Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
COMPANY INFORMATION
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CLOUSTON GROUP LIMITED
CONTENTS
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CLOUSTON GROUP LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors present their annual report on the affairs of Clouston Group Limited (the "Company") and its subsidiaries (the "Group") for the year ended 31 December 2023.
Clouston Group Limited (the “Company”) is the parent company for a group whose main activity is the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne. The Company acts as a holding company and its three trading subsidiaries are Stephenson Hotel Limited, Stephenson Quarter Developments Limited and Stephenson Rocket Limited. To date the Group has completed construction of a Crowne Plaza branded hotel, refurbished the Boiler Shop events venue and has constructed a 357 space multi-storey car park adjoining the Stephenson Quarter, all of which are now operated by the Group through its trading subsidiaries. Further development proposals for this area, which are yet to come into fruition, include residential apartments, commercial offices, exhibition and event space, retail and restaurant facilities.
The Group's EBITDA in the current year was a loss of £2.2m (2022: £1.4m EBITDA loss) with a net loss of £5.0m (2022: £1.2m loss). Of the £4.0m loss, £2.36m relates to an impairment charge on the land and buildings of Stephenson Hotel Limited. Other additional costs contributing to the increased loss are legal and professional fees paid in relation to a court case as well as general inflationary rises impacting payroll and other costs. The development, performance and position of the Group's trading subsidiaries during the year are summarised below, with further detail provided in each entity's own annual report. Stephenson Hotel Limited (“SHL”) The construction of the 251 bed Crowne Plaza hotel within the Stephenson Quarter area of Newcastle upon Tyne was completed in August 2015. This hotel forms part of a wider proposed development by the Clouston Group (the group headed by Clouston Group Limited, ‘the group’) of which the company is part. The group has also developed a multi storey car park and office block, an exhibition and event venue and the UniversityTechnical College building in the area. Further development proposals for this area include residential apartments, commercial offices, exhibition and event space, retail and restaurant facilities. In March 2019 the company terminated the IHG Hotel Management Agreement and appointed a new management company, Interstate, under a franchise agreement, to improve trading performance and hotel value whilst retaining the Crowne Plaza brand. Over the following 12 months the directors and Interstate achieved a strong performance trajectory, with increasing revenue and Revenue Generation Index ('RGI'), as detailed in the 2019 annual report, which should have led to a stabilisation by 2024. Unfortunately, that progress was arrested in March 2020 by the COVID-19 pandemic and the introduction of government restrictions which, understandably, had a major detrimental impact on the business. Faced with lockdown measures, travel restrictions and reduced demand the directors acted swiftly to mitigate operational losses insofar as possible by implementing furlough, redundancies, salary reductions, termination of non-necessary services and other similar measures. The directors also agreed a deferral of ground lease payments in respect of the hotel. Whilst not yet back to previously achieved levels, the business also saw gross margin improvement, from £5.6m in 2022 to £6.3m in the current year and the company generated an operating loss, before financing costs, of £0.2m (2022: £1.8m). After finance charges of £2.2m (2022: £2.2m), the company reported a net loss of £4.0m (2022: £0.3m). Of the £4.0m loss, £2.36m relates to an impairment charge on the land and buildings. Other additional costs contributing to the increased loss are the addition of a land charge from Stephenson Quarter Developments Limited (a fellow subsidiary) to Stephenson Hotel for the use of Hawthorn Sq and the land to the rear of the hotel; legal and professional fees paid in relation to a court case as well as general inflationary rises impacting payroll and other costs. At the balance sheet date the company had net current liabilities of £45.9m (2022: £44.2m) and net liabilities of £33.9m (2022: £29.8m) which includes £39.0m (2022: £38.7m) due to Newcastle City Council (‘NCC’) in respect of term loan facilities and £2.0m (2022: £2.1m) in respect of a deferred
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CLOUSTON GROUP LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
hotel funding contribution, further details of which are provided in note 15 to the financial statements.
