Scotco (Northern) Limited Company accounts

Scotco (Northern) Limited Company accounts

SCOTCO (NORTHERN) LIMITED - Company Information

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COMPANY REGISTRATION NUMBER: 09294355
Scotco (Northern) Limited
Financial Statements
31 December 2020
Scotco (Northern) Limited
Financial Statements
Period from 30 December 2019 to 31 December 2020
Contents
Page
Officers and professional advisers
1
Strategic report
2
Directors' report
4
Independent auditor's report to the members
6
Statement of income and retained earnings
11
Statement of financial position
12
Notes to the financial statements
13
Scotco (Northern) Limited
Officers and Professional Advisers
The board of directors
Mr M Issa
Mr Z V Issa
Registered office
Waterside Head Office
Haslingden Road
Guide
Blackburn
Lancashire
BB1 2FA
Auditor
Maneely Mc Cann
Chartered Accountants & Statutory Auditors
Aisling House
50 Stranmillis Embankment
Belfast
BT9 5FL
Solicitors
Freeths
Cumberland Court
80 Mount Street
Nottingham
NG1 6HH
Skadden, Arps, Slate, Meagher & Flom LLP
40 Bank Street
Canary Wharf
London
E14 5DS
Scotco (Northern) Limited
Strategic Report
Period from 30 December 2019 to 31 December 2020
PRINCIPAL ACTIVITY AND BUSINESS REVIEW The principal activity of the company is the provision of fast food services under franchise with Kentucky Fried Chicken (Great Britain) Limited. The company's revenues are generated by fast food sales. The company operates throughout England. The COVID-19 pandemic has been without precedent in living memory and continues to impact our operations, as it has since early March 2020. The pandemic has seen repercussions for our customers, colleagues and business partners across all business streams. We have seen restrictions and adaptations to our portfolio of stores - limitations on in-store dining, which has been offset through the growth in demand for take-out and home delivery. Our outlets were temporarily closed from the end of March 2020, substantially reopening in May 2020 albeit with some restrictions on operations. The strong growth in demand for delivery and drive-thru food service has meant that our business has largely traded at or slightly above expected levels. The company recognised a gross profit for the period of £6,130,993 (2019: £7,676,893) achieving a gross profit margin of 37% (2019: 42%). Loss on ordinary activities before taxation was £4,935,384 (2019: Profit £88,426). The net liabilities of the company at the period end were £4,169,147 (2019: net assets £538,171). Overall the directors are satisfied with the company's results for the period. The KFC franchise business continues to trade strongly. The key performance indicators that management monitored on a monthly basis during the year were as follows: - store by store growth compared to prior period - food costs as a percentage of sales - labour costs as a percentage of sales - labour hours used on a weekly, store by store basis compared to sales achieved and same week prior year. The company is well placed to deal with uncertainties that may arise due to the current economic downturn and in response to this the directors are involved in prudent business planning and working close with the company's key stakeholders.
Future Developments The company transferred its trade to a fellow group company, Scotco Restaurants Limited, on 29 Novemeber 2020, consequently the trading results for the period have been included in 'Discontinued operations' in the Statement of Income and Retained Earnings.
Principal Risks and Uncertainties The KFC business is sensitive to consumer spending habits, inflation and increased costs which include wages, energy costs and direct costs. The directors, however, focus strongly on managing and mitigating these risks as well as exploring new opportunities for the business.
Financial Risk Management The company's operations expose it to a variety of financial risks that include liquidity risk and interest rate risk. Credit risk is negligible as the company does not make any credit sales. Given the size of the company, the directors have not delegated the responsibility of monitoring financial risk management to a sub committee. The policies are set and reviewed by the directors, and are implemented by the company's finance team. The main risks are summarised below: Liquidity risk The company actively maintains a mixture of long-term and short-term finance to ensure sufficient liquidity available for operations and any planned expansions. Interest rate risk The company finances its operations through a combination of bank overdrafts and loans from related parties, and has a policy of maintaining debt at competitive rates to ensure a reasonable degree of certainty over future interest cash flows. The directors will revisit the appropriateness of this policy should the company's operations change in size or nature.
