing transactions are those in which payment is deferred beyond normal business terms or is financed at a rate of interest that is not a market rate.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and loans from 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 for a similar debt instrument. Financial liabilities classified as payable within one year are not amortised. Financing transactions are those in which payment is deferred beyond normal payment terms or is financed at a rate of interest that is not a market rate.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged, expires or cancelled.
Ordinary shares are classified as equity.
Interest income
Interest income is recognised in the profit and loss account using the effective interest method.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following is the critical judgement and estimation that the directors have made in the process of applying the company's accounting policies and that have the most significant affect on the amounts recognised in the financial statements.
The carrying amounts of the company's investment in subsidiaries and joint ventures, including related long term intercompany loans, are reviewed at each balance sheet date to determine whether there is any indication of impairment as required by FRS 102 Section 27 Impairment of Assets. if any such indication exists, the recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of the investment exceeds its recoverable amount. Refer to note 5 for further details.
The auditors renumeration is borne by the parent undertaking, CP Holdings Limited.
The company has no employees other than the directors, who were remunerated by the parent undertaking, CP Holdings Limited.
Factors that may affect future tax charges
From 1 April 2023 the corporation tax rate increased to 25%.
In 2023 Investments in Joint Venture and Loans to Joint Ventures have been disclosed separately. In calculating separate opening balances it was highlighted that the analysis was incorrectly reported in prior years.
Loans to joint ventures represent quasi equity investments in the company's joint venture undertaking and included amounts previously provided against, amounting to £5,507,602, which were reclassified to fixed asset investments during 2008 reflecting their long term nature. In 2023, following a review of the investments, it was concluded that an impairment loss of £767,141 should be reversed.
There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the repayment of capital.
Profit and loss account
The profit and loss account includes all current and prior period retained profits and losses.
The company has taken advantage of the exemption contained in FRS 102 section 33 "Related Party Disclosures" from disclosing transactions with entities which are a wholly owned part of the group.
During the year the company entered into the following transactions with related parties:
The parent undertaking of the smallest group of undertakings for which group financial statements are drawn up and of which the company is a member is CP Holdings Limited whose registered office is CP House, Otterspool Way, Watford, Hertfordshire, WD25 8JJ. Copies of these group financial statements are available to the public from Companies House , Crown Way, Cardiff, CF14 3UZ.
The immediate controlling party is CP Holding Limited.
The ultimate controlling parties are the Gibbor and Schreier families.