The directors present their annual report and financial statements for the period ended 30 June 2024.
The company's accounting reference date is 27 June 2024 however, the company has taken advantage of the option available under S390(3) of the Companies Act 2006 to prepare its group financial statements for the period to 30 June 2024.
The results for the period are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The Group has reported a loss after tax of £492.3k , has net liabilities of £451.5k at the balance sheet date. In assessing the ability of the Group to continue as a going concern, the directors have taken into consideration the financial implications of the group restructuring that has taken place post year end (see note 16) and have made enquiries into the adequacy of the Group' financial resources, through a review of their budget and medium-term financial plan, including cash flow forecasts for the remaining group post-restructure. The remaining group will consist of the operation of the Devil's Advocate Limited and Bon Vivant Limited company only operations.
The Group has modelled a ‘base case’ forecast in which recent momentum of sales, profit and cash flow growth is sustained. Within this forecast, the Group has anticipated continued high level of inflation, particularly on wages, utility costs and business development. The base case scenario indicates that the Group will have sufficient resources to continue to settle its liabilities as they fall due and operate within its financial covenants for the going concern assessment period.
At the period end, the Group and Company had bank loans payable of £1.4m. The directors are satisfied that the Group and Company will have access to sufficient bank loan facilities for a minimum period of 12 months from the date of approval of these financial statements.
The company’s parent has indicated that it will continue to provide financial support to the Company and will not call for the repayment of the amount owing for at least a period of 12 months from the signing of the financial statements.
After due consideration of the matters set out above, the directors have satisfied themselves that the Group will 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 Devil’s Advocate Group has committed to a restructuring exercise post year-end that will result in the cessation of trade of El Cartel Mexicana Limited and Bacchus & Liber Limited, entities over which the company has control, and the transfer of the trade and assets of Lady Libertine Limited to St Andrew Square (Property) Limited, an entity under common control. In considering the impact of the restructuring exercise, the directors were clear that the decision, as well as accelerating progress with the core strategic medium-term goals of increasing adjusted EBITDA and deleveraging the Group, was also in the interests of suppliers and other stakeholders.
The Group had faced difficulties during the Covid pandemic and the subsequent cost-of-living crisis, hence the decision taken is to enable the Group to place greater focus on enhancing performance within the remaining companies across the Group as well as supporting the transfer of the Lady Libertine restaurant to St Andrew Square (Property) Limited in order to complement the current offering at The Edinburgh Grand and The Register Club which will achieve an improved commercial outlook on a wider group basis.
Following an assessment by the directors, no adjustments have been made in the financial statements for impairment of assets or the recognition of onerous contracts as a result of the group restructuring exercise. The result of the restructuring significantly improves the outlook of the Group and continues to hold sufficient headroom within its covenants.
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
We have audited the financial statements of Devil's Advocate Limited ('the parent company') and its subsidiaries ('the group') for the period ended 30 June 2024, which comprise the Group Statement of Comprehensive Income, Group Balance Sheet, Company Balance Sheet, Group Statement of Changes in Equity, Company Statement of Changes in Equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
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 or 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
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 Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
The Directors' Report have been prepared in accordance with applicable legal requirements.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and the parent company and the sector in which they operate, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
Companies Act 2006;
Corporation Tax legislation;
VAT legislation; and
UK Generally Accepted Accounting Practice.
We gained an understanding of how the group and the parent company are complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through out review of submitted returns, external inspections, relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the group's and parent company's financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk. We identified a heightened fraud risk in relation to:
Management override of controls; and
Revenue recognition
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing the level of and reasoning behind the group's and parent company's procurement of legal and professional services;
Performing audit procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and assessing judgements made by management in their calculation of accounting estimates for potential management bias;
For each material revenue stream, verifying the revenue for occurrence and completeness through reviewing a sample of transactions to supporting documentation and tracing to bank statements as appropriate;
Completion of appropriate checklists and use of our experience to assess the group's and parent company's compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that 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 international concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed 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.
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 auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company's members as a body for oru 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 period was £292,878 (2023: £114,145 profit).
Devil's Advocate Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is 7 Advocates Close, Edinburgh, EH1 1ND.
The group consists of Devil's Advocate Limited and all of its subsidiaries.
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 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
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 £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
Under Section 1A Small Entities of FRS 102 the company is not required to prepare a cash flow statement.
The consolidated group financial statements consist of the financial statements of the parent company Devil's Advocate Limited and all of its subsidiaries (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits).
All financial statements are made up to 30 June 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The Group has reported a loss after tax of £492.3k , has net liabilities of £451.5k at the balance sheet date. In assessing the ability of the Group to continue as a going concern, the directors have taken into consideration the financial implications of the group restructuring that has taken place post year end (see note 16) and have made enquiries into the adequacy of the Group' financial resources, through a review of their budget and medium-term financial plan, including cash flow forecasts for the remaining group post-restructure. The remaining group will consist of the operation of the Devil's Advocate Limited and Bon Vivant Limited company only operations.
