ST_GILES_HOTEL_LIMITED - Accounts

The directors present the strategic report for the year ended 31 December 2019.

The principal activity of the group during the year was hotel operation and management. The company's subsidiary, St. Giles Hotel, LLC which is in its 9th year of trading, operates two hotels, “The Court” and “The Tuscany” in New York. “The Court” was closed in April 2018.

At the year-end, the group’s total equity was reported at £ (0.003m) compared to £4.843 m in 2018.

St Giles London continues to perform well year on year, achieving an increase in occupancy and Average Day Rate (ADR) of 96.3% (2018: 94.9%) and £82.56 (2018: £81.56) respectively. This has resulted in an increase in room revenue during the year under review. These results, combined with tight management of direct costs and overheads, the operating profit for the year has improved.

The turnover for St Giles London increased from £20.53 m in 2018 to £21.45 m in 2019. This has generated a profit before tax of £2.33 m compared to £2.07 m in 2018, representing an increase of 12.6%. The increase in profit before tax was resulted by the increase in ADR of £1 and of the occupancy rate of 1.4 %.

“The Court” was closed in April 2018, which has had a significant impact on the revenue for St. Giles Hotel, LLC. Due to the closure of “The Court”, we achieved an occupancy of 88.0% (2018: 70.3% combined) during the year under review. The ADR grew by US$13.40 to US$214.60 from US$201.20 in 2018. We believe the increase in ADR was due to the higher rate of “The Tuscany”, given it is of the “Boutique Luxury” category. Despite the dropped in operating loss from US$10.23 m in 2018 to US$5.29 m in 2019, the loss for the year has increased from US$8.88 m in 2018 to US$ 9.09 m in 2019. This is mainly due to the exchange loss arising on financing transactions due to appreciation of GBP.

Accordingly, the group has delivered an after tax loss of £4.85 m (2018: loss of £5.37 m). This loss does not represent a liquid cash loss, but rather the impact of the significant currency movements over the 2 years.

The directors consider the performance of both hotels as being satisfactory in a very challenging hospitality business.

Pre COVID-19

Economic

The hospitality market in the US and the UK remain to be a challenging environment due to the current economic and political uncertainties. Therefore, management has concentrated on controlling costs and improving efficiencies in operations, as well as aggressively driving sales and revenue through various marketing and promotional activities and taking advantage of opportunities where possible.

The economic impact of Brexit on the cost of goods, free movement between UK and European countries, and the availability of crucial immigrant staff, will be an area we will continue to monitor closely and plan accordingly.

The US Presidential election in November 2020 may also bring about some economic impact, however we do not foresee it to be detrimental to the hotel industry.

Competition

The New York City hotel offerings continue to be harshly competitive, as the over-supply of hotel rooms has led to a stark reduction in ADR and RevPAR, with another 13,000 rooms planned to open in the next 3 years. London also continues to see a fast-paced growth in new hotels opening, adding more layers to the crowded scene. Changes in individual disposable income, as well as a more discerning pattern of guest spending is also a challenge. However our strategy remains to provide a value added and superior level of guest service and enhanced experience at a competitive rate, which will enable us to drive loyalty and increase revenue.

The travel and hospitality industry throughout the world have been deeply affected by the COVID-19 pandemic that has spread throughout the world at an alarming pace.

In the UK and US, the situation changes by the day as the country begins to understand the severity of the spread of the disease. We began to see a dramatically sharp decrease in occupancy and cancellations toward the end of February with the pace of that decline getting faster as we came into March. During this short period, we went from having an average occupancy between 80% - 90% dropping down to the teens and single digit within a matter of days. Through careful evaluation of the health risks and the evolving situation globally, we made the decision to temporarily close the St Giles London on March 26, and The Tuscany on March 28.

The short, medium to long term impact of COVID-19 on our business is still to be seen. As with most, we do not know how long the world will be in lockdown, and how long it will take businesses and individuals to resume a somewhat normal work and travel activity. The effects of the looming recession and how long it will take countries and economies to recover will determine our business outlook for remainder of 2020 and 2021.

The management team regularly review and analyse a wide range of KPls for an assessment of the group's performance and financial position. The main indicators from the financial statements are turnover, operating profit and profit before taxation. These are outlined in the business review above.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2019.

The principal activity of the company and group continued to be that of hotels operator. The company's subsidiary, St. Giles Hotel, LLC operates two hotels in New York, "The Court" and "The Tuscany". In April 2018, the company closed down "The Court" due to on-going loss making. It is currently in vacant possession.

