The directors present the strategic report for the year ended 31 December 2024.

The company owns Down Hall Hotel, one of England’s most established country house hotels located in Hatfield Heath, near Bishop’s Stortford on the Hertfordshire and Essex border.

During the year ended 31 December 2024, the hotel continued to face the challenges presented by domestic and global social, economic and political issues. Those challenges are reflected by increased costs of operation, interest charges on borrowings, supply shortages and a tight labour market. However, the hotel continues to adapt effectively to these challenges and to navigate through them. Despite the obstacles, the hotel has shown resilience and has successfully adjusted its operations to meet the evolving demands of the current domestic and global environment.

There are several principal risks and uncertainties that impact operations and financial performance of the company:

Economic conditions: Fluctuations in the overall economic environment, such as recessions or downturns, can have a significant impact on the demand for hotel services. Reduced consumer spending, decreased business travel, and lower discretionary income can lead to decreased occupancy rates and revenue.

Competitive landscape: The hotel industry is highly competitive. Increased competition, emergence of alternative accommodation options, and changing customer preferences can pose risks to hotel profitability.

Market demand and seasonality: Demand for hotel accommodation can vary significantly based on factors such as travel trends, local events and seasonality.

Operational risks: The hotel can face operational risks such as maintenance issues, supply chain disruptions, technology failures, and regulatory compliance. These risks can result in reputational damage, guest dissatisfaction, increased costs, or even legal consequences.

Health and safety concerns: The hotel industry is particularly sensitive to health and safety concerns, including outbreaks of diseases, natural disasters, or other unforeseen events. Such incidents can lead to reduced travel, cancellations, or changes in travel patterns, negatively impacting hotel performance.

Environmental factors: The hotel must contend with environmental risks such as climate change, natural disasters, and sustainability expectations. These factors can affect infrastructure, property damage, insurance costs, and operational efficiencies.

Financial risks: The hotel faces financial risks and uncertainties related to the use of financial instruments. The directors' report aims to provide a comprehensive understanding of how the company utilises financial instruments to support its operations and manage financial risks effectively.

The directors monitor and manage these risks effectively through comprehensive risk assessment, contingency planning, strategic pricing, brand differentiation, investment in technology, and continuous adaptation to changing market dynamics. Throughout the year, the company remained committed to investing in its infrastructure to ensure ongoing sustainability. Significant investments continue to be made in renovation projects aimed at enhancing the overall hospitality experience and ensuring that the hotel can meet the demands and expectations of its guests. These renovations have positively contributed to the hotel's ability to deliver exceptional service, improve guest satisfaction, and maintain a competitive edge in the market. By continually investing in the property, the company strives to provide a welcoming and comfortable environment that exceeds guest expectations and fosters long-term loyalty.

During the year ended 31 December 2024, revenue increased from £7,705,370 to £8,620,508, resulting in an operating profit of £465,998 (2023: £198,837). The company made a small loss before taxation of £20,585 during the year ended 31 December 2024 (2023: loss of £297,758).

Net current liabilities at 31 December 2024 were £13,273,904 (2023: £18,822,128) and net liabilities at 31 December 2024 were £779,824 (2023: £373,903). Such amounts include loans from the parent company, amounting to £12,523,000 (2023: £12,523,000). The parent company has pledged its continuing support.

The directors consider the company's financial position and future prospects at 31 December 2024 to be in line with expectations.

The directors receive monthly divisional updates in order to track and assess key performance indicators (“KPIs”) against targets set every year. The KPIs monitored include gross profit and operating profit.

• Gross profit: £2,195,031 (2023: £1,755,097)

• Gross profit percentage: 25.46% (2023: 22.78%)

• Operating profit: £465,998 (2023: £198,837)

• Operating profit percentage: 5.41% (2023: 2.58%)

The directors are cautiously optimistic about the company’s future prospects and will continue to prioritise investment in its people to enable it to deliver excellent guest service, continue the renovation work and further development of the hotel.

The directors are pleased to report that the company continues to operate as a going concern. Despite the current domestic and global political, social and economic issues, the hotel has shown resilience and is on a continuing path of financial improvement.

The positive trends observed in the industry are promising. The management team continue to work diligently to adapt the hotel's operations to address the new economic challenges and changing conditions in the industry. Ongoing renovations to the hotel continue to attract guests, resulting in reasonable occupancy levels. This has contributed to improved financial performance and stability. With available capacity in occupancy levels, the directors are confident that the improvements in financial performance witnessed to date will continue.

The company renewed its bank loan facility in June 2024. Under the terms of the new facility, the loan is repayable in June 2029.

On the basis of the parent company’s support, the renewed availability of bank loan facilities and the financial projections prepared, the directors are of the opinion that the company will continue to possess the ability to meet its financial obligations as they fall due and therefore consider it appropriate to adopt the going concern basis in preparing the financial statements.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2024.

The company's principal activity is that of a hotelier.

The business review, future developments, financial risk and going concern are included in the strategic report.

