MELDRUM_HOUSE_ESTATES_LIM - Accounts

The directors present the strategic report for the year ended 30 June 2021.

Turnover for the year was £3.7m (2020: £4.9m, for 18 months) which resulted in an operating profit of £546k (2020: operating loss £742k).

Following a challenging 12 months with the uncertainties attached to Covid-19 and the second national lockdown, the business is delighted to report an encouraging set of results. The business mix changed overnight due to the pandemic and the great outdoors was well received. Staycations and the innovation rolled out, being the dining domes, supported the trading performance at the Hotel, whereas memberships experienced a growth year on year with golf being viewed as a safe method of exercise. These results also reflect the positive contribution from plot sales which commenced towards the end of the year.

The company reports an EBITDA of £686k for the year compared to an EBITDA loss of £325k for the 18 month period ended 30 June 2020.

The company’s net liabilities have reduced from £12.1m at 30 June 2020 to £11.6m at 30 June 2021. This includes £13.4m of directors’ loans (2020: £13.2m) which, although presented as current liabilities in accordance with FRS 102, will not be repaid in the foreseeable future.

The impacts of Covid-19 have affected several external factors relevant to the business. Recruitment is an ongoing challenge for the hospitality industry which results in a skills gap throughout the UK. The cost of living crisis raises concern with the premium offering the business provides. Our supply chain also presents its challenges in sourcing the materials the business requires, within an appropriate timeframe. Meldrum House is, however, strongly placed to deal with these challenges with the return of our events and corporate business and a new segment it enjoyed during the staycation surge.

The business is thrilled to have obtained planning consent for the housing development and to start seeing residents move into the Estate. There has been positive interest for the plots with phase 1 progressing well. The business notes the growing increases to building materials which creates slight challenges for future plot sales.

Having prepared cashflow forecasts for the housing development, together with financial forecasts for the hotel and golf course, we are confident that the company can continue to operate and meet its liabilities as they fall due for a period of at least 12 months from now. We have confirmed that repayment of the directors’ loans will not be sought in the foreseeable future and we have therefore prepared the financial statements on the going concern basis.

On behalf of the board

The directors present their annual report and financial statements for the period ended 30 June 2020.

The principal activities of the company are to provide hotel and golf facilities and develop the surrounding land within the Meldrum House Estate.

The results for the periodare 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 period and up to the date of signature of the financial statements were as follows:

Information regarding future developments is contained within the Strategic Report.

The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

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 are responsible for preparing the strategic report, directors' 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 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.

We have audited the financial statements of Meldrum House Estates Limited (the 'company') for the period ended 30 June 2021 which comprise the Statement of Income and Retained Earnings, Balance Sheet, Statement of Cash Flows 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 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 30 June 2021 and of its profit for the period 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 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 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 period 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 our 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 in relation to which 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:

We obtained an understanding of the legal and regulatory frameworks that are applicable to the company, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:

• FRS 102

• Companies Act 2006

• Corporation Tax legislation

• VAT legislation

• Alcohol licensing laws and regulations

• Planning regulations

We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns, external inspections and relevant correspondence with regulatory bodies.

We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk.

The following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:

• Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;

• Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias.

Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/Our-Work/Audit/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for-auditors/Auditors-responsibilities-for-audit/Description-of-auditors-responsibilities-for-audit.aspx. This description forms part of our auditor's 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 income and retained earnings has been prepared on the basis that all operations are continuing operations.

Meldrum House Estates Limited is a limited company incorporated in Scotland. The registered office is Bishop's Court, 29 Albyn Place, Aberdeen, AB10 1YL. The place of business is Meldrum House Country Hotel & Golf Course, Oldmeldrum, Aberdeenshire, AB51 0AE.

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 pounds sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest pound sterling.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

As discussed in the Strategic Report, the company is progressing with plans for a housing development within the Meldrum House Estate. Planning consent for the housing development has now been received with plot sales commencing during the year. The company has a pipeline of further plot sales at varying stages of agreement and the directors are confident that the full development will be completed over the next 2 years, generating additional revenue and profit for the business.

Having prepared cashflow forecasts for the housing development, together with financial forecasts for the hotel and golf course, the directors are confident that the company can continue to operate and meet its liabilities as they fall due for a period of at least 12 months from the date of approval of these financial statements.

As part of the company’s banking arrangements, the directors have formally postponed repayment of their loans. Although the directors’ loans are included in current liabilities in accordance with the requirements of FRS102, the directors have confirmed that they will not seek repayment for the foreseeable future. The directors have further confirmed that they can and will provide additional funds to the company to meet its ongoing liabilities should this be required.