This report was approved by the board of directors on 30 September 2022 and signed on behalf of the board by:
Mr Z V Issa
Director
Registered office:
Waterside Head Office
Haslingden Road
Guide
Blackburn
Lancashire
BB1 2FA
Scotco (Northern) Limited
Directors' Report
Period from 30 December 2019 to 31 December 2020
The directors present their report and the financial statements of the company for the period ended 31 December 2020 .
Directors
The directors who served the company during the period were as follows:
Mr M Issa
(Appointed 10 March 2020)
Mr Z V Issa
(Appointed 10 March 2020)
Mr M A Herbert
(Resigned 10 March 2020)
Mrs L E Herbert
(Resigned 10 March 2020)
Mr A G Purnell
(Resigned 25 February 2020)
Mr J Carlisle
(Resigned 10 March 2020)
Dividends
The directors do not recommend the payment of a dividend.
Employment of disabled persons
The company gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by a handicapped or disabled person. Where existing employees become disabled, it is the company's policy wherever practicable to provide continuing employment under normal terms and conditions and to provide training and career development and promotion to disabled employees wherever appropriate.
Employee involvement
It is the policy of the company to provide employees with information on matters of concern to them through the normal management channels. The involvement of the employees in the company's performance is encouraged by the provision of relevant information aimed at achieving employee awareness of the various factors affecting the company.
Directors' responsibilities statement
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 period. 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 judgments 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. Auditor
Each of the persons who is a director at the date of approval of this report confirms that:
- so far as they are aware, there is no relevant audit information of which the company's auditor is unaware; and - they have taken all steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the company's auditor is aware of that information.
This report was approved by the board of directors on 30 September 2022 and signed on behalf of the board by:
Mr Z V Issa
Director
Registered office:
Waterside Head Office
Haslingden Road
Guide
Blackburn
Lancashire
BB1 2FA
Scotco (Northern) Limited
Independent Auditor's Report to the Members of Scotco (Northern) Limited
Period from 30 December 2019 to 31 December 2020
Qualified opinion
We have audited the financial statements of Scotco (Northern) Limited (the 'company') for the period ended 31 December 2020 which comprise the statement of income and retained earnings, statement of financial position and the related notes, 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, except for the effects of the matter described in the basis for qualified opinion section of our report, the financial statements: - give a true and fair view of the state of the company's affairs as at 31 December 2020 and of its loss for the period then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; - have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for qualified opinion
Payroll records for the period from 29 December 2019 to 3 July 2020 and Furlough Grant Claim records for the period were not made available to us. We were unable to obtain sufficient appropriate audit evidence regarding the Wages and salaries, Social security costs, Other pension costs, and Government grant income. Consequently we were unable to determine whether any adjustments to these amounts were necessary.
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 qualified opinion.
Material uncertainty related to going concern
We draw attention to note 3 to the financial statements, which indicates that the accounts have been prepared on a going concern basis, the validity of which depends on the continued support of the other group companies and the group's bankers. The financial statements do not include any adjustments which would result if this continued support was not secured. As stated in note 3, these events or conditions, along with the other matters as set forth in note 3, indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the strategic report and the 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.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report. Arising from the limitation of our work referred to above: - we have not received all the information and explanations we require for our audit. 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 directors' remuneration specified by law are not made.
Responsibilities of directors
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.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue 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: Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following: - the nature of the industry and sector, control environment and business performance including the design of the Group's remuneration policies, key drivers for directors' remuneration, bonus levels and performance targets; - results of our enquiries of management about their own identification and assessment of the risks of irregularities; - any matters we identified having obtained and reviewed the Group's documentation of their policies and procedures relating to: - identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; - detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; - the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; - the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, 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 key laws and regulations we considered in this context included the Companies Act 2006 and Taxation Legislation. Audit response to risks identified Our procedures to respond to risks identified included the following: - reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; - enquiring of management and external legal counsel concerning actual and potential litigation and claims; - performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; - reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; and - in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in new making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. - Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 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.
Cathal Maneely
(Senior Statutory Auditor)
For and on behalf of
Maneely Mc Cann
Chartered Accountants & Statutory Auditors
Aisling House
50 Stranmillis Embankment
Belfast
BT9 5FL
30 September 2022
Scotco (Northern) Limited
Statement of Income and Retained Earnings
Period from 30 December 2019 to 31 December 2020
31 Dec 20
29 Dec 19
Continuing operations
Discont'd operations
Total
Continuing operations
Discont'd operations
Total
Note
£
£
£
£
£
£
Turnover
4
–
16,399,399
16,399,399
–
18,504,792
18,504,792
Cost of sales
–
10,268,406
10,268,406
–
10,827,899
10,827,899
----
-------------
-------------
----
-------------
-------------
Gross profit
–
6,130,993
6,130,993
–
7,676,893
7,676,893
Administrative expenses
82,680
6,008,945
6,091,625
–
8,070,459
8,070,459
Other operating income
5
82,680
601,142
683,822
–
109,043
109,043
--------
------------
------------
----
------------
------------
Operating profit/(loss)
6
–
723,190
723,190
–
( 284,523)
( 284,523)
Income from shares in group undertakings
9
–
( 5,423,708)
( 5,423,708)
–
1,300,000
1,300,000
Interest payable and similar expenses
10
–
234,866
234,866
–
927,051
927,051
--------
------------
------------
----
------------
------------
(Loss)/profit before taxation
–
( 4,935,384)
( 4,935,384)
–
88,426
88,426
Tax on (loss)/profit
11
–
( 228,066)
( 228,066)
–
( 106,038)
( 106,038)
----
------------
------------
----
---------
---------
(Loss)/profit for the financial period and total comprehensive income
–
( 4,707,318)
( 4,707,318)
–
194,464
194,464
----
------------
------------
----
---------
---------
Retained earnings at the start of the period
538,071
343,607
------------
---------
Retained (losses)/earnings at the end of the period
( 4,169,247)
538,071
------------
---------
Scotco (Northern) Limited
Statement of Financial Position
31 December 2020
31 Dec 20
29 Dec 19
Note
£
£
£
Fixed assets
Intangible assets
12
–
2,398,508
Tangible assets
13
–
5,406,960
Investments
14
500,000
5,923,708
---------
-------------
500,000
13,729,176
Current assets
Stocks
15
–
164,400
Debtors
16
–
4,823,988
Cash at bank and in hand
147,024
87,952
---------
------------
147,024
5,076,340
Creditors: amounts falling due within one year
17
4,816,171
17,883,001
------------
-------------
Net current liabilities
4,669,147
12,806,661
------------
-------------
Total assets less current liabilities
( 4,169,147)
922,515
Provisions
Taxation including deferred tax
18
–
384,344
------------
---------
Net (liabilities)/assets
( 4,169,147)
538,171
------------
---------
Capital and reserves
Called up share capital
23
100
100
Profit and loss account
24
( 4,169,247)
538,071
------------
---------
Shareholders (deficit)/funds
( 4,169,147)
538,171
------------
---------
These financial statements were approved by the board of directors and authorised for issue on 30 September 2022 , and are signed on behalf of the board by:
Mr Z V Issa
Director
Company registration number: 09294355
Scotco (Northern) Limited
Notes to the Financial Statements
Period from 30 December 2019 to 31 December 2020
1. General information
The company is a private company limited by shares, registered in England and Wales. The address of the registered office is Waterside Head Office, Haslingden Road, Guide, Blackburn, Lancashire, BB1 2FA.
2. Statement of compliance
These financial statements have been prepared in compliance with FRS 102, 'The Financial Reporting Standard applicable in the UK and the Republic of Ireland'.
3. Accounting policies
Basis of preparation
The financial statements have been prepared on the historical cost basis, as modified by the revaluation of certain financial assets and liabilities and investment properties measured at fair value through profit or loss.
The financial statements are prepared in sterling, which is the functional currency of the entity.
Going concern
The financial statements have been prepared on the going concern basis, notwithstanding the fact that the company had a net shareholders deficit of £4,169,147 at the year end. The company has the necessary cash cover and secured lender and other group companies' support to meet its total on-going unsecured creditor obligations and liabilities for the medium to long term. In light of the above, the directors consider it appropriate to prepare the financial statements on a going concern basis.
