Northgate Healthcare Limited - Limited company accounts 20.1

REGISTERED NUMBER: 05773858 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

FOR

NORTHGATE HEALTHCARE LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Income Statement

8

Other Comprehensive Income

9

Balance Sheet

10

Statement of Changes in Equity

11

Cash Flow Statement

12

Notes to the Cash Flow Statement

13

Notes to the Financial Statements

15

DIRECTORS:

A K Haines

K Haines

M K Haines

SECRETARY:

K Haines

REGISTERED OFFICE:

White Gables

Cross Lane Head

Bridgnorth

Shropshire

WV16 4SJ

REGISTERED NUMBER:

05773858 (England and Wales)

AUDITORS:

BSS & Co (Accountancy Services) Limited

75 Aston Road

Shifnal

Shropshire

TF11 8DU

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

We aim to present a balanced and comprehensive review of the development and performance of our business during the year and its position at the year end. Our review is consistent with the size and non-complex nature of our business and is written in the context of the risks and uncertainties we face.

REVIEW OF BUSINESS

We are a provider of residential care homes for the elderly and currently own and operate four homes in the Midlands. We assess the performance for each home separately.

We pride ourselves on the quality of our homes and care we provide. Across our group of four homes we now provide nursing care in addition to specialist dementia care. Nursing care is provided solely at Autumn House which also provides specialist dementia care along with our other three homes.

During 2019, the occupancy rates across the three specialist dementia homes have been satisfactory with each home showing good returns in line with our expectations. The nursing care facility at Autumn House has expanded during the year and has been close to full occupancy but there have still been issues regarding getting the correct team to run the combined nursing and specialist dementia care in one home. This has resulted again in the results for Autumn House being below expectations for 2019 but during 2020 we have strengthened the team at Autumn House and will be moving forward with the plans for this home to be a dedicated nursing home.

We have continued with the on-going program of repairs to all homes to ensure they are kept to the high standards which we continue to meet for all of our service users.

As the group now also provides nursing care, this enables the company to increase the range of care available to residents. Residential nursing care is a growing sector of our industry and the directors are satisfied that adding this service is proving to be a good addition to the Northgate Healthcare group. This will enable Northgate Healthcare to continue to provide high quality care for their residents when nursing care is required.

We consider the key financial performance indicators are those that communicate the financial performance and strength of the company as a whole, these being average occupancy rates, gross profit margin and earnings before interest, tax, depreciation and amortisation (EBITDA).

We target occupancy rates to be in excess of 95% and this was largely achieved across our three specialist dementia homes for the year. Autumn House was again below our target for the year with an average occupancy of 87% and this is being assessed in the current year with a view to increase this going forward. We continue to have high resident retention and satisfaction across all homes in the group.

The gross profit margin for the company as a whole was 34.03%, an increase from 2018 and this is mainly due to the improvements put in place at Autumn House. Our three dedicated dementia homes had results which were slightly down on 2018 but this is mainly due to an increase in payroll costs including the increased pension costs due to auto enrolment.

PRINCIPAL RISKS AND UNCERTAINTIES

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

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

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

With these risks and uncertainties in mind, we are aware that any plans for the future development of the business may be subject to unforeseen events outside of our control.

FINANCIAL RISK MANAGEMENT

The company's credit risk is low, being primarily attributed to its trade debtors. All credit risk both publicly and privately funded is managed by monitoring payments against contractual agreements.

The company faces financial risk from the inflationary pressures from staff costs. Any future changes in the National Living Wage will have significant impact on labour costs in the care sector as a whole. The company reviews upcoming changes to the National Living Wage and currently pay above this rate to ensure good quality care staff. The company plans future wage increases to ensure financial stability of the company going forward and to ensure these increases do not overly impact cashflow and profitability.

POST BALANCE SHEET EVENTS

Since the start of the Covid pandemic in early 2020 all homes have been affected by the impact of the virus. We have put more controls in place over this period in line with government advice with even tighter controls being implemented where we felt it was necessary to ensure the safety of both our staff and residents.

We have been in receipt of grants from the local authority to ensure we can continue to provide the care required to our residents in a safe and secure manner and also to assist with the additional costs and restrictions which have occurred in relation to the pandemic.

The company has demonstrated continued resilience during 2020 and is continuing to be profitable but at a lower level than in previous years which was expected when the full impact of the pandemic became clear. We do not envisage that this short term fall in profitability will affect the long term financial viability of the company.

Through the work done by our management and staff, we will continue to strive to provide the high level of care our residents have come to expect across all our homes during these difficult times and in the future.

ON BEHALF OF THE BOARD:

A K Haines - Director

10 December 2020

The directors present their report with the financial statements of the company for the year ended 31 December 2019.

DIVIDENDS

Interim dividends totalling £2917.8294 per share were paid during the year. The directors recommend that no final dividend be paid.

The total distribution of dividends for the year ended 31 December 2019 will be £ 291,783 .

FUTURE DEVELOPMENTS

The directors are confident about the continuing financial performance of the business and continue to seek opportunities to develop the business further.

EVENTS SINCE THE END OF THE YEAR

Information relating to events since the end of the year is given in the notes to the financial statements.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2019 to the date of this report.

A K Haines

K Haines

M K Haines

OUR PEOPLE

The company provides employees with information on matters of concern to them, consulting them regularly so that their views can be taken into account when making decisions that are likely to affect their interests.

DISABLED EMPLOYEES

The company is committed to a policy of recruitment and promotion based on the basis of aptitude and ability without discrimination of any kind. Particular attention is given to the training and promotion of disabled employees to ensure that their career development is not unfairly restricted by their disability, or perceptions to it.

The HR procedures make clear that full and fair consideration must be given to applications made by and the promotion of disabled persons. Where an employee becomes disabled whilst employed by the company, the HR procedures also require that reasonable effort is made to ensure they have the opportunity for continued employment within the company. Retaining of employees who become disabled whilst employed by the company is offered where appropriate.

DISCLOSURE IN THE STRATEGIC REPORT

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

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

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

ON BEHALF OF THE BOARD:

A K Haines - Director

10 December 2020

Opinion

We have audited the financial statements of Northgate Healthcare Limited (the 'company') for the year ended 31 December 2019 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 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 directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

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

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

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

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

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

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

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

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

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

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on pages four and five, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

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

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

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

75 Aston Road

Shifnal

Shropshire

TF11 8DU

10 December 2020

TURNOVER

7,354,140

5,916,081

Cost of sales

4,851,269

4,043,725

GROSS PROFIT

2,502,871

1,872,356

Administrative expenses

1,296,150

1,144,932

OPERATING PROFIT

4

1,206,721

727,424

Interest payable and similar expenses

5

266,038

249,730

PROFIT BEFORE TAXATION

940,683

477,694

Tax on profit

6

226,279

71,027

PROFIT FOR THE FINANCIAL YEAR

714,404

406,667

PROFIT FOR THE YEAR

714,404

406,667

OTHER COMPREHENSIVE INCOME

Revaluation surplus

Income tax relating to other comprehensive income

(60,080

)

30,040

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

(60,080

)

30,040

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

654,324

436,707

FIXED ASSETS

Intangible assets

8

839,067

913,893

Tangible assets

9

13,804,264

13,791,582

14,643,331

14,705,475

CURRENT ASSETS

Stocks

10

20,103

14,342

Debtors

11

539,365

621,135

Prepayments and accrued income

23,149

35,086

Cash at bank and in hand

743,513

387,157

1,326,130

1,057,720

CREDITORS

Amounts falling due within one year

12

1,717,037

1,631,620

NET CURRENT LIABILITIES

(390,907

)

(573,900

)

TOTAL ASSETS LESS CURRENT LIABILITIES

14,252,424

14,131,575

CREDITORS

Amounts falling due after more than one year

13

(7,788,300

)

(8,158,325

)

PROVISIONS FOR LIABILITIES

17

(1,028,417

)

(900,084

)

NET ASSETS

5,435,707

5,073,166

CAPITAL AND RESERVES

Called up share capital

18

100

100

Revaluation reserve

19

3,353,220

3,413,300

Retained earnings

19

2,082,387

1,659,766

SHAREHOLDERS' FUNDS

5,435,707

5,073,166

The financial statements were approved by the Board of Directors and authorised for issue on 10 December 2020 and were signed on its behalf by:

A K Haines - Director

Called up

share

Retained

Revaluation

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 January 2018

100

1,496,099

3,383,260

4,879,459

Changes in equity

Dividends

-

(243,000

)

-

(243,000

)

Total comprehensive income

-

406,667

30,040

436,707

Balance at 31 December 2018

100

1,659,766

3,413,300

5,073,166

Changes in equity

Dividends

-

(291,783

)

-

(291,783

)

Total comprehensive income

-

714,404

(60,080

)

654,324

Balance at 31 December 2019

100

2,082,387

3,353,220

5,435,707

Cash flows from operating activities

Cash generated from operations

1

1,601,125

848,600

Interest paid

(265,595

)

(266,679

)

Interest element of hire purchase payments paid

(443

)

(611

)

Tax paid

(79,723

)

(59,520

)

Net cash from operating activities

1,255,364

521,790

Cash flows from investing activities

Purchase of tangible fixed assets

(135,654

)

(145,278

)

Net cash from investing activities

(135,654

)

(145,278

)

Cash flows from financing activities

Loan repayments in year

(370,025

)

(251,481

)

Inter company loan

1,183

-

Capital repayments in year

(7,585

)

(2,865

)

Amount withdrawn by directors

(52,297

)

(44,075

)

Equity dividends paid

(291,783

)

(243,000

)

Net cash from financing activities

(720,507

)

(541,421

)

Increase/(decrease) in cash and cash equivalents

399,203

(164,909

)

Cash and cash equivalents at beginning of year

2

344,310

509,219

Cash and cash equivalents at end of year

2

743,513

344,310

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

31.12.19

31.12.18

£

£

Profit before taxation

940,683

477,694

Depreciation charges

152,712

152,936

Loss on disposal of fixed assets

45,088

-

Finance costs

266,038

249,730

1,404,521

880,360

Increase in stocks

(5,761

)

