The directors present the strategic report for the Period ended 28 September 2024.
The full financial results for Brewhouse and Kitchen Limited for the period ending 28 September 2024 are shown in the Comprehensive Statement of Income on page 12 of the accounts.
Progress in the year was mixed. The backcloth of continuing high energy costs, election jitters, and an unseasonably wet summer did not inspire consumer confidence. Overall, our sales remained at the level of the prior year. Company EBITDA was also to the same level. Margins showed small improvements for liquor, food, and wages. Profit Before Interest improved and was £189k versus a loss of £675k in the prior year. Trading cash flow was also positive, and our cash position remained (and remains) strong.
During the year, finding a route to liquidity continued to be a major objective. Since our four most recent freehold acquisitions (Cardiff, Southsea, Worthing, and Chelmsford) had all matched or exceeded our expectations, we felt (and feel) that we know the type of site that best fits the B&K brand. Accordingly, we sought to raise more funds by means of a Rights Issue so that we could then expand the estate and thereby increase the attractiveness of the business. We hoped to raise £4.1m. Unfortunately, we only raised £1.2m. During the process it became clear that investor appetite for the pub sector was by no means strong. In more recent months the arrival of the Labour government has made our sector even less attractive to investors. The Company does believe that workers rights should be protected but there are aspects of the proposed legislation that will be extremely damaging for a modern hospitality business. Moreover, the sharp increase to National Insurance contributions amounts to nothing more than a punitive tax on employers and jobs; and therefore a brake to growth. This will have consequences for the future profitability of the entire hospitality sector. Consequently, we have had to rethink our strategic plan.
Our current intention is to consolidate and conserve cash until we can assess the impact of the government’s latest increases in NI, and NMW. These took effect from the beginning of April. In response to these increases we have been obliged, like everyone else in our sector, to raise our prices. We have also reshaped our head office team in a manner that will streamline its structure.
We are however pressing ahead with our plan to transform the site at Southbourne into a brewpub with rooms by converting the space above the brewpub into 14 hotel rooms. The conversion will start as soon as planning is approved. Meanwhile we shall continue to carry out low cost enhancements to our more mature brewpub sites.
In more recent months, and during the current year, we have had to take account of the extra costs of food, liquor, labour, and energy as well as the successive increases in taxation. Because of this and taking into account the on-going shifts in consumer behaviour we have repositioned some of our smaller high street sites into the more viable craft house format. This meant taking out the costly micro-breweries and then providing a more relevant and modern street food offering . We have also introduced a delivery service from the craft houses.
Financial performance
1. Total Gross profit margin is 77%
2. Group turnover is £16.3m (2023: £16.7m)
3. The Group reported an Operating profit of £189k (2023: loss of £675k)
4. Shareholders equity has increased year on year to £14.7m (2023: £13.9m)
Principal risks and uncertainties
COVID: a new variant of the pandemic.
Further disruptions emanating from the wars in Ukraine and the Middle East.
A significant and adverse change in consumer behaviour: we continue to monitor trends as they emerge.
Economic: the strength of the regional economy is a principal determinant of our success, and reduced consumer spending could adversely affect our performance. However, we mitigate this by proactively responding to changing consumer trends (e.g. the transformation of some sites to the craft house format). We are also exposed to tariff disputes as well as swings in foreign exchange as we purchase raw materials for the breweries in US$, and capital items for the breweries from China.
Weather: having as we do, so many beer gardens means that our performance can always be affected by the weather.
Food Inflation has been incredibly challenging. Because of the extra regulation resulting from Brexit, imported food items are taking longer to enter the UK market. This has driven up cost and reduced shelf life. We hope that some of the recent developments by the new government will yield results through less red tape.
Regulation and tax: the drinks industry is heavily regulated and taxed through excise duty. There is a risk that future increases could affect the market and our profitability.
Operational brands and reputation: the Company has an increasing range of brands and an excellent reputation; this could be adversely affected by unexpected events/incidents.
Financial: The Company has loans of £6.5m.
Energy: The utility market remains very volatile in terms of pricing. Whilst there has been improvement, it remains much higher compared to pre-war and pre-pandemic levels. We expect this to continue for at least the next 2 years.
Key performance indicators
The core areas that are normally measured in each monthly set of management accounts are:
Year on year sales growth.
Liquor gross margin.