Disclosure exemptions
The entity satisfies the criteria of being a qualifying entity as defined in FRS 102. Its financial statements are consolidated into the financial statements of EG Group Limited which can be obtained from Waterside Head Office, Haslingden Road, Blackburn, Lancashire, BB1 2FA. As such, advantage has been taken of the following disclosure exemptions available under paragraph 1.12 of FRS 102: No cash flow statement has been presented for the company.
Judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported. These estimates and judgements are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Revenue recognition
Turnover is measured at the fair value of the consideration received or receivable for goods supplied and services rendered, net of discounts and Value Added Tax. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have transferred to the buyer (usually on despatch of the goods); the amount of revenue can be measured reliably; it is probable that the associated economic benefits will flow to the entity; and the costs incurred or to be incurred in respect of the transactions can be measured reliably.
Income tax
The taxation expense represents the aggregate amount of current and deferred tax recognised in the reporting period. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, tax is recognised in other comprehensive income or directly in equity, respectively. Current tax is recognised on taxable profit for the current and past periods. Current tax is measured at the amounts of tax expected to pay or recover using the tax rates and laws that have been enacted or substantively enacted at the reporting date.
Deferred tax is recognised in respect of all timing differences at the reporting date. Unrelieved tax losses and other 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. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference.
Intangible assets
Intangible assets are initially recorded at cost, and are subsequently stated at cost less any accumulated amortisation and impairment losses. Any intangible assets carried at revalued amounts, are recorded at the fair value at the date of revaluation, as determined by reference to an active market, less any subsequent accumulated amortisation and subsequent accumulated impairment losses. Intangible assets acquired as part of a business combination are only recognised separately from goodwill when they arise from contractual or other legal rights, are separable, the expected future economic benefits are probable and the cost or value can be measured reliably.
Amortisation
Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful life of that asset as follows:
Goodwill
-
5% straight line
Franchise licence
-
10% straight line
If there is an indication that there has been a significant change in amortisation rate, useful life or residual value of an intangible asset, the amortisation is revised prospectively to reflect the new estimates.
Tangible assets
Tangible assets are initially recorded at cost, and subsequently stated at cost less any accumulated depreciation and impairment losses. Any tangible assets carried at revalued amounts are recorded at the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. An increase in the carrying amount of an asset as a result of a revaluation, is recognised in other comprehensive income and accumulated in equity, except to the extent it reverses a revaluation decrease of the same asset previously recognised in profit or loss. A decrease in the carrying amount of an asset as a result of revaluation, is recognised in other comprehensive income to the extent of any previously recognised revaluation increase accumulated in equity in respect of that asset. Where a revaluation decrease exceeds the accumulated revaluation gains accumulated in equity in respect of that asset, the excess shall be recognised in profit or loss.
Depreciation
Depreciation is calculated so as to write off the cost or valuation of an asset, less its residual value, over the useful economic life of that asset as follows:
Short leasehold property
-
Over the duration of the lease
Plant and machinery
-
Over 5, 10, 12 or 15 years
Fixtures, fittings and equipment
-
Over 5, 10, 12 or 15 years
Investments
Fixed asset investments are initially recorded at cost, and subsequently stated at cost less any accumulated impairment losses.
Listed investments are measured at fair value with changes in fair value being recognised in profit or loss.
Investments in associates
Investments in associates accounted for in accordance with the cost model are recorded at cost less any accumulated impairment losses. Investments in associates accounted for in accordance with the fair value model are initially recorded at the transaction price. At each reporting date, the investments are measured at fair value, with changes in fair value recognised in other comprehensive income/profit or loss. Where it is impracticable to measure fair value reliably without undue cost or effort, the cost model will be adopted. Dividends and other distributions received from the investment are recognised as income without regard to whether the distributions are from accumulated profits of the associate arising before or after the date of acquisition.