To provide additional support over the period of lockdown restrictions, the Term Facilities Agreement with NCC was amended in 2020 and additional funding of £1m (Facility D) was agreed, with the final £0.4m drawn down in 2022 the year. Due to UK lockdowns lasting far longer than was first anticipated, the directors sought to reschedule repayment terms under the Facilities Agreement which were not accepted. Throughout 2023 the hotel has remained open, allowing the hotel to operate normally. Occupancy rates rose to 85.7% in 2023 (2022: 79.5%) and the hotel maintained strong RGI and Average Daily Rate (‘ADR’). Stephenson Quarter Development Limited (“SQDL”) The company's main activity is to oversee the successful redevelopment of the Stephenson Quarter area in Newcastle by the Clouston Group, the group headed by Clouston Group Limited. In 2017 the company started construction on the North East Futures University Technical College ("UTC") on behalf of the Education and Skills Funding Agency, which was completed in the autumn of 2018. The company also worked on the design and refurbishment of the Boiler Shop which commenced in 2016 and the scheme achieved the Lord Mayors Design Award Conservation Prize in 2018. Since its restoration, the company has operated the Boiler Shop as a cultural events venue and intends to expand the range and volume of events held there over the coming years. Trading performance to the end of the year was encouraging although inflationary pressures have arisen since the year end which persist at the date of approval of these financial statements and which present further potential challenges for the business as the Boiler Shop relies: for part of its income on bar sales, which could be impacted by the current cost of living crisis. However, because this is an arts and meetings venue it does not appear to be adversely affected to the extent that bars and pubs are reporting. The venue operates ticketed events and to date the directors have not seen a fall off in sales. In addition to the arts, it will now start to build the daytime meetings and events business working with its sister company, Stephenson Hotel Limited, to add value to both businesses. To assist with funding refurbishment of the Boiler Shop, the company secured a loan from NELEP Investment Fund Regional Growth Fund ('LEP") which was renegotiated and extended during 2021 following a deferment of interest charges and capital repayments in 2020 to provide support during the pandemic. Additional loan funding of 268,945 was provided in 2021 to support the company's recovery from the pandemic and the loan maturity date was extended to 31 March 2025. At the year end the company had net current liabilities of £11,729,759 (2022: £11,365,916) and net liabilities of £10,450,883 (2022: £10,230,135) which included £9,495,605 (2022: £9,411,346) owing to group undertakings and £1,789,094 (2022: £1,915,821) in respect of the RGF loan that has been extended. Stephenson Rocket Limited (“SRL”) The construction of a 357 space multi-story car park (‘MSCP’) with offices above was completed in August 2015 during the initial phase of the redevelopment of the Stephenson Quarter area of Newcastle upon Tyne. The company operates the car park with rent payable to Newcastle City Council (‘NCC’). The car park was designed as a facility to service the fully developed Stephenson Quarter, as well as to meet parking demand for the nearby train station. The as yet incomplete development on the adjoining Stephenson Square site and a lack of the previously expected access improvements from the train station have contributed to the car park failing to achieve the anticipated utilisation levels and, as such, not being able to generate revenue at the levels initially predicted. Financial performance has been further impeded since March 2020 due to the impact of the COVID-19 global pandemic, ensuing lockdowns and reduced demand having a significant adverse impact on revenue. As a consequence, the company has incurred successive losses and has not been able to meet its rental and other obligations to NCC.
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CLOUSTON GROUP LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
In order to secure a sustainable future, the directors sought to introduce a specialist operator to take over management of the car park through which they were confident sufficient revenues would be generated to meet all other operating costs. However, NCC have entered into an agreement to develop the remaining areas of the Stephenson Quarter and require full control of the car park to support the development of offices and reduce building costs. Therefore, the company’s sub lease of the car park was terminated in November 2022. The directors welcome this and agreed to continue operating the MSCP until 28 June 2023 to allow for a smooth handover to NCC. Trading has now ceased, and the directors expect to complete a consensual agreement with NCC to clear arrears within the next 6 months. As the directors do not intend for the company to acquire or commence a replacement trade they no longer consider the company to be a going concern therefore, once this has been completed, the company will be wound up.
The delays in the regeneration of the Stephenson Quarter, and their ultimate design and content, as noted in the “business review" section above has created some uncertainty over the Group’s ability to optimise trading performance of its operating assets. As noted in this report, these risks were exacerbated by the impact of COVID-19 on the group's ability to operate each of the businesses and achieve their potential.
The Group's other principal risks and uncertainties include property values and property yields. The Crowne Plaza Hotel and the Boiler Shop are, as expected, yet to reach a stabilised basis of trading. Should trading fall below managements current forecasts, the carrying value of these assets in the balance sheet may be further impaired. As detailed in note 2.2 in the financial statements, the Group is reliant on the performance of it's subsidiaries in order to continue as a going concern and indicates that there is risk as going concern is dependent on negotiations with its principal lender in respect of its loan which is due for repayment as well as the the quantum and timing of future cashflows that may be insufficient to permit the Group to meet its obligations as and when they fall due.
