MBO_Hotels_Limited - Accounts

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

The principal activity of the group is that of trading as Luxury Family Hotels.

The group continues with its programme of building the reputation, awareness, sustainability and profitability of the Luxury Family brand through the following areas:-

1. Investing significantly in developing the hotels to develop and maintain them as leading boutique hotels. During the year we invested in Fowey Hall Hotel with a programme that continued into 2022 increasing room stock from 36 keys to 60 keys and enhancing facilities. We also began a refurbishment of Moonfleet Manor in 2022 which is nearing completion.

2. Operational improvement: – consistent and improving operational standards through recruitment, training and guest service surveys in all customer-facing areas of the business.

3. Sales and marketing activities, both strategic and tactical: – the continuing focus on the development of the group’s core Luxury Family brand through public relations and profile awareness, affinity marketing with key relevant partners alongside tactical leisure offers through a range of distribution channels. The central reservations office continues to develop its role within the business to grow the group’s proportion of direct and website booked business.

4. Proactive and reactive maintenance: – the group continues to develop a pro-active maintenance programme managed by its in-house facilities team.

The Board considers that the group performed satisfactorily against the hotel market generally.

The Board considers the principal risks affecting the UK hotels in general in 2021 were the periods of Government imposed lockdowns and closure as a result of the COVID 19 pandemic, continuing staff shortages across the industry, and operating cost increases outside of group control.

The Board manages its exposure to price risk through careful yield management, assessing the demand levels and adjusting key tariffs accordingly. The Board does not consider it is exposed to credit risk.

The Board has ensured that sufficient funding is available to meet the group’s needs in the foreseeable future through a prudent combination of equity and bank debt; along with regular management and updates of forecasts, cash flow and liquidity risks are managed.

The main KPIs of the business for the 2021 trading period, as traditionally assessed by the hotel industry, are as follows:-

Occupancy – 80% (2020 - 67%)

ADR (Average daily rate) - £273 (2020 - £209)

RevPAR (Revenue per available room) - £219 (2020 - £141)

The KPIs reflect the fact that the majority of COVID led closures and disruption impacted on the seasonally quieter months of the year, giving rise to strong demand when the hotels were allowed to open. The improvements at Fowey Hall were very well received in the market and have demonstrated proof of concept; the board expects to see similar changes across the rest of the estate, along with additional keys, over the next few years.

The core driver of the group’s business is short breaks taken by families with younger children, with MICE (Meeting/incentives/conferences and events) being a relatively minor part; hence the impact of COVID has not been as high as other hospitality businesses. In additions, the group’s properties are situated away from city centres, in holiday and leisure destinations.

Following reopening, the group has benefitted from the positive macro effect of UK “staycations” as well as initiatives such as the EOHO, the waiver of business rates and the reduction in VAT levels. The net effect has contributed to a significant return to profitability, with Business on the Books reports and actual results showing this trend continuing throughout 2021 and thereafter.

The Directors of the group, as those of all UK companies, must act in accordance with a set of general duties. These duties are detailed in section 172 of the UK Companies Act 2006 which is summarised as follows:

A director of a company must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its shareholders as a whole and, in doing so have regard (amongst other matters) to:

• the likely consequences of any decisions in the long-term;

• the interests of the company’s employees;

• the need to foster the company’s business relationships with suppliers, customers and others;

• the impact of the company’s operations on the community and environment;

• the desirability of the company maintaining a reputation for high standards of business conduct; and

• the need to act fairly as between shareholders of the company.

As part of their induction, a Director is briefed on their duties and they can access professional advice on these, if they judge it necessary, from an independent adviser.

It is important to recognise that in an organisation such as ours, the Directors fulfil their duties mainly by a “hands-on” control of all activities and the close supervision of employees. This Strategic Report sets out how the Directors have managed risk and engaged with employees throughout the year. The group's stakeholders are its Directors and communication with them is maintained by regular Board Meetings.

On behalf of the board

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

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

The results for the year are set out on page 11.

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

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the group continues and that the appropriate training is arranged. It is the policy of the group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

The group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.

Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.

A resolution will be passed to re-appoint the auditors. Saffery Champness LLP have expressed their willingness to continue in office.

The truegroup has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the group's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report.

The hotels operated by the group are undergoing significant development works, which are completed by third parties. It is therefore currently impractical to gather sufficient data from all organisations in order to report the total energy and carbon used by the group.

The directors will endeavour to address this when the capital expenditure projects are finalised.

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 auditor of the company 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 auditor of the company is aware of that information.

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 group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

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

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

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

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of MBO Hotels Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group 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 group and of the parent company's affairs as at 31 December 2021 and of the group's 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 group and parent 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 group's and parent 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.

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 the 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 group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

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

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

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent 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 parent 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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.

Identifying and assessing risks related to irregularities:

We assessed the susceptibility of the group and parent company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the group and parent company by discussions with directors and by updating our understanding of the sector in which the group and parent company operates.

Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006 and UK Tax legislation.

Other laws and regulations which do not have a direct effect on the financial statements, but with which compliance is essential in order for the company to continue to operate or avoid material penalty include HSE regulations and UK employment law.

Audit response to risks identified

We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of group and parent company financial statement disclosures. We reviewed the parent company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.

During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.

As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.

There are inherent limitations in the audit procedures described above 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 would become aware of it. Also, 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 deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

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 parent 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 parent company's members those matters we are required to state to them in an auditors 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 parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.

The income statement has been prepared on the basis that all operations are continuing operations.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,148,540 (2020 - £4,724,975 loss).

