THE_LETTINGS_ROOM_LIMITED - Accounts

The directors present the strategic report for the year ended 31 March 2021.

Despite a fall in turnover in the year, completions have increased from 2019, in real terms, the figures have increased as indicated by a rise in deferred income.

Despite the turbulent year with Brexit, the developments produced have sold very well. The expansion into wider areas has seen an increased desire for investors to acquire a more nationwide portfolio and spread their risk.

There has also been an increased influx from overseas investors taking advantage of the weak pound sterling and thus making property investment in the United Kingdom an attractive proposition. With this in mind, the business is looking further a field to work in collaboration with overseas agents in countries such as Hong Kong and the Middle East to enable their clients to purchase the product the business will produce.

As evidenced on the balance sheet, the company maintains a strong liquidity ratio.

The results for the year and the financial position at the year end were considered satisfactory by the directors.

Management consider that the key risk for the company are the changes in the potential development law whereby permitted development conversions from B1 office space to C3 residential could be withdrawn in the near future thus making stock much harder to acquire.

Additionally, the costs of converting and developing is set to increase with the latest Grenfell reports being released whereby it is almost certain that buildings are going to be required to have much more stringent systems in place to tackle potential fire issues ultimately costing more to produce the typical product.

In anticipation of the above, the business will seek to acquire more land to build out of the ground and will limit the height these buildings will reach to ensure the fire risk is reduced and mitigating a number of requirements that will be introduced for tall buildings over 30 metres in height.

This year has been a challenging year with the impact COVID-19 has had on the business. Whilst sales have remained strong, the nervousness from our larger clients has been highlighted by the pandemic and their pledge to purchase in the future. They have confirmed they will be investing in the future with more caution as they have lost large sums of monies in other asset investment classes.

With regards to the construction of the sites, obtaining materials for the development of our sites has been challenging in particular the availability of plaster and plaster boards. This has obviously impacted and delayed the delivery of our developments with a typical delay being experienced of 3 to 4 months across the portfolio. Delays also have reduced projected profits.

Finally, the largest impact COVID-19 has had on the business has been in the area of our lettings business. Arrears have drastically increased despite the introduction of furlough as a number of our tenants tend to work in the sectors of hospitality and retail which has been hardest impacted by the pandemic. In addition, the inability to perform face to face viewings and increased reluctance of prospective tenants to carry out such viewings is taking a huge effect on this side of the business.

The business will continue to set KPI’s for each respective department to work within and review these on a monthly basis. Any area of the business not performing will be strengthened with personnel to ensure every aspect of the business runs as effectively and efficiently as possible.

The key area for the business to progress is delivering the product on time with a quality that is not improvised. Stringent JCT contracts are in place and monitored to ensure this is delivered.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 March 2021.

The principal activity of the company was the sale of property developments. The company ceased the sale of developments during the year, this responsibility has been transferred to other group companies. The company will manage rental guarantees going forward.

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

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

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

Royston Parkin Limited were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

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;

•     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.

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.

We have audited the financial statements of The Lettings Room Limited (the 'company') for the year ended 31 March 2021 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including 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 March 2021 and of its loss for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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 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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://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.

The Lettings Room Limited is a private company, limited by shares and incorporated in England and Wales. The registered office is The Hart Shaw Building, Europa Link, Sheffield Business Park, Sheffield, S9 1XU. This business address is Samuel House, Fox Valley, Stocksbridge, Sheffield, S36 2AA.

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.

This 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:

- 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’: 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 financial statements of the company are consolidated in the financial statements of TIRTLR Holdings Limited. These consolidated financial statements are available from its registered office, The Hart Shaw Building, Europa Link, Sheffield, S9 1XU.

During the year the company has made a loss, it is also in a position of net liabilities and net current liabilities. true

The directors have continued to prepare the financial statements on the going concern basis as they believe that the company will have access to the necessary funds to allow it to meet its liabilities as they fall due for a period of at least 12 months from the date of the approval of the financial statements. The directors have prepared future forecasts and, as with any forecasts, these are dependant on a number of estimates and assumptions. The key assumptions include the fellow group companies will not seek repayments of the sums due, as included in these financial statements and also advance such further funds as the forecasts may show to allow the company to meet its operating liabilities as they fall due. The directors are in receipt of such assurances from the parent company, and have assessed the parent company's ability to make good on such assurances throughout the period covered by the forecasts and hence have concluded that no material uncertainty exists as to the basis of preparation of the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably. For revenue which is derived from properties sold as part of a development this is invariably when the property is signed off as habitable, not on legal completion, cash received on legal completion is recognised as deferred income. For revenue which is derived from the sale or resale of habitable properties, this is on legal completion.

Revenue for letting agent services is recognised as the agreed services are provided to landlords.

Stocks are stated at the lower of cost and net realisable value. Costs comprise of direct costs of property purchase and any construction costs incurred in relation to bringing the stocks to their present condition. Net realisable value consists of the estimated selling price less all direct costs associated with the sale.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

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 balance sheet 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.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs. Financial assets classified as receivable within one year are not amortised.

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, 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 company after deducting all of its liabilities.

Basic financial liabilities, including creditors and loans from fellow group companies, are initially recognised at transaction price. 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.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs.

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

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.

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

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

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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Revenue from the sale of properties is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. As a result, revenue and the associated costs of sale are recognised at different points depending on the nature of the property being sold. The directors have assessed that the following judgements are the most significant to the financial statements:

• For properties sold as part of a development, the risk and rewards are invariably transferred when the development is signed off by an independent third party as habitable. This can be after “completion” when the property is legally sold, in which case the revenue is included in deferred income.

