Introduction
The directors present the strategic report for The Stage Shoreditch Development Limited (the "Company") for the year ended 31 December 2023.
During the year the Company continued with the development of a residential and commercial site in Shoreditch and the directors believe that the Company will continue with the development for the foreseeable future.
The Company’s development site is located within a prime London metropolitan area and is well-placed to benefit from the positive long-term outlook for the city.
Turnover has decreased by 70% year on year. The turnover is comprised of recharges of development expenses to fellow members of The Stage Shoreditch LLP incurred during the year. Gross loss is £41,732,926 in the year (2022 loss- £15,662,013) as the development fee contract expired and was not renewed.
A part of the Company's strategy is to identify risks and uncertainties in the course of its day to day operations and assess those risks with a view to minimising or mitigating these where possible. The directors consider that the principal risks and uncertainties faced by the Company are in the following categories:
Market risk
The property development industry is susceptible to the macro-environment economic risks nationally and regionally. The primary market risk to the Company is the risk inflationary and interest rate increases adversely impacting the Company.
These risks are managed by fixed price contracts, focusing on appropriate pricing in negotiations, strict cost control and detailed monitoring of projects against expectations and budgets. This risk is also further mitigated as the development nears completion.
Energy prices
The energy price cap increase came into effect on 1 April 2022. The directors do not anticipate any material impact on development costs resulting from energy price cap as the Company has already agreed a fixed contract price on behalf of the fellow members of The Stage Shoreditch LLP ("Group").
Regulatory risk
As the Company is engaged in development management services, it is therefore subject to extensive and complex laws and regulations relating to the environment and health and safety. Non-compliance can result in delays thereby incurring additional costs, restrictions and/or delays on construction or damage to the Company’s reputation.
The Company actively engages with professionals to ensure that all regulatory and legal compliance criteria are met.
Liquidity risk
The liquidity risk faced by the Company is the inability to meet its financial obligations as it falls due. The Company mitigates the risk by continuously monitoring its monthly development expenses. The monthly development expenses are funded under loan funding arrangements held by The Stage Shoreditch LLP the Group.
Credit risk
The Company's debtors are mostly comprised of intra-group receivables due from fellow subsidiaries within the group, see note 7. At the reporting date, management performed an assessment to consider the risk of fellow subsidiaries defaulting on the repayment of the intra-group receivables. Following the assessment, a provision for bad debt was made.
Directors' statement of compliance with duty to promote the success of the Company
The directors consider, both individually and together, that they have acted in the way they consider in good faith would be most likely to promote the success of the Company for the benefit of its stakeholders (having regard to matters set out in Section 172 (1) (a) to (f) of the Companies Act 2006) in the decisions taken during the year ended 31 December 2023. Such considerations are set out below, having regard for, amongst other matters, the following:
- the need for the Company to foster strong business relationships with all stakeholders;
- the likely long term consequences of any decision making during the financial year;
- the need to communicate strategic decisions to stakeholders and explain the thought process and impact;
- the desirability of the Company maintaining a reputation for high standards of business conduct;
- the impact of the Company's operations on the community and the environment;
- the health, safety and wellbeing of suppliers and those on-site; and
- the need to act fairly and with integrity.
Whilst the Company does not have any employees (refer to note 5), and does not envision any significant impact to the community or environment due to its operations, no disclosures in relation to the same have been made below. The directors understand the importance of maintaining positive relations with all stakeholders.
Suppliers
As part of ensuring that the Company’s and its stakeholders’ commercial dealings are aligned, regular meetings and other forms of engagement are undertaken. This allows the Company to build on the relationships, discuss the appropriate strategic decisions and ensure milestones are met. This is important to ensure that the principal activity of the Company meets the Group's end customers' requirements whilst suppliers are treated ethically and fairly.
Customers
The Group's commercial tenants are the principal end customers. The Company continuously seeks to identify areas of the property which can be improved with the aim to provide an overall better area in which the tenants can operate. The Company through the operations of other intra-group entities also engage with tenants in order to identify areas which can be refined in order to provide a more engaging space to the local community which ultimately leads to increased commercial performance.
