The directors present the strategic report for the year ended 31 October 2024.
Our objectives are to maintain the principal activity of the group, which consists of the running of nursing and residential homes and includes landlord duties to our private close care properties. We will achieve this by maintaining our continued improvement of quality care standards and the care homes’ environments, our commitment to high levels of training for our staff. We continue to introduce a number of technological solutions in order to improve our efficiency and compliance such as a computerised care planning system and digital document signing.
Royal Bay Care Homes Ltd also acts as a holding company for the Royal Bay group of companies.
During the previous 12 months, the Group’s seven care homes performed well with the overall combined group average occupancy of 85% (2023 yearly average 83.83%). Also on top of this, our group average fee levels have increased by 4.5% across the year.
Throughout the whole trading year, the directors have continued to authorise expenditure on accommodation and equipment upgrades in all the homes in line with normal group policy. The continued commitment to providing the best quality care and accommodation and customer services is integral to the Group’s appeal to premium customers.
We also consider:
The care and welfare of our staff; promoting self-development and career opportunities including training and promotion and supplying access to a counselling service and other healthcare support.
Diversity and equal opportunity and all newly introduced Employment Law legislation.
The Group turnover has increased by 3.5% to £13,185,162 in comparison with the 2023 level of £12,737,437. Operating profit for the year, excluding developments (care only), was £1,163,395 in comparison with 2023’s figure of £1,222,758. The group saw a profit before tax decrease from 2023 of £706,058 to 2024 of £631,994.
In the future we will endeavour to improve all aspects of quality at all levels. The marketing activity will be actively expanded and targeted to improve occupancy and fee income. The group's particular expertise in designing, developing, marketing, and operating care villages gives an opportunity to undertake further ventures. Care home acquisitions could be contemplated based on affordability, ‘cluster’ location, and improvement potential.
Principal Risks and Uncertainties
The care industry is to face fundamental changes to the public funding framework commencing April 2022, yet must also deal with external economic pressures such as inflation, cost increases and interest rate rises. Inflation across the year up to 31 October 2024 was approximately 3%, as well the rise in National Living Wage. We have had to counteract this by covering costs via fee increases, good occupancy and cost reductions.
Due to external global pressures, energy costs have risen considerably and continue to contribute to a rising cost of living. Care Homes are particularly susceptible due to their costs being largely made up of energy, wages as well as consumables such as food. Fortunately a large proportion of our energy costs can be mitigated by longer term energy contracts and in conjunction we continue to seek cost savings elsewhere.
There has also been a continuing effort in recent years to improve our cash flow by streamlining operations, reducing costs in turn increasing profitability, all of which will be carried forward for the next 12 months and beyond. Notable instances include finding efficiencies, negotiating supplier contracts, taking advantage of group purchasing power, reducing out dated marketing expenses (traditional print) and maintaining our internet-based Payment Authorisation System for any purchase over £100.
Local Authority and CCGs continue to have more pragmatic approach to fee increases, although there is still room for improvement in order to meet a more realistic market average. This, together with the company’s attention to both improving average fees whilst controlling costs and overheads, will allow the group to enhance its profitability.
There is a continuing drive to provide community care services to keep the elderly at home for as long as possible but it was not meeting all of the needs of the elderly in the U.K. and sheer numbers created by demographics meant that residential care was still in demand and would continue to increase. Estimates quote that the number of over 85 year olds with high needs will almost double (2.5% of the UK population to 4.3%) in the next 20 years (ONS).
Ultimately it is an objective of the group to move toward a higher ratio of private to Local Authority clients, thus reducing some of the complications involved with dealing with a third party.
Work place pensions have now been in place for a number of years and all Homes now make the 3% contribution and are able to manage the increased financial pressure. In recent years the rise of National Living Wage has been a significant cost that we have been required to budget for, however as a group we always aim to pay slightly more than the National Living Wage. National labour shortages and industry specific labour shortages continues to be the main significant hurdle to overcome, with recruitment becoming a bigger challenge than ever before. This continues to also push up wages in the industry and all care homes compete to retain and recruit care staff. This pressure can be reduced by accelerating fee increases and relying more on ‘costed care plans’ as the basis for fee determination with local authorities and the NHS. All homes are now required to pay a 0.5% Apprenticeship Levy.
