The directors present the strategic report in respect of Lorndale Aberdeen Limited ("the company") and its subsidiary C&K Black Limited (collectively known as "the group"), for the year ended 31 May 2025.
Principal activities
The principal activities of the group were the provision of early years childcare services across 5 settings, training of early years childcare professionals and painting and decorating services.
The group generated a profit before tax for the year of £87,000 (2024: £51,000). This is after charging interest payable of £241,000 (2024: £196,000), amortisation of £nil (2024: £30,000), depreciation of £17,000 (2024: £20,000) and an exceptional impairment charge of £61,000 (2024: £nil); giving operational Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of £407,000 (2024: £297,000).
The group’s key financial performance indicators during the year were as follows:
Group turnover was £5,372,000 for the year, an increase of 7.6% from prior year, which arose primarily from the introduction of additional out of school care capacity and an uplift in nursery fees. Overall nursery occupancy levels for the 2024/25 school year were slightly below the previous year’s level, however the rate paid for funded hours of early learning and childcare services continue to be increased below the level of the group’s cost of sales increase, which mainly comprise regulatory annual increases in the Real Living Wage and National Minimum Wage plus Employer’s National Insurance contributions as set by the UK and Scottish Governments. The business continued to invest in its people, premises and facilities during the year.
The directors have continued to focus on cash and profit preservation with the full support of the bank. The directors are focused on managing liquidity and profitability as the group navigates through the challenges of the reduced real term funding rates combined with ongoing cost increases and high interest rates present across the whole UK economy.
Net assets of the group at 31 May 2025 were £2,115,000 (2024: £2,282,000).
The principal risks for the group are:
Future pandemic risk
From a health and safety perspective, the group continues to follow the guidelines in place, working in partnership with the Care Inspectorate to manage this risk.
The directors believe that while the impact of any future pandemic would be significant, the group is well placed to manage this risk and can respond with sufficient speed to manage the cash flows of the business to continue to operate.
General economic conditions in Aberdeen and Aberdeenshire
The regional economy remains heavily influenced by the oil and gas sector, which continues to undergo structural change. Although oil prices have fluctuated in recent years, the sector has not returned to the stability seen prior to 2014, and employment levels remain under pressure as the industry transitions toward lower‑carbon activity. The local economy therefore continues to experience variability, and the directors maintain a watching brief on developments affecting employment and business confidence in the region.
Council funding remains in place to partially fund eligible 2 year olds and 3-5 year olds nursery provision. All 4 of the group’s settings offer full funded hours under the national 1,140 hours initiative to qualifying customers on a flexible basis. The directors are focusing on managing the increasing financial challenges of the reduced real term funding rates which continue to be set below the regulatory wages increases.
Regulatory risk
Every nursery and out of school club is regulated by the Care Inspectorate in Scotland. Internal control procedures are in place to ensure that the relevant regulations are adhered to.
Pricing risk
The group operates in a very competitive sector with exposure to cost increases from regulatory driven inflation in the form of National Living Wage increases, business rates increases, Modern Apprentice Levy, Employer National Insurance contributions, energy and general UK cost increases. Recent indications are that the local demographics are changing in areas supported by the group’s nursery settings, with fewer under 5’s, which is causing increased competition; including competition from Council operated nursery settings.
The group prepares estimates of cost increases and seeks to recover these through price increases whilst balancing the need to remain competitive in the marketplace.
Property risk
Processes and controls are in place to ensure that the group’s property portfolio is adequately secured and maintained to a good state of repair.
Liquidity risk
The group carefully manages its cash and borrowing requirements in order to ensure the group has sufficient liquid resources to meet the operating needs of the business through a combination of a short term bank overdraft, long term debt and cash balances generated from operating activities. Regular and timely payment of borrowing repayments as they fall due has been made to date and has continued beyond the balance sheet date.
One of the group’s premises was also sold in October 2025 following the opening of a new Out of School Club in the nearby school premises, which generated additional cashflow of £177,000 (net of expenses) in addition to boosting the occupancy levels of the group’s neighbouring nursery setting.
The directors continue to work closely with the bank to ensure that borrowing levels are maintained at sufficient levels to allow the group to pay debts as they fall due.
Future developments
Staff retention and development continues to be a priority.
Inflationary and regulatory cost increases are expected to continue to be significant. As a result, the entire sector continues to face challenges with significant increases in labour costs arising from the National Living Wage and Real Living Wage increase each year which trend at or above inflation. These cost increases combined with an increase in employer’s National Insurance Contributions and continued high interest rates inevitably results in fee increases at a rate higher than underlying national inflation and is exacerbated by Council 1,140 hours funding rates not being increased at the same or even similar levels. Working with the Council to provide a funding rate equivalent to the initial rate set when the 1,140 hours initiative was launched in real terms remains a priority of the directors.
