Knead Group Limited - Limited company accounts 20.1

REGISTERED NUMBER: 03980576 (England and Wales)

KNEAD GROUP LIMITED

STRATEGIC REPORT,

REPORT OF THE DIRECTOR AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

Page

Company Information

1

Strategic Report

2

to

3

Report of the Director

4

Report of the Independent Auditors

5

to

6

Profit and Loss Account

7

Other Comprehensive Income

8

Balance Sheet

9

Statement of Changes in Equity

10

Cash Flow Statement

11

Notes to the Cash Flow Statement

12

to

13

Notes to the Financial Statements

14

to

23

DIRECTOR:

M J Thurlby

REGISTERED OFFICE:

14 All Saints Street

Stamford

Lincolnshire

PE9 2PA

BUSINESS ADDRESS:

Office 1

32 North Street

Bourne

Lincolnshire

PE10 9AB

REGISTERED NUMBER:

03980576 (England and Wales)

AUDITORS:

Duncan & Toplis Limited, Statutory Auditor

14 All Saints Street

Stamford

Lincolnshire

PE9 2PA

BANKERS:

Barclays Bank Plc

The director presents his strategic report for the year ended 31 December 2019.

The group had a strong performance in 2019 with turnover increasing by over six percent. This was helped by a very good summer and the high quality of the food and beverage offering across the estate.

The business has incurred a higher level of employment costs with an increase in the minimum wage during the year along with increased employee pension costs. It also continues to maintain and improve the properties in the estate which it views as being an important factor in maintaining customer loyalty and growth.

The results for the year and financial position of the company are as shown in the annexed financial statements.

The director aims to present a balanced and comprehensive review of the development and performance of the business during the year and its position at the year end. The review is consistent with the size and the non-complex nature of the business and is written in the context of the risks and uncertainties faced.

The director considers the key performance and business performance indicators as being those that represent the financial performance and strength of the company as a whole. These are viewed as being turnover, gross profit and net profit.

REVIEW OF BUSINESS

2019

2018

increase

£

£

%

Turnover

5,367,993

5,056,485

6.16

Gross profit

3,504,986

3,295,588

6.35

Gross profit percentage

65.29%

65.18%

Net profit before taxation

676,997

310,908

Net profit/sales percentage

12.61%

6.15%

The above results have seen net assets increase by £558,754 to £3,153,138. The company has a strong asset base which will enable further investment in the pubs and allow future growth as opportunities arise.

PRINCIPAL RISKS AND UNCERTAINTIES

The main risks arising from the company's activities are liquidity risk and interest rate risk.

The board reviews and agrees policies for managing each of these risks and they are summarised below.

Liquidity risk

The company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. Short term flexibility is achieved by overdraft facilities.

Interest rate risk

The company finances its operations through bank borrowings. The company's exposure to interest rate fluctuations on its borrowings is managed by the use of both fixed ans variable rate facilities.

Covid-19 risk

The full impact of the Covid-19 pandemic remains uncertain and continues to develop on a frequent basis.

The director and the management team have implemented strategies to mitigate the risks to the business. These include the use of the furlough scheme, signing up to the Eat Out to Help Out scheme together with the reduction on VAT on food and non-alcoholic beverages. The company has also taken out a Coronavirus Business Interruption Loan Scheme (CBILS) business loan to assist with cash flow.

The director has considered all of the factors and concluded that the business is a going concern.

FUTURE DEVELOPMENTS

The director has reviewed future plans in light of the Covid-19 pandemic and any major capital expenditure projects have been postponed at this time. The company's primary objective in the short term is to ensure the business returns to profitability.

ON BEHALF OF THE BOARD:

M J Thurlby - Director

23 December 2020

The director presents his report with the financial statements of the company for the year ended 31 December 2019.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of running public houses.

DIVIDENDS

No dividends will be distributed for the year ended 31 December 2019.

DIRECTOR

M J Thurlby held office during the whole of the period from 1 January 2019 to the date of this report.

STATEMENT OF DIRECTOR'S RESPONSIBILITIES

The director is responsible for preparing the Strategic Report, the Report of the Director and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is 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 director is 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 director is 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 him to ensure that the financial statements comply with the Companies Act 2006. He is 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 director is 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 he 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, Duncan & Toplis Limited, Statutory Auditor, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

M J Thurlby - Director

23 December 2020

Opinion

We have audited the financial statements of Knead Group Limited (the 'company') for the year ended 31 December 2019 which comprise the Profit and Loss Account, 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 2019 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 director's use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the director has 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 director is responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Director, 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 Director 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 Director 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 Director.

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 director's remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of director

As explained more fully in the Statement of Director's Responsibilities set out on page four, 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 director determines 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 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 company or to cease operations, or has 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.

Mark Hindmarch (Senior Statutory Auditor)

for and on behalf of Duncan & Toplis Limited, Statutory Auditor

14 All Saints Street

Stamford

Lincolnshire

PE9 2PA

23 December 2020

TURNOVER

5,367,993

5,056,485

Cost of sales

(1,863,007

)

(1,760,897

)

GROSS PROFIT

3,504,986

3,295,588

Administrative expenses

(2,858,745

)

(2,679,522

)

646,241

616,066

Other operating income

25,174

30,736

OPERATING PROFIT

5

671,415

646,802

Impairment of freehold property

6

67,896

(246,969

)

739,311

399,833

Interest receivable and similar income

1

7

739,312

399,840

Interest payable and similar expenses

7

(62,316

)

(88,932

)

PROFIT BEFORE TAXATION

676,996

310,908

Tax on profit

8

(118,242

)

(105,796

)

PROFIT FOR THE FINANCIAL YEAR

558,754

205,112

PROFIT FOR THE YEAR

558,754

205,112

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

558,754

205,112

FIXED ASSETS

Tangible assets

9

5,010,640

5,362,283

Investments

10

1

1

5,010,641

5,362,284

CURRENT ASSETS

Stocks

11

83,294

96,541

Debtors

12

1,067,025

1,007,310

Cash at bank and in hand

360,348

359,495

1,510,667

1,463,346

CREDITORS

Amounts falling due within one year

13

(1,477,593

)

(2,238,246

)

NET CURRENT ASSETS/(LIABILITIES)

33,074

(774,900

)

TOTAL ASSETS LESS CURRENT LIABILITIES

5,043,715

4,587,384

CREDITORS

Amounts falling due after more than one year

14

(1,848,502

)

(1,961,631

)

PROVISIONS FOR LIABILITIES

19

(42,075

)

(31,369

)

NET ASSETS

3,153,138

2,594,384

CAPITAL AND RESERVES

Called up share capital

20

100

100

Retained earnings

3,153,038

2,594,284

SHAREHOLDERS' FUNDS

3,153,138

2,594,384

The financial statements were approved and authorised for issue by the director and authorised for issue on 23 December 2020 and were signed by:

M J Thurlby - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2018

100

2,389,172

2,389,272

Changes in equity

Total comprehensive income

-

205,112

205,112

Balance at 31 December 2018

100

2,594,284

2,594,384

Changes in equity

Total comprehensive income

-

558,754

558,754

Balance at 31 December 2019

100

3,153,038

3,153,138

Cash flows from operating activities

Cash generated from operations

1

667,798

616,562

Interest paid

(513

)

(309

)

Tax paid

(103,291

)

(136,059

)

Net cash from operating activities

563,994

480,194

Cash flows from investing activities

Purchase of tangible fixed assets

(112,984

)

(72,535

)

Sale of tangible fixed assets

453,323

-

Interest received

1

7

Net cash from investing activities

340,340

(72,528

)

Cash flows from financing activities

Loan repayments in year

(207,886

)

(80,077

)

Bank loan interest paid

(61,803

)

(88,623

)

Amount introduced by directors

30,000

40,000

Amount withdrawn by directors

(571,873

)

(268,270

)

Repayment of other loans

-

(101,628

)

Net cash from financing activities

(811,562

)

(498,598

)

Increase/(decrease) in cash and cash equivalents

92,772

(90,932

)

Cash and cash equivalents at beginning of year

2

187,730

278,662

Cash and cash equivalents at end of year

2

280,502

187,730

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

2019

2018

£

£

Profit before taxation

676,996

310,908

Depreciation charges

79,267

81,201

(Profit)/loss on disposal of fixed assets

(67

)

438

Impairment of freehold property

(67,896

)

246,969

Finance costs

62,316

88,932

Finance income

(1

)

(7

)

750,615

728,441

Decrease/(increase) in stocks

13,247

(2,034

)

Increase in trade and other debtors

(59,715

)

(170,328

)

(Decrease)/increase in trade and other creditors

(36,349

)

60,483

Cash generated from operations

667,798

616,562

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 2019

31.12.19

1.1.19

£

£

Cash and cash equivalents

360,348

359,495

Bank overdrafts

(79,846

)

(171,765

)

280,502

187,730

Year ended 31 December 2018

31.12.18

1.1.18

£

£

Cash and cash equivalents

359,495

327,118

Bank overdrafts

(171,765

)