Shareholders
The Company seeks to generate a long term and stable return for its shareholders. The construction of the development site with the recent completion of some of the commercial properties in the development that have subsequently been leased demonstrates the Company's ultimate intention to serve its shareholders.
On behalf of the board
The directors present their report of The Stage Shoreditch Development Limited for the year ended 31 December 2023.
The loss for the period, after taxation, amounted to £42,040,929 (2022: £15,662,013). The directors do not recommend payment of a dividend (2022: £nil).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Details of any post reporting date events are set out in Note 14.
The directors consider that the Company will continue to develop the residential and commercial site in Shoreditch, London for the foreseeable future, until final completion is achieved.
Going concern
The financial statements have been prepared on a going concern basis, which assumes the Company will be able to meet its liabilities as and when they fall due from the date of approval of the financial statements through to 31 December 2025 (the ‘going concern period’). At 31 December 2023, the Company has net current liabilities of £51,236,680 (2022: £9,195,751) and net liabilities of £51,751,680 (2022: £9,710,751).
The directors have assessed the going concern period under assessment to be the period from the date of approval of the financial statements through to the end of the going concern period.
The directors have also received written confirmation from the ultimate parent of the Company, the LLP, that it does not intend to call upon the Company to repay any intra-group debts in relation to operational costs not covered above unless the Company has the cash available to settle the debts. The LLP have provided a letter of support to the Company to meet operating expenses during the going concern period.
The letter of support is not a guarantee or formal financial commitment however, the directors believe that the risks that the shareholders will not provide support are remote. The directors therefore consider it appropriate to prepare the Company’s accounts on a going concern basis for the going concern review period to 31 December 2025.
Ernst & Young LLP were appointed as auditor to the Company 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.
Section 172 statement
The Directors' Report and the Strategic Report confirm compliance with the obligations set out in section 172 of the Companies Act 2006.
As per the UK Government's Streamlined Energy and Carbon Reporting (“SECR”) regulations, the Company qualifies as a low energy user and is exempt from reporting under the SECR regulations. The Company is billed for energy usage consumed by intragroup entities. These costs are in turn recharged to the intra-group entities, and hence the Company is not responsible for this energy usage as it falls outside its organisational boundary in the current financial year.
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. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s ability to continue as a going concern.
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 set out on page 4, 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.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant are the Companies Act 2006, those relating to its reporting framework being United Kingdom Generally Accepted Accounting Practice, and any relevant direct and indirect tax compliance regulation in the United Kingdom. In addition, the Company has to comply with laws and regulations relating to its operations, including health and safety, data protection, anti-bribery and corruption.
We understood how the Company is complying with those frameworks by making enquiries of management and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of minutes of board meetings of the Company as well as validating how policies and procedures in these areas are communicated and monitored. We also reviewed any correspondence with relevant authorities.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur in revenue recognition and management override of controls. We also considered management’s incentives around improving the performance of the Company, the opportunities available to execute any such actions through management override as well as the controls that the Company has established to address any such risks identified, including to prevent, deter and detect fraud and the monitoring of such controls by management.
Based on this understanding we designed our audit procedures to identify noncompliance with such laws and regulations. Our procedures involved supplementing our enquiries of management and those charged with governance as well as review of meeting minutes with journal entry testing procedures undertaken using defined risk criteria tailored to the fraud risk factors affecting the Company in line with its current operations.
A further description of our responsibilities for the audit of the financial statements is located 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 directors those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The notes on pages 12 - 17 form part of these financial statements.
All amounts relate to continuing operations.
The Stage Shoreditch Development Limited is a private Company limited by shares incorporated in England and Wales. The registered office was changed to 72 Welbeck Street, London, W1G 0AY on 23 April 2024 (previously 116 Upper Street London N1 1QP). The Company number is 09565038. The date of incorporation was 28 April 2015.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price 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.
Basic financial liabilities, including creditors, and loans from fellow group entities that are classified as debt, are initially recognised at transaction price including transaction costs 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 and are subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the Company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Company.