The company is adjusting its budget expenditures and fee income decisions to make realistic forward plans to meet all of the pressure from the points outlined above and the directors are hopeful that the trading performance will improve over the next 12 months.
Section 172 statement - Promoting the success of the company
All of our decisions are made with conscientious attitude as to how our choices will benefit the business in the long term in order to maintain and improve stability, profitability and on going success. At the forefront, the Directors have been actively looking to:
Reducing unnecessary costs.
Improving principal assets via refurbishment and capital expenditure.
Improving our workforce.
Our staff are integral to our business model being our largest cost to our service. Maintaining their morale and keeping turnover to an acceptable level is always our aim whilst dealing with more macro business decisions. On a personal basis the company always remains flexible and understanding to individual’s circumstances. We have maintained a good reputation as being kind employers for years by:
Maintaining a decent competitive wage plus good company sick pay.
Providing a high standard of training whilst paying staff their training hours.
Provision of a Healthcare Scheme/Staff Appreciation Week/Staff Christmas vouchers.
As part of our aims to reduce costs it has meant choosing new suppliers or renewing contracts with existing suppliers. Over the years we have garnered great, long lasting relationships with almost all of our suppliers and so continue to foster these. When signing new contracts we also take reliability, professionalism and personability on board as well as price. We continue to include customers (service users and their relatives) where we can and as much as we can. We also try to support local communities and charities, which can often be mutually beneficial. Actions the directors have taken include:
Maintaining long term relationship of goods/services suppliers including a corporate contract across all homes, as well as in communications and energy.
Considering the results of service user quality assurance questionnaires as well as day to day involvement in decision making.
Supporting charities i.e. Macmillan Coffee Mornings.
In the care industry reputation is everything, therefore it is of our utmost desirability to maintain our already well-groomed reputation in our local areas. We have always conducted ourselves with the highest of standards and continue to do so through day to day business dealings, b2b relationships and with our clients. This is evidenced by:
Six of seven Homes rated ‘Good’ in all areas by CQC. One unfortunately got rated ‘Requires Improvement’ however we believed it to be a questionable decision. We eagerly await reinspection.
High number of 5* in all categories reviews via Carehome.co.uk, including above average rating scores.
We intentionally put emphasis on the need to act fairly between all members of staff or service users. Our company has a culture of understanding and impartiality as well as focusing on carrying out all duties accordingly and within the confines of law and regulation. This is achieved by:
Maintaining compliance at all the homes i.e. fire, insurance, electrical, H&S.
Where appropriate, use legal helpline advice to ensure good procedures/protocols.
Ensuring staff are aware of company policies, including fair and transparent complaints procedure.
On behalf of the board
The directors present their annual report and financial statements for the company and its subsidiaries for the year ended 31 October 2024.
The results for the year are set out on page 12.
Ordinary dividends were paid amounting to £81,750. 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's activities expose it to a variety of financial risks. The Board reviews and agrees policies for managing these risks at regular intervals dependant on circumstances. The group’s principal financial instruments include assets and liabilities such as trade receivables and trade payables arising directly from its operations. In accordance with group’s treasury policy, derivative instruments are not entered into for speculative purposes.
The group manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the group has sufficient liquid resources to meet the operating needs of the business.
The group is exposed to fair value interest rate risk on floating rate deposits, bank overdrafts and loans. The cash flow interest rate risk is managed within the group's business projections and planning, in the monitoring of financial covenants and through negotiation of facility terms with the provider of the borrowing facility at specified intervals.
The group’s principal foreign currency exposures arise from investments in overseas companies.
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 residents 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. The group is not exposed to commodity price risk.
The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present.
Further information in respect of future developments is given in the Strategic Report and above.
The auditor, Morris Lane, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per bed, the recommended ratio for the sector.
The group continues to take measures to increase energy efficiency, with the main focus being the replacement of single pane windows with double glazing.
The directors are responsible for the maintenance and integrity of the company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We have audited the financial statements of Royal Bay Care Homes Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 October 2024 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, the company 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 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's and parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and 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 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; taxation legislation including pay as you earn and corporation tax and pensions legislation.
In addition to the above, the group and 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 the Care Quality Commission regulations; food hygiene laws; health and safety laws; General Data Protection Regulation (GDPR) and employment law.
In order to identify risks of material misstatement due to fraud, we assessed events and conditions where opportunities and incentives may exist within the group and company for fraud to occur. Our risk assessment procedures included enquiring of directors as to any instances of fraud, their procedures to identify fraud and by using analytical procedures to identify any unusual or unexpected relationships. We identified the greatest potential for fraud in the following areas: recognition of income; ghost employees and grant income. As required by auditing standards, we are also required to perform specific procedures to respond to the risk of management override.
The identified risks of material misstatement due to fraud were communicated to the audit team in order that they remained alert to any non-compliance throughout the audit.
As a result of performing our risk assessments as detailed above, we planned and performed our audit so as to identify non-compliance with such laws and regulations, including fraud by undertaking the following:
Reviewing the disclosures contained within the financial statements and testing to supporting documentation in order to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements.
Enquiring of the directors concerning actual and potential non-compliance of laws and regulations.
Reviewing Care Quality Commission inspection reports in order to identify any potential non-compliance of laws and regulations.
Performing substantive testing with regard to employees to ensure that identification and employment contracts are on file, the pay as you earn system is operating correctly, pension deductions are made where appropriate and valid right to work documentation is available where required.
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud.
Revenue recognition was addressed by obtaining an understanding of relevant controls with regard to revenue recognition and undertaking substantive testing to ensure that revenue is recognised in line with the company’s accounting policy and in line with accounting standards.
The risk relating to management override of controls was addressed by testing the appropriateness of journal entries and other adjustments, assessing whether accounting estimates are indicative of potential bias and evaluating the business rationale of any significant transactions that are considered unusual or outside the normal course of business.
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.
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.
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 profit for the year was £51,187 (2023: £179,322 loss).
Royal Bay Care Homes Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 31/33 Commercial Road, Poole, Dorset, BH14 0HU.
The group consists of Royal Bay Care Homes 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.
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 and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s profit for the year was £51,187 (2023: £179,322 loss).
The consolidated financial statements incorporate those of Royal Bay Care Homes Ltd and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 31 October 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.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign operations are translated from their functional currency to sterling using the closing exchange rate. Income and expenses are translated using the average rate for the period. Exchange differences arising on the translation of group companies are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
The directors have adopted the going concern basis in preparing these financial statements assessing the principal risks applicable to the company. These include rising inflation, staff shortages as a result of Brexit, the 9.8% increase in the National Living Wage for employees over the age of 21, the increase in National Insurance costs, the cost of living crisis and higher insurance premiums. They are satisfied that the company, with the support of other group companies, can meet its liabilities as they fall due, being a period of not less than 12 months from the date of approval of these financial statements, and to be well placed to manage its financing and business risks satisfactorily. Overall, the directors do not consider there to be a cause for material uncertainty regarding the company's going concern status as at the date of signing these financial statements.
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.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the supply of care services represents the value of services provided under contracts to the extent that there is a right to consideration and is recorded at the fair value of the consideration received or receivable. Where payments are received from customers in advance of services provided the amounts are recorded as deferred income and included as part of payables due within one year.
Interest income is recognised when it is probable that the economic benefits will flow to the group 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.
Freehold land is not depreciated.
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.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible 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.
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.
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 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.
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.
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.
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.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
Government grants relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
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.
Credit risk
The group implements appropriate credit checks on residents and service users prior to providing services. This reduces the exposure of the group in respect of credit risk.
Liquidity risk
The policy of the Group is to maintain a mix of short and long term borrowings to effectively manage
liquidity risk.
Cash flow and interest rate risk
The Group’s interest rate risk arises primarily from long-term borrowings issued at variable rates which exposes the Group to cash flow interest rate risk. The cash flow interest rate risk is managed within the Group’s business projections and planning, in the monitoring of financial covenants and through negotiation of facility terms with the provider of the borrowing facility at specified intervals.
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 group's most significant asset and is assessed to have a useful life of 25 - 35 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 31 October 2024 was determined by the directors based on an external valuation undertaken post year end by an independent third party. The valuation by the third party determined the market value as a fully operational entity by considering factors such as current and future projected income levels, location recent comparable sales and their knowledge of the sector.
An analysis of the group's revenue is as follows:
Amortisation of intangible assets is included in administrative expenses.
Government grants are the release of capital grants in line with the accounting policy, these relate to various Covid-19 support schemes.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2023: 2).
The actual charge for the year can be reconciled to the expected 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:
Intangible fixed assets with a carrying amount of £5,229 (2023: £6,429) have been pledged to secure liabilities of the group. Further information is provided in note 22.
The carrying value of land, included in land and buildings above, comprises:
Freehold land and buildings were revalued on the 31 October 2024 based on the expected market value of the business as determined by the directors of the company. The valuation was established by reference to an independent valuation by Knight Frank LLP that took place on the 1 September 2025, on the basis of market value.
If revalued assets were stated on an historical cost basis rather than a fair value basis, the total amounts included would have been as follows:
Property, plant and equipment with a carrying amount of £18,729,461 (2023: £19,003,267) have been pledged to secure liabilities of the group. Further information is provided in note 22.
The fair value of the investment property excluding the investment property held by RW Royal Bay Care Homes Limited was revalued in October 2018 by Savills (UK) Limited, independent valuers not connected with the company on the basis of market value. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties.
Investment properties held in subsidiary company RW Royal Bay Care Homes Limited were revalued in August 2020 by Christiana Zaloumi, independent valuers not connected with the company, on the basis of market value.
The directors have reviewed the fair value of the investment properties as at 31 October 2024 based on existing market evidence available to them in respect of yields and transaction prices. They consider that the values have not materially changed.
Investment properties with a carrying amount of £1,126,252 (2023: £1,157,285) have been pledged to secure liabilities of the group. Further information is provided in note 22.
The carrying value of land, included in land and buildings above, comprises:
Fixed asset investments with a carrying amount of £2,741,947 (2023: £2,741,947) have been pledged to secure liabilities of the company. Further information is provided in note 22.
Details of the company's subsidiaries at 31 October 2024 are as follows:
The investments in subsidiaries are all stated at cost, less provision for impairment.
The registered office of each of the above subsidiaries is 31/33 Commercial Road, Poole, Dorset BH14 0HU, with the exception of RW Royal Bay Care Homes Limited whose registered office is Gladstonos 1, Panayiotio Building, Floor 2, Flat 205, 6023, Larnaca, Cyprus.
Further information relating to financial assets and liabilities can be found in notes 19, 20 and 21.
Inventories with a carrying amount of £22,919 (2023: £22,577) have been pledged to secure liabilities of the group. Further information is provided in note 22.
Trade debtors and other receivables with a carrying amount of £3,727,983 (2023: £3,178,964) have been pledged to secure liabilities of the group. Further information is provided in note 22.
Included in bank loans is a loan of £6,369,320 (2023: £6,498,218) which is repayable by instalments and matures in October 2028. The loan bears interest at a rate at a rate of 2.85% per annum above the bank base rate. Also included is a loan of £734,251 (2023: £746,282) repayable by instalments and maturing in November 2028. This loan bears interest at a rate of 3.5% per annum above the bank base rate.
