The directors present the strategic report for the year ended 31 December 2025.
Blue Gem Holdings Limited is a workspace services group. It provides the people, systems and management expertise that operate a portfolio of premium serviced office centres in central London, run to five-star hospitality standards, and managed workspace solutions for landlords and occupiers. The Group is owned by an Employee Ownership Trust for the benefit of its people, and 2025 was its first full year under that ownership.
In 2024 the Group invested in new brands, established the Employee Ownership Trust and adopted a divisional structure, with separate head offices and leadership, to carry the ambitions of a diversified services group. In 2025 that structure was tested against results and found wanting, and the Board acted decisively to reset the business.
The serviced office centres operated by the Group performed strongly. Occupancy averaged 94 per cent, against published London market averages in the mid-80s, average workstation rates held at £525 without discounting, client retention remained high and service standards were sustained.
The same could not be said of the wider Group. The divisions launched in 2024 did not perform to plan: the investment in them had not converted into growth, they wrote little or no new business, and the divisional structure carried overhead and leadership costs that the Group’s income could not support. Turnover fell to £4.9 million from £5.3 million, administrative expenses exceeded gross profit, the loss for the year widened to £0.84 million from £0.54 million, and the Group ended the year with net liabilities. Forecasts prepared for the Board made clear that, without fundamental change, the position would deteriorate further.
The Board concluded that the situation could not be allowed to continue. From the start of the second half it undertook a strategic review and, over the remainder of the year, took a series of decisions to restructure the Group around its core serviced office operations: the separate divisional head offices were closed and their costs removed, loss-making divisional activities were ceased, the activities that remained were absorbed into existing departments, and support functions were consolidated into a single team serving the Group. In December 2025 the Board further decided to withdraw from the Flexioffices brokerage business, which had continued to underperform; that withdrawal was implemented carefully through the first half of 2026. As a consequence of these closures, a number of roles across the Group ceased to exist. These were structural decisions taken by the Board on economic grounds in the interests of the Group as a whole.
The result is a simpler business, organised around its centres and its clients, with a materially lower cost base and an operating model that can carry additional sites, and expansion through the Group’s managed workspace product, without a corresponding increase in overhead. As a services group, the Group’s costs are predominantly its people, and the closure of the divisional head offices and loss-making activities, with the overhead and leadership cost they carried, is the principal source of the reduction. The 2025 result absorbed the full cost of those structures and of removing them, so the benefit falls in 2026; the gross margin on the Group’s services nonetheless improved to 78.7 per cent from 74.4 per cent, confirming that the loss arose in overhead the Board has since removed, not in the operations themselves. Alongside the restructuring, the Board reset the Group’s commercial strategy, retaining clients for longer and shortening void periods between licences, so that occupancy converts into income more fully.
Having reviewed forecasts extending to September 2027 and the income contracted across the portfolio, the directors are satisfied that the Group has adequate resources to meet its obligations as they fall due and have adopted the going concern basis.
Through a year of substantial change, the Group’s people held occupancy, clients and rates. Service in this sector is delivered by people, and the directors regard that stability as the employee ownership model working as intended.
The 2024 comparatives have been restated to apply merger accounting to the January 2024 group reorganisation, as explained in note 27; the restatement affects neither the 2024 loss nor cash.
The principal risks facing the Group are those of its market: competition from an increased supply of flexible workspace in London, which the Group meets by competing on quality, location and independently benchmarked service rather than on price. The Group’s income depends on the occupancy and renewal cycle of the portfolio it operates, which is managed by tracking committed occupancy continuously, centre by centre, with a high proportion of income contracted in advance. Above all, the Group’s proposition depends on its people, and employee ownership, together with continued investment in recruitment and development, is the principal mitigation of that risk.
| 2024 (restated) | 2025 |
Turnover | £5.25m | £4.94m |
Gross margin | 74.4% | 78.7% |
Loss for the year | (£0.54m) | (£0.84m) |
Average occupancy | >90% | 94% |
Average workstation rate | £525 | £525 |
Turnover, gross margin and loss for the year are the consolidated figures in the financial statements. Occupancy and workstation rate relate to the serviced office portfolio operated by the Group, which includes centres held outside the consolidated group.
Outlook
The transformation carried out in 2025 has produced an outstanding 2026. Freed from the divisional cost base and the loss-making activities, and with the new commercial strategy in effect, the Group is trading at a level it has never achieved. Average occupancy across the portfolio for 2026 stands at 97 per cent, against a London market average in the mid-80s, and at the date of this report most centres are at 100 per cent and the portfolio is effectively full. More than £20 million of licence income for 2026, and £10 million for 2027, was already contracted across the portfolio. On that basis the directors expect the Group to return to profit in 2026 and to be cash generative, materially ahead of any prior year.