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year up to the date of the signature of the financial statements were as follows:

The company operates a treasury function which is responsible for managing the liquidity, interest and foreign currency risks associated with the company’s activities. As the company has significant borrowings, credit and liquidity risks are particularly important. The loan facility was renewed in June 2024 and is now available to the company until June 2029. The directors have sufficient expertise to manage these risks.

The directors maintain strong internal policies and procedures to ensure that liquidity risk is suitably managed. Monthly performance reports, forecasts and cash flows are reviewed and action taken where appropriate.

The company’s principal financial instruments could include derivative financial instruments, the purpose of which is to manage currency risks and interest rate risks arising from the company’s activities, and bank overdrafts and loans, the main purpose of which is to raise finance for the company’s operations. In addition, the company has various other financial assets and liabilities such as trade debtors and trade creditors arising directly from its operations. In accordance with company’s treasury policy, derivative instruments are not entered into for speculative purposes.

The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.

The company is exposed to fair value interest rate risk on its fixed rate borrowings and cash flow interest rate risk on floating rate deposits, bank overdrafts and loans. The company permits to use interest rate derivatives to manage the mix of fixed and variable rate debt so as to reduce its exposure to changes in interest rates. An interest rate swap contract was entered into during the year to mitigate interest risk. It is the company’s policy not to apply hedge accounting to this financial instrument.

The company’s principal currency is sterling therefore the risk exposure is low.

Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which must fulfil credit rating criteria approved by the Board. All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.

Having reviewed the company’s exposure to credit risk, liquidity risk and cash flow risk, the directors are of the view that these are manageable notwithstanding adverse market conditions.

The company continues to develop new processes and services to improve and enhance its customer service and customer experience.

The auditor, PK Audit LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

The company is not required to present an energy and carbon report, as it qualifies for an exemption based on its classification as a medium-sized company.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Down Hall Hotel Limited (the 'company') for the year ended 31 December 2024 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the 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).

In our opinion the financial statements:

• give a true and fair view of the state of the company's affairs as at 31 December 2024 and of its loss for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the 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.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the 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, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

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 company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

• the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;

• we identified the laws and regulations applicable to the company through discussions with the directors and from our commercial knowledge and experience of the sector; we focused on those laws and regulations which we considered may have a direct material effect on the financial statements or the company's operations, including the Companies Act 2006, taxation legislation, data protection, employment, environmental and health and safety legislation;

• we assessed the extent of compliance with the laws and regulations identified above through enquiries of management;

• we enquired of the company's solicitor and insurer as to whether there have been any litigation and claims;

• identified laws and regulations were communicated within the audit team who remained alert to instances of non-compliance throughout the audit;

• we assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by making enquiries of management as to where they considered there was susceptibility to fraud and their knowledge of actual, suspected and alleged fraud; and

• we considered the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.

Based on our understanding of the company and industry, and through discussion with the directors and other management, we identified that the principal risks were in relation to:

• management bias in relation to the risk of management override of controls;

• management assumptions in the accounting estimates associated with property impairment, the depreciation of assets and deferred tax assets;

• not complying with relevant rules and regulations;

• not complying with bank covenants and the associated risk of going concern;

• revenue recognition;

• determining the value of derivative financial instruments measured at fair value;

• the accuracy, presentation and disclosure of loan balances and interest charges; and

• accuracy, completeness and classification of fixed assets.

In response to the risk of irregularities, including fraud and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

• performing analytical procedures to identify any unusual or unexpected relationships and transactions;

• auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business;

• assessing whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias;

• agreeing disclosures within the financial statements to underlying supporting documentation;

• requesting minutes of meetings of those charged with governance;

• enquiring of management, those charged with governance and the entity’s solicitors and insurers around actual and potential litigation and claims;

• for an appropriate sample of transactions, identifying the revenue recognition point for the provision of services and testing for completeness by ensuring the transactions were properly recorded in the sales nominal ledger account;

• for an appropriate sample of transactions checking the assets physical existence and confirming the correct classification;

• identifying the terms and conditions of loans and assessing whether their covenants were met;

• enquiring of the entity's staff involved in the tax and compliance functions to identify any instances of non-compliance with laws and regulations;

• reviewing correspondence with HM Revenue and Customs and bankers and reviewing relevant costs within the financial statements; and

• discussing the existence of related parties with management and obtaining confirmation of inter-company balances.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.

The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities 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 Profit And Loss Account has been prepared on the basis that all operations are continuing operations.

These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.

Down Hall Hotel Limited is a company limited by shares incorporated in England and Wales. The registered office address is at 7-12 Half Moon Street, Mayfair, London, W1J 7BH. The company's trading address is Matching Road, Hatfield Heath, Bishop's Stortford, CM22 7AS.

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. The principal accounting policies adopted are set out below.

This 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:

• Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;

• 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’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

• Section 26 ‘Share based Payment’ – Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;

• Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.

The financial statements of the company are consolidated in the financial statements of Veladail Hotels Limited. These consolidated financial statements are available from Companies House.

