Michels Ventures 3 Limited 31/12/2020 iXBRL

Michels Ventures 3 Limited 31/12/2020 iXBRL

MICHELS VENTURES 3 LIMITED - Company Information

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Company registration number: 11165736
Michels Ventures 3 Limited
Financial statements
31 December 2020
Michels Ventures 3 Limited
Contents
Directors and other information
Strategic report
Director's report
Independent auditor's report to the members
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Notes to the financial statements
Michels Ventures 3 Limited
Directors and other information
Director Sir D Michels
Secretary Ian Noble
Company number 11165736
Registered office 2nd Floor
32-33 Gosfield Street
London
W1W 6HL
Auditor Baker Friend Audit Limited
2nd Floor
32-33 Gosfield Street
London
W1W 6HL
Michels Ventures 3 Limited
Strategic report
Year ended 31 December 2020
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The principal activity of the company during the year was the ownership and operation of an hotel.
In February 2019, it was agreed that Hilton could surrender the lease and would pay a reverse premium in order to exit the arrangement.
The money paid by Hilton was on the condition that it was to be used solely for the refurbishment of the hotel. As a result of this arrangement the management of the hotel was subcontracted to Michels & Taylor (London) Limited who took over from the 1st of March 2019. All the staff were transferred under the TUPE regulations and are now employed directly by the company.
Citibank who had provided a loan were required to change the original agreement from a leased to a managed hotel. Therefore, the original loan documentation was amended to reflect the change.
During the 2019 and throughout 2020, the hotel started an extensive refurbishment of the hotel. The improvement to the accommodation should increase the room rate chargeable and result in an improved level of profitability. The effect of this refurbishment has unfortunately been delayed due to the COVID-19 pandemic, which has strongly and negatively impacted the hotel industry since March 2020. The hotel was temporarily closed during the following periods:
- completely closed from 25 March to 30 April 2020
- open for key workers only from 1 May to 3 July 2020
- partially reopened as per Government guidelines from 4 July to 4 November 2020
- second lockdown from 5 November to 31 December 2020- open for key workers only
- full lockdown from 6 January to 12 April 2021, open to key workers only
- from the end of the third lockdown on 17 May 2021, hotel services fully opened within government restrictions.
68 unfurnished rooms have been unavailable for sale since 25 March 2020 and remain unavailable at the date of signing this report.
RESULTS AND DIVIDENDS
The profit for the period, after taxation, amounted to £449,195. This result includes £2,449,672 relating to the reverse premium paid by Hilton, as outlined above. The director has not recommended a dividend.
As mentioned above, the profit has been impacted by the COVID-19 pandemic, resulting in a drop in revenue (both ADR and occupancy rates) due to the closures detailed above.
The net assets position amounted to £4,288,428 compared with £3,839,233, which is explained by the finalisation of the refurbishment which started in 2019 and the careful and strict management of the working capital and cash balance during the whole pandemic.
PRINCIPAL RISKS AND UNCERTAINTIES
Since March 2020, the outbreak of COVID-19 and related global response have caused material disruptions to businesses around the world, leading to an economic slowdown.
Measures have been taken to contain the spread of the virus, including travel bans, hotel closures, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown.
As mentioned above, the hotel temporarily closed in March 2020 and has only partially reopened since then. 68 unfurnished rooms remain closed to the public to date.
This report was approved by the board of directors on 30 September 2021 and signed on behalf of the board by:
Sir D Michels
Director
Michels Ventures 3 Limited
Director's report
Year ended 31 December 2020
The director presents his report and the financial statements of the company for the year ended 31 December 2020.
Director
The director who served the company during the year was as follows:
Sir D Michels
Dividends
Future developments
As a result of the COVID-19 pandemic, the hotel has been temporarily closed during the first quarter of 2021, and 68 unfurnished rooms are still not open to the public. The subsequent consequences of the closure are referred to in note 3 to the accounts.
Financial instruments
The company uses various financial instruments. These include loans from shareholders, bank loans and various items, such as trade debtors and trade creditors, which arise directly from its operations. The main purpose of these financial instruments is to raise finance for the company's operations and to fund extensive refurbishments to the hotel. The existence of these financial instruments exposes the company to a number of financial risks, the principal ones of which are liquidity risk and credit risk.
Director's responsibilities statement
The director is responsible for preparing the strategic report, director's report and the financial statements in accordance with applicable law and regulations.
Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is 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 director is required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and accounting estimates that are reasonable and prudent; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The director is 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 him 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.
The auditor is deemed to have been re-appointed in accordance with section 487 of the Companies Act 2006.
This report was approved by the board of directors on 30 September 2021 and signed on behalf of the board by:
Sir D Michels
Director
Michels Ventures 3 Limited
Independent auditor's report to the members of
Michels Ventures 3 Limited
Year ended 31 December 2020
Opinion
We have audited the financial statements of Michels Ventures 3 Limited (the 'company') for the year ended 31 December 2020 which comprise the statement of comprehensive income, statement of financial position, statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). In our opinion, the financial statements: - give a true and fair view of the state of the company's affairs as at 31 December 2020 and of its profit for the year then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and - have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 3 in the financial statements, which indicates the impact of the COVID-19 pandemic. As stated in Note 3, these events or conditions, along with 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.
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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other Information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The director is 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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the strategic report and the director's report has 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 director's report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or - the financial statements are not in agreement with the accounting records and the returns; or - certain disclosures of director's remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has 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:
Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK)
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to pensions legislation, UK and other relevant tax legislation, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006.
We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial results and management bias in accounting estimates. Audit procedures performed by the Audit team and / or component auditors included:
o Discussions with management, legal counsel and the internal audit function, including consideration of unknown or suspected instances of non-compliance with laws and regulations and fraud:
o Challenging assumptions made by management in its significant accounting estimates in particular in relation to estimation of the cashflow projections used to value