Investments in joint ventures
Investments in jointly controlled entities accounted for in accordance with the cost model are recorded at cost less any accumulated impairment losses. Investments in jointly controlled entities accounted for in accordance with the fair value model are initially recorded at the transaction price. At each reporting date, the investments are measured at fair value, with changes in fair value recognised in other comprehensive income/profit or loss. Where it is impracticable to measure fair value reliably without undue cost or effort, the cost model will be adopted. Dividends and other distributions received from the investment are recognised as income without regard to whether the distributions are from accumulated profits of the joint venture arising before or after the date of acquisition.
Impairment of fixed assets
A review for indicators of impairment is carried out at each reporting date, with the recoverable amount being estimated where such indicators exist. Where the carrying value exceeds the recoverable amount, the asset is impaired accordingly. Prior impairments are also reviewed for possible reversal at each reporting date. For the purposes of impairment testing, when it is not possible to estimate the recoverable amount of an individual asset, an estimate is made of the recoverable amount of the cash-generating unit to which the asset belongs. The cash-generating unit is the smallest identifiable group of assets that includes the asset and generates cash inflows that largely independent of the cash inflows from other assets or groups of assets. For impairment testing of goodwill, the goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the company are assigned to those units.
Stocks
Stocks are measured at the lower of cost and estimated selling price less costs to complete and sell. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the stock to its present location and condition.
Government grants
Government grants are recognised at the fair value of the asset received or receivable. Grants are not recognised until there is reasonable assurance that the company will comply with the conditions attaching to them and the grants will be received. Government grants are recognised using the accrual model and the performance model. Under the accrual model, government grants relating to revenue are recognised on a systematic basis over the periods in which the company recognises the related costs for which the grant is intended to compensate. Grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs are recognised in income in the period in which it becomes receivable. Grants relating to assets are recognised in income on a systematic basis over the expected useful life of the asset. Where part of a grant relating to an asset is deferred, it is recognised as deferred income and not deducted from the carrying amount of the asset. Under the performance model, where the grant does not impose specified future performance-related conditions on the recipient, it is recognised in income when the grant proceeds are received or receivable. Where the grant does impose specified future performance-related conditions on the recipient, it is recognised in income only when the performance-related conditions have been met. Where grants received are prior to satisfying the revenue recognition criteria, they are recognised as a liability.
Provisions
Provisions are recognised when the entity has an obligation at the reporting date as a result of a past event, it is probable that the entity will be required to transfer economic benefits in settlement and the amount of the obligation can be estimated reliably. Provisions are recognised as a liability in the statement of financial position and the amount of the provision as an expense. Provisions are initially measured at the best estimate of the amount required to settle the obligation at the reporting date and subsequently reviewed at each reporting date and adjusted to reflect the current best estimate of the amount that would be required to settle the obligation. Any adjustments to the amounts previously recognised are recognised in profit or loss unless the provision was originally recognised as part of the cost of an asset. When a provision is measured at the present value of the amount expected to be required to settle the obligation, the unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises.
Financial instruments
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 equity after deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. When the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instrument are debited direct to equity.
Defined contribution plans
Contributions to defined contribution plans are recognised as an expense in the period in which the related service is provided. Prepaid contributions are recognised as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund. When contributions are not expected to be settled wholly within 12 months of the end of the reporting date in which the employees render the related service, the liability is measured on a discounted present value basis. The unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.
4. Turnover
Turnover arises from:
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Sale of goods
16,399,399
18,504,792
-------------
-------------
The whole of the turnover is attributable to the principal activity of the company wholly undertaken in the United Kingdom.
5. Other operating income
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Government grant income
601,142
–
Other operating income
82,680
109,043
---------
---------
683,822
109,043
---------
---------
6. Operating profit
Operating profit or loss is stated after charging:
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Amortisation of intangible assets
38,884
55,128
Depreciation of tangible assets
874,906
928,037
Loss on disposal of tangible assets
–
170,481
Operating lease rentals
1,100,484
1,101,980
------------
------------
7. Auditor's remuneration
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Fees payable for the audit of the financial statements
13,550
12,000
--------
--------
8. Staff costs
The average number of persons employed by the company during the period, including the directors, amounted to:
31 Dec 20
29 Dec 19
No.
No.