The group continues to make every effort to balance fee increases with commercial pressures in a competitive market place to ensure that the group continues to deliver a value service at a competitive price.
The group will continue to focus on quality childcare, occupancy levels, attraction and retention of high quality staff and cost optimisation.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 May 2025.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 10.
Ordinary interim dividends were paid amounting to £199,000 (2024: £134,000). The directors do not recommend payment of a final dividend (2024: £nil).
The group's activities expose it to a number of financial risks, including liquidity risk, interest rate risk and credit risk. The group does not use derivative financial instruments to manage these risks or for speculative purposes.
The group manages its cash and borrowing requirements in order to ensure the group has sufficient liquid resources to meet the operating needs of the business. The group uses a mixture of a short term bank overdraft, long term debt and cash balances generated from operating activities to achieve this.
The group has interest bearing liabilities, notably a bank loan which bears interest at a variable rate. The directors manage interest rate risk by monitoring Bank of England policy and forecasting interest cost as part of their budgeting process. The directors would consider derivatives for managing interest rate risk if deemed necessary, which it is currently not.
The group’s financial assets are bank balances and cash and trade and other receivables. The group's credit risk is primarily attributable to its receivables. An allowance for impairment is made where there is an identified loss event, which based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
The group has no significant concentration of credit risk, which exposure spread across customers and counterparties.
Subsequent to the year end, on 24 October 2025, the group disposed of a property for gross proceeds of £180,000. The carrying value of the property in the financial statements as at 31 May 2025 was £241,000. As a result, an impairment charge of £61,000 has been recognised in the financial statements for the year ended 31 May 2025 to reflect the reduction in recoverable amount.
Details of future developments can be found in the strategic report and form part of this report by cross-reference.
Johnston Carmichael LLP have expressed their willingness to continue in office as auditor and appropriate arrangements are being made for them to be deemed reappointed as auditor.
In preparation of the financial statements, the directors have made an assessment of the group's and company's ability to continue as a going concern. The group has net current liabilities of £3,454,000 (2024: £3,504,000) and the company has net current liabilities of £3,457,000 (2024: £3,502,000) at the balance sheet date and both the group and company are wholly reliant on the continued support of its funders, being its bankers.
Critical to this is the continued availability of the overdraft facility, which is reviewed quarterly by the bank. One other important aspect is that there has been a breach of one of the financial covenants at 31 May 2025, in respect of the existing bank debt, which was not formally rectified by the end of the reporting period, meaning that the bank could technically demand repayment of this debt. In the unlikely event that the overdraft facility is not continued or the bank does not waive the financial covenant breach, the directors would need to seek alternative sources of finance for the business to continue to operate. As such both the group and company are wholly reliant on the continued support of its bankers and this indicates that a material uncertainty exists that may cast significant doubt on both the group and company’s ability to continue as a going concern.
As a result of this, the directors have consulted with the company’s bankers and received confirmation of their ongoing support for the business. As such, the directors believe it is reasonable to assume that the overdraft facility will continue, plus the company will receive a formal waiver of the financial covenant breach in due course, and have therefore developed a reasonable expectation that the group and company will continue as a going concern for a period of at least 12 months from the date of approval of the financial statements. Accordingly, they have prepared these financial statements under the going concern basis.
We have audited the financial statements of Lorndale Aberdeen Limited (‘the parent company’) and its subsidiary (‘the group’) for the year ended 31 May 2025, which comprise the Group Profit and Loss Account, Group Balance Sheet, Company Balance Sheet, Group Statement of Changes in Equity, Company Statement of Changes in Equity, Group Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including 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
Material uncertainty related to going concern
We draw attention to note 1.4 in the financial statements, which indicates that the group and parent company’s going concern position is linked to the continued support of the company’s bankers, in the form of the continued availability of its overdraft facility, plus the receipt of a formal waiver in due course, regarding the financial covenant breach at 31 May 2025 in respect of its existing bank debt. The bank have confirmed its continued support for the group and parent company to the directors and as such, the directors have made a reasonable assumption that the overdraft facility will continue and that the bank will waive the financial covenant breach in due course. Should the overdraft facility not continue or the bank not waive the financial covenant breach, the directors would need to seek alternative sources of finance for the business to continue to operate. As stated in note 1.4, these events or conditions, along with other matters as set forth in note 1.4, indicate that a material uncertainty exists that may cast significant doubt on the group and parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the 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.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and the parent company and the sector in which they operate, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
Companies Act 2006;
UK Tax legislation;
UK Generally Accepted Accounting Practice;
Children and Young People (Scotland) Act 2014 (Modification No.1) Order 2019; and
Regulations of Care (Scotland) Act 2001.
We gained an understanding of how the group and the parent company are complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns, external inspections and relevant correspondence with regulatory bodies.
