The directors present the strategic report for the year ended 30 November 2023.
During the period under review, the hotel navigated several significant challenges while making strategic improvements to enhance long-term performance.
The previous year's increase in utility costs continued to pressure financial outcomes. Additionally, the rise in interest rates, staffing issues, and supply chain disruptions further hampered profitability. Despite efforts, there was increased reliance on third-party agencies, and it was not possible to fully pass on the inflationary increases to customers, leading to a strain on margins. As a result, the group had a loss before tax of £244,551 for the year ended 30 November 2023, compared to a profit before tax of £150,045 for the year ended 30 November 2022.
In response to these challenges, strategic investment was necessary. The installation of a new hot water system and the upgrade of the plant room these are expected to improve operational efficiencies. Furthermore, the completion of the 45 refurbished bedrooms was finalised to cater to the family market, building on the hotel's family ethos and values.
Changes in compliance requirements and potential legal challenges necessitated the introduction of new Training and H&S software and tracking platforms. These measures were implemented to mitigate uncertainties and manage additional costs effectively.
The rapid pace of technological and marketing change underscores the need for continuous investment, and there is a commitment to making these necessary enhancements throughout 2024 to maintain a competitive edge.
The group balance sheet weakened with total equity as at 30 November 2023 being £54,787 compared with total equity of £595,195 as at 30 November 2022. This is mainly as a result of the losses arising and the revaluation of freehold land and buildings.
The hotel and leisure sector faces several ongoing risks and uncertainties. The economic downturn, changes in consumer spending patterns, and fluctuations in tourism significantly impact our industry. Additionally, the continued fluctuations in the Bank of England interest rates pose further challenges.
The directors are keenly aware of these risks and are proactively managing them. Close monitoring of working capital requirements and strategic product investment will secure a stable future for the hotel.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 November 2023.
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The group aims to mitigate liquidity risk and cash flow risk by managing working capital, and as a result, it continues to closely monitor the working capital requirements. In addition, the directors continue to work with group's bank to ensure that these working capital requirements are met.
Future developments include a continuing program of refurbishment in order to maintain standards and increase revenue. In addition, there is an ongoing centralisation and restructure of resources for cost-saving efficiencies. The company continues to invest in staff welfare, training and development along with improved staff communication to ensure that the key policy of maintaining high customer service and satisfaction is met. In addition, there is an emphasis on fostering business relationships with suppliers to maintain cost control.
The directors have considered the financial position of the group and its ability to continue as a going concern. The group is reliant on the support of its directors, bankers, and other related parties to meet its liabilities as they fall due. The group balance sheet shows net current liabilities of £13.5m and a fall in net assets to £54,787. The net current liabilities include bank loans of £8.8m which were refinanced with a new lender post year end. The new bank loan has a final repayment date of 4 March 2029. The consolidated financial statements show a loss after tax of £308,925 for the year ended 30 November 2023, compared to a loss after tax of £23,118 for the previous year. These conditions indicate the existence of a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern. However, the directors have a reasonable expectation that the group will continue to operate and meet its liabilities as they fall due, and therefore, the financial statements have been prepared on a going concern basis.
Morris Lane were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of Langstone Quays Hotel Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 November 2023 which comprise the group income statement, 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 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Material uncertainty related to going concern
We draw your attention to note 1.4 in the financial statements, which indicates that the group has incurred a net loss of £308,925 during the year ended 30 November 2023 and, as of that date, the group had a net current liabilities of £13.5m. These conditions, along with other matters as set forth in note 1.4, indicate that a material uncertainty exists that may cast significant doubt on the group’s ability 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.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
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.
Identifying and assessing the risks of material misstatement due to irregularities, including fraud
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and the parent company through discussion with the directors and from our general commercial experience. The identified laws and regulations were communicated to the audit team in order that they remained alert to any non-compliance throughout the audit.
