Q.N._(HOLDINGS)_LIMITED - Accounts
Q.N._(HOLDINGS)_LIMITED - Accounts
The director presents the strategic report for the year ended 31 December 2019.
There was a small drop in revenue year on year. This is in line with the provincial hotel market given the economic uncertainties.
The Gross Profit margin for the year was 48.6% (2018: 49.6%).
Direct costs were well controlled. Payroll cost increased across however with increases in Living Wage and minimum wage this is an acceptable increase in payroll costs.
Expenses were well managed.
The group continued to invest into its assets with refurbishment works being undertaken at the hotel in Newport. The hotel in Sandy and Aylesbury were sold in October 2019 and January 2019 respectively.
The hotels in Newport and Ashford have had a complete refurbishment of the lobby areas to fully comply with the frachisor's brand standards. The impact of Covid-19 has been substantial on the group and it is difficult to accurately forecast the business.
In the opinion of the directors the key performance indicators are occupancy, average room rate and revenue per available room.
The principal risks and uncertainties facing the group (apart from those associated with a general economic downturn) relate to the management of cash and borrowing requirements and the potential default of debtors. The group has stringent reviews on reviewing aged debtors.
The impact of Covid-19 has been substantial as the hotels in the group have had to suffer complete closure for several weeks. Even after re-opening there remain severe restrictions and revenue is severely impacted. The group are utilising the UK Government’s Coronavirus Job Retention Scheme and has also been supported by way of grants by the Welsh Government’s Economic Resilience Fund.
There also continues to be some uncertainty in the economy due to the Brexit vote.
Section 414CZA(1) of the Companies Act 2006 requires the directors to explain how they considered the matters set out in section 172(1) (a) to (f) of the Companies Act 2006 (‘S172 (1)’) when performing their duty to promote the success of the group. When making decisions, each director ensures that they act in the way that would most likely promote the group’s success for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the following matters:
(a) The likely consequences of any decision in the long term
The directors understand the business and the evolving environment in which the group operates, including the challenges of operating in this Covid time period. The Directors decided to utilise the lockdown period to refurbish the public areas in Holiday Inn Newport and the Holiday Inn Ashford North. The refurbishments were extensive and likely to be disruptive to the business. By completing these the group is fully in compliant with the franchisor’s brand requirements.
(b) The interests of the group’s employees
The directors recognise that the success of the business depends on attracting, retaining and motivating high quality employees. The directors take into account the implications of decisions which may affect their perception as a responsible employer, on determining remuneration and benefits, and on providing a healthy and safe workplace environment, where relevant. The group utilises the services of an external company to audit that the group is providing a safe and healthy working environment to its employees. The group hosts a Celebrate Service week which was created to say a big ‘thank you’ to all our colleagues who go above and beyond to deliver True Hospitality. We celebrate and recognise colleagues who make our guests and those we interact with every day, feel welcome and care for, recognised and respected.
(c) The need to foster the group's business relationships with suppliers, customers and others
The directors seek to promote strong mutually beneficial relationships with suppliers, customers, the regulators and authorities. Such general principles are critical in the delivery of the group’s strategy. The group has strong relationships with suppliers by adhering to the payment terms. The loyalty programmes insures that the customer feels valued and rewarded for his business.
(d) The impact of the group’s operations on the community and the environment
The group is committed to understanding the interests of these stakeholder groups. The directors receive information on these topics on a periodic basis to provide relevant information for specific board decisions. The group participates in the Green Engage programme and is committed to reducing its carbon footprint.
(e) The desirability of the group maintaining a reputation for high standards of business conduct
The directors recognise the importance of acting in ways which promote high standards of business conduct. The board periodically reviews and approves clear operating frameworks to ensure that its high standards are maintained both within the businesses and the business relationships the group has with stakeholders. As a result of these reviews it was felt important to carry out the Open Lobby refurbishments in 2 of the hotels.
(f) The need to act fairly as between members of the group
The directors aim to act fairly as between the group’s members when delivering the group’s strategy. The group is an Equal Opportunities employer and conducts regular audits to insure that this is being met. The group also has a thorough grievance procedure.
