Northgate Healthcare Limited - Limited company accounts 18.2

REGISTERED NUMBER: 05773858 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

FOR

NORTHGATE HEALTHCARE LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Income Statement

8

Other Comprehensive Income

9

Balance Sheet

10

Statement of Changes in Equity

11

Cash Flow Statement

12

Notes to the Cash Flow Statement

13

Notes to the Financial Statements

14

DIRECTORS:

A K Haines

K Haines

M K Haines

SECRETARY:

K Haines

REGISTERED OFFICE:

White Gables

Cross Lane Head

Bridgnorth

Shropshire

WV16 4SJ

REGISTERED NUMBER:

05773858 (England and Wales)

AUDITORS:

BSS & Co (Accountancy Services) Limited

75 Aston Road

Shifnal

Shropshire

TF11 8DU

The directors present their strategic report for the year ended 31 December 2018.

We aim to present a balanced and comprehensive review of the development and performance of our business

during the year and its position at the year end. Our review is consistent with the size and non-complex nature of

our business and is written in the context of the risks and uncertainties we face.

REVIEW OF BUSINESS

We are a provider of residential care homes for the elderly and currently own and operate four homes in the

Midlands. We assess the performance for each home separately.

We pride ourselves on the quality of our homes and care we provide. The purchase of Autumn House in 2017,

being our fourth home has seen the group enter the nursing care sector to expand the services and care we are

able to offer across the group.

The occupancy rates across the three specialist dementia homes have been satisfactory over the year with each

home showing good returns in line with our expectations. The transition period into nursing for Autumn House

has had a number of issues which has resulted in only part of the nursing care facility being open during this

year. The profitability of the new home has not been as expected due to this. We have put a number of strategies

in place to move forward with the plans for this home to be a dedicated nursing home.

We have continued with the on-going program of repairs to all homes to ensure they are kept to the high

standards which we continue to meet for all of our service users.

With the addition of nursing care to be provided at our newest home this enables the group to grow the range of

care available to residents across the group. Residential nursing care is a growing sector of our industry and the

directors felt this was a significant addition to the Northgate Healthcare group and although comes with

challenges it will mean residents can continue to receive the high quality care they have been used to from a

Northgate Healthcare home when nursing care is required.

We consider the key financial performance indicators are those that communicate the financial performance and

strength of the company as a whole, these being average occupancy rates, gross profit margin and earnings

before interest, tax, depreciation and amortisation (EBITDA).

We target occupancy rates to be in excess of 95% and this was largely achieved across our three specialist

dementia homes for the year. Autumn House was below our target but following the changes which have been

put in place during 2018 and since the financial year end we are expecting that home will reach our occupancy

targets by the end of 2019. We continue to have high resident retention and satisfaction across all homes in the

group.

The gross profit margin for the company as a whole was 31.65%, a significant reduction from 2017, this was

mainly due to the performance of Autumn House. Our 3 dedicated dementia homes had gross margins of at

least 40% which is in line with our target. We expect our gross margins for 2019 will be much higher than for

2018 overall, with the 3 dementia care homes returning a similar gross profit margin as 2018 and Autumn

House showing a vastly improved results.

PRINCIPAL RISKS AND UNCERTAINTIES

A number of risk factors continue to potentially impact the operating and financial performance of the company.

These being:

- The effects of a further economic downturn which could lead to further pressures on margins

- Changes in the availability of public sector funding. A number of users of the company's care homes rely on

government funding to assist with fees

With these risks and uncertainties in mind, we are aware that any plans for the future development of the

business may be subject to unforeseen events outside of our control.

FINANCIAL RISK MANAGEMENT

The company's credit risk is low, being primarily attributed to its trade debtors. All credit risk both publicly and

privately funded is managed by monitoring payments against contractual agreements.

The company faces financial risk from the inflationary pressures from staff costs. Any future changes in the

National Living Wage will have significant impact on labour costs in the care sector as a whole. The company

reviews upcoming changes to the National Living Wage and currently pay above this rate to ensure good quality

care staff. The company plans future wage increases to ensure financial stability of the company going forward

and to ensure these increases does not overly impact cashflow and profitability.

ON BEHALF OF THE BOARD:

A K Haines - Director

30 September 2019

The directors present their report with the financial statements of the company for the year ended 31 December 2018.

DIVIDENDS

The total distribution of dividends for the year ended 31 December 2018 will be £ 243,000 .

