SOUTH_COAST_NURSING_HOMES - Accounts

The directors present the strategic report for the year ended 31 October 2020.

The directors are satisfied with the financial year, albeit this was obviously an exceptional year due to the COVID-19 crisis. Revenue has increased, as have operating profits.

2020     2019     2018     2017

£     £ £ £                             

Revenue        18,370,363    17,971,947    16,718,283    15,301,002

Gross profit         6,306,299     6,386,632     5.696.379     5,273,289

Profit before tax         2,964,497     3,513,156     1,954,848     2,217,598

The impact of the COVID-19 pandemic has been significant across the care sector, and the intervention of the UK Government in providing grants for care home companies to continue effective operation, employment of staff and to protect vulnerable people in their care, has enabled the company to ensure that, as we head towards a UK roll-out of vaccines and society as a whole trying to return to some normality, we will be well placed to continue the provision of first class care.

Inevitably our costs have increased in the year due to the COVID-19 crisis, however the grants have given us the ability to bear these costs whilst also furloughing the minimal levels of staff.

Investment in the homes during the year has continued both insofar as infrastructure, and also ensuring that our staff receive salary reviews despite the current and ongoing crisis.

The company has launched the build of a new 50-bed care home, Berkeley Lodge Nursing, in Worthing during the year, and this will represent a £7.5m investment.

Staff retention is important to the directors of the company, and this is reflected in the salary level and benefits awarded to staff. The company also maintains a health investment in the training and development of all our staff.

The unprecedented pandemic will continue to affect the wider economy into the next financial year and beyond. The adverse impact on our occupancy level has been felt, however, the company has managed to maintain this level as high as possible during the crisis. With the new vaccines being administered to all staff and residents in care homes, we can only see that this will have a positive effect on confidence and will bring occupancy back to normal levels.

Clearly the long-term effect of the crisis will affect all businesses, and we wait to hear how the Chancellor intends to bring the deficit under control and the impact this is likely to have on our business going forward.

Expenditure plans for the new year are inevitably restrained although the cost of borrowing remains low, and has allowed the company to take advantage of this in terms of financing for the major building project currently underway.

Brexit will have an impact on supplies, in particular, perishable foodstuffs, pharmaceuticals and medical supplies. The directors continue to maintain a close relationship with key suppliers, and form relationships with new suppliers, in order to ensure continuity of supply.

As stated above, the new home currently under construction is progressing well. This home will contain significant investment in its environmental infrastructure with the objective of significantly reducing the carbon footprint of the new building. The new home is due to be handed over by the contractor in December 2021 with commencement of operation set for January 2022. The company will look forward to being able to provide a significant number of new jobs to the local community when the new care home is completed at the end of 2021, and the home starts to accept new residents.

The company has also made considerable efforts during the year to provide additional benefits to its staff, and has now made provision for an employee helpline facility, to provide assistance relating to financial, health and legal advice if required.

The company has invested, and will continue to invest, in ensuring quality auditing of its processes and the continued training of its staff. The company now has a dedicated resource to ensure a continual process of audit, review and improvement in place across the organisation.

The company is proud of its equality and fairness policy, which will be further enhanced by a new Human Relations resource being added to the management structure in the new financial year.

High quality care continues to be our aim, as is the well-being of all our residents particularly in the crisis experienced over the last year. We are particularly committed to a close relationship with the residents' relations, and ensuring that they are able to be in contact with the loved ones as much as possible, whilst maintaining a high degree of care and provision of safe environment to those same residents.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 October 2020.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The results for the year are set out on page 8.

Dividends totalling £80,000 (2019 - £100,000) were declared during the year.

The company operates a number of policies to ensure there is sufficient liquidity and cash. Regular cash flow forecasts are prepared to ensure the company is able to cover its interest payments.

The business has built its success over the years with a significant contribution to this success from the employees within the business. The company has a significant number of employees with long service. The company has a policy in which we will pay our staff at minimum the level of the National Living wage.

The managers of each of the homes are encouraged to meet regularly with their staff. The directors also ensure that there are regular meetings with the managers and that any training required for them is implemented.

The directors are currently awaiting the outcome of a survey carried out to ascertain employee satisfaction within the business.

The directors have a philosophy of fairness and honesty with all our residents and their families and decisions are made always with regard to the wellbeing of the home residents in conjunction with relatives.

The directors have built a business where there are a significant number of long-term suppliers to the business. The company also has robust systems in place whereby suppliers are paid within their credit terms and reports separately on this. With new suppliers the company will offer equal terms to those offered to longer term suppliers.

The company has supported national and local charities throughout the year whether it be within the home themselves (e.g. Macmillan Nurses appeals) or local based charities such as the YMCA and their work with local homeless people.

The directors have detailed future developments requiring disclosure within the strategic report.

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

In line with the Government's new Streamlined Energy and Carbon Reporting (SECR) policy, the company has disclosed the following in respect of its annual energy consumption:

2020         2019

KWh         KWh

Gas usage     2,142,483        2,486,913

Electricity usage        992,825     1,054,957

Fuel usage      53,448 58,622

Total usage 3,188,756     3,600,492

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The directors have undertaken the robust assessment of the company's future trading prospects and have concluded that the company remains a going concern. See note 1.2 to the financial statements for further detail.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

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

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

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

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the 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.