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CLOUSTON GROUP LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
The Group’s activities expose it to a number of financial risks including cash flow risk, credit risk and liquidity risk.
Cash flow risk In addition to the risks associated with trading performance, as highlighted in this report, the Group's activities expose it to the financial risks associated with fluctuations in interest rates. The Group monitors changes in interest rates and the likely interest payments. Despite recent increases, interest rates remain at historically low levels and, as noted above, the group has refinanced a large proportion of its loan facilities in such a way as to significantly reduce the cash cost of its annual finance charges during the term of the facilities. Credit risk The Group's principal financial assets are cash and bank balances together with trade and other debtors. The group's credit risk is primarily attributable to its trade debtors. The amounts presented in the balance sheet are net of allowances for doubtful debtors. An allowance for impairment is made when there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cashflows. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. Liquidity risk In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the group uses a mixture of long-term and short-term debt finance. Further details regarding liquidity risk and the impact on going concern can be found in the directors’ report.
The Crowne Plaza hotel continues to grow with occupancy in July 2024 at 93%.
Given the quality of our management, the strength of the Crowne Plaza brand , and the outstanding support of
our hotel consultants, Hamilton Pyramid we agreed to renew the Management Agreement with Aimbridge (previously Interstate) for a further five years. As detailed in note 2.2, the Group is in negotiations with its principal lender, NCC, which started in early 2023 and continue to be ongoing to agree appropriate repayment terms, as the loan has expired. This will form part of a consensual agreement to resolve the other liabilities in all Group companies which relate to this lender in return of NCC obtaining ownership of the hotel building and land held by Stephenson Quarter Developments Limited.
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CLOUSTON GROUP LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
This report was approved by the board and signed on its behalf.
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CLOUSTON GROUP LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their report and the financial statements for the year ended 31 December 2023.
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £5,031,152 (2022 - loss £1,149,868).
The directors do not recommend the payment of a final dividend (2022: £nil)
The directors who served during the year were:
The following information, which would otherwise have been disclosed in the directors' report, is instead disclosed in the strategic report, as permitted by section 414c(11) of the Companies Act 2006:
- financial risk management objectives and policies - future developments
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CLOUSTON GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Clouston Group Limited is the parent company for a group whose recent activity included the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne. The company acts as a holding company and its two trading subsidiaries are Stephenson Hotel Limited, Stephenson Quarter Developments Limited, including the Boiler Shop and non-trading subsidiary Stephenson Rocket Limited. The company is reliant on the performance of the subsidiaries of the group in order to continue to operate as a going concern.
The Group’s trading performance has been encouraging with financial performance and initial projections with a positive trajectory continuing through 2024. The Directors are changing the mix of events in one subsidiary and is continuing to build on the daytime meetings and events business to help support other areas of the event calendar, such as, grassroots music. However, as there is a cost of living crisis that could impact income, the directors acknowledge that there is a risk that the quantum and timing of future cash flows may be insufficient to permit the company to meet its obligations as they fall due in the normal course of business. The Group's principal risks and uncertainties include property values and property yields caused primarily by the delays in the regeneration of the Stephenson Quarter, which is owned by its lender, and its ultimate design and content. This has also created uncertainty over the Group's ability to optimise trading performance of its operating assets. Following the effects of COVID-19 these risks were heightened by the continued impact of the energy and cost of living crises on the group's ability to operate each of the businesses and achieve their potential. At 31 December the Group had net liabilities of £42,509,183 with amounts totalling £38.9m within Stephenson Hotel Limited owing to Newcastle City Council (“NCC”). At the year end, Stephenson Hotel Limited was in breach of its covenants and the loan expired in full on 25 October 2023. The Group is in negotiations with its principal lender, NCC, which started in early 2023 and continue to be ongoing to agree appropriate repayment terms, as the loan has expired. This will form part of a consensual agreement to resolve the other liabilities in all Group companies which relate to this lender in return of NCC obtaining ownership of the hotel building and land held by Stephenson Quarter Developments Limited. Stephenson Quarter Developments Limited also holds a £1.9m loan due to NELEP. This loan is due to expire in March 2025. The Directors are actively exploring various options, including refinancing or a sale and leaseback of the building. However, initial discussions with NELEP have given the Directors a reasonable expectation that they will remain supportive and wish to see the business thrive following their investment. They understand the inter-connection of the NCC consensual agreement around the freehold of the land and how this may impact the timeline for re-finance of their loan. The Directors therefore expect extended terms to be negotiated. Other creditors includes a significant historical balance which relates to amounts owed to two former members of the group as further explained in note 19. The Directors are satisfied that they are taking suitable steps in order to rectify the position and that this liability will no longer exist moving forwards. The Directors consider it appropriate to prepare these financial statements on the going concern basis, however they acknowledge that should the trading performances of the subsidiaries not reach the requisite levels and should the aforementioned agreement with NCC not be finalised, the quantum and timing of future cash flows
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CLOUSTON GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
may be insufficient to enable it to meets it obligations in the normal course of business and therefore such material uncertainties may cast doubt on the ability of the company to continue as a going concern.