Sales staff
458
363
----
----
The aggregate payroll costs incurred during the period, relating to the above, were:
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Wages and salaries
4,415,989
4,578,644
Social security costs
196,325
232,955
Other pension costs
46,940
40,779
------------
------------
4,659,254
4,852,378
------------
------------
9. Income from shares in group undertakings
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Dividends from group undertakings
–
1,300,000
Gain/(loss) on fair value adjustment to shares in group
(5,423,708)
–
------------
------------
( 5,423,708)
1,300,000
------------
------------
10. Interest payable and similar expenses
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Interest on banks loans and overdrafts
234,866
641,593
Loss on fair value adjustment of financial liabilities at fair value through profit or loss
–
285,458
---------
---------
234,866
927,051
---------
---------
11. Tax on (loss)/profit
Major components of tax income
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
Current tax:
UK current tax expense
156,278
–
Deferred tax:
Origination and reversal of timing differences
( 384,344)
( 106,038)
---------
---------
Tax on (loss)/profit
( 228,066)
( 106,038)
---------
---------
Reconciliation of tax income
The tax assessed on the (loss)/profit on ordinary activities for the period is higher than (2019: lower than) the standard rate of corporation tax in the UK of 19 % (2019: 19 %).
Period from
Period from
30 Dec 19 to
24 Dec 18 to
31 Dec 20
29 Dec 19
£
£
(Loss)/profit on ordinary activities before taxation
( 4,935,384)
88,426
------------
--------
(Loss)/profit on ordinary activities by rate of tax
( 937,723)
16,801
Effect of expenses not deductible for tax purposes
1,031,275
2,780
Effect of capital allowances and depreciation
62,726
80,403
Effect of revenue exempt from tax
–
( 247,000)
Group relief surrendered
–
147,016
Movement in deferred tax provision
( 384,344)
( 106,038)
------------
---------
Tax on (loss)/profit
( 228,066)
( 106,038)
------------
---------
12. Intangible assets
Goodwill
Franchise Licences
Total
£
£
£
Cost
At 30 December 2019
2,284,805
324,158
2,608,963
Additions
–
20,746
20,746
Disposals
( 2,284,805)
( 344,904)
( 2,629,709)
------------
---------
------------
At 31 December 2020
–
–
–
------------
---------
------------
Amortisation
At 30 December 2019
76,939
133,516
210,455
Charge for the period
4,054
34,830
38,884
Disposals
( 80,993)
( 168,346)
( 249,339)
------------
---------
------------
At 31 December 2020
–
–
–
------------
---------
------------
Carrying amount
At 31 December 2020
–
–
–
------------
---------
------------
At 29 December 2019
2,207,866
190,642
2,398,508
------------
---------
------------
13. Tangible assets
Short leasehold property
Plant and machinery
Fixtures and fittings
Total
£
£
£
£
Cost
At 30 December 2019
71,659
3,513,323
4,818,615
8,403,597
Additions
–
4,571
249,751
254,322
Disposals
( 71,659)
( 3,517,894)
( 5,068,366)
( 8,657,919)
--------
------------
------------
------------
At 31 December 2020
–
–
–
–
--------
------------
------------
------------
Depreciation
At 30 December 2019
45,930
1,350,097
1,600,610
2,996,637
Charge for the period
7,241
355,493
512,172
874,906
Disposals
( 53,171)
( 1,705,590)
( 2,112,782)
( 3,871,543)
--------
------------
------------
------------
At 31 December 2020
–
–
–
–
--------
------------
------------
------------
Carrying amount
At 31 December 2020
–
–
–
–
--------
------------
------------
------------
At 29 December 2019
25,729
2,163,226
3,218,005
5,406,960
--------
------------
------------
------------
14. Investments
Shares in group undertakings
£
Cost
At 30 December 2019 and 31 December 2020
5,923,708
------------
Impairment
At 30 December 2019
–
Impairment losses
5,423,708
------------
At 31 December 2020
5,423,708
------------
Carrying amount
At 31 December 2020
500,000
------------
At 29 December 2019
5,923,708
------------
Subsidiaries, associates and other investments
Class of share
Percentage of shares held
Subsidiary undertakings
Herbel (Western) Limited
Ordinary Shares
100
Herbel (Northern) Limited
Ordinary Shares
100
Scotco One Five Five Limited
Ordinary Shares
100
The companies were involved in the fast food retail trade and transferred their trade to a fellow subsidiary during the period, and were dormant at the period end.