FUTURE DEVELOPMENTS

The directors are confident about the continuing financial performance of the business and continue to seek

opportunities to develop the business further.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2018 to the date of

this report.

A K Haines

K Haines

M K Haines

DISCLOSURE IN THE STRATEGIC REPORT

A review of the business, principle risks and uncertainties and financial risk management are included in the

Strategic Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors 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;

-	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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the

Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps

that he ought to have taken as a director in order to make himself aware of any relevant audit information and to

establish that the company's auditors are aware of that information.

AUDITORS

The auditors, BSS & Co (Accountancy Services) Limited, will be proposed for re-appointment at the

forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

A K Haines - Director

30 September 2019

Opinion

We have audited the financial statements of Northgate Healthcare Limited (the 'company') for the year ended

31 December 2018 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet,

Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, 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 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 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 Auditors' 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 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 in the

Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of

the Auditors 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 the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

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 Report of the Directors.

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, 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.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, 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 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.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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 www.frc.org.uk/auditorsresponsibilities. This description forms part of our

Report of the Auditors.

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 a Report of the Auditors 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.

Mr T Afzal A.C.A. (Senior Statutory Auditor)

for and on behalf of BSS & Co (Accountancy Services) Limited

75 Aston Road

Shifnal

Shropshire

TF11 8DU

30 September 2019

TURNOVER

5,916,081

5,047,701

Cost of sales

4,043,725

3,226,054

GROSS PROFIT

1,872,356

1,821,647

Administrative expenses

1,144,932

871,047

OPERATING PROFIT

4

727,424

950,600

Interest receivable and similar income

-

741

727,424

951,341

Interest payable and similar expenses

5

249,730

172,555

PROFIT BEFORE TAXATION

477,694

778,786

Tax on profit

6

71,027

144,316

PROFIT FOR THE FINANCIAL YEAR

406,667

634,470

PROFIT FOR THE YEAR

406,667

634,470

OTHER COMPREHENSIVE INCOME

Revaluation surplus

Income tax relating to other comprehensive income

30,040

28,620

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

30,040

28,620

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

436,707

663,090

FIXED ASSETS

Intangible assets

8

913,893

988,721

Tangible assets

9

13,791,582

13,724,414

14,705,475

14,713,135

CURRENT ASSETS

Stocks

10

14,342

11,550

Debtors

11

621,135

475,809

Prepayments and accrued income

35,086

46,438

Cash at bank and in hand

387,157

509,219

1,057,720

1,043,016

CREDITORS

Amounts falling due within one year

12

1,631,620

1,462,758

NET CURRENT LIABILITIES

(573,900

)

(419,742

)

TOTAL ASSETS LESS CURRENT LIABILITIES

14,131,575

14,293,393

CREDITORS

Amounts falling due after more than one year

13

(8,158,325

)

(8,502,661

)

PROVISIONS FOR LIABILITIES

17

(900,084

)

(911,273

)

NET ASSETS

5,073,166

4,879,459

CAPITAL AND RESERVES

Called up share capital

18

100

100

Revaluation reserve

19

3,413,300

3,383,260

Retained earnings

19

1,659,766

1,496,099

SHAREHOLDERS' FUNDS

5,073,166

4,879,459

The financial statements were approved by the Board of Directors on 30 September 2019 and were signed on its behalf by:

A K Haines - Director

Called up

share

Retained

Revaluation

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 January 2017

100

1,059,629

3,354,640

4,414,369

Changes in equity

Dividends

-

(198,000

)

-

(198,000

)

Total comprehensive income

-

634,470

28,620

663,090

Balance at 31 December 2017

100

1,496,099

3,383,260

4,879,459

Changes in equity

Dividends

-

(243,000

)

-

(243,000

)

Total comprehensive income

-

406,667

30,040

436,707

Balance at 31 December 2018

100

1,659,766

3,413,300

5,073,166

Cash flows from operating activities

Cash generated from operations

1

848,600

1,230,190

Interest paid

(266,679

)

(154,226

)

Interest element of hire purchase payments paid

(611

)

(769

)

Tax paid

(59,520

)

37,126

Net cash from operating activities

521,790

1,112,321

Cash flows from investing activities

Purchase of intangible fixed assets

-

(160,001

)

Purchase of tangible fixed assets

(145,278

)

(2,839,731

)