(2,792

)

Decrease/(increase) in trade and other debtors

93,707

(133,974

)

Increase in trade and other creditors

108,658

105,006

Cash generated from operations

1,601,125

848,600

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

743,513

387,157

Bank overdrafts

-

(42,847

)

743,513

344,310

Year ended 31 December 2018

31.12.18

1.1.18

£

£

Cash and cash equivalents

387,157

509,219

Bank overdrafts

(42,847

)

-

344,310

509,219

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1.1.19

Cash flow

At 31.12.19

£

£

£

Net cash

Cash at bank and in hand

387,157

356,356

743,513

Bank overdrafts

(42,847

)

42,847

-

344,310

399,203

743,513

Debt

Finance leases

(7,585

)

7,585

-

Debts falling due within 1 year

(370,480

)

-

(370,480

)

Debts falling due after 1 year

(8,158,325

)

370,025

(7,788,300

)

(8,536,390

)

377,610

(8,158,780

)

Total

(8,192,080

)

776,813

(7,415,267

)

1.	STATUTORY INFORMATION

Northgate Healthcare Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

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

Critical accounting judgements and key sources of estimation uncertainty

In order to properly apply the company’s accounting policies, as described in note 1 above, the directors are required to make judgements and estimates in respect of carrying values of assets and liabilities which may not be apparent from other sources of information. The directors base these critical accounting judgements and estimations on previous historical experience and other factors which the directors judge to be relevant. Judgements and estimates will invariably differ from actual results and hence such judgements and estimates are reviewed by the directors on an ongoing basis.

Key sources of estimation uncertainty

The key sources of estimation uncertainty which have a significant effect on the amounts recognised in the financial statements are described below:

Property valuation

The care homes owned by the company have been revalued on a regular basis, the latest of these being based on professional valuations prepared in 2017 and have been reviewed each year by the directors. Although this complies with the relevant accounting standards there is a possibility that the realisable value of the homes may differ to the values used in the event of a sale.

Turnover

Turnover represents the fees derived from the provision of care services to residents during the year. Income is recognised on a daily basis for the provision of nursing care services.

Goodwill

Intangible assets

Intellectual property rights and books of account, being the amount paid in connection with the acquisition of a care home in 2010, are being amortised evenly over the deemed useful life of twenty years.

Tangible fixed assets

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

Freehold property

-

not provided

Fixtures fittings & equipment

-

10% on reducing balance

Motor vehicles

-

25% on reducing balance

Computer equipment

-

25% on reducing balance

Freehold property is not depreciated, as it is the opinion of the directors that periodic revaluation in line with generally accepted accounting principles fairly reflects the fair market value of the properties, and therefore depreciation is considered to be immaterial.

Stocks

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

Financial instruments

(i) Cash and cash Equivalents

Cash and cash equivalents are basic financial instruments and include cash in hand, deposits held at call with banks, and bank overdrafts.

(ii) Debtors and creditors receivable/payable within one year

Debtors and creditors with no stated interest rate and receivable or payable within one year are stated at transaction price. Any losses arising from impairment are recognised in the profit and loss account in other administrative expenses.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

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

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.

The interest element of these obligations is charged to profit or loss over the relevant period. The capital element of the future payments is treated as a liability.

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

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Going concern

The company had a strong balance sheet and financial position at the balance sheet date with a strong cash balance. At the time of signing these accounts, the directors have considered the impact of Covid-19 on the company and revised forecasts accordingly. They have also renegotiated bank covenants with regarding their loans and agreed an extended capital repayment holiday to ensure they have sufficient cash resources in the event of a reduction in resident numbers due to Covid-19. The directors will monitor the situation closely and will take whatever measures are required to protect the company.

At the time of signing the accounts forecasts indicate that the company will continue to be profitable and over the following 12 months. On that basis the directors have prepared these accounts on a going concern basis.

3.	EMPLOYEES AND DIRECTORS

31.12.19

31.12.18

£

£

Wages and salaries

4,320,584

3,641,435

Social security costs

211,940

162,138

Other pension costs

62,600

33,852

4,595,124

3,837,425

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

31.12.19

31.12.18

Lane House

48

43

The Firs

79

77

Meadowfields

78

84

Autumn House

81

57

286

261

31.12.19

31.12.18

£

£

Directors' remuneration

18,752

17,304

Directors' pension contributions to money purchase schemes

6,000

-

4.	OPERATING PROFIT

The operating profit is stated after charging:

31.12.19

31.12.18

£

£

Hire of plant and machinery

62,267

62,231

Other operating leases

3,600

3,600

Depreciation - owned assets

77,884

75,948

Depreciation - assets on hire purchase contracts

-

2,162

Loss on disposal of fixed assets

45,088

-

Goodwill amortisation

74,201

74,202

Intellectual property & books amortisation

625

626

Auditors' remuneration

4,950

5,100