The directors present the strategic report and financial statements for the year ended 30 June 2024.
In June 2023 we finally started noticing our post-COVID recovery starting to take effect, with staffing starting to stabilise and demand firming on the back of improving service levels.
Following the disposal of nine sites at the end of June, the first quarter of the new financial year was predominately concerned with re-organising the company, slimming down the Head Office structure, reducing costs, stabilising and reassuring the remaining staff team.
This being successfully achieved, we concentrated on utilising our staffing gains to build occupancy and continue our journey to a return to a profitable and sustainable operation.
The change to the two-year olds staffing ratio requirement in September 2023, followed by the relaxation in January 2024 on how we are allowed to use Apprentices in numbers once deemed competent has been helpful and assisted in releasing capacity.
Cost inflation has been sticky, with salaries, utilities and food remaining high through the year. Our biggest overhead, salaries, saw increases of up to 21.2% on the back of increases to National Minimum Wages in the April. We met these increases with a fairly chunky price increase of 9.5% in January 2024 and predict that a similar will be needed next year.
We await the impact, if any, of the change in Government and any associated changes in policy.
Thankfully the new Labour Government remain committed to the previous Government’s expansion of the Early Years Entitlement. In April 2024 this was extended to working families of two year olds, with a further expansion for working families of children from nine months old from September of the same year. This is having the joint benefit of releasing a lot of cost pressure on qualifying families and stimulating the market.
As a result, demand is robust, in particular for baby places. This bodes well for the future as children who join us as babies would typically stay with us for three years.
On a like for like basis revenue for the 2023-24 year was up 19% on the previous 12 months. With the new academic year starting well, we plan for similar for 2024-25, thereby achieving a return for profitability, positive cash flow and balance sheet.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2024.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The Group has an arranged overdraft with the bank which helps to meet its financial obligations and mitigate liquidity risk.
The directors anticipate strong market demand to continue, stimulated by Government incentives. The company is in an improving financial position and the risks that have been identified are being well managed. With continued focus on staff recruitment, retention and development, coupled with inward investment, the directors are confident in the company's ability to meet growing demand, albeit with cautious expectations.
Saffery LLP have expressed their willingness to remain in office as auditor of 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 directors have prepared the accounts on a going concern basis. In arriving at the conclusion that the Group has adequate resources, the directors have taken into consideration the support from the bank along with the balance sheet at the year end.
The directors are confident that they have taken sufficient measures to safeguard the business through the Coronavirus pandemic and Lockdown to ensure that there is adequate cash.
Having had due consideration of the order book and forecast data, the annual budgets for 2025 and beyond the directors remain confident that the Group will have adequate resources to operate in the foreseeable future.
We have audited the financial statements of Gingerbread (Holdings) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2024 which comprise 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. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. 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 the 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 group and parent company 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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the group and parent company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the group and the parent company by discussions with directors and updating our understanding of the sector in which the group and parent company operates.
Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006 and UK Tax legislation. In addition, the group and the parent company are subject to other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to their ability to operate or to avoid a material penalty. These include health and safety and food hygiene regulations, Childcare Act 2006, Nursery Education and Grant-Maintained Schools Act 1996 and OFSTED.
Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of the group and parent company financial statement disclosures. We reviewed the company’s records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company’s policies and procedures for compliance with laws and regulations with members of management responsible for compliance and specifically considered whether there had been any issues identified in the OFSTED inspections undertaken in the year.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, 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.
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 parent 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 parent company's members those matters we are required to state to them in an auditors 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 parent company and the parent 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 £4,524 (2023 - £323,772).
Gingerbread (Holdings) Limited (“the Company”) is a limited company incorporated in England and Wales. The registered office is 1st Floor, 60-62 High Street, Hanham, Bristol, BS15 3DR.
During the year, the Group consisted of Gingerbread (Holdings) Limited, Mama Bear's Day Nursery Limited and Bright Sparks Day Nursery and Pre-School Limited.
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 £1.
The financial statements have been prepared under the historical cost convention, modified to include investment properties and certain financial instruments at fair value. The principal accounting policies are set out below.
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 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The directors have prepared the accounts on a going concern basis. In arriving at the conclusion that the group has adequate resources, the directors have taken into consideration the support from the bank along with the balance sheet position of the net assets at the period end.
Management forecasts for future periods demonstrate an ability for the Group to continue to increase the net assets position.
Having had due consideration of the order book and forecast data, the annual budgets for 2024 and beyond the directors remain confident that the group will have adequate resources to operate in the foreseeable future.
The previous financial statements cover the 18 month period to 30 June 2023 as the accounting period was extended in order to incorporate the sale of settings in the financial period and, as a result, comparative amounts presented in the financial statements including the related notes are not entirely comparable.
Turnover represents invoiced fees and grant funding receivable.
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.
Although it is a departure from the general requirements of the Companies Act 2006 for all tangible assets to be depreciated, in the directors' opinion any depreciation charge & accumulated depreciation in respect of the freehold land and buildings would be immaterial to the accounts due to high residual values.
In the parent company 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 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 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, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows 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, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities, including debt instruments that do not meet the definition of a basic financial instrument, are measured at fair value through profit or loss.
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. Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
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.
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 that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
The Investment properties were valued by Knight Frank LLP in January 2020, a firm of chartered Surveyors who specialise in the valuation of commercial property. The directors were of the opinion that the values remain appropriate for the period ended 30 June 2023 and this was used as the deemed cost of the properties on their transfer to freehold land and buildings following the triennial review of FRS102.
An analysis of the group's turnover is as follows:
The average monthly number of persons (including directors) employed by the group during the year was:
Their aggregate remuneration comprised:
On 30 June 2023 the Group signed a business transfer agreement to dispose of eleven settings. The disposal was effected as part of a business restructuring.
A profit of £1.8m arose on the disposal, being the proceeds of the sale less the carrying amount of the business assets.
The actual charge for the year can be reconciled to the expected charge based on the profit or loss and the standard rate of tax as follows:
Goodwill relates to the excess payments made to acquire new business over and above the fair value of the assets acquired.
Fixed asset investments entirely reflect the company's investments in subsidiaries.
In the opinion of the directors, the aggregate value of the company's investment in subsidiary undertakings is not less than the amount included in the balance sheet.
Included within other debtors is £558 (2023: £558) owed by the directors to the company.
In March 2016, a loan from HSBC was taken out by Gingerbread (Holdings) Limited for £5,250,000. This loan has a term of 15 years and is charged at 2.25% over the Bank of England base rate.
The loan is secured by fixed charges over the freehold property owned by Gingerbread (Holdings) Limited. The property value over which the loans are secured in the accounts is £4,995,000.
As part of the loan agreement there is a debenture in place comprising fixed and floating charges over all the assets and undertaking of Mama Bear’s Day Nursery Limited including all present and future freehold and leasehold property, book and other debts, chattels, goodwill and uncalled capital both present and future.
In November 2018, a loan from HSBC was taken out by Gingerbread (Holdings) Limited for £175,000. This loan has a term of three years and is charged at 2.75% over the Bank of England base rate.
In May 2020, a loan from HSBC was taken out by Mama Bear's Day Nursery Limited for £1,200,000 as part of the Coronavirus Business Interruption Loan Scheme. This loan has a term of 6 years and is charged at 3.99% over the Bank of England base rate.
In June 2022, a loan was taken out by Gingerbread (Holdings) Limited for £350,000. This loan has a term of 2 years 3 months and is charged at 10%.
Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (before offset) for financial reporting purposes:
It is not possible to quantify the expected tax reversal of deferred tax liabilities in the period ended 30 June 2023.
Deferred income is included in the financial statements as follows:
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.
Operating lease payments represents rental payable by the company for certain of its properties. Leases are negotiated over a range of years dependent on the circumstance of each item leased, several leases have optional extensions attached.
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:
During the year directors of the company received £nil (2023: £29,700), in respect of rent from the group for a property that is used in the trade.
At the outset of the year directors loan accounts totalled £108,221 being amounts owed by the directors to the group. The balance carried forward at the year end was £55,751 being amounts owed by the directors.
Included within other debtors is £558 (2023: £558) owed to the company by the directors.
During the year, close family members of directors received remuneration of £47,947 (2023: £34,552), in exchange for services provided to the company.
During the year, rent was paid to close family members of the directors totalling £nil (2023: £72,081). In addition, a loan of £350,000 was taken out in the prior year owed to close family members. Loan interest of £36,750 (2023: £29,750) has been charged in the year.
The company has taken advantage of the exemption available in FRS 102 whereby it has not disclosed transactions between group companies where the members are entirely owned by the parent company.
Details of the company's subsidiaries at 30 June 2024 are as follows:
Bright Sparks Day Nursery and Pre-School Limited is exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of s479A. This subsidiary is currently under voluntary strike off, for which notice was given on 10 September 2024.