Due to COVID-19 Pandemic, the operation of the hotels are temporarily closed since 26 March. The current and potential future impacts are disclosed in the Strategic Report.

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.

No ordinary dividends were paid. The directors do not recommend payment of a further dividend.

In the opinion of the directors the current market value of the company's interests in land and buildings exceeds the book value by approximately £28 million.

The group operates a treasury function which is responsible for managing the liquidity and interest risks associated with the group activities.

The group's financial instruments comprise cash at bank, trade debtors and trade creditors that arise directly from operations and loans to and from group companies and banks. The financial risks affecting the group is monitored and reviewed by the directors on a regular basis.

Liquidity risk arises from the group’s management of working capital. It is the risk that the group will encounter difficulty in meeting its financial obligations as they fall due. The group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by mataching the maturity profiles of financial assets and liabilities.

The group is exposed to interest rate risk because the group borrows funds at both fixed and floating interests rates. The risk is managed by the group by maintaining an appropriate mix between fixed and floating rate borrowings, and the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and define risk appetite, ensuring the most cost-effective hedging strategies are applied.

The group is exposed to the functional currency of its foreign subsidiary in the USA. It is the policy of the group to enter into borrowings and interest rate swap contracts in the same currency of the country of its foreign operation to minimise the risk.

The group's principal credit risk relates to the recovery of amounts owned by trade debtors. In order to manage the risk, limits are set for each client based upon a mixture of past payment history and third party credit references. These are regularly reviewed. Debts are actively chased by the credit control department and those over a certain size or age are reported to the board monthly.

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.

The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.

Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.

There is no employee share scheme at present, but the directors are considering the introduction of such a scheme as a means of further encouraging the involvement of employees in the company's performance.

The group is currently facing unprecedented uncertainty about the impact of COVID-19 Pandemic, the extent and duration of social distancing measures and the impact of temporarily closure of both St Giles London and “The Court” in New York. The directors have foreseen the challenges in the coming months. The directors have considered carefully the potential impact of these matters, taking into account of available cash resources, including access to existing financing facilities and the current availability and extent of support through UK government support measures that have been announced as of the date of signing this report. Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements. Significant judgements and assumptions have been made by the directors as follow:

In the UK,

• Business Rates Holiday in England – this will be waived for the entire year from 1 April.

• Coronavirus Job Retention Scheme (UK) - grant from HMRC to cover the cost for each furloughed employee.

• VAT Deferral (UK) by deferring VAT payments for 3 months.

• The landlord has extent their wiliness for rent reduction.

• The company’s banker has extent their willingness to refinance its current facilities and providing additional overdrawn facilities if needed.

• The use of available bank interest holiday.

• Extended credit terms to 60 -90 days from main suppliers and price reductions for on-going services required such as IT maintenance.

• Refund on reduction in insurance due to lower turnover.

In the US,

The United States Federal Government recently passed a stimulus package due to the economic effects of the COVID-19. Within the package, there is a section to assist small businesses (defined as 500 employees or less). It would be a loan that can be forgiven under certain circumstances which St. Giles Hotel, LLC is qualified to make application.

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.

The truegroup has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the group's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report.

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.

In accordance with the company's articles, a resolution proposing that be reappointed as auditor of the group will be put at a General Meeting.

We have audited the financial statements of St Giles Hotel Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2019 which comprise the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, 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 December 2019 and of the group's loss 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.

Use of our report

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

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 £1,938,699 (2018 - £1,355,570 profit).

St Giles Hotel Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is .

The group consists of St Giles Hotel Limited and all of its subsidiaries.

The company's and the group's principal activities and nature of its operations are disclosed in the Directors' Report.

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, modified to include the revaluation of investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

The consolidated financial statements incorporate those of St Giles Hotel Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.

All financial statements are made up to 31 December 2019. 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.

At the time of approving the financial statements, the directors have a reasonable expectation that the company has 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.

Further details are noted on Directors' Report.

The financial statements do not include any adjustments that would result if such supports were withdrawn. If the company was unable to continue to trade, adjustments would have to be made to reduce the value of assets to their recoverable amounts, provide for further liabilities that may arise and to reclassify non-current assets and non-current liabilities as current assets and liabilities.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue derived from hire of rooms is recognised on the arrival of the guests.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation 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:

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

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

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.