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 December 2019.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The results for the year are set out on page 7.
No ordinary dividends were paid. The director does not recommend payment of a dividend.
The director has considered the effect of the Covid-19 pandemic that has been spreading throughout the world in 2020 on the group’s activities. This outbreak has caused significant disruption to the group’s business prior to the date of approval of these financial statements due to forced closure and subsequent limitations on capacity. Due to the prolonged outbreak, the director anticipates the disruption to continue however, the extent and financial effect of any continuing disruption remains uncertain.
The auditor, HW Fisher, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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.
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.
Material uncertainty over going concern
We draw attention to note 1.3 in the financial statements which indicates that the Covid-19 pandemic has caused significant disruption to the group’s business. As stated in note 1.3, the group’s hotels plan to remain open with limited capacity and are subject to government restrictions. It is unclear when the restrictions on its activities will be relaxed. This gives rise to a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
The director is 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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's 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 director's 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 director's responsibilities statement, the director is 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 director is 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 director either intends 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.
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 £100,000 (2018 - £0 profit).
Q.N. (Holdings) Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is QN House Unit 4, Loughton Business Centre, 5 Langston Road, Essex, IG10 3FL.
The group consists of Q.N. (Holdings) Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The consolidated financial statements incorporate those of Q.N. (Holdings) 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).
All financial statements are made up to 31 December 2019.
All intra-group balances are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
As stated in note 26, the director has considered the effect of the Covid-19 pandemic. The outbreak has had a significant effect on the business due to the forced closure between 22 March 2020 and early July 2020, the requirement to operate at limited capacity on reopening as a result of social distancing measures, and a further lockdown period imposed from 5 November. The director has taken advantage of government incentives and there has been a restructure of staff to allow activities to continue following the reopening of the hotel. Additionally with the ongoing support of the bank, the director plans for the group’s hotels to stay open as long as government guidelines allow. Therefore, not withstanding the uncertainty, the director has continued to adopt the going concern basis in these financial statements.
Turnover is derived from hotel operations, and arose wholly in the United Kingdom. Turnover is recognised when services have been rendered. The turnover of the hotels is derived primarily from the rental of rooms, conference and banqueting, food and beverage sales. Turnover is all rendering of goods and services. Turnover is also derived from the sale of fitness club membership and associated joining and administration fees.
Turnover is measured at the fair value of the consideration received, excluding discounts, rebates, value added tax and other sales taxes.
The residual value of the buildings is considered to equal to the carrying value and so no depreciation is charged.
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.
Interest in subsidiaries are initially measured at cost in the parent company financial statements, 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.
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 or , unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
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 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 and loans from fellow group companies, 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.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The group makes pension contributions to a money purchase scheme in respect of certain directors. Contributions payable are charged to the profit and loss account in the Period they are payable.
The group operates a defined contribution pension scheme under the automatic enrolment legislation for the benefit of its employees. Contributions payable are charged to the profit and loss accounts in the period they are payable.
Rentals payable under operating leases, including any lease incentives received, are charged to income 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 lease 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.
In the application of the group’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The group has adopted the revaluation model in respect of land and buildings. The fair value of the assets has been determined using a multiple of 2.7 applied to turnover, which the directors consider the appropriate method to use due to the nature of the company's operations. The method is based on a widely applied method by surveyors. The valuation is subjective due to, among other factors, the individual nature and condition of the buildings and their location. As a result the valuation is subject to a degree of uncertainty and is made on the basis of assumptions which may not prove to be accurate
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 number of directors for whom retirement benefits are accruing under defined benefit schemes amounted to 1 (2018 - 1).
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:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
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 profit and loss account.
The carrying value of land and buildings comprises:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Q N Hotels Limited's long leasehold building was revalued by the directors using a multiple of turnover, which the directors believe to be appropriate. This basis is consistent with an open market valuation for a similar asset held by a group undertaking, carried out in May 2017 by a firm of Chartered Surveyors. The company's freehold land and building was sold in the year.