We have audited the financial statements of South Coast Nursing Homes Limited (the 'company') for the year ended 31 October 2020 which comprise the Statement of Comprehensive Income, the Statement Of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 October 2020 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 Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

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

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

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

•     adequate accounting records have not been kept, 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.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the 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.

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 Statement of Comprehensive Income has been prepared on the basis that all operations are continuing operations.

South Coast Nursing Homes Limited is a company limited by shares incorporated in England and Wales. The registered office is Winchester House, 34 Crescent Road, Worthing, West Sussex, BN11 1RL.

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 investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

At the truestatement of financial position date, the company had net current liabilities and is dependent on the continued provision of external financing for its ongoing operations, however the directors are confident this support will continue and confirm that the company can meet its liabilities as they fall due.

The COVID-19 pandemic and the ensuing economic shutdown has had an impact on the company’s operations, but the company has been able to continue to operate with certain measures introduced such social distancing and personal protective equipment being used. In response to the COVID-19 pandemic, the directors have performed a robust analysis of forecast future cash flows taking into account the potential impact on the business of possible future scenarios arising from the impact of COVID-19. This analysis also considers the effectiveness of available measures to assist in mitigating the impact.

Based on these assessments and having regard to the resources available to the entity, the directors have concluded that there is no material uncertainty in relation to the appropriateness of continuing to adopt the going concern basis in preparing the annual report and accounts.

Revenue represents the total invoice value of residential room fees and other services recognised net of trade discounts, other sales taxes, VAT and on an accruals basis.

Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

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

Freehold land and assets under construction are not depreciated. Depreciation will start to be charged on assets under construction once the construction is complete.

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 credited or charged to profit or loss.

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

At each reporting period end date, the company 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.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Inventories are stated at the lower of cost and estimated selling price less costs to complete and sell.

Cash and cash equivalents are basic financial assets and include cash in hand and deposits held at call with banks.

The company 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 company's statement of financial position when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with 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.

The company enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans from banks and loans from related parties.

Debt instruments like loans and other accounts receivable and payable are initially measured at the transaction price (including transaction costs) and subsequently at amortised cost using the effective interest method; Debt instruments that are payable or receivable within one year are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity. Financial liabilities are derecognised when, and only when, the company's obligations are discharged, cancelled, or they expire.

Equity instruments issued by the company 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 company.

The company has entered into an interest rate cap. This is a derivative and not a basic financial instrument.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in the income statement immediately.

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

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

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

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

The costs of short-term employee benefits are recognised as a liability and an expense.

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

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

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.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

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

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

The company operates in one principal activity, that of the supply of services, which is wholly undertaken in the United Kingdom. Revenue is therefore made up 100% by the fees in relation to the supply of these services.

Other operating income relates to government grants received to assist with infection control, as a result of the global COVID-19 pandemic, and other funding received to help mitigate the impact of the pandemic on the company and its activities.

Government grants have been received to assist in implementing additional infection control procedures at the company's care homes, to mitigate the impact of the global COVID-19 pandemic.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2019 - 4).

During the prior year the company sold one of its nursing homes, Manor Hall, to a third party.

The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

The company applied the transitional arrangements of Section 35 of FRS 102 and used a previous valuation as the deemed cost for certain freehold land and buildings. These buildings are being depreciated from the valuation date. As the assets are being depreciated or sold an appropriate transfer is made from the revaluation reserve to retained earnings.

If assets were stated on an historical cost basis rather than a deemed cost basis, the total amounts included would have been as follows:

The fair value of the investment properties has been arrived at on the basis of a valuation carried out by the directors at the reporting date, who deemed that there had been no material in the market value between the date of acquisition and the reporting date.

Included within other payables is a directors' current account balance of £342,399 (2019 - £451,910) relating to monies owed to the directors. The directors have confirmed their continued support to the company by not requesting payment of the above balance unless there are sufficient funds available to do so.

The bank loans are subject to a rate of interest being LIBOR plus between 1.4% to 1.6%. An interest rate cap of 4% is in place covering £2,953,662 (2019 - £3,143,303) of the year end liability.

The bank loans are secured by the way of first legal charges over the company's freehold land and buildings as well as a debenture over all assets of the company.

Deferred tax assets and liabilities are offset where the 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:

The directors have considered the deferred tax liabilities notes above and concluded that it is not possible to state the estimated liabilities which will reverse within the next 12 months. This is due to the level of reversal being dependant on events which are not yet known.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

At the statement of financial position date £27,485 (2019 - £23,225) of pension costs remained unpaid.

Ordinary shares have attached to them full voting and dividend rights.

The preferred ordinary shares of £1 each are non-voting and have a preferred ordinary share entitlement of £1,000 per share.

During the previous year the company purchased 2,788 ordinary shares back from former shareholders for an amount of £3,200,000.

After the reporting date, the company has signed a contract to complete the asset under construction. Bank loans of £8,000,000 have also been agreed, after the reporting date, at interest rates of between 1.6%-2.0% per annum.

The remuneration of key management personnel is as follows.

During the year, dividends were declared to shareholders who are also directors totalling £80,000 (2019 - £100,000).

During the year the company was charged £741,500 (2019 - £600,000) in management charges from connected companies under the control of the directors. At the statement of financial position date £96,500 (2019 - £50,300) was owed to the connected companies and this amount is included within other payables.

The ultimate controlling party is Mr P G Colville.