The group and parent company are subject to laws and regulations which have a direct effect on the financial statements and the disclosures contained therein. These have been identified as: the financial reporting framework under which the group and company operates - Financial Reporting Standard 102; Statutory Instrument 2008/410 – The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008; the Companies Act 2006 and taxation legislation including pay as you earn; value added tax; corporation tax and pensions legislation.
In addition to the above, the group and parent company are subject to other operational laws and regulations where non-compliance may have a material effect on the financial statements. Non-compliance of such laws and regulations may result in litigation, the imposition of fines or the closure of the business which could have a material impact on amounts or disclosures in the financial statements. We have identified the following laws and regulations which are more likely to have significant effect as: compliance with licencing laws; food hygiene laws; health and safety laws; General Data Protection Regulation (GDPR) and employment law.
Audit procedures designed to respond to the risks of material misstatement due to irregularities, including fraud
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statements items including a review of financial statements disclosures. We reviewed the group and 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 group and 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 senior statutory auditor 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 possible indication of management bias. At the completion stage of the audit, the senior statutory auditor'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.
Auditing standards limit the audit procedures required to identify non-compliance with other operational laws and regulations to enquiry of directors and management and inspection of any correspondence. If a breach of operational regulations is not evident from relevant correspondence or disclosed to us, an audit is unlikely to detect that breach. In addition, the further removed non-compliance with laws and regulations is from the events and transactions included in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting to an error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Due to the inherent limitations of an audit, there is an unavoidable risk that, despite properly planning and performing our audit in accordance with accounting standards, some material misstatements may not have been detected.
In addition, the risk of not detecting material misstatement from due to fraud is higher than the risk of one not being detected through error as fraud may involve deliberate concealment through collusion, forgery, misrepresentations and intentional omissions.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The income statement has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s loss for the year was £1,077,036 (2022 - £1,045,618 loss).
Langstone Quays Hotel Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Lion Quays Hotel & Spa, Weston Rhyn, Gobowen, Oswestry, Shropshire, SY11 3EN. The principle place of business is Langstone Hotel, Northney Road, Hayling Island, PO11 0NQ.
The group consists of Langstone Quays Hotel Limited and its 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 £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: The disclosure requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c), 12.26, 12.27, 12.29(a), 12.29(b), and 12.29A;
Section 26 ‘Share based Payment’: Share based payment arrangements required under FRS 102 paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Langstone Quays Hotel Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 30 November 2023. 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 directors have considered the financial position of the group and its ability to continue as a going concern. The group is reliant on the support of its directors, bankers, and other related parties to meet its liabilities as they fall due. The group balance sheet shows net current liabilities of £13.5m and a fall in net assets to £54,787.The net current liabilities include bank loans of £8.8m which were refinanced with a new lender post year end. The new bank loan has a final repayment date of 4 March 2029. The consolidated financial statements show losses after tax of £308,925 for the year ended 30 November 2023, compared to a loss after tax of £23,118 for the previous year. This increase in losses has negatively impacted the group's cash flow and its ability to pay its liabilities as they fall due. These conditions indicate the existence of a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern. However, the directors have a reasonable expectation that the group will continue to operate and meet its liabilities as they fall due, and therefore, the financial statements have been prepared on a going concern basis.
Revenue 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.
Revenue is recognised as follows:
Rooms
Revenue is recognised when the rooms are occupied.
Food and beverages
Revenue is recognised at the point of sale, when the food and beverages have been provided.
Health club and spa memberships
Revenue is recognised over the period of membership.
Health club and spa treatments and products
Revenue is recognised when the goods or service has been provided.
Deferred revenue consisting of deposits paid in advance are recognised on the day that services are performed.
Freehold land is not depreciated.
During the period, the group revised the depreciation rates of certain fixed assets to better reflect their expected useful lives. This change in estimate was applied prospectively from 1 December 2022. As a result, the accumulated depreciation was recalculated, leading to a reduction of £74,331 in the current period's depreciation charge.