Swanfield Limited's freehold land and buildings was revalued by the directors using a multiple of turnover, which the directors believe to be appropriate. The basis is consistent with an open market valuation for a group undertaking carried out in May 2017 by a firm of Chartered Surveyors.
Q N Hotels (Wrexham) Limited's leasehold land and buildings was revalued by the directors using a multiple of turnover, which the directors believe to be appropriate. The basis is consistent with an open market valuation for a group undertaking carried out in May 2017 by a firm of Chartered Surveyors.
Q N Hotels (Aylesbury) Limited's freehold land and building was sold in the year.
All other tangible fixed assets are stated at historical cost.
If revalued assets were stated on an historical cost basis rather than a fair value basis, the total amounts included would have been as follows:
More information on the impairment arising in the year is given in note 10.
Details of the company's subsidiaries at 31 December 2019 are as follows:
Registered office key:
1 - QN House, Loughton Business Centre, 5 Langston Road, Loughton, Essex, IG10 3FL
Bank loans totalling £5,363,938 (2018: £6,340,302) is secured by way of a fixed and floating charge over the assets of the company and its subsidiaries, Q.N. Hotels Limited, Q N Hotels (Wrexham) Limited and Swanfield Limited.
In the prior year ending 31 December 2018 the bank loan totalling £952,963 was secured by way of a fixed and floating charge over the assets of the company and its subsidiaries, Q.N. Hotels Limited, Q N Hotels (Wrexham) Limited, Q.N (Aylesbury) Limited and Swanfield Limited. At 31 December 2019 this loan has been fully repaid.
The other loan is secured by a way of a legal charge over the assets of Q.N. Hotels (Wrexham) Limited, and is subject to a fixed rate of interest of 6.7%.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
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:
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.
On 27 February 2019 the company cancelled 30,000 ordinary shares with nominal value of £1 each for consideration of £125,000.
On 11 March 2019 the company cancelled 960,300 shares with nominal value of £1 for consideration of £960,300.
The company and its subsidiary undertakings form part of a cross company guarantee securing bank borrowings of Q.N. Hotels Limited. At 31 December 2019 these borrowings amounted to £5,363,938 (2018: £6,340,302).
In the prior year ending 31 December 2018 the company and its subsidiary undertakings formed part of a cross company guarantee securing the bank borrowings of Q. N. Hotels (Aylesbury) Limited amounting to £952,963. At 31 December 2019 these borrowings have been fully repaid so there is no guarantee relating to this loan.
A director was owed £20,393 by a group company on 1 January 2019. During the year, net advances of £206,136 were taken by the director. At the year end, the director owed £185,734 to the company. The transactions mainly relate to personal expenses paid by the company on the director’s behalf and cash withdrawals by the director. The amount owed to the director is unsecured, interest free and repayable on demand.
A director owed a group company £39,229 on 1 January 2019. During the year no advances or repayments were made. At the year end, the director was owed £39,229 by the company. The transactions mainly relate to personal expenses paid by the company on the director’s behalf and cash withdrawals by the director. The amount owed to the director is unsecured, interest free and repayable on demand.
During the year a group company was charged rent of £55,000 (2018: £63,748) for the use of a property owned by a company under common control. The group company also paid expenses of £76,201 (2018: £70,191) on behalf of the related party. At year end, an amount of £441,544 (2018: £410,649) was due from this related party.
At the year end, an amount of £121,887 (2018: £200,586) was due to the group from another company under common control.
The director has considered the effect of the Covid-19 pandemic that has been spreading throughout the world in 2020 on the group’s activities. This outbreak has caused significant disruption to the group’s business prior to the date of approval of these financial statements due to forced closure and subsequent limitations on capacity. Due to the prolonged outbreak, the director anticipates the disruption to continue however, the extent and financial effect of any continuing disruption remains uncertain.
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 leases to third parties. The leases are negotiated over terms of 70 months and rentals are fixed for the period. There is no break clause and there are no options in place for either party to extend the lease terms. There are no contingent rent or escalation clauses. There are no significant restrictions imposed by lease arrangements.
At the reporting end date the group had contracted with tenants for the following minimum lease payments: