The directors present their annual report and financial statements for the year ended 30 June 2024.
The results for the year are set out on page 6.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Azets Audit Services Limited were appointed as auditor to the company during the year to fill the casual vacancy arising on the resignation of the previous auditor, Cheesmans.
This report has been prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating to small companies.
We have audited the financial statements of Berjaya UK Investment & Development Limited (the 'company') for the year ended 30 June 2024 which comprise the income statement, the statement of financial position, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
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 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, however we bring the readers attention to note 1.2 of the financial statements.
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
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the directors' report has been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
the directors were not entitled to take advantage of the small companies' exemptions in preparing the directors' report and from the requirement to prepare a strategic report.
As explained more fully in the directors' report, 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.
Extent to which 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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud. We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
The income statement has been prepared on the basis that all operations are continuing operations.
Berjaya UK Investment & Development Limited is a private company limited by shares incorporated in England and Wales. The registered office is 4 Aztec Row, Berners Road, London, N1 0PW. The company's principal activities and nature of its operations are disclosed in the directors' report.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires the Company to exercise judgement in applying the Company's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effects are disclosed in note 2.
Impact of new standards
The following amendments to standards have been adopted for the first time in these financial statements:
Insurance contracts (IFRS 17)
Deferred tax relating to Assets and Liabilities arising from a Single Transaction (amendments to IAS 12)
International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)
Definition of Accounting Estimates (Amendments to IAS 8)
Disclosure of Accounting policies (Amendments to IAS 1 and IFRS Practice Statement 2)
None of these standards have had a material impact on the Company.
Standards issued but not yet effective up to the date of issuance of the company’s financial statements are listed below. This listing is of relevant standards and interpretations issued, which the company reasonably expects to be applicable at a future date:
IAS 1 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current
IFRS 16 Leases - Lease liability in a Sale and leaseback
IAS 11 Presentation of Financial Statements – non-current liabilities with covenants
IAS 7 and IFRS 7 – Supplier finance amendments
IAS 10 and IAS 28 – Sale of contribution of assets between an investor and its Associate or Joint Venture.
The directors do not expect any material impact as a result of adopting the standards and amendments listed above in the financial year they become effective.
These financial statements have been prepared on a going concern basis. The directors have a reasonable expectation that the Company will continue in operational existence for the foreseeable future and at least twelve months from the approval of these financial statements. In adopting the going concern basis, the directors have considered the activities of the company and the principal risks and uncertainties. The directors have carried out a forecasting exercise for the 2025 financial year and the period thereafter up to September 2026.
Occupancy levels – considered to be the key variable - during the financial year ended 30 June 2024 ranged from between 94% to 100%, with an average occupancy of 98%. It has been assumed that occupancy levels for the projected period to September 2026 will fluctuate between 96% and 99%.
The result of these assumptions is a loss of £1.39m for the 2025 financial year before the impact of any change in property valuation. Significantly, this result assumes that the term loan interest rate of 8.73% per annum charged at the time of the preparation of the forecasts is maintained throughout the period until the loan falls due for repayment in October 2025; interest rate movements cannot realistically be predicted. Thereafter, it has been assumed that the Company secures a replacement loan on similar repayment terms with a more favourable interest rate of 7% per annum.
The Company also maintains a small cost base and a strong cash position, with the cash balance currently standing at around £850k. It has the support of its parent company who has confirmed that it will not recall the loan balance payable during the period of 12 months from the approval of the financial statements as well as providing assurances that it will continue to support the Company.
As a result, the directors believe that it is appropriate for the Company to adopt the going concern principle in preparing its financial statements.
Revenue from rental of investment properties is recognised over time as the service is delivered. Revenue is recognised net of VAT and is typically charged in advance, resulting in deferred revenue balances for unfulfilled performance obligations. The resulting contract liabilities are described as deferred revenue (see note 20). There are no contract assets. Deferred revenue balances are typically settled within a year of the reporting date.
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 profit or loss.
Investment properties are property held either to earn rental income or for capital appreciation, but not for sale in the ordinary course of business. Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at fair value. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is carried out by independent professional valuers.
Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise.
Cost includes expenditure that is directly attributable to the acquisition of investment property. The cost of self-constructed investment property includes the cost materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.
Investment property will be derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the asset) is recognised in profit or loss.
When the use of property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.
Impairment of tangible assets (continued)
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.
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.
IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.
Financial liabilities are derecognised when, and only when, the Company’s obligations are discharged, cancelled, or they expire.
Financial instruments are offset when the Company has a legally enforceable right to offset and intends to settle either on a net basis, or to realise the asset and settle the liabilities simultaneously.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Company.
In the application of the Company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The directors do not consider that there are any estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities.
The average monthly number of persons (including directors) employed by the Company during the year was:
Their aggregate remuneration comprised:
The charge for the year can be reconciled to the loss per the income statement as follows:
Investment property was valued at fair value on 30 June 2024 by Aitchinson Raffety, RICS registered valuers.
The residential property, which represents over 90% of the Company's investment property by value,has been valued using a market approach. This contrasts with the income approach adopted for the equivalent valuation at the end of the previous financial year which gave rise to a valuation of £44,000,000 based on level 3 inputs within the fair value hierarchy.
The residential property was recently marketed for sale so that the directors could assess interest. The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the relevant asset would take place between market participants under current market conditions. The directors consider that the best offer received of £37,000,000 represents a reliable indicator of the market value of the property and that a valuation on this basis it is categorised as a level 1 input in the fair value hierarchy. The directors assess transfers between the levels of the fair value hierarchy at each financial year end.
The valuation of the remaining commercial element of the investment property continues to be based on its intrinsic value, which is considered to be a level 3 input within the fair value hierarchy. Income has not recovered to the levels enjoyed before the Covid-19 Pandemic and the directors have recently taken steps to remedy this by engaging new agents and considering plans to make alterations to the property. Because of the disappointing income levels generated in two successive financial years, the directors do not consider that an income based approach to valuation is appropriate. However, because of the continued disappointing income levels generated in the financial year, the fair value of the commercial property has been reduced from £4,500,000 to £4,000,000. The revaluation loss of £500,000 is recognised in the statement of comprehensive income within Other gains and losses.
The fair value measurement is based on the above items' highest and best use, which does not differ from their actual use.
At 30 June 2024, there were no restrictions on the realisability of investment property or the remittance of income and proceeds of disposal (2023 - None).
There are currently no obligations to construct or develop the existing investment properties. At 30 June 2024, contractual obligations to purchase investment property amounted to £Nil (2023 : £Nil).
Rental income generated from the investment property in the year was £2,228,830 (2023: £2,072,007) with direct operating expenses of £397,414 (2023: £448,037).
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
No significant receivable balances are impaired at the reporting end date.
Borrowings are classified based on amounts that are expected to be settled within 12 months of and after more than 12 months from the reporting date as follows:
The bank loan is secured against the Company's assets including its investment properties and supported by a corporate guarantee given by the ultimate parent company Berjaya Assets Berhad and an assignment of the Company's rental income. The original terms of the loan provided for capital repayments of £500,000 in each quarter of its seven year term followed by a final payment of £15,875,000 at the end of the term in October 2025. The COVID-19 pandemic led the Company to negotiate capital repayment holidays such that the capital repayments that otherwise fell due in the quarters April 2020 to October 2022 were not made and will instead be added to the final sum payable in October 2025. Loan interest accrues at 3.50% above the Bank of England's Sterling Overnight Index Average (SONIA) and is payable at the same time as the quarterly repayments of capital fell or fall due under the original terms of the loan.
The directors consider that the carrying amounts of financial liabilities carried at amortised cost in the financial statements approximate to their fair values.
The following table details the remaining contractual maturity for the Company's borrowings with agreed repayment periods. The contractual maturity is based on the earliest date on which the Company may be required to pay.
Borrowings are shown net of unamortised finance costs as follows:
1 month £12,341 (2023: £12,965)
3 months to 1 year £35,853 (2023: £37,839)
1 to 5 years £15,425 (2023: £63,322)
The following are the major deferred tax liabilities and assets recognised by the Company and movements thereon during the current and prior reporting period.
Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax liabilities above represents accelerated capital allowances (ACA's),
At the reporting end date the Company has unused tax losses of £7,891,000 (2023: £6,315,000) available for offset against future profits. The Company has an unrecognised deferred tax asset of £1,972,824 (2023: £1,442,963) in respect of such losses.
During the year the Company entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The amounts outstanding are unsecured and will be settled in cash.
Amounts repayable attract interest of 3.18% per annum charged on the outstanding balance.
The bank loan is guaranteed by the ultimate parent company, Berjaya Assets Berhad, a company incorporated in Malaysia. The bank loan was advanced for the specific purpose of refinancing an existing loan that was taken out in order to acquire 70 apartments at 1-17 Essex Road, London N1 2SE and 12a Islington Green, London N1 2XN.
Liquidity risk:
The directors consider that the risk of the Company encountering difficulty in meeting its financial obligations, in particular the ongoing repayments falling due under the terms of its bank loan, is managed by securing the undertaking of its parent company to continue to provide it with financial support.
Interest rate risk:
Interest payable on the Company's bank borrowings is linked to the Sterling Overnight Interest Average rate and as such will fluctuate with changes in interest rates. The continued support from the parent company will mitigate this risk.
Credit risk:
The directors do not consider there to be any material exposure to credit risk as tenants largely pay in advance.
Capital risk:
The Company is not subject to any externally imposed capital requirements.