These are secured by:
A first legal charge over all properties held by the group, excluding those held by RW Royal Bay Care Homes Limited.
A cross guarantee and a first debenture over all assets and undertakings of the group, excluding RW Royal Bay Care Homes Limited.
In addition, three directors have provided personal joint and several guarantees in respect of these borrowings, limited to £2,450,000. These guarantees include a charge over the shares they hold in the parent undertaking. One of the directors has also provided an additional personal guarantee of £800,000.
For the group, government grants totalling £nil (2023: £692) were received in the year. An amount of £165,659 (2023: £165,659) has not yet been fully utilised as at 31 October 2024 and so is recognised in accruals and deferred income. In addition, as at 31 October 2024 an amount of £21,118 (2023: £26,777) remains in accruals and deferred income to be released in line with the accounting policy for capital grants.
For the company, an amount of £40,454 (2023: £40,454) has not yet been fully utilised as at 31 October 2024 and so is recognised in accruals and deferred income. In addition, as at 31 October 2024 an amount of £4,773 (2023: £6,586) remains in accruals and deferred income to be released in line with the accounting policy for capital grants.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Group
Of the deferred tax liability set out above, an amount of £29,404 (2023: £34,438) is expected to reverse within 12 months and relates to accelerated capital allowances.
Of the deferred tax liability set out above, an amount of £152,503 (2023: £69,988) is expected to reverse within 12 months and relates to revaluation of freehold property.
Company
Of the deferred tax liability set out above, an amount of £14,075 (2023: £14,779) is expected to reverse within 12 months and relates to accelerated capital allowances.
Of the deferred tax liability set out above, an amount of £39,996 (2023: £17,692) is expected to reverse within 12 months and relates to revaluation of freehold property.
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. At the balance sheet date, unpaid contributions of £34,064 (2023: £30,884) were due to the fund. They are included in other creditors and in accruals.
All shares carry voting rights but have no right to fixed income or fixed repayment of capital.
The revaluation reserve represents the cumulative effect of revaluations of freehold land and buildings which are revalued to fair value. At the end of each reporting period a transfer is made to retained earnings to transfer the excess depreciation that has been charged in the income statement which relates to the revalued portion of the assets. In respect of revaluation gains, deferred tax is recognised and is initially debited to the revaluation reserve. The amount of deferred tax recognised is adjusted on an annual basis for any movement in amounts debited or credited to the revaluation reserve in the year. Current year corporation tax is not required to be recognised in respect of any amounts debited or credited to the revaluation reserve.
The capital redemption reserve represents the nominal value of share capital previously cancelled by the group.
Retained earnings represents cumulative profits or losses, including unrealised profit on the remeasurement of investment properties, net of dividends paid and other adjustments.
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:
As at the 31 October 2024, the group and company had committed to service costs of £12,147 (2023: £nil).
The remuneration of key management personnel is 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 following amounts were outstanding at the reporting end date:
The directors have given personal joint and several guarantee in respect of borrowings from Metro Bank PLC, limited to £2,450,000. In addition, a director has given a personal guarantee in respect of the above borrowings.
The key management personnel loan is unsecured, repayable on demand and interest is charged at the official rate.
The loans from other entities and related parties are unsecured, repayable on demand and no interest is charged.
Dividends totalling £81,750 (2023: £87,500) were paid in the year in respect of shares held by the company's directors.
As at 31 October 2024 the group was owed amounts totalling £3,179,968 (2023: £2,852,510) from its directors. These loans are repayable on demand and interest is charged at the official rate.
Of the amount owed by directors above, a provision for doubtful debt was included in the year of £1,011,087 (2023: £1,011,087) in relation to a directors loan account for which the directors believe may not be fully recoverable.
A director has given a personal guarantee in respect of borrowings from Metro Bank PLC, limited to £800,000. In addition, the directors have given a personal joint and several guarantee in respect of the Metro Bank PLC borrowings, limited to £2,450,000.