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.
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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
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 profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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 trade and other receivables 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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including trade and other payables, 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 payables 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 payables 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 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. Deferred tax is charged or credited in the income statement, 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 non-current 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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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.
Freehold property represents the company's most significant asset and is assessed to have a useful life of 50 years and is carried at a revalued amount, being its fair value at the date of revaluation less any subsequent depreciation.
The value of freehold property as at 30 November 2023 was determined based on an external valuation, having regards to factors such as current and future projected income levels, location and recent market residual value of the company's property which are determined by management and reviewed annually for appropriateness.
An analysis of the group's revenue is as follows:
The whole of the turnover is attributable to the group's principal activity wholly undertaken in the United Kingdom.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Included in employee remuneration above is £217,584 (2022 - £222,065) of employee costs recharged to the company from a related party hotel.
The remuneration is in respect of directors' salary recharged from a related party hotel.
The actual charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:
Property, plant and equipment with a carrying amount of £14,000,000 (2022 - £14,500,000) have been pledged to secure borrowings of the group and that of a company under common control. Additional information is given in notes 18 and 23.
The value of freehold land and buildings as at 30 November 2023 was determined based on a valuation performed on 30 January 2024 by Aitchison Raffety, independent valuers not connected to the company on the basis of market value. The valuation conforms to RICS Valuation - Global Standards and is based on an income approach having regard the property's trading potential.
Freehold land and buildings are carried at valuation. If the assets were measured using the cost model, the carrying amounts would be as follows:
Details of the company's subsidiaries at 30 November 2023 are as follows:
The registered office of the above subsidiary is Lion Quays Hotel & Spa, Weston Rhyn, Gobowen, Oswestry, Shropshire, SY11 3EN.
The carrying amount of inventories includes £47,310 (2022 - £60,744) pledged as security for liabilities. Additional information is given in notes 18 and 23.
The carrying amount of trade and other receivable includes £313,563 (2022 - £228,744) pledged as security for liabilities. Additional information is given in notes 18 and 23.
Included in bank loans above, is a loan of £8,498,425 (2022: £ 9,023,725), which is repayable by instalments with a final repayment date of 31 July 2024. Interest was charged on the loan at 2.1% above SONIA per annum until 12 October 2023, and 3% above SONIA per annum thereafter.
Also included in bank loans is a loan of £338,028 (2022: £448,639), which is being repaid by instalments with a final repayment date of 1 December 2026. Interest was charged on the loan at 4.25% above base rate per annum. This loan has been shown as fully repayable within one year as the group breached some of the financial covenants set by the lenders.
The bank loans are secured by a fixed and floating charge over assets of the group and of Lion Quays Hotel Limited, a company under common control.
Subsequent to the year end, all bank loans were refinanced with a new lender. The new bank loan is repayable by instalments with a final repayment date of 4 March 2029.
The loans from related parties are interest free, unsecured and repayable on demand.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Of the group's deferred tax liability set out above, an amount of £35,192 relating to accelerated capital allowances and £57,909 relating to revaluations are expected to reverse within 12 months.
Of the company's deferred tax liability set out above, an amount of £23,628 relating to accelerated capital allowances and £57,909 relating to revaluations are expected to reverse within 12 months.
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 operates a defined contribution pension scheme for its employees. Included in the balance sheet are pensions commitments of £18,056 (2022 - £4,730).
Revaluation reserve relates to the unrealised profit on the remeasurement of freehold land and buildings at fair value together with annual deferred tax adjustments.
Retained earnings represents cumulative profits or losses net of dividends paid and other adjustments.
The group has provided security for the borrowings of Lion Quays Hotel Limited, a company under common control, by way of a fixed and floating charge over all the assets of the company. As at 30 November 2023, the maximum exposure of the group under the guarantee was £5,993,406 (2022 - £6,463,865).
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The loans to and from related parties above are interest free and repayable on demand.