15. Stocks
31 Dec 20
29 Dec 19
£
£
Finished goods and goods for resale
–
164,400
----
---------
16. Debtors
31 Dec 20
29 Dec 19
£
£
Amounts owed by group undertakings
–
4,394,093
Prepayments and accrued income
–
238,150
Corporation tax repayable
–
34,548
Other debtors
–
157,197
----
------------
–
4,823,988
----
------------
17. Creditors: amounts falling due within one year
31 Dec 20
29 Dec 19
£
£
Bank loans and overdrafts
–
15,916,631
Trade creditors
–
1,130,009
Amounts owed to group undertakings
4,659,678
–
Accruals and deferred income
–
153,788
Corporation tax
156,493
–
Social security and other taxes
–
297,703
Other creditors
–
384,870
------------
-------------
4,816,171
17,883,001
------------
-------------
Bank security provided is an unlimited multilateral guarantee given by the company and its subsidiaries, and a Group set off held.
18. Provisions
Deferred tax (note 19)
£
At 30 December 2019
384,344
Charge against provision
( 384,344)
---------
At 31 December 2020
–
---------
19. Deferred tax
The deferred tax included in the statement of financial position is as follows:
31 Dec 20
29 Dec 19
£
£
Included in provisions (note 18)
–
384,344
----
---------
The deferred tax account consists of the tax effect of timing differences in respect of:
31 Dec 20
29 Dec 19
£
£
Accelerated capital allowances
–
384,344
----
---------
20. Employee benefits
Defined contribution plans
The amount recognised in profit or loss as an expense in relation to defined contribution plans was £ 46,940 (2019: £ 40,779 ).
21. Government grants
The amounts recognised in the financial statements for government grants are as follows:
31 Dec 20
29 Dec 19
£
£
Recognised in other operating income:
Government grants recognised directly in income
601,142
–
---------
----
22. Financial instruments
The carrying amount for each category of financial instrument is as follows:
31 Dec 20
29 Dec 19
£
£
Financial assets that are debt instruments measured at amortised cost
Financial assets that are debt instruments measured at amortised cost
–
4,673,790
----
------------
Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss
–
285,458
----
---------
Financial liabilities measured at amortised cost
Financial liabilities measured at amortised cost
–
17,443,755
----
-------------
23. Called up share capital
Authorised share capital
31 Dec 20
29 Dec 19
No.
£
No.
£
Ordinary shares of £ 1 each
100
100
100
100
----
----
----
----
Issued, called up and fully paid
31 Dec 20
29 Dec 19
No.
£
No.
£
Ordinary shares of £ 1 each
100
100
100
100
----
----
----
----
24. Reserves
Profit and loss account - This reserve records retained earnings and accumulated losses.
25. Operating leases
The total future minimum lease payments under non-cancellable operating leases are as follows:
31 Dec 20
29 Dec 19
£
£
Not later than 1 year
655,455
903,236
Later than 1 year and not later than 5 years
2,508,867
3,543,915
Later than 5 years
5,441,434
8,079,170
------------
-------------
8,605,756
12,526,321
------------
-------------
26. Related party transactions
Transactions The company has taken advantage of the exemption from disclosing related party transactions with group companies, in accordance with Financial Reporting Standard No 102 Section 33 Related Party Disclosures.
27. Controlling party
In the opinion of the Directors, the Company's ultimate parent Company and ultimate controlling party is Optima Bidco (Jersey) Limited, a company registered in Jersey, Channel Islands. The Company's immediate controlling party is Euro Garages Limited . The parent undertaking of the largest group, which includes the Company and for which group accounts are prepared, is EG Group Holdings Limited , a company incorporated in Great Britain, registered at Waterside Head Office, Haslingden Road, Guide, Blackburn, Lancashire, BB1 2FA, United Kingdom.