Independent quality audits of every centre against luxury hotel standards, commissioned in 2026, have seen the portfolio average rise from 81 per cent to almost 90 per cent across two cycles, with every centre now above 85 per cent. Growth was an ambition of the Group in earlier years; it is now a plan. With its platform settled, its core offering proven and its leadership team in place, the Group is executing a carefully sequenced programme of expansion through new serviced office sites and through its managed workspace portfolio, where the first agreements have been signed on capital-light terms and are generating income ahead of the levels originally modelled. On 28 September 2026 a reduction of the Company’s share capital, approved by special resolution supported by a solvency statement, was registered at Companies House, converting £27.0 million of share capital into distributable reserves.
Conclusion
2025 was the most demanding year in the Group’s history, and the year in which the Board took the hard decisions and carried them through without disruption to clients, occupancy or service. The Group that has emerged is focused, full, with income substantially contracted, a lower cost base and a commercial strategy that is delivering. The Board’s ambition is to be the operator that London’s best businesses choose, and to grow a portfolio that earns that choice building by building. The directors believe the Group has never been better equipped to deliver it.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2025.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
M J Bushell Audit LLP were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
United Kingdom company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have elected to prepare the group and parent company 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 group and parent company, and of the profit or loss of the group 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;
state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and parent 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 group and parent company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of Blue Gem Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2025 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, 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.
The auditor’s explanation of its audit response will depend on the risks identified but may include:
- Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.
The auditor’s explanation of its audit response will depend on the risks identified but may include:
- Enquiry of management, those charged with governance around actual and potential litigation and claims.
- Enquiry of entity staff in tax and compliance functions to identify any instances of non-compliance with laws and regulations.
- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
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 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.
As permitted by section 408 of the Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £12,000 (2024 - £0 profit).
Blue Gem Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Ground Floor, Kings House, 101-135 Kings Road, Brentwood, Essex, CM14 4DR.
The group consists of Blue Gem Holdings 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. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Blue Gem Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
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.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the directors have a reasonable expectation that the group and parent company have adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements. In assessing whether the going concern assumption is appropriate, management has taken into account all available relevant information about the future, which is at least, but is not limited to, 12 months from the date when the financial statements are authorised for issue.
Revenue comprises sales of goods or services provided to customers net of value added tax and other sales taxes, less an appropriate deduction for actual and expected returns and discounts. Revenue is recognised when performance obligations are satisfied and the control of goods or services is transferred to the buyer. Where the performance obligation is satisfied over time, revenue is recognised in accordance with its progress towards complete satisfaction of that performance obligation.
When cash inflows are deferred and represent a financing arrangement, the promised consideration is adjusted for the effects of the time value of money, which is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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.
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.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
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 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.
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 creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
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 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.
The group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.
In the comparative period, the group classified leases as finance leases whenever the terms of the lease transferred substantially all the risks and rewards of ownership to the lessees. All other leases were classified as operating leases. Assets held under finance leases were 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 was included in the balance sheet as a finance lease obligation. Lease payments were treated as consisting of capital and interest elements and the interest was charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability. Rentals payable under operating leases, less any lease incentives received, were charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis was more representative of the time pattern in which economic benefits from the leased asset were 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.
During the year the directors reviewed the recoverability of an amount of £7,400 owed by One Avenue Managed Limited, a company under common control. The directors concluded that it was irrecoverable, so it has been written off in full to the profit and loss account. It has been disclosed separately because of its nature, and it is not expected to recur.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Administrative and management services, including staff, are provided by the company to related companies by virtue of common key management.
The cost of these services charged by the company in the year totals £2,376,181 (2024: £2,336,015) and this is excluded from the above.
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
On 4 January 2024, the Group underwent a restructuring process, whereby the trading activities of the One Avenue Group were separated from its property business, allowing for the demerger of the trade. This group was valued at £27,060,000.
Details of the company's subsidiaries at 31 December 2025 are as follows:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The company has one class of ordinary shares, being ordinary B shares, which carry full voting rights and rank equally for dividends.
Upon incorporation, the Company allotted 1 Ordinary share at nominal value £1.
Subsequently, as part of the group restructuring and share-for-share exchange completed on 04 January 2024, the Company issued and allotted 27,059,999 ordinary shares of £1 each.
The allotment formed part of the reorganisation under which the Company became the new holding company of the Group. No cash consideration was received in respect of the share issue; instead the fair value of the shares issued represented the consideration transferred for the acquisition of the subsidiaries.
The Company has provided a guarantee in connection with the Employee Ownership Trust transaction entered into on 4 January 2024, securing the obligations of the Buyer (Trident Trust Company (U.K.) Limited) to the Sellers.