We assessed the susceptibility of the group’s and parent company’s financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk. We identified a heightened fraud risk in relation to:
Management override of controls
Revenue recognition
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Enquiries with those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the group’s and parent company’s procurement of legal and professional services
Performing audit procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Performing audit procedures over the risk of revenue recognition, including performing a reconciliation of nursery fee income from the operating system to the independent sales ledger to confirm completeness and testing a sample of pupils from the fee reports to the attendance registers to confirm occurrence;
Reviewing any available Care Inspectorate reports for potential areas of concern;
Completion of appropriate checklists and use of our experience to assess the group’s and parent company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Profit for the financial year is all attributable to the owners of the parent company.
There are no recognised gains and losses in the current or prior year other than as included in the profit and loss account above. Accordingly no statement of comprehensive income is provided.
The profit and loss account 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 profit and loss account and related notes. The company’s profit for the year was £44,000 (2024: £50,000).
Lorndale Aberdeen Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is Great Western Pre-School Nursery Kingswells Village Centre, Kingswells, Aberdeen, Scotland, AB15 8TB. The company's principal place of business is 356-358 Great Western Road, Aberdeen, AB10 6LX.
The group consists of Lorndale Aberdeen Limited and its subsidiary C&K Black Limited (collectively known as "the group").
The nature of the group's activities are as per the strategic report on page 1.
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 group and company. Monetary amounts in these financial statements are rounded to the nearest thousand.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The Companies Act 2006 would normally require the systematic depreciation of fixed assets, however the directors believe that the policy of not providing depreciation on the buildings is not material for the financial statements. In their view, the value of the buildings will have a significant residual value at the end of their useful lives and as such, any depreciation charge on these buildings would not be material for the financial statements.
The parent company is a qualifying entity for the purposes of FRS 102, being a member of a group where it prepares publicly available consolidated financial statements, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The parent company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
The requirements of Section 7 Statement of Cashflows and paragraph 3.17 (d);
The requirements of Section 11 Basic Financial Instruments paragraphs 11.42, 11.44, 11.45, 11.47, 11.48 (a) (iii), 11.48 (a) (iv), 11.48 (b), 11.48 (c) in respect of financial instrument disclosures;
The requirements of paragraph 33.7 within Section 33 Related Party Disclosures with respect to disclosure of the company's key management personnel compensation.
The consolidated financial statements incorporate those of Lorndale Aberdeen Limited and its subsidiary (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits).
All financial statements are made up to 31 May 2025. 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.
In preparation of the financial statements, the directors have made an assessment of the group's and company's ability to continue as a going concern. The group has net current liabilities of £3,454,000 (2024: £3,504,000) and the company has net current liabilities of £3,457,000 (2024: £3,502,000) at the balance sheet date and both the group and company are wholly reliant on the continued support of its funders, being its bankers.
Critical to this is the continued availability of the overdraft facility, which is reviewed quarterly by the bank. One other important aspect is that there has been a breach of one of the financial covenants at 31 May 2025, in respect of the existing bank debt, which was not formally rectified by the end of the reporting period, meaning that the bank could technically demand repayment of this debt. In the unlikely event that the overdraft facility is not extended or the bank does not waive the financial covenant breach, the directors would need to seek alternative sources of finance for the business to continue to operate. As such both the group and company are wholly reliant on the continued support of its bankers and this indicates that a material uncertainty exists that may cast significant doubt on both the group and company’s ability to continue as a going concern.
As a result of this, the directors have consulted with the company’s bankers and received confirmation of their ongoing support for the business. As such, the directors believe it is reasonable to assume that the overdraft facility will continue, plus the company will receive a formal waiver of the financial covenant breach in due course, and have therefore developed a reasonable expectation that the group and company will continue as a going concern for a period of at least 12 months from the date of approval of the financial statements. Accordingly, they have prepared these financial statements under 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. The fair value of consideration takes into account trade discounts and settlement discounts.
Turnover from the provision of childcare services and training of early years childcare professionals, represents the value of the services provided under contracts to the extent that there is a right to consideration and it is recorded at the fair value of the consideration received or receivable. This type of turnover is recognised once the services have been provided. Where a contract has only been partially completed at the balance sheet date, turnover represents the fair value of the service provided to date based on date of completion of the contract activity at the balance sheet date. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of creditors due within one year. are accounted for in the period which the service is provided.
Training and painting and decorating services are invoiced upon completion of services provided and accounted for in the period which the service is provided.
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 profit and loss account.
No depreciation has been provided on buildings under the immaterial principal noted above.
Investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible 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.
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 balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the profit or loss account.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the profit or loss account.
