SPRINGHILL_CARE_GROUP_LTD - Accounts

The directors present their strategic report and financial statements for the year ended 31 July 2018.

The group continues to service the care industry through its provision of nursing and residential care to adults and older people and is diversified across several areas of healthcare.

Care home demand continues to increase and it is anticipated to do so over the next 25 years.

The care home industry continues to face challenging times with regard to publicly funded residents as local authorities and NHS commissioners seek to address their own financial strictures through frozen or reduced fees for residential and nursing care.

Through the continued investment in the provision of high quality facilities and services across the group, the directors seek to mitigate the impact of public funding cuts by attracting more self-funding residents and residents who are prepared to make a contribution towards their public funded fees.

The group’s recent expansion and enhanced facilities will continue to provide the opportunity for greater economies of scale and for more specialist forms of care provision, which will continue to attract higher fee rates and provide a wide range of services.

The group continues to maintain tight budgetary control and management across all its operational entities, to ensure high levels of occupancy and continued high standards of care, to enhance the group’s prospects and profitability for the future.

Operating profits from the group increased in the year under review by £389,837.

The operating profit from the Bristol subsidiary increased by 9.20% compared to the previous year and the largest increase in operating profit came from the Accrington subsidiary showing an increase of 38.93% compared to the previous year. The remaining subsidiary based in Skelmersdale increased its operating profit by £70,592. Since the financial year end additional work has been undertaken to improve the performance of this subsidiary. Current results are reflecting the benefit of this additional work in relation to the Skelmersdale subsidiary, which has benefited from a change and strengthening in its management base and staffing recruitment, together with much tighter control over the need for use of agency staff.

The turnover of the group’s trading subsidiaries has grown by 2.96% over the levels achieved for 2017.

This growth in turnover has been reflected in increased growth in operating profits which have grown by 27.46% for the year under review by comparison to the previous year.

Staff numbers in the three main trading subsidiaries increased from 381 in 2017 up to 408 in 2018, and as the subsidiaries look to reduce reliance on agency staff, this number is expected to be maintained or increased as staff are a major asset of the business.

The group’s pre-tax profits represent 14.44% of turnover (13.41% in 2017)

During the year under review, the group has increased its net assets by £1,006,401, being a 43.20% increase.

The increase in net assets has arisen primarily due to retained earnings in the group.

The group and its subsidiaries do not actively use financial instruments as part of their financial risk management. The group is exposed to the usual credit risks and cash flow risks associated with selling on credit and manages these through standard credit control procedures.

All of the parent company income is from its trading subsidiaries, and its credit risk and liquidity risk are therefore minimal.

The group’s long-term bank loans are subject to interest at current commercial rates and repayments are met out of working capital.

The group has generated substantial cash reserves in the year of £443,483 resulting in cash balances of £2,852,640 as at 31 July 2018 compared with £2,409,157 at the previous year end.

Interest rates have remained low for the period under review and the improved profitability and cash flow within the group will continue to assist the group to manage and deal with interest rate fluctuations in the short and medium term.

In response to the national Registered Nurse shortage, the group continues to invest in the assistant practitioner programme. Since the year end, it is also working in close collaboration with local universities to explore opportunities for a nurse apprenticeship programme across the group.

Since the year end, the group has further reviewed its terms and conditions for Registered Nurses. As a result, during the year under review and since the year end, there has been a significant reduction in the group’s reliance on agency nurses. The group will continue to keep terms and conditions under review to ensure these remain attractive and competitive in order to ensure the sustainability of the high-quality nursing provision that is required, in order to meet the complex healthcare needs of an ageing population.

Since the introduction of the national living wage, the group has applied the equal differential across the workforce to ensure that the staff team are appropriately recognised for additional roles and responsibilities. The group also applies the national living wage to those aged over 21, this is over and above the regulatory requirement (aged 25 and over).

The holding company measures its trading subsidiaries overall performance by reference to;

• Turnover

• Occupancy levels and average occupancy

• Average weekly fees

• Pre-tax profit

All trading subsidiaries showed an increase in turnover by comparison to 2017.

Group turnover increased by 2.96% compared to 2017.

Overall occupancy levels across all three major trading subsidiaries was in excess of 87%.

This key performance indicator identified the need for the Skelmersdale performance to be improved and significant work has been undertaken in this regard during the year under review, and since the year end.