Brewery and food gross margins.
Individual unit wages expressed as a % of total sales.
EBITDA % improvement per site year on year.
Return on capital employed per site %.
Reputational scores.
Corporate social responsibility
Our people are critical for our success. We have continued to support our teams’ physical, financial, and mental wellbeing through various support initiatives. Our team turnover is now at a record low of 53%, and vacancy rates are averaging 5% versus a sector average of over 10%.
It has also been a year of continued growth, recognition, and people-focused achievement at Brewhouse & Kitchen. We are proud that once again, following a full colleague engagement survey, we have been accredited by Best Companies, maintaining our standing as one of the UK’s top employers. This recognition reflects our continued commitment to creating a supportive, engaging, and inclusive culture across all the sites where our colleagues enjoy working.
A key focus has been our investment in learning and development, particularly through apprenticeships. We are delighted to have met our goal of ensuring at least 5% of our total workforce is engaged in apprenticeship programmes. These apprenticeships span across front-of-house, kitchen, brewing, and leadership roles. They provide team members with valuable opportunities to grow their skills and careers while supporting the long-term succession of talent within our business.
Our dedication to our people has also been recognised externally through several prestigious industry awards. This year alone we have been recognised as winners of the ‘Empowering People’ award by SIBA, and ‘Best Apprenticeship Strategy’ by both Springboard and the BII National Innovation in Training Awards (NITAS). In addition, we have been finalists in several award categories for Best Employer, Disability Confidence, and Best Recruitment Initiative for our industry’s leading work experience programme. These accolades are a testament to the effectiveness of our approach to people development, well-being, and employee engagement.
The business had another outstanding year in terms of reputation and recognition. Our reputation scores across Tripadvisor, Google and Facebook continue to track at 4.5 out of 5. We understand that this is one of the highest ratings of any managed-house pub group in the UK hospitality market. It demonstrates our commitment to great service, beer, and food.
Through our participation in Peddling for Pubs (recently newnamed Hospitality Rides) in Sri-Lanka, Yorkshire, Keyna, Devon, Taiwan and The Lake District, Peddling for and to Pubs has raised over £1.6m for the Licensed Trade Charity and Only a Pavement Away. Through these endeavours the Company has raised £17,667 for charity over the last three years. Additionally during the year under review, and as part of our 10th birthday celebrations, a number of our brewpubs have undertaken local fundraising initiatives to benefit their local communities.
Brewhouse and Kitchen have continued to make progress towards being carbon neutral and each year we have calculated our emissions based on consumption. This has allowed us to offset our impact whilst continuing to explore ways to reduce our impact on the environment. We have partnered with Ecologi and you can track our progress by visiting: https://ecologi.com/brewhouseandkitchen. To date through our contributions we have offset 3387.6 tonnes of C02 which is equivalent to 8400 miles driven in a car. We have also planted 3032 trees (local and international).
Further to the above the Company replaced its office printing machines with heat-free alternatives which are expected to reduce our energy consumption for printing processes by 87%. We have also installed digital screens in our kitchens which help us better manage our environmental impact by not using paper to receive our customers’ orders.
Our waste management company has continued to work with our general managers to refine and maintain their recycling rates. During the reported period the company averaged 71.5% of our waste being recycled. This will exclude any brewery waste where it goes directly to farmers and local allotments.
Our key food and drink suppliers have continued to work with us to reduce the amount of secondary packaging. We are currently recycling 57% of our used oil into bio-diesel. During the energy crises oil theft has grown exponentially within our industry due to much higher values obtained for recycled oil. This has caused our recycling rate to reduce by 10%. But in July 24 we introduced oil testing to improve food quality and to prevent oil wastage. This has yielded an initial reduction of 30% in oil consumption.
Recent performance and future outlook
Post year end, the company entered into a new £4m loan facility on a 5 year term provided by LHV Bank to refinance in full the existing loan provider. Furthermore, the existing loan with Barclays Bank plc has also been extended for a further 5 years.