In the application of the Company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The Company has identified the following areas where significant judgement and estimation are required:
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The Company makes a judgement of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management consider factors including the ageing profile and historical experience. The debtor balance at the reporting date includes a provision for impairment, see note 7 for carrying amount of debtors.
The Company utilises judgement to determine the quantum of the development recharges to be made using the most relevant and accurate information available to ensure that it best reflects the split of the development works undertaken on the respective buildings. During the year, there has been a change in the estimate post the practical completion of certain properties under development resulting in a change in the development recharges. The Company expects that this accounting estimate will be reviewed accordingly each financial reporting period, until such time that the development is finally completed.
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 Company recognises provision when there is a legal or constructive present obligation as a result of a past event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The Company establishes provisions depending on reasonable estimates based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies.
The Company recognises estimates in relation to accrued expenses recorded at the year end based on past experience of similar outgoings incurred or their knowledge of the expected outgoings to be incurred depending on the nature of goods or services rendered that are yet to be billed.
All turnover arose within the United Kingdom.
The number of persons (including directors) employed by the Company during the year was nil (2022: nil).
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Factors that may affect future tax charges
In the March 2021 budget, it was announced that legislation would be introduced in the Finance Bill 2021 to increase the main rate of UK corporation tax from 19% to 25%, effective April 2023. This was substantively enacted in May 2021 therefore, any closing deferred tax balance is calculated at 25%. The forthcoming change in the corporation tax rate in future years is not expected to materially affect the future tax charge.
Deferred tax
The Company has cumulative tax losses arising in the UK of £308,003 (2022: £433,701) that are available indefinitely for the offset against future taxable profits. Deferred tax assets have not been recognised in respect of these losses as it is unlikely they will be recognised against the reversal of deferred tax liabilities or other future taxable profits for the foreseeable future.
Amounts due to group undertakings are unsecured, interest free and payable on demand without restrictions.
Included in amounts due to group undertakings is an unsecured, interest free loan of £194,906,546 (2022: £173,792,795) from The Stage Shoreditch LLP, the ultimate parent undertaking, which is payable on demand without restrictions. Accordingly this has been classified as current.
As at 31 December 2023, the Company has provided a guarantee in respect of the Group’s £390 million development loan facility coordinated by lead arranger, Lloyds Bank plc, for the development site held by the Group via a fixed and floating charge on its assets and shares. Subsequent to the reporting date, this guarantee for the loan expired per note 14. The Company does not have any other financial commitments, guarantees and contingencies aside from the disclosed commitments.
The Company's immediate parent undertaking and the smallest group in which the results of the Company are consolidated is that prepared by The Stage Shoreditch LLP. Copies of the consolidated financial statements ofThe Stage Shoreditch LLP are publicly available from 72 Welbeck Street, London, W1G 0AY.
The largest group in which the results of the Company are consolidated is that prepared by Eldridge Industries LLC, of 600 Steamboat Road, Greenwich, CT 06830. The financial statements of this entity are not publicly available.
Development management and marketing fees of £nil (2022: £127,487) were charged by Galliard Homes Limited, a subsidiary of Galliard Holdings Limited. Galliard Holdings Limited is a Designated Member of the Group of which the Company is a member. Residential sales agents fees of £115,271 (2022: £nil) were charged by Galliard Construction Limited, a subsidiary of Galliard Holding Limited. At the reporting date, there was a balance of £63,241 (2022: £nil).
Amounts due to the Company's parent, The Stage Shoreditch LLP, are noted within note 8.
At the reporting date, the amounts due from fellow members of the Group were £143,799,775 (2022: £172,037,717). At 31 December 2023, the amounts due to fellow members of the Group were £1,057,036 (2022: £3,270,914).
The Company has taken advantage of the exemption afforded by FRS 102.33.1A not to disclose transactions between wholly owned members of the Group.
The Company was party to a guarantee in respect of a development loan from Lloyds to The Stage Shoreditch LLP, the Company’s parent undertaking, until the loan was repaid in full in 2024.
The debtor amounts due from The Stage Shoreditch (Curtain Theatre) LP of £22,723,597 (note 7) and an amount of the same value due to The Stage Shoreditch LLP (note 8) were settled on 19 April 2024.