The directors present the strategic report for the year ended 31 December 2025.

The year to 31 December 2025 saw total turnover generated of £13,142,413 (2024: £12,733,665), an increase of £408,748 (3.2%) from that achieved in 2024. The total for 2025 is the highest annual turnover figure for Surgeons Quarter Ltd, continuing a strong trend of growth observed from 2023 onwards. One trend that has not stopped since 2023 is that of high bedroom occupancy, with ten of the twelve months in 2025 surpassing 90%, adding to the twenty-two months from March 2023 which were also over 90% occupancy.

Focussing on key departments, Accommodation Revenue totalled £6,829,219 (2024: £6,790,311), a modest annual increase of £38,908 (0.6%). Within 2025, Q1 witnessed a slow start in Rooms, albeit with a three-month Occupancy total of 87.8%, however as a result Occupancy was playing catch-up for the remainder of the year. For the full year, Occupancy totalled 95.8%, a very strong result, however in comparison to 2024 at 97.0% somewhat backwards. During the year there was a conscious shift to maximising Average Room Rate (ARR) and in doing so Occupancy reduced slightly.

Food and Beverage areas had a mixed year, with total revenue at £3,602,722 (2024: £3,621,315), a decrease of £18,593 (0.5%). The results from 2024 set the bar very high for F&B, with six of the months in 2024 record breaking. Similar to Rooms in 2025, F&B also started the year slowly, however during Q2 both April and June surpassed any prior year totals. The Festival month of August, a key month in any year, exceeded all expectations in 2025 with total revenue in F&B at £359,292 (2024: £349,726). Café 1505 had its second-best year in 2025 with revenue totalling £269,368, however in comparison to 2024 (£288,876) the result was backwards year on year. This trend also occurred in Scottish Nights and Events F&B with the results in 2024 higher than those achieved in 2025.

Surgeons Quarter Travel continued to grow on prior year totals with a turnover of £2,012,764 (2024: £1,609,409), a growth of 25.1%. Considering the growth from 2023 to 2024 was 23.9%, the past two years for Surgeons Quarter Travel have been exceptional. Monthly records tumbled in 2025, with the total for August at £432,178 the single highest revenue month in the five-year history of Surgeons Quarter Travel. The bulk of the bookings were for RCSEd, however considerable growth also occurred in Corporate Travel with a total of £105,548 achieved in 2025 (2024: £63,881).

At the start of 2025, six new team members joined Surgeons Quarter Ltd, with two from RCSEd Birmingham, and four from the AV team in RCSEd. Revenue generation for both areas was a new focus for the Surgeons Quarter team as well as minimising cost spend. Other costs were transferred from RCSEd, namely Utility Costs, Insurance, Waste Management, and some other Operational Costs, under a new Licence to Occupy arrangement between Surgeons Quarter and RCSEd. Focus in all these areas occurred as the year unfolded with improved clarity in all areas by the end of the year.

Total Wages and Salaries for 2025 of £4,127,145 (2024: £3,806,890) represented 31.4% of turnover, an increase of 1.5% on 2024. Increased headcount and an increase in Employers National Insurance contributions from April 2025, had a financial impact on the overall total for the year. Surgeons Quarter Ltd remains as both a Real Living Wage and a Real Living Pension employer, both accredited with the Living Wage Foundation.

In terms of Costs, two significant cost areas in 2025 remain consistent year on year, namely Food and Beverage Cost. The move to in-house procurement in 2023 has resulted in a very settled expenditure in both key areas of the business. The total cost percentages for 2025 were Food at 29.1% (2024: 29.1%), and Beverage at 25.9% (2024: 25.8%), highlighting two years of very consistent performance.

Hotel Lease Costs to the parent company RCSEd for 2025 were maintained at £1.19million, the same total as in 2024. No new property leases were taken on in 2025, with Café 1505 maintained at the same value as 2024, and Mission Hall benefitting from a credit of £8k on its lease due to water damage in late 2024 impacting the office operation for a short period.

Surgeons Quarter Limited continued to pay back the government backed CBILS loan of £1.5million (received in November 2020), with a total of £300,000 paid in the year. At the end of 2025 the balance remaining to be paid was £275,000. The conclusion of this loan will occur in 2026, and due to increased interest commitments occurring in the final twelve months, the loan may be concluded earlier than required.

Sustainability continues to be a focus for Surgeons Quarter Limited in 2025, with initiatives underway in an attempt to take Ten Hill Place Hotel on a journey to ‘Net Zero’. Collaborations with Cyrenians Partnership and donations to Ecologi (charity partner) are all focussed on supporting community led projects both locally in Edinburgh and around the world.

Profit for the year amounted to £1,066,027, in comparison to a profit of £1,211,100 in 2024, a decrease of £145,073. Gift Aid as a distribution for 2025 was £900,825 (2024: £618,649).

Both the Board of Directors and the Senior Team within Surgeons Quarter Ltd regularly review all principal risks, and these can be defined as those which could have the greatest impact on our business and represent the most significant threat to the achievement of our objectives for the year ahead.

Principal Risks for 2026

Reputational risk

This is mitigated by improved capital planning to ensure up-to-date facilities, proactive handling of any media attention, and robust succession planning to reduce the risk of loss of any key staff and ensure the aims and strategy of the Company remain clear and consistent moving forwards.

Price risk

The new Edinburgh Visitor Levy begins on 24th July 2026 with 5% of the accommodation cost payable to City of Edinburgh Council. All bookings and IT systems are in place, and an estimation of the financial impact has been estimated for 2026. However, how this impacts bookings and Average Room Rates (ARR) for 2026 and onwards needs to be closely monitored for both Ten Hill Place Hotel and the wider city hotel community.