On this basis, the directors have continued to prepare the financial statements on a going concern basis.

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. The fair value of consideration takes into account any discounts offered.

Revenue from the sale of food and beverages is recognised at the point of sale.

Revenue from the sale of pro shop goods is recognised when the rewards of ownership of the goods have passed to the buyer on the dispatch of the goods.

Revenue from the provision of hotel accommodation and room hire is recognised on the date that the service is provided.

Revenue for golf membership is recognised on the first date of the membership period, as no refunds are given on unused membership. Where this is paid in advance, income is deferred until the membership start date.

Tangible fixed assets 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:

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 the statement of income and retained earnings.

The golf course is not depreciated on the basis that it is maintained to a high standard with maintenance costs being charged to the statement of income and retained earnings when incurred.

At each reporting end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Stock is stated at the lower of cost and net realisable value. Cost comprises the purchase price of goods and those costs incurred in bringing the stocks to their present location and condition.

Trading stock relates to the cost of land for future development. Cost includes all costs incurred in developing the land.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stock over its estimated selling price is recognised as an impairment loss in the statement of income and retained earnings.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, 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 and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit and loss.

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.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Basic financial liabilities, including trade and other payables and bank loans are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

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

The company operates a defined contribution scheme for the benefit of its employees. Contributions payable are charged to the profit and loss account in the period they are payable.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases and hire purchase contracts are recognised as assets at the lower of the assets' fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.

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.

Government grants are recognised as other operating income in the period to which the grants relate.

Grants towards capital expenditure are recognised in income systematically over the related asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.

Group accounts

The financial statements present information about the company as an individual undertaking and not about its group. The company's subsidiary undertakings are dormant, have no assets or liabilities and as such, are immaterial to the group. The company has therefore taken advantage of the exemptions provided by section 402 of the Companies Act 2006 not to prepare group accounts.

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 are considered to be either judgements that have had the most significant effect on amounts recognised in the financial statements, or estimates that are dependent on assumptions which could change in the next financial year and have a material effect on the carrying amounts of assets and liabilities recognised at the balance sheet date.

In light of historic operating losses and the ongoing impact of the Covid-19 pandemic on the global economy, the directors have considered the potential impairment of fixed assets.

The directors previously wrote down the carrying value of fixed assets at 31 December 2016 based on an independent valuation of £4.1m that was obtained in January 2018. While results since that date have not yet shown the full extent of improvement anticipated, the company has shown resilience and agility during the Covid-19 pandemic, developing a safe and attractive environment which has had a positive impact on the company’s results for the year. This improvement is continuing post year-end and the directors are confident that the level of improvement anticipated at the time of the 2018 valuation is sustainable going forward. Consequently, the directors consider that no further impairment is required for the period ended 30 June 2021.

The directors have considered the carrying value of trading stock and based on forecasts for the housing development, are satisfied that the net realisable value is in excess of its cost of £1,909,877.

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

The average monthly number of persons employed by the company during the year was:

Their aggregate remuneration comprised:

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

A deferred tax asset of £802,188 (2020 - 692,696) in relation to trading losses has not been recognised.

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Included above is land at cost of £137,116 (2020: £137,116) and golf course construction costs of £556,238 (2020: £519,976) that are not depreciated.

Details of the company's subsidiaries at 30 June 2021 are as follows:

The bank loan is secured by a standard security over the property and a bond and floating charge over the whole assets of the company. The loan is repayable over 5 years in half-yearly instalments. Interest is payable at 4.75% over base rate. Directors' loans are subordinated to the bank loan.

Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. Net obligations under hire purchase contracts are secured by fixed charges on the assets concerned.

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.

Total outstanding contributions at the year end are £5,365 (2020: £4,555).

All share classes have equal voting, dividend and capital distribution rights.

The profit and loss reserve account represents cumulative realisable profits and losses.

No key management personnel, including directors, are remunerated through the company.

The directors have provided personal guarantees in proportion to their shareholdings, to the combined value of £1,999,600 in respect of secured bank borrowings.

During the year the company entered into the following transactions with related parties:

Sales of £300,000 (2020: £nil) were made to one of the directors and purchases of £21,000 (2020: £nil) were made from a business controlled by one of the directors.

Included within creditors due within one year are unsecured interest free loans from the directors and companies under their control of £13,397,653 (2020: £13,217,653).

Included within creditors due after more than one year are interest bearing loans from directors of £213,595 (2020: £213,595) on which interest of £6,406 (2020: £6,406) was paid in the year.