Average weekly fees across all three major subsidiaries increased by 8.32% and each of the three subsidiaries showed increases of between 6.20% and 9.92%.

Pre-tax profits for the group increased from £1,422,948 in 2017 up to £1,578,145 in 2018.

Group post-tax profits increased by £142,886.

The directors are pleased with the group results and performance for the year, which demonstrated significant improvement on the previous year.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 July 2018.

The principal activity of the company is that of a holding company.

The principal activity of the group is the provision of nursing and residential care to the elderly.

The results for the year and the financial position at the year end were considered satisfactory by the directors.

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 9.

Ordinary dividends were paid amounting to £240,000. The directors do not recommend payment of a further dividend.

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the group continues and that the appropriate training is arranged. It is the policy of the group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Springhill Care Group is proud to be an Investor in People, and the board recognises that a well trained, stable and motivated workforce is the key to delivering quality services, as well as improving business success. The board has maintained its commitment to the continuing development of the group's managers to a consistently high standard and to provide a culture in which all staff feel valued and have opportunities for both learning and personal development.

The auditor, Pierce C A Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

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 group and 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 UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•     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 group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 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 auditor of the company 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 auditor of the company is aware of that information.

We have audited the financial statements of Springhill Care Group Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 July 2018 which comprise 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 a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 group's and the parent company's affairs as at 31 July 2018 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

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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 group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

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

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

• the parent company 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 group's and the parent 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 group or the parent 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.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

The Profit And Loss Account has been prepared on the basis that all operations are continuing operations.

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 £687,805 (2017 - £374,066 profit).

Springhill Care Group Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 11 Cannon Street, Accrington, Lancashire, BB5 1NJ.

The group consists of Springhill Care Group Ltd 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 financial statements incorporate those of Springhill Care Group Ltd and all of its subsidiaries.

All financial statements are made up to 31 July 2018. 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.

The group is reliant upon the support of its bankers. The financial statements have been prepared on a going concern basis on the assumption that this finance will continue to be made available to the group. The directors have no reason to believe that such financial support will not continue for the foreseeable future.

Turnover represents amounts receivable for services.

Acquired goodwill is written off in equal annual instalments over its estimated useful economic life of 10 years.

Tangible fixed assets are measured at cost, net of depreciation.

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:

No depreciation charge is made on freehold buildings on the grounds that it would be immaterial due to the length of the estimated remaining useful economic life and because the estimated residual value of the land and buildings is not materially different from the carrying amount of the asset.

No depreciation has been provided on the pool of consumable equipment on the basis that the cost of replacements are charged directly to the profit and loss account as incurred.

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.

In the parent company financial statements, investments in subsidiaries are measured at cost.

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.

Stocks are stated at cost.

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

The 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 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.

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 cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

The Group operates a defined contribution scheme for the benefit of its employees. Contributions payable are charged to the profit and loss account in the period they are payable.

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 balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Government grants are recognised at the fair value of the asset received when there is reasonable assurance that the grant conditions will be met and the grants will be received.

The grant is released to the profit and loss account in-line with the depreciation policy of the associated asset.

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.

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

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

Their aggregate remuneration comprised:

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

Intangible fixed assets for the group represents goodwill created on consolidation.

The net carrying value of tangible fixed assets includes the following in respect of assets held under hire purchase contracts.

Details of the company's subsidiaries at 31 July 2018 are as follows:

The group's bank loans and overdrafts are secured by legal charges and debentures created 25 March 2003, 27 March 2003, 24 August 2004, 14 January 2005 and 4 August 2011 in favour of the Royal Bank of Scotland plc.

The charges are in respect of all monies due or to become due to the chargee on any account

whatsoever and are charged against the group's properties and fixed and floating charges over all fixed assets.

The finance leases are secured over the assets concerned.

The bank loans are repayable in full by instalments to be fully repaid by March 2022, carrying a market rate of interest.

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

The deferred tax liability set out above is expected to reverse within the foreseeable future and relates to accelerated capital allowances that are expected to mature within the same period.

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

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

Dividends totalling £240,000 (2017 - £240,000) were paid in the year in respect of shares held by some of the company's directors.

The company is under the control of two of the directors, K A & N J Nolan, who together own 100% of the issued share capital of the company.