The guarantee covers all amounts due under the related agreement, up to £27,060,000, plus any associated costs. No claim has been made under the guarantee, and the directors consider the likelihood of any liability arising to be remote. Accordingly, no provision has been recognised.
On 28 September 2026, the Company reduced its issued share capital from £27,060,000 to £27,060 by reducing the nominal value of each of its 27,060,000 fully paid B ordinary shares from £1 to £0.001. The reduction was approved by special resolution supported by a solvency statement under section 641(1)(a) of the Companies Act 2006 and took effect upon registration at Companies House.
The reduction created distributable reserves of £27,032,940 through a transfer from share capital to reserves within equity. The reduction itself did not change the Company's total equity. The reduction of capital is a non-adjusting event after the reporting period. Accordingly, no adjustment has been made to the amounts recognised in these financial statements, which reflect the Company's share capital and reserves at 31 December 2025.
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
On 4th January 2024, the group completed a significant legal and corporate reorganisation as part of a wider transaction to establish an Employee Ownership Trust ("EOT"). The restructuring was undertaken to separate the group's serviced office trading operations from the property-holding activities previously carried out within the wider One Avenue group.
As part of the reorganisation:
Transfer of trade and assets: The trade and associated assets of several companies within the former One Avenue group were transferred to Blue Gem Management Services Limited ("BGMS"), the principal trading subsidiary of the group. BGMS recognised the assets, liabilities and associated trading operations transferred at the consideration paid, giving rise to the purchased goodwill carried in BGMS and in the group balance sheet (note 10).
Recognition of investments: The company acquired the entire share capital of BGMS in exchange for the issue of 27,060,000 ordinary shares of £1 each. This combination was a group reconstruction and is accounted for using merger accounting (note 27); the investment is carried in the company's balance sheet at the nominal value of the shares issued.
Intercompany and pre-acquisition adjustments: Certain pre-existing intercompany balances were released prior to the restructuring. These releases were recognised in the individual financial statements of the companies concerned and therefore do not impact the consolidated profit and loss account.
Investment in Flexi Holdings: The group acquired the investment in Flexi Holdings Limited from One Avenue Holdings Limited for nominal consideration as part of the restructuring process.
These transactions are non-recurring and exceptional in nature and were undertaken solely to implement the new EOT group structure. Following the reorganisation, the trading group now provides ongoing management and operational services to the wider group. Under merger accounting the assets and liabilities of BGMS are included in the consolidated financial statements at their pre-combination carrying amounts and no goodwill or fair value adjustments arise on the combination; the restructuring adjustments are eliminated on consolidation and therefore do not impact the group's consolidated profit and loss account. The consolidated results therefore reflect the group's underlying trading performance.
During the year the directors reviewed the accounting treatment adopted for the combination of Blue Gem Holdings Limited and Blue Gem Management Services Limited, which completed on 04 January 2024 (the "Combination"). The Combination was previously accounted for using the acquisition method, under which the identifiable assets and liabilities of Blue Gem Management Services Limited were recognised in the consolidated financial statements at their fair values at the date of the Combination, and the excess of the consideration transferred over those fair values, £27,060,000, was recognised as goodwill.
On reconsideration, the directors have concluded that the Combination was a group reconstruction and that the conditions set out in paragraph 19.27 of FRS 102 were satisfied at the date of the Combination, namely that:
the use of merger accounting was not prohibited by the Companies Act 2006 or by other relevant legislation or regulation, merger accounting for group reconstructions being permitted by paragraph 10 of Schedule 6 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008;
the ultimate equity holders remained the same, and the rights of each equity holder, relative to the others, were unchanged as a result of the Combination; and
no non-controlling interest in the net assets of the group was altered by the transfer.
The Combination did not result in any change in the ultimate control of the businesses concerned and no acquirer was, in substance, obtained. Accordingly, the recognition of fair value adjustments and goodwill on the Combination was not an appropriate reflection of the transaction, and the directors consider the previous treatment to constitute a material error. In accordance with Section 10 of FRS 102, the error has been corrected by retrospective restatement, and merger accounting has been applied to the Combination as if it had been adopted from the outset.
The effect of the restatement is to eliminate the goodwill of £27,060,000 previously recognised on the Combination, and to record the assets and liabilities of Blue Gem Management Services Limited at their pre-combination carrying amounts. The purchased goodwill arising in Blue Gem Management Services Limited on the transfer of trade to it (note 23) is unaffected. The corresponding amounts for the year ended 31 December 2024 have been restated accordingly, and the resulting difference arising on the Combination has been recognised in other reserves (the merger reserve).
As a result, group reserves as at 31 December 2024 have been reduced by £27,060,000. The restatement has no effect on the cash flows of the group and no effect on Blue Gem Holdings Limited's individual financial statements. The restatement had no effect on the reported profit for the year ended 31 December 2024.