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 creditors and bank loans are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the 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 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 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 if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following are considered to be either judgements that have had the most significant effect on amounts recognised in the financial statement, or estimates that are dependent upon assumptions which could change in the next financial year and have a material effect on the carrying amounts of assets and liabilities recognised at the balance sheet date:
As disclosed within note 1.4, the directors have developed a reasonable expectation that the group and company will continue as a going concern for the foreseeable future and accordingly, have prepared these financial statements under the going concern basis. This represents a critical accounting judgement taken by the directors. The basis for this judgement is the expected continued support by the bank, both as regards the continued availability of the overdraft facility and that a waiver will be granted in due course with respect to the financial covenant breach at 31 May 2025.
The directors consider whether fixed assets are impaired and where an indication of impairment is identified, an estimation of recoverable value of the fixed assets is required. Particularly, management have considered the carrying value of the group's land and buildings at the balance sheet date. For the purposes of these financial statements the directors have considered the periodic third party valuation, as instructed by the group’s bankers in line with their standard procedures, and carried out in March 2024. This valuation provides a value of the business and property based on trade assessments. The overall value of the group’s land and buildings is supportable per this valuation, coupled with continued profitable trading of the group, and, as such the directors consider the carrying value of the group’s land and buildings to be appropriate at the balance sheet date. As discussed in note 21, the group disposed of one of the properties post-year end at a loss in comparison to the carrying value in the financial statements. Despite this loss on disposal, the directors do not consider this to be indicative of impairment on the remaining assets as the property was sold as a non-registered premises rather than as a going concern nursery setting.
The directors have reviewed the painting and decorating work ongoing at the year end, and an assessment has been made regarding the stage of completion of each job. Accrued income has been recognised at the year end as necessary, to record the sales value of the work completed prior to the year end. The judgement has been made by the directors to ensure appropriate revenue has been recognised for the financial year.
The directors consider that there are no other judgements, estimated and underlying assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities.
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 3 (2024: 3).
There is no deferred tax in the current and prior years.
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:
Details of the company's subsidiaries at 31 May 2025 are as follows:
The total value of investments recorded on the balance sheet as at 31 May 2025 was £2, representing 2 ordinary shares at £1 each.
The group has taken advantage of the exemptions in section 479A to 479C of the Companies Act 2006 meaning that its UK subsidiary is exempt from an audit.
Amounts owed by group undertakings are unsecured, interest free and repayable on demand.
At the end of the current and prior year, there was breach of one of the financial covenants on the bank debt, which was not formally rectified by the end of the current and prior year financial reporting period. In accordance with the requirements of FRS 102, this requires all bank debt to be shown as amounts falling due within one year and represents a technical financial reporting classification point.
The bank loans above relate solely to the CBILs loan amounts. Please see note 16 for further detail.
A bank loan, which has a balance of £1,973,000 at the year end, is repayable by instalments over a 20 year period from June 2014 and bears interest at 1.7% above the Bank of England Base Rate. The loan is secured by a floating charge over the assets of the company.
As discussed within note 14, a financial covenant breach of this bank loan at both 31 May 2025 and 31 May 2024 has resulted in the full bank loan being classified as amounts falling due within one year in accordance with the requirements of FRS 102. Under the terms of the bank debt, only £102k (2024: £149k) is due within one year in respect of bank loans, subject to receipt of a waiver from the bank in due course. Should such a waiver have been received prior to the year end, the bank loan would have been presented in accordance with its contractual maturity profile. On this basis, net current liabilities would have been £1,583k (2024: £1,528k).
A Coronavirus Business Interruption Loan Scheme (CBILs) loan, which has a balance of £63,000 at the year end, is repayable over a 5 year period from 2021.The interest rate is 3.99% per annum over the Bank of England Base Rate. The CBILS loan is underpinned by a 80% guarantee from the UK Government to the lender but the group remains liable for the repayment of the CBILS loan in full.
The group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund. At the year end £12,000 (2024: £25,000) is included within other creditors in relation to the defined contribution pension scheme.
The profit and loss reserve represents cumulative profits and losses net of dividends 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:
Subsequent to the year end, on 24 October 2025, the group disposed of a property for gross proceeds of £180,000. The carrying value of the property in the financial statements as at 31 May 2025 was £241,000. As a result, an impairment charge of £61,000 has been recognised in the financial statements for the year ended 31 May 2025 to reflect the reduction in recoverable amount.
This event occurred after the balance sheet date but provides evidence of conditions that existed at the reporting date. Accordingly, the impairment adjustment has been reflected in these financial statements in accordance with FRS 102 Section 32 – Events after the End of the Reporting Period.
The remuneration of key management personnel is as follows.
Dividends totalling £198,800 (2024: £134,050) were declared in the year in respect of shares held by the company's directors.
The group were owed £23,000 (2024: £15,000) by the directors at 31 May 2025.