Additional related party information is given in notes 6, 7, 18, and 23,
The carrying value of the freehold property as at 30 November 2022 was adjusted to reflect the market value of the property as at that date. This adjustment results in a decrease in tangible fixed assets and a decrease in revaluation reserve of £1,771,448 in the prior year.
A deferred tax adjustment is needed in line with the revaluation adjustment in note 1 above. This results in a decrease in deferred tax liability and an increase in revaluation reserve of £442,862 in the prior year.
Tangible fixed assets totalling £1,866,135 previously accounted for in the subsidiary's financial statements as fixtures and fittings have been transferred to the parent entity's financial statements and treated as freehold property. This correction results in an increase in retained profit brought forward of £180,399 and a decrease in the depreciation charge of £123,054 in the prior year.
Due to changes in fixed assets as noted above, the deferred tax on capital allowances has been adjusted. This correction results in an increase of £88,638 in the deferred tax charge and the deferred tax liability in the prior year.
Loans due to entities under common control totalling £1,131,451 in the prior year have been reclassified from long-term liabilities to short term. As a result, the loan amount is now classified as a current liability.
This is in respect of interest charged on the directors' loan in prior years. This adjustment results in a decrease of £256,852 in the directors' loan, an increase of £197,941 in retained earnings brought forward and a decrease of £58,911 in finance costs in the prior year.
In 2018, when the property was acquired as part of a business acquisition, £4,200,000 was allocated to intangible fixed assets instead of property, plant and equipment. To correct this, a prior year adjustment has been processed, resulting in the reduction of intangible fixed assets, a decrease in the revaluation reserve of £2,833,700, an increase in retained earnings brought forward of £1,075,590, the removal of the amortisation charge of £420,000, and an increase in the depreciation charge of £97,323 in the prior year. The comparative figures for the year ended 30 November 2022 have been restated to reflect these adjustments.
The carrying value of the freehold property as at 30 November 2022 was adjusted to reflect the market value of the property as at that date. This adjustment results in a decrease of £1,771,448 in tangible fixed assets and a decrease of £1,771,448 in revaluation reserve in the prior year.
A deferred tax adjustment is needed in line with the revaluation adjustment in note 1 above. This results in a decrease in deferred tax liability and an increase in revaluation reserve of £442,862 in the prior year.
Tangible fixed assets previously accounted for in the subsidiary's financial statements have been transferred to the parent entity's financial statements. This correction results in an increase in amount due to the subsidiary of £1,866,135, a decrease in retained profit brought forward of £407,699, an increase in the depreciation charge for the year of £146,440 and an increase in tangible fixed assets of £1,311,997 in the prior year.
Due to changes in fixed assets as noted above, the deferred tax on capital allowances has been adjusted. This correction results in an increase of £161,477 in the deferred tax charge and the deferred tax liability in the prior year.
Loans due to entities under common control totalling £179,677 in the prior year have been reclassified from long-term liabilities to short term. As a result, the loan amount is now classified as a current liability.
The loan due to the subsidiary in the prior year of £3,208,814 has been reclassified from long-term to short term. Consequently, the loan amount is now classified as a current liability.
This is in respect of interest charged on the directors' loan in prior years. This adjustment results in a decrease of £256,852 in the directors loan, an increase of £197,941 in retained earnings brought forward and a decease of £58,911 in finance costs in the previous year.
8. Correct prior year intangible fixed assets allocation
In 2018, when the property was acquired as part of a business acquisition, £4,200,000 was allocated to intangible fixed assets instead of property, plant and equipment. To correct this, a prior year adjustment has been processed, resulting in a reduction in intangible fixed assets, a decrease in the revaluation reserve of £2,833,700, an increase in retained earnings brought forward of £1,075,590, the removal of the amortisation charge of £420,000, and an increase in the depreciation charge of £97,323 in the prior year. The comparative figures for the year ended 30 November 2022 have been restated to reflect these adjustments.