The company has net trueliabilities of £779,824 (2023: £373,903) as at 31 December 2024. As at 31 December 2024, net current liabilities amounted to £13,273,904 (2023: £18,822,128).

The company's parent undertaking, Veladail Hotels Limited, has pledged its continuing support to the company. As at the balance sheet date, the company owed its parent £12,523,000 (2023: £12,523,000), all of which is included within current liabilities.

The directors have carried out a detailed review of the company’s financial position including a review of cash flows and forecasts. At the time of approving the financial statements, the directors are of the opinion that the company will continue to be able to meet its financial obligations as they fall due and to continue in operational existence for at least the next twelve months from the date of approval of the accounts.

Therefore the directors consider it is appropriate to prepare the financial statements on the going concern basis.

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.

Revenue from the sale of goods and services is recognised when it is probable that the economic benefits associated with the transaction will flow to the entity and the revenue can be measured reliably.

The company supplies hotel rooms, conference and event facilities to businesses and private customers. Sales of rooms, conference and events facilities are recognised on the date of the stay or event. Deposits received in advance are not recognised as revenue until the day of the stay or event.

The hotel operates the restaurant, bar and spa. Sales of goods are recognised when the hotel restaurant, spa or bar sells a product to a customer.

Interest income is recognised when it is probable that the economic benefits will flow to the company and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.

Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

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 credited or charged to profit or loss.

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). 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 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.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell.

Stock is calculated using the weighted average method.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include 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.

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 company 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 company 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.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge. The company has not applied hedge accounting.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company 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 company.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

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 profit and loss account 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 company’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 profit and loss account, 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 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.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

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.

Assets are valued at the lower of cost and net realisable value. Calculation of net realisable value in use requires judgements to be made, which include estimated future cash flows expected to arise from the cash generating unit and the application of a suitable discount rate in order to calculate the present value of future cash flows.

The deferred tax asset in respect of unrelieved tax losses is recognised only to the extent that it is probable that it will be recovered against the reversal of deferred tax liabilities or other future taxable profits in the company or the group. The company's ability to generate future taxable profits is dependent on many factors, amongst which is its ability to continue to build occupancy rates and to consolidate on the hotel's improvements and developments made to date. The recovery of the deferred tax asset may also be influenced by the tax policy decisions made by the group of which the company forms a part.

By its very nature, the recognition and measurement of deferred tax requires assumptions to be made about the future. The company estimates that, as at 31 December 2024, the deferred tax asset in respect of unrelieved tax losses amounted to £387,735 (2023: £772,486). The directors, whilst confident as to the recoverability of the deferred tax asset, feel it inappropriate to provide an estimate of the time period over which this asset may be recovered.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives. The residual value of the freehold property is calculated as a sum of the value of the land and 60% of the core building. As at 31 December 2024 the estimated residual value of the freehold amounted to £10.6 million (2023: £10.6 million).

An analysis of the company's turnover is as follows:

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

The actual charge/(credit) for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

The value of freehold property as at 31 December 2024 is split as follows: freehold land £5,959,190 (2023: £5,959,190); and freehold buildings £9,159,776 (£8,995,004).

The bank loan is secured by a fixed and floating charge over the assets of the company, and is due for repayment in June 2029. The average effective rate of interest on the new loan facility during the year was 8.41%.

The company has entered in to an interest rate swap contract (the ‘contract’) in order to mitigate the interest rate risks attached to its bank loan. As at 31 December 2024, the contract amounted to £4,113,200 (2023: £nil), carries a fixed interest rate of 4.036% per annum and has a termination date of 12 June 2029.

The contract is measured at fair value, and changes in the fair value are reflected through the profit and loss account. The contract’s fair value is determined using valuation techniques that apply observable inputs. The key input is the discount rate applied to calculate the present value of the future fixed and floating cashflows. The discount rate is calculated by taking account of expected future sterling interest rates, as determined by the lender.

As at 31 December 2024, the fair value of the contract was £5,504 (2023: £nil) and is presented as part of creditors due within one year. Notes 11 and 14 refer.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The tax losses deferred tax asset set out above is expected to reverse in a timeframe exceeding one year, and is influenced by various factors including the company's future profits, those of the group of which it forms a part and the broader group tax planning policy.

The deferred tax provision is calculated using a corporation tax rate of 25% (2023: 25%). Future changes to corporate tax laws that affect the prevailing rate may in turn affect the deferred tax assets and liabilities. Any movements in the assets and liabilities resulting from such changes will be reflected as part of the tax charge included in the financial statements for future periods.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The company has one class of ordinary shares which carry full voting rights.

The immediate parent company is Veladail Hotels Limited, a company registered in England and Wales.

Veladail Hotels Limited prepares group financial statements and copies can be obtained from 7-12 Half Moon Street, London W1J 7BH.

The ultimate holding company is Arrow Trading & Investment Est. 1920, a company incorporated in Vaduz.

The ultimate controlling party is Arrow Trust.