The Group has modelled a ‘base case’ forecast in which recent momentum of sales, profit and cash flow growth is sustained. Within this forecast, the Group has anticipated continued high level of inflation, particularly on wages, utility costs and business development. The base case scenario indicates that the Group will have sufficient resources to continue to settle its liabilities as they fall due and operate within its financial covenants for the going concern assessment period.
At the period end, the Group and Company had bank loans payable of £1.4m. The directors are satisfied that the Group and Company will have access to sufficient bank loan facilities for a minimum period of 12 months from the date of approval of these financial statements.
The company’s parent has indicated that it will continue to provide financial support to the Company and will not call for the repayment of the amount owing for at least a period of 12 months from the signing of the financial statements.
After due consideration of the matters set out above, the directors have satisfied themselves that the Group will 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 company has taken the option available under s390(3) of the Companies Act 2006 and prepared its financial statements to 30 June 2024. The financial statements for the current period therefore cover the period from 26 June 2023 to 30 June 2024 with the comparative period covering 27 June 2022 to 25 June 2023. As a result, comparative amounts presented in the financial statements (including the related notes) are not entirely comparable.
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 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 statement of comprehensive income.
In the parent company financial statements, interests in subsidiaries entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in the statement of comprehensive income.
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.
At each reporting period end date, the group 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). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the statement of comprehensive income.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include certain debtors and cash and bank balances, 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 assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the statement of comprehensive income.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the statement of comprehensive income.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including certain 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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income 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. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is 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.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
At each reporting period end date, the directors review the carrying value of the group's fixed 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). The assessment of recoverable amount involves judgement over net sales value and future cash generation attributable to the underlying assets.
The carrying value of the group's tangible fixed assets is outlined at note 5.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Details of the company's subsidiaries at 30 June 2024 are as follows:
The registered office of Bon V Limited, Lady Libertine Limited and El Cartel Mexicana Ltd is 7 Advocate's Close, Edinburgh, EH1 1ND.
Bon V Limited (Company registration number SC448443), Lady Libertine Ltd (Company registration number SC611811), Bacchus&Liber Ltd (Company registration number SC393359) and El Cartel Mexicana Ltd (Company registration number SC571805) have taken the exemption from the requirement to have their individual financial statements audited. This exemption is available under section 479A of the Companies Act 2006.
* Nature of business is relevant for the period which these financial statements have been prepared. See note 16 for restructuring details which have impacted the future nature of business.
Amounts owed by group undertakings are interest free and repayable on demand.
Other debtors includes amounts owed by companies under common control of £8,920 (2023: £38,943).
Bank loans above are secured by way of a floating charge held over the company's property and undertakings. There is also a cross company guarantee in place in respect of a floating charge over the property and undertakings of the subsidiary companies within the group.
Amounts owed to group undertakings are interest free and repayable on demand.
Other creditors included amounts owed to companies under common control of £290,566 (2023: £185,077) and preference shares which are classified as liabilities of £250,000 (2023: £250,000).
Bank loans above are secured by way of a floating charge held over the company's property and undertakings. There is also a cross company guarantee in place in respect of a floating charge over the property and undertakings of the subsidiary companies within the group.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, as follows:
Following an operational decision taken post year-end, the lease of the unit at 15-16 Teviot Place was terminated on 23 September 2024, thus reducing the contracted minimum lease payments to £2,404,481.
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
In addition to the above balances, £60,000 (2023: £60,000) was due by the company and group to a company director at the reporting date.
The Devil’s Advocate Group has committed to a restructuring exercise post year-end that will result in the cessation of trade of El Cartel Mexicana Limited and Bacchus & Liber Limited, entities over which the company has control, and the transfer of the trade and assets of Lady Libertine Limited to St Andrew Square (Property) Limited, an entity under common control. In considering the impact of the restructuring exercise, the directors were clear that the decision, as well as accelerating progress with the core strategic medium-term goals of increasing adjusted EBITDA and deleveraging the Group, was also in the interests of suppliers and other stakeholders.
The Group had faced difficulties during the Covid pandemic and the subsequent cost-of-living crisis, hence the decision taken is to enable the Group to place greater focus on enhancing performance within the remaining companies across the Group as well as supporting the transfer of the Lady Libertine restaurant to St Andrew Square (Property) Limited in order to complement the current offering at The Edinburgh Grand and The Register Club which will achieve an improved commercial outlook on a wider group basis.
Following an assessment by the directors, no adjustments have been made in the financial statements for impairment of assets or the recognition of onerous contracts as a result of the group restructuring exercise. The result of the restructuring significantly improves the outlook of the Group and continues to hold sufficient headroom within its covenants.