Sale of tangible fixed assets

-

729

Interest received

-

741

Net cash from investing activities

(145,278

)

(2,998,262

)

Cash flows from financing activities

New loans in year

-

2,740,500

Loan repayments in year

(251,481

)

(285,211

)

Inter company loan

-

64

Capital repayments in year

(2,865

)

(2,707

)

Amount introduced by directors

-

4,001

Amount withdrawn by directors

(44,075

)

(96,494

)

Equity dividends paid

(243,000

)

(198,000

)

Net cash from financing activities

(541,421

)

2,162,153

(Decrease)/increase in cash and cash equivalents

(164,909

)

276,212

Cash and cash equivalents at beginning of year

2

509,219

233,007

Cash and cash equivalents at end of year

2

344,310

509,219

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2018

2017

£

£

Profit before taxation

477,694

778,786

Depreciation charges

152,936

150,854

Profit on disposal of fixed assets

-

(729

)

Finance costs

249,730

172,555

Finance income

-

(741

)

880,360

1,100,725

Increase in stocks

(2,792

)

(4,850

)

Increase in trade and other debtors

(133,974

)

(378,985

)

Increase in trade and other creditors

105,006

513,300

Cash generated from operations

848,600

1,230,190

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect

of these Balance Sheet amounts:

Year ended 31 December 2018

31.12.18

1.1.18

£

£

Cash and cash equivalents

387,157

509,219

Bank overdrafts

(42,847

)

-

344,310

509,219

Year ended 31 December 2017

31.12.17

1.1.17

£

£

Cash and cash equivalents

509,219

233,007

1.	STATUTORY INFORMATION

Northgate Healthcare Limited is a private company, limited by shares , registered in England and Wales.

The company's registered number and registered office address can be found on the Company

Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets.

Turnover

Turnover represents the fees derived from the provision of care services to residents during the year.

Income is recognised on a daily basis for the provision of nursing care services.

Goodwill

Intangible assets

Intellectual property rights and books of account, being the amount paid in connection with the

acquisition of a care home in 2010, are being amortised evenly over the deemed useful life of twenty

years.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Freehold property

-

not provided

Fixtures fittings & equipment

-

10% on reducing balance

Motor vehicles

-

25% on reducing balance

Computer equipment

-

25% on reducing balance

Freehold property is not depreciated, as it is the opinion of the directors that periodic revaluation in line

with generally accepted accounting principles fairly reflects the fair market value of the properties, and

therefore depreciation is considered to be immaterial.

Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete

and slow moving items.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement,

except to the extent that it relates to items recognised in other comprehensive income or directly in

equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted

or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the

balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods

different from those in which they are recognised in financial statements. Deferred tax is measured using

tax rates and laws that have been enacted or substantively enacted by the year end and that are expected

to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable

that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet.

Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held

under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the

shorter.

The interest element of these obligations is charged to profit or loss over the relevant period. The capital

element of the future payments is treated as a liability.

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of

the lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's

pension scheme are charged to profit or loss in the period to which they relate.

3.	EMPLOYEES AND DIRECTORS

2018

2017

£

£

Wages and salaries

3,641,435

2,930,423

Social security costs

162,138

120,627

Other pension costs

33,852

12,081

3,837,425

3,063,131

The average number of employees during the year was as follows:

2018

2017

Lane House

43

45

The Firs

77

73

Meadowfields

84

76

Autumn House

57

53

261

247

2018

2017

£

£

Directors' remuneration

17,304

17,304

4.	OPERATING PROFIT

The operating profit is stated after charging/(crediting):

2018

2017

£

£

Hire of plant and machinery

62,231

46,900

Other operating leases

3,600

3,600

Depreciation - owned assets

75,948

73,146

Depreciation - assets on hire purchase contracts

2,162

2,883

Profit on disposal of fixed assets

-

(729

)

Goodwill amortisation

74,202

74,201

Intellectual property & books amortisation

626

625

Auditors' remuneration

5,100

5,100

5.

INTEREST PAYABLE AND SIMILAR EXPENSES

2018

2017

£

£

Bank interest

845

-

Bank loan interest

247,794

171,786

Other interest

480

-

Hire purchase

611

769

249,730

172,555

6.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

2018

2017

£

£

Current tax:

UK corporation tax

52,176

90,945

Deferred tax

18,851

53,371

Tax on profit

71,027

144,316