Freehold land and buildings are stated at cost and building is not depreciated due to the company's nature

of business. It is a departure from the general requirement of the Companies Act 2006 for all tangible assets to be depreciated over their useful life except land which generally has an unlimited useful life. In the opinion of the directors compliance with the standard is necessary for the financial statements to give a true and fair view. Depreciation or amortisation is only one of many factors reflected in the annual valuation and the amount of this which might otherwise have been charged cannot be separately identified or quantified.

Assets in the course of construction are carried at cost, less any identified impairment loss. Depreciation commences when the assets are ready for their intended use.

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.

Where fair value cannot be achieved without undue cost or effort, investment property is accounted for as tangible fixed assets.

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.

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.

Where a reasonable and consistent basis of allocation can be identified, assets are allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

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.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

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

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 statement of financial position 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 though 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.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

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

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

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

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the income statement for the period.

The trading results of group undertakings are translated into sterling at the average exchange rates for the year. The assets and liabilities of overseas undertakings, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates ruling at the year-end. Exchange adjustments arising from the retranslation of opening net investments and from the translation of the profits or losses at average rates are recognised in ‘Other comprehensive income’.

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

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

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

Financial and non-financial assets are subject to impairment reviews based on whether current or future events and circumstances suggest that their recoverable amount may be less than their carrying value. Recoverable amount is based on the higher of the value in use and fair value less costs to sell. Value in use is calculated from expected future cash flows using suitable discount rates and includes management assumptions and estimates of future performance.

The severance costs were incurred due to the closure of "The Court" in April 2018.

Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £1,616,087 (2018 - £2,273,035 gain).

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

Their aggregate remuneration comprised:

Investment income includes the following:

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:

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

The impairment losses in respect of financial assets are recognised in other gains and losses in the income statement.

More information on impairment movements in the year is given in note 12.

The investment property has been disposed of after the reporting period. The sale price after cost of disposal is approximate £243,000. The fair value of the property has not been adjusted as at the period end as it is not material.

Details of the company's subsidiaries at 31 December 2019 are as follows:

The company and its subsidiary have entered into an interest rate swap transactions on 9 October 2018 to receive interest at LIBOR and pay interest at a fixed 1.29% and 3.2% respectively. The swaps are based on a principal amounts of £5,416,000 and US$12,000,000 respectively. Both is mature on 22 August 2020 (see note 23). The fair values of the interest rate swaps are disclosed above.

The bank loans are interest bearing between 1.7% - 2.5% above LIBOR. They are secured by fixed charges over the properties and floating charges over the remaining assets of the group. The loans are due for repayment in year 2020. As of the date of signature, the directors were in discussion with the banker to refinance the exiting facilities. Its banker is keen to refinance subject to acceptable terms.

Loans from related parties are unsecured and no fixed date of repayment. They carry an interest of 4% above LIBOR.

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

The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.

Deferred tax is not recognised in respect of tax losses arose from its subsidairies as it is not probable that they will be recovered against the future taxable profits in the short term.

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's ordinary shares, which carry no right to fixed income, each carry the right to one vote at general meetings of the company.

Consideration received for shares issued above their nominal value net of transactions costs.

The nominal value of shares repurchased and still held at the end of the reporting period.

Profit and loss reserves represent cumulative profit and loss net of distribution to owners. It includes translation reserve of £1,264,600 (2018: £955,200) arising from re-translation of foreign subsidiaries and fair value reserve of £14,900 loss (2018: £14,900 loss) related to revaluation of investment property which are non-distributable.

In the previous year, the group has incurred approximately US$1 million on severance payments due to the closure of "The Court". As per the agreement entered by the group with the Hotel Association of New York City, Inc, if "The Court" is converted to residential use, there will be further severance liability to be incurred. In this event, the group could be liable up to additional US$ 3.3 million which has not been provided for in the accounts.

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

The operating leases represent sub-leases to third parties. The leases are negotiated over terms of 3 - 25 years and rentals are fixed for 3 - 5 years. All leases include a provision for theree to five-yearly upward rent reviews according to prevailing market conditions. There are no options in place for either party to extend the lease terms.

At the reporting end date the group had contracted with tenants for the following minimum lease payments:

The comparatives for the group and company have been restated to include the total of future minimum lease payments as lessee and lessor under non-cancellable operating leases. These adjustments have had no effect on net equity or profit and loss account.

Amounts contracted for but not provided in the financial statements:

During the year the group entered into the following transactions with related parties:

The following amounts were outstanding at the reporting end date:

The following amounts were outstanding at the reporting end date:

The company is owned by a number of private shareholders and companies, none of whom own more than 50% of the issued share capital of the company. Accordingly there is no parent entity nor ultimate controlling party.