• For properties that are already habitable, including properties that were purchased by the group for resale, the risks and rewards of ownership pass on legal completion of the sale.

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 issue “rental guarantees” primarily, but not exclusively, on the sale of properties that it is developing. The rental guarantee is a contract entered into by a group company which guarantees a landlord/investor a net yield, usually in the range of 8-10% of the property price. Guarantees are not entered into for all properties sold in the year but are used to provide security of investment to key customers. The agreements usually pay out the guaranteed amount in full up to the point the property is habitable and then for a further 2 years from that date, topping up the rent and covering unforeseen costs and void periods as necessary to meet the contracted amount. The group does have some legacy guarantees that are lifetime guarantees. Most contracts include a three month termination notice period.

The directors are of the opinion that the substance of the contracts is most fairly represented by the accounting treatment used for a warranty provision. Therefore, on legal completion of a sale with a rental guarantee a provision is recognised for the future outflows expected to occur under the agreement. The provision required/recognised is heavily dependent on several factors including, expected date of habitability, expected occupancy rates, expected market rent, expected increase in other associated property costs and the discount rate used.

Provisions for contracts which, due to the increase in rental yields over time, are no longer expected to be loss making over the course of the next 12 months are not recognised as a liability. Contracts which are expected to be profit generating are not recognised as an asset.

The carrying amounts of these provisions can be found with further explanation in note 16 – Provisions for liabilities. Actual outcomes could vary significant from these estimates.

An analysis of the company's turnover is as follows:

During the 31 March 2020 financial year, the company:

• sold the letting agency business to another group company

• sold a development to a fellow group company which generated a gross loss

• impaired the value of two further developments that it sold at a gross loss to a fellow group company after the yearend.

The company recognises the cost in relation to the guaranteed rent provisions as an exceptional item, see note 16 for further details.

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

Their aggregate remuneration comprised:

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

Guaranteed rent agreements

The group issue “rental guarantees” primarily, but not exclusively, on the sale of properties that it is developing. The rental guarantee is a contract entered into by a group company which guarantees a landlord/investor a net yield, usually in the range of 8-10% of the property price. Guarantees are not entered into for all properties sold in the year but are used to provide security of investment to key customers. The agreements usually pay out the guaranteed amount in full up to the point the property is habitable and then for a further 2 years from that date, topping up the rent and covering unforeseen costs and void periods as necessary to meet the contracted amount. The group does have some legacy guarantees that are lifetime guarantees. Most contracts include a three month termination notice period.

The directors are of the opinion that the substance of the contracts is most fairly represented by the accounting treatment used for a warranty provision. Therefore, on legal completion of a sale with a rental guarantee a provision is recognised for the future outflows expected to occur under the agreement. The provision required/recognised is heavily dependent on several factors including, expected date of habitability, expected occupancy rates, expected market rent, expected increase in other associated property costs and the discount rate used.

Provisions for contracts which, due to the increase in rental yields over time, are no longer expected to be loss making over the course of the next 12 months are not recognised as a liability. Contracts which are expected to be profit generating are not recognised as an asset.

Actual outcomes could vary significant from these estimates.

The above represents the directors best estimate of the timing of outflows which they expect to fall due. Included within amounts expected to fall due after 1 year is the directors best estimate of amounts covered by lifetime guarantees. These have been provided for over the timeframe in which the rental yield is expected to increase so as to cover the minimum guarantee and all associate costs and voids. Depending on the age of the individual agreements amongst other factors (listed above) the period ranged from 6 - 10 years. Where applicable a discount rate of 5% has been applied to amounts falling due after 1 year.

Due to the significant amounts involved and and the unpredictable nature of the estimates the directors have chosen to show the amounts charged to the profit and loss account each year as an exceptional item.

Deferred income represents deposits and amounts paid on legal completion of property sales on developments prior to the risk and rewards of ownership being transferred to the purchaser. Amounts which relate to sales completions are secured over the legal title of the property it relates to which is included in stock, amounts which relate to deposits are unsecured.

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

The company has taken advantage of the exemptions allowed by FRS 102 section 33.1A and has not disclosed transactions with fellow group companies. The company's accounts are consolidated into the accounts of the parent company as a wholly owned subsidiary.

Sales of £nil (2020 - £900,000) were made to a company with a common director.

Purchases of £6,641 (2020 - £nil) were made to a company with a common director.

At the year end a balance of £36,636 (2020 - £628,836) included as other debtors is due from a company with common director. There is no interest charged on this balance and the debt is not secured.

The immediate and ultimate parent is TIRTLR Holdings Limited, a company registered and incorporated in England and Wales.

The company is included within the consolidated accounts of TIRTLR Holdings Limited and copies of the financial statements are available from its registered office; The Hart Shaw Building, Europa Link, Sheffield, S9 1XU.

The ultimate controlling party is L Jones by virtue of his shareholdings in TIRTLR Holdings Limited.

In the previous year developments were sold to fellow group companies. The cost of these developments were incorrectly transferred through group loans and not included in cost of sales.

Subsequent to the previous year end two further developments were sold to fellow group companies. As the sales proceeds were lower than the cost an impairment has also been recognised.

Further to the sale of developments in the prior year, it was identified that costs had been incurred on behalf of other group companies, which had not been recharged to the company with the development.