(48,456

)

187,730

278,662

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1.1.19

Cash flow

Transfer

At 31.12.19

£

£

£

£

Net cash

Cash at bank

and in hand

359,495

853

-

360,348

Bank overdrafts

(171,765

)

91,919

-

(79,846

)

187,730

92,772

-

280,502

Debt

Debts falling due

within 1 year

(204,407

)

207,886

(113,129

)

(109,650

)

Debts falling due

after 1 year

(1,961,631

)

-

113,129

(1,848,502

)

(2,166,038

)

207,886

-

(1,958,152

)

Total

(1,978,308

)

300,658

-

(1,677,650

)

1.	STATUTORY INFORMATION

Knead Group 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.

The presentation currency of the financial statements is the Pound Sterling (£).

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.

Going concern

Since the financial year end the business has experienced the effects of the Covid-19 pandemic, which has had a significant impact on the hospitality industry as a whole.

The director and the management team have implemented strategies to mitigate the risks to the business. These include the use of the furlough scheme, signing up to the Eat Out to Help Out scheme together with the reduction on VAT on food and non-alcoholic beverages. The company has also taken out a Coronavirus Business Interruption Loan Scheme (CBILS) business loan to assist with cash flow.

Taking into account the above the director considers the financial statements should be prepared on a going concern basis because:

- he has given an undertaking not to withdraw monies lent to the company if it would prejudice the ability of the company to continue as a going concern.

- in his opinion, the company's bankers will continue to support the company for the foreseeable future.

- in his opinion, the company will continue to achieve profitability in future periods.

Preparation of consolidated financial statements

The financial statements contain information about Knead Group Limited as an individual company and do not contain consolidated financial information as the parent of a group. The company is exempt under section 402 of the Companies Act 2006 from the requirements of the Companies Act 2006 from the requirements to prepare consolidated financial statements.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Freehold property

-

not provided

Plant and machinery

-

25% on reducing balance

Fixtures and fittings

-

25% on reducing balance

Motor vehicles

-

25% on reducing balance

Computer equipment

-

33.3333% on cost

Freehold buildings are not depreciated as the buildings are maintained to such a standard that their residual value is not less than their cost or valuation.

Investments in subsidiaries

Investments in subsidiary undertakings are recognised at cost less impairment.

Stocks

Stocks are stated at the lower of cost and fair value less costs to complete and sell after making due allowance for slow moving and obsolete items.

Cost is calculated using the first-in-first-out basis.

Financial instruments

The company has chosen to adopt the Sections 11 and 12 of FRS 102 in respect of financial instruments.

Basic financial assets, including trade and other debtors and cash and bank balances are initially recognised at transaction price, 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.

At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. 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.

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 the income statement, except that investments in equity instruments that are not publically traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or(b) substantially all the risks and rewards of the ownership of the asset are transferred to another part or (c) control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.

Basic financial liabilities, including trade and other creditors and bank loans 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 receipts discounted at a market rate of interest.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Profit and Loss Account, 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

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.	CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the company's accounting policies, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and underlying 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

There are no critical accounting judgements or estimation uncertainty that, in the opinion of the directors, will have a material effect on the financial statements.

4.	EMPLOYEES AND DIRECTORS

2019

2018

£

£

Wages and salaries

1,631,363

1,567,390

Social security costs

104,500

97,614

Other pension costs

73,892

14,910

1,809,755

1,679,914

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

2019

2018

Management

1

1

Direct

115

114

Administration

8

8

124

123

2019

2018

£

£

Director's remuneration

-

-

Director's pension contributions to money purchase schemes

50,000

-

5.	OPERATING PROFIT

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

2019

2018

£

£

Hire of plant and machinery

3,072

2,668

Other operating leases

5,356

5,356

Depreciation - owned assets

79,267

81,201

(Profit)/loss on disposal of fixed assets

(67

)

438

Auditors' remuneration

6,000

6,500

6.	EXCEPTIONAL ITEMS

2019

2018

£

£

Impairment of freehold property

67,896

(246,969

)

7.

INTEREST PAYABLE AND SIMILAR EXPENSES

2019

2018

£

£

Bank overdraft interest

413

309

Bank loan interest

61,803

62,767

Other interest

-

25,856

Interest on VAT

100

-

62,316

88,932

8.

TAXATION

Analysis of the tax charge

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

2019

2018

£

£

Current tax:

UK corporation tax

107,527

103,289

Adjustment re previous years

9

-

Total current tax

107,536

103,289

Deferred tax

10,706

2,507

Tax on profit

118,242

105,796