MBO Hotels Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is Hyde Park House, 5 Manfred Road, London, SW15 2RS.

The group consists of MBO Hotels Limited and all of its subsidiaries.

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

The 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 for parent company information presented within the consolidated financial statements:

• 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 financial instruments not measured at fair value; 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 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

The consolidated group financial statements consist of the financial statements of the parent company MBO Hotels Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

All financial statements are made up to 31 December 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

At the year end the net current liabilities of the group indicated that it may not be able to meet its liabilities as they fall due for payment. However, at the time of approving the financial statements, the directors consider the group has access to 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.

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. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation 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 recognised in the income statement.

Equity investments are not publicly traded and are recognised at cost less impairment until a reliable measure of fair value becomes available.

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

At each reporting period end date, the group 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.

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

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 or 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 not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or 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.

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

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

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

Financial assets and liabilities are offset and 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, 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 or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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 group after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, 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. 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.

Trade creditors 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 creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities, including debt instruments that do not meet the definition of a basic financial instrument, are measured at fair value through profit or loss.

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

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.

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 leased asset are consumed.

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 relating to turnover are recognised as income over the periods when the related costs are incurred. Grants relating to an asset are recognised in income systematically over the 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.

In the application of the group’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 the critical judgements that the directors have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

The group’s key assets are its freehold properties. The property, plant and equipment are included at fair value on acquisition. The directors review this value annually having regard to factors such as current and future projected income levels, location, and recent market transactions in the sector. Carrying value is then calculated on the basis of estimates of depreciation periods derived from the expected useful life of the hotel property, and residual values.

Refurbishment expenditure is judged by management as that which will enhance the business and provide return over a reasonable economic life, in line with the company’s depreciation policy.

The group’s management monitor macro and micro economic influences on the business, including the ability to maintain and improve pricing and demand levels, operating cost increases and macro influences, as well as the positioning of the group amongst its peers. The company considers that there are no factors other than recurring and perennial business challenges that would cause a material adjustment to the carrying value of assets and liabilities.

Group turnover arose from the provision of hotel services in the UK. Total turnover for the group being £14,333,059 (2020: £9,120,224).

The average monthly number of persons (including directors) employed by the group and 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:

The group has estimated losses of £2,406,250 (2020: £3,480,394 ) available for carry forward against future trading profits. The group has an estimated non-trade loan relationship deficit of £9,273,690 (2020: £6,995,928) available for carry forward against future non-trade loan relationship income and excess management expenses of £2,417,211 (2020: £2,399,210) available for carry forward against future capital gains.

This represents deferred tax assets across the group of £3,529,973 (2020: £2,446,351) which have not been recognised in the financial statements as the criteria for recognition has not been met.

The total carrying value of freehold and leashold land and buildings has been pledged as security for the long term borrowings as disclosed in notes 17 and 18.

Included within freehold land and buildings is land of £4,000,000 (2020: £4,000,000) which is not depreciated.

Details of the company's subsidiaries at 31 December 2021 are as follows:

The long-term loan is secured by fixed and floating charges over the subsidiary hotel properties. The loan is repayable in quarterly instalments over a period of five years from October 2017. Interest is charged at Libor plus a margin.

In October 2022 the long-term loan was refinanced to be repayable in quarterly instalments over a period of three years to October 2025. Interest is charges at the Bank of England Rate plus a margin.

The preference shares do not have voting or dividend rights but have capital distribution rights in priority to ordinary shares.

The loan notes bear interest at 10% and are repayable in 2022. Until such time as the principal amount of the notes is paid in full, interest will accrue and be capitalised annually into the outstanding principal amount of the notes. Any accrued and unpaid interest is repayable on the repayment of the notes. The loan notes are secured by a fixed and floating charge on the subsidiary hotel properties and the debt is subordinated to the debt owed on the bank loan.

Following the year end the loan notes were amended such that they are repayable in 2025.

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

The ordinary shares have full voting, dividend and capital distribution rights. They do not confer any rights of redemption.

The share premium account includes any premiums received on issuing of share capital.

Any transaction costs associated with the issuing of shares are deducted from the share premium.

A personal injury occurred at a hotel during a prior year which could lead to a future claim, the timing and amount of which is currently unknown. It is anticipated this will be covered in full by insurance. A fine may also be due in respect of this incident which is not expected to be covered by insurance, however, the timing and amount is currently unknown and so a provision has not been recognised in respect of this.

The hotel has a 99 year lease from the National Trust, commencing in 2001, under which it is committed to paying a basic annual rent of £200,000 plus an annual indexation.

Amounts contracted for but not provided in the financial statements:

The company and the group has taken advantage of the exemption in FRS 102 section 33 from the requirement to disclose transactions with any wholly owned subsidiary undertakings.

During the year professional services amounting to £71,868 (2020: £87,520) and recharges of £nil (2020: £7,055) were provided to the group by companies in which some of the directors have an interest. These companies also advanced funds of £nil (2020: £274,054) to the company. At the year end the amount owed to these companies was £225 (2020: £70,225).

During the year the group recharged costs and advanced funds totalling £31,809 (2020: £190,618) to companies in which some of the directors are also directors. At the balance sheet date the total amount owed to the company was £2,183 (2020: £350,912).

Key management personnel

The directors and other key management personnel provide consultancy services through third party entities. Management charges totalled £71,868 (2020: £174,797).

The ultimate controlling party is RBC Trustees (Guernsey) Limited as corporate trustee of the Levy G142 Manchester Settlement and Levy G143 London Settlement.