We have maintained our consultancy with Prestige Purchasing. They presented their outlook on food and drink inflation in December 24; a subject that throughout the period under review remained extremely challenging. The Food Price Index (FPI) rose to 19.4% in 2023. Thankfully, at 5.9% it was more settled in 2024. Likewise, the figures for CPI were 14.7% and 2.9% in 2023 and 2024 respectively. Additionally, micro issues around beef, poultry & cooking oil have continued to drive FPI upwards, although to levels less than in previous years. Nonetheless it remains a challenge to manage. Key drivers of inflation in our sector have been commodities, wages, energy and fuel. The energy markets remain stubborn because it is driven by geopolitical conflicts and high wholesale prices. But we expect the market to settle and stabilise in the next 2 years. We continue to acquire our energy by means of a hybrid model through fixing our non-commodity costs and hedging our energy requirements on the wholesale market.
During the first 35 weeks of the current year like for like sales increased by 2.5%. With the subdued market, and the ongoing, and ever increasing, pressures on the hospitality sector, we continue to focus on improving efficiency and productivity whilst striving to protect margins and profitability. The pressure on food margins, energy costs, wages and employment costs, as well as the loss of business rate relief have all conspired to create a perfect storm of operational and financial challenges. The guest can only deal with so many price increases. We are doing all we can to minimise those increases without reducing our margins.
For the reasons outlined above, 2025 is a year that continues to be challenging. However, we are optimistic because we are a premium, mainly freehold business that is well established, has a skilled and loyal team, and is ready to take the opportunity to expand when the conditions improve.
As indicated above, investor sentiment towards our sector is at an all-time low. Despite that we shall keep an eye open for any creative opportunity that might arise. It is the Company’s intention to create liquidity for shareholders by introducing a matched bargain service (Asset Match) which we shall launch within the next quarter, subject to shareholder approval.
Going Concern
The company has a strong management team, a high-quality estate that is being continually enhanced, and a strong balance sheet. Given the willingness and support entrusted in the company from both the existing and new bank, the directors therefore have a reasonable expectation that the company is a going concern for at least 12 months from the date of signing the accounts.
On behalf of the board
The directors present their annual report and financial statements for the Period ended 28 September 2024.
The results for the Period are set out on page 12.
No ordinary dividends were paid.
The directors who held office during the Period and up to the date of signature of the financial statements were as follows:
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.
Saffery LLP have expressed their willingness to continue in office.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Brewhouse & Kitchen Limited (the 'parent company') and its subsidiaries (the 'group') for the Period ended 28 September 2024 which comprise the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, 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 FRS 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 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 Period 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 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 parent company by discussions with directors and by 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.
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 group and parent company financial statement disclosures. We reviewed the parent 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.
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 loss for the year was £424,177 (2023 - £1,172,920 loss).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
Brewhouse & Kitchen Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is The Old Mill House, Merretts Mills Industrial Centre, Woodchester, Stroud, Gloucestershire, GL5 5EX.
The group consists of Brewhouse & Kitchen Limited and its dormant subsidiary.
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 certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The group financial statements incorporate those of Tafarnau Cymru Cyf. In 2019 the trade and assets of Tafarnau Cymru Cyf were hived up to Brewhouse & Kitchen Limited and the subsidiary has remained dormant since that point.
All financial statements are made up to 28 September 2024.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
The strategic report covers this in greater detail.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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 income statement.
In the parent company financial statements, 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 period end date, the company reviews the carrying amounts of its tangible 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).
Recoverable amount is the higher of fair value less costs to sell and value in use.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
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 statement of financial position 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.
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.
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 income statement 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, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
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.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
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 company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Judgement is used to identify and determine whether an item should be classified as Exceptional so to separately disclose and not affect the underlying performance. This involves the nature of the item as well as size and frequency.
Estimation is required to determine whether any impairment is required for Property, plant and equipment. These are based on value in use and fair values which are derived from external valuations and market conditions.
The share based payment cost requires an estimation using an appropriate valuation model. The Black-Scholes model being used involves volatility of shares and life of granted options. This determines the cost required for the period.
The average monthly number of persons (including directors) employed by the group and company during the Period was:
Their aggregate remuneration comprised:
The actual charge for the Period can be reconciled to the expected credit for the Period based on the profit or loss and the standard rate of tax as follows:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
A third party valuation was carried out in the prior year and impairments were recognised in respect of two freehold sites owned by the entity and group.
More information on impairment movements in the Period is given in note 12.
Details of the company's subsidiaries at 28 September 2024 are as follows:
The registered office address of the subsidiaries is:
Brewhouse & Kitchen Ltd C/O Tba Solutions Ltd
The Old Mill House
Merretts Mills Industrial Centre
Woodchester
Stroud Glos, England
GL5 5EX
Included within other debtors is an amount of £71,250 (2023: £71,250) relating to property deposits which fall due after more than one year.
At at the year end date, the bank loan and the loan note facility were due to mature in March 2025 and September 2025, respectively. However, as detailed in Note 25, the company has since undertaken a refinancing exercise to extend its financing arrangement to a five-year term.
The bank loan is secured on the freehold and leasehold properties of the company. Interest is payable on the loan at the Bank of England base rate plus 2.5% on the principal amount.
In the prior period the company entered into new loan facilities which was secured by a fixed charge over a number of the freehold properties held by the company. Interest is payable on the loan facilities at 7.5% + SONIA on the outstanding commitment.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Total tax losses carried forward are £8,052,613 (2023: £8,326,833). Recognition of an asset on these losses has been restricted to the extent that they offset the capital allowances.
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.
The company has a share based option scheme for certain employees.
Options are exercisable at a price equal to the estimated fair value of the company's shares on the date of grant. The vesting period is three years and the options can be exercised for a period of seven years once vested, subject to certain performance criteria. Options are forfeited if the employee leaves the company before the options vest.
The fair value of the share options at the grant date was calculated using the Black Scholes model, which is considered to be the most appropriate generally accepted valuation method of measuring fair value.
Details of the share options outstanding at the period end are as follows:
The options outstanding at 28 September 2024 had an exercise price of £1.00, and a remaining contractual life of 1 year.
During the period, the Group & Company recognised total share-based payment expenses of £nil (2023: £32,397) which related to equity settled share based payment transactions.
All share classes rank pari passu in respect of distributions to shareholders. B Ordinary shares do not carry any entitlement for the holder to attend or vote at Annual General Meetings, whilst Ordinary and A Ordinary shares rank pari passu in respect of voting rights.
Distributions to the respective share classes on an exit event or winding up of the company vary dependent upon the nature of the exit event.
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:
Subsequent to the reporting date, the company entered into a new £4 million loan facility with LHV Bank on a 5-year term, fully refinancing its existing loan provider. In addition, the existing loan agreement with Barclays Bank plc has been extended for a further 5 years.
These financing arrangements do not impact the financial position as of the reporting date but provide enhanced funding stability for the company moving forward.
The remuneration of key management personnel is as follows.
During the period, the company was invoiced £90,000 (2023: £90,000) for management services by Comportamento Limited, a company related by virtue of common directorship of Simon Bunn. At 28 September 2024 a total of £nil (2023: £15,395) was owed by the company to Comportamento Limited.
During the period the company was invoiced £80,000 (2023: £80,000) for management services by Ardour Consulting Limited, a company related by virtue of common directorship of Kristian Gumbrell. At 30 September 2024 a total of £nil (2022: £11,427) was owed by Ardour Consulting Limited to the company.
During the period the company received franchise fees of £195,000 (2023: £195,000) under franchise arrangements with Hot Copper Pub Company Limited, a company with common directorship of Kristian Gumbrell and Simon Bunn. A further £24,780 (2023: £26,686) was recharged from Brewhouse & Kitchen Limited in respect of other intercompany recharges. At 28 September 2024 the company was owed a total of £57,805 (2023: £65,971) by Hot Copper Pub Company Limited.
During the period the company recognised franchise income of £39,000 (2023: £39,000) in respect of the operation of sites for and on behalf of Warm Hearth Limited, a related company by virtue of Ian Lishman who qualifies as key management personnel for both companies. A further £4,800 (2023: £5,563) was recharged to Warm Hearth Limited in respect of other intercompany recharges. At 28 September 2024 the company owed a total of £1,923 (2023: £22,540) to Warm Hearth Limited.
During the period the company recognised franchise income of £39,000 (2023: £78,000) in respect of the operation of sites for and on behalf of Knott End Pub Company Limited, a related company by virtue of Kristian Gumbrell who qualifies as key management personnel for both companies. A further £4,800 (2023: £10,363) was recharged to Knott End Pub Company in respect of other intercompany recharges. At 28 September 2024 the company was owed a total of £13,304 (2023: £43,025) by Knott End Pub Company Limited
The connected company debtors are unsecured and repayable on demand.