Labour risk

The Senior Leadership Team within Surgeons Quarter Ltd are absorbing the information contained within the Employee Rights Bill 2026, with assistance from RBS Mentor to work through each part of the Bill and their order of implementation.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2025.

The principal activity of the company continued to be that of the management of a hotel, events, food and beverage business, and café outlet. In more recent years, the activities have expanded to include travel agency services.

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

The Directors recommend a gift aid distribution to the parent Charity of £900,825 (2024 : £618,649).

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

Further to the above, in November 2025, A Paisley and Professor A Watson OBE joined the Board as Board Observers. Both are Vice Presidents of the company's parent charity, The Royal College of Surgeons of Edinburgh.

Saffery LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

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

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

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

• select suitable accounting policies and then apply them consistently;

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

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

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

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

We have audited the financial statements of Surgeons Quarter Limited (the 'company') for the year ended 31 December 2025 which comprise the statement of income and retained earnings, the statement of financial position, the 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).

In our opinion the financial statements:

• give a true and fair view of the state of the company's affairs as at 31 December 2025 and of its profit for the year then ended;

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

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

Basis for opinion

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

Conclusions relating to going concern

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

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

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

Other information

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

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

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

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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

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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.

Identifying and assessing risks related to irregularities:

We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with directors and by updating our understanding of the sector in which the company operates.

Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.

Audit response to risks identified

We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.

During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.

There are inherent limitations in the audit procedures described above 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. Also, 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 deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

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.

Surgeons Quarter Limited is a private company limited by shares incorporated in Scotland. The registered office is The Royal College of Surgeons of Edinburgh, Nicolson Street, Edinburgh, EH8 9DW.

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. The principal accounting policies adopted are set out below.

The financial statements have been prepared on a going concern basis. The directors have assessed the Company's ability to continue as a going concern and have reasonable expectation that the Company has adequate resources to continue in operational existence in the foreseeable future.true

The Directors are satisfied that all forecasts and cashflow projections indicate a reasonable forecast of outcomes. Thus the Directors continue to adopt the going concern basis of accounting in preparing these financial statements.

Turnover represents amounts receivable from room revenue, event hire and income from food and beverage net of VAT. Revenue is recognised when rooms are occupied, events take place, and food and beverages sold.

Travel revenue is raised at the point of booking the required journey, with Surgeons Quarter acting as Principal. All Travel revenue and costs are treated as gross transactions.

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

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

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

A review of indicators of impairment is carried out at each reporting date, with the recoverable amount being estimated where such indicators exist. Where the carrying value exceeds the recoverable amount, the asset is impaired accordingly. Prior impairments are also reviewed for possible reversal at each reporting date.

For the purposes of impairment testing, when it is not possible to estimate the recoverable amount of an individual asset, an estimate is made of the recoverable amount of the cash-generating unit to which the asset belongs. The cash-generating unit is the smallest identifiable group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Stocks are valued at the lower of cost and net realisable value, after making due allowances for obsolete and slow moving items.

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

A financial asset or a financial liability is recognised only when the entity becomes a party to the contractual provisions of the instrument.

Basic financial instruments, which include trade and other receivables and cash and bank balances, are initially recognised at the transaction price, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future receipts discounted at a market rate of interest for a similar debt instrument.

Other financial instruments, including derivatives, are initially recognised at fair value, unless payment for an asset is deferred beyond normal business terms or financed at a rate of interest that is not a market rate, in which case the asset is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Other financial instruments are subsequently measured at fair value, with any changes recognised through profit or loss.

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 that are measured at cost or amortised cost are reviewed for objective evidence of impairment at the end of each reporting date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss immediately

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Basic financial liabilities, which include trade and other payables, are initially recognised at the transaction price, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future receipts discounted at a market rate of interest for a similar debt instrument.

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 company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the 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 when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The company makes contributions to defined contribution pension schemes on behalf of certain employees. Contributions are charged to the profit and loss account in the period to which they relate.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Lease payments payable under operating leases are recognised as an expense over the lease term on a straight-line basis. The aggregate benefit of lease incentives is recognised as a reduction to expense over the lease term, on a straight-line basis.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See note 7 for the carrying amounts of tangible assets.

The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtor, the ageing profile of debtors and historical experience. See note 8 for carrying amount of debtors.

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

Their aggregate remuneration comprised:

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:

Included within tangible fixed assets are assets held under finance leases or hire purchase contracts, as follows:

On 26 August 2020, the Company entered into a £1,500,000 fixed‑rate loan facility with The Royal Bank of Scotland plc under the UK Government Coronavirus Business Interruption Loan Scheme (“CBILS”).

The loan carries a fixed interest rate for the first 60 months from the date the fixed rate was agreed, after which interest is charged at 2.53% per annum over the Bank of England Base Rate. Under the terms of CBILS, interest due during the first 12 months of the loan was paid directly by the UK Government. The loan is secured by a bond and floating charge granted by the Company. In addition, the bank loan is subject to a cross guarantee by the Royal College of Surgeons of Edinburgh.

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

Each ordinary share carries one vote in any circumstances.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

During the year the company carried out various transactions in the normal course of business with The Royal College of Surgeons of Edinburgh ('the College'), the sole trader of the company.

Property rental expenses totalled £1,262,000 (2024: £1,270,000). Management charges totalled £86,640 (2024: £132,000). Recharge of staff costs to the college were £950 (£nil).

Sales by the company to the college were £2,012,764 (2024: £1,551,804). Included in trade debtors is an amount totalling £187,297 due from the College.

The gross amount due to the College at the year end was £1,167,430 (2024: £963,982).

In the opinion of the directors the ultimate controlling parties are trustees of the Royal College of Surgeons of Edinburgh, by way of being the sole shareholder of the company.