There have been no significant events affecting the Group since the year end.
The auditors, Haysmac LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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CLOUSTON GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED
We have audited the financial statements of Clouston Group Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2023, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of 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).
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
We draw attention to note 2.2 in the financial statements, which explains that should the trading performances of the subsidiaries not reach the requisite levels and should the agreement with NCC not be finalised, the quantum and timing of future cash flows may be insufficient to enable it to meets it obligations in the normal course of business and therefore such material uncertainties may cast doubt on the ability of the company to continue as a going concern. Our opinion is not modified in respect of this matter.
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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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CLOUSTON GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group 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 Group 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 its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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CLOUSTON GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED (CONTINUED)
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 Auditors' 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 Group 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:
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud. Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to regulatory requirements and trade regulations, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, income tax, payroll tax and sales tax. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to posting inappropriate journal entries to revenue and management bias in accounting estimates. Audit procedures performed by the engagement team included:
∙inspecting correspondence with regulators and tax authorities;
∙discussions with management including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;
∙evaluating management's controls designed to prevent and detect irregularities;
∙identifying and testing journals, in particular journal entries posted with unusual account combinations, postings by unusual users or with unusual descriptions; and
∙challenging assumptions and judgments made by management in their critical accounting estimates.
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 is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
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CLOUSTON GROUP LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CLOUSTON GROUP LIMITED (CONTINUED)
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 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 Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Statutory Auditors
10 Queen Street Place
EC4R 1AG
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CLOUSTON GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
REGISTERED NUMBER: 02892920
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 24 March 2025.
The notes on pages 20 to 39 form part of these financial statements.
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CLOUSTON GROUP LIMITED
REGISTERED NUMBER: 02892920
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 20 to 39 form part of these financial statements.
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CLOUSTON GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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CLOUSTON GROUP LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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CLOUSTON GROUP LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Clouston Group Limited (‘the Company’) and its subsidiaries (together ‘the Group’) remain focused on the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne.
The Company is a private company, limited by shares, incorporated and domiciled in the United Kingdom and registered in England and Wales. The address of the registered office is given in the company information page of this annual report.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
Clouston Group Limited is the parent company for a group whose recent activity included the successful redevelopment of the Stephenson Quarter area of Newcastle upon Tyne. The company acts as a holding company and its two trading subsidiaries are Stephenson Hotel Limited, Stephenson Quarter Developments Limited, including the Boiler Shop and non-trading subsidiary Stephenson Rocket Limited. The company is reliant on the performance of the subsidiaries of the group in order to continue to operate as a going concern.
The Group’s trading performance has been encouraging with financial performance and initial projections with a positive trajectory continuing through 2024. The Directors are changing the mix of events in one subsidiary and is continuing to build on the daytime meetings and events business to help support other areas of the event calendar, such as, grassroots music. However, as there is a cost of living crisis that could impact income, the directors acknowledge that there is a risk that the quantum and timing of future cash flows may be insufficient to permit the company to meet its obligations as they fall due in the normal course of business. The Group's principal risks and uncertainties include property values and property yields caused primarily by the delays in the regeneration of the Stephenson Quarter, which is owned by its lender, and its ultimate design and content. This has also created uncertainty over the Group's ability to optimise trading performance of its operating assets. Following the effects of COVID-19 these risks were heightened by the continued impact of the energy and cost of living crises on the group's ability to operate each of the businesses and achieve their potential. At 31 December the Group had net liabilities of £42,509,183 with amounts totalling £38.9m within Stephenson Hotel Limited owing to Newcastle City Council (“NCC”). At the year end, Stephenson Hotel Limited was in breach of its covenants and the loan expired in full on 25 October 2023.
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The Group is in negotiations with its principal lender, NCC, which started in early 2023 and continue to be ongoing to agree appropriate repayment terms, as the loan has expired. This will form part of a consensual agreement to resolve the other liabilities in all Group companies which relate to this lender in return of NCC obtaining ownership of the hotel building and land held by Stephenson Quarter Developments Limited.
Stephenson Quarter Developments Limited also holds a £1.9m loan due to NELEP. The NELEP loan is due to expire in March 2025. The Directors are actively exploring various options, including refinancing or a sale and leaseback of the building. However, initial discussions with NELEP have given the Directors a reasonable expectation that they will remain supportive and wish to see the business thrive following their investment. They understand the inter-connection of the NCC consensual agreement around the freehold of the land and how this may impact the timeline for re-finance of their loan. The Directors therefore expect extended terms to be negotiated. Other creditors includes a significant historical balance which relates to amounts owed to two former members of the group as further explained in note 19. The Directors are satisfied that they are taking suitable steps in order to rectify the position and that this liability will no longer exist moving forwards. The Directors consider it appropriate to prepare these financial statements on the going concern basis, however they acknowledge that should the trading performances of the subsidiaries not reach the requisite levels and should the aforementioned agreement with NCC not be finalised, the quantum and timing of future cash flows may be insufficient to enable it to meets it obligations in the normal course of business and therefore such material uncertainties may cast doubt on the ability of the company to continue as a going concern.
Turnover consists of the income received for the provision of services and sale of goods at the hotel, car park and Boiler Shop, net of VAT and other sales related taxes. Turnover for services is recognised at the point in time the services are delivered and sale of goods is recognised on transfer of legal title to the customer. All turnover originated in the United Kingdom.
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The Group has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the Group's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
Basic financial assets, which include trade and other debtors, cash and bank balances, are initially measured at their transaction price (adjusted for transaction costs except in the initial measurement of financial assets that are subsequently measured at fair value through profit and loss) and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, 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.
Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other debtors due with the operating cycle fall into this category of financial instruments.
Impairment of financial assets
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. 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.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
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 the deduction of all its liabilities.
Basic financial liabilities, which include trade and other creditors, bank loans, other loans and loans due to fellow group companies are initially measured at their transaction price (adjusting for transaction costs except in the initial measurement of financial liabilities that are subsequently measured at fair value through profit and loss). When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future payments discounted at a market rate of interest, discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade creditors are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade creditors are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade creditors are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Derecognition of financial instruments
Derecognition of financial assets
Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Group transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Group will continue to recognise the value of the portion of the risks and rewards retained.
Derecognition of financial liabilities
Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3.Judgments in applying accounting policies (continued)
Significant judgments in applying the Group's accounting policies and key sources of estimation uncertainty. Useful lives of tangible assets Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on the number of factors. In re-assessing asset lives, factors, such as technological innovation and maintenance are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Impairment of tangible assets The Group is required to evaluate the carrying values of tangible fixed assets for impairment whenever circumstances indicate, in management's judgment, that the carrying value of such assets may not be recoverable. An impairment review requires management to make subjective judgments concerning the cash flows, growth rates and discount rates of the cash generating units under review. Management have reviewed the tangible fixed assets and reversed a historic impairment in the current year. Recoverability of intercompany debtors Management evaluate intercompany debtors for impairment whenever circumstances indicate, in management’s judgment, that the carrying value may not be recoverable. An impairment review requires management to make subjective judgments concerning the future trading prospects and cash flows of the group companies under review. Where actual cash flows in subsequent years differs to those forecast as part of the management’s impairment review this may result in additional impairments or conversely reversals of existing impairments recognised in future years. Historic impairments exist within intercompany debtors for the company and management concluded that these impairments should continue to exist in the current year.
The whole of the turnover is attributable to the Group's principal activities.
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The loss after tax of the parent Company for the year was £
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
14.Tangible fixed assets (continued)
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
17.Debtors (continued)
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
.Creditors: Amounts falling due within one year (continued)
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Capital redemption reserve
Profit and loss account
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £73,201 (2022: £65,193). Contributions totalling £9,711 (2022: £17,376) were payable to the fund at the reporting date and are included in creditors.
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CLOUSTON GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The ultimate controlling party is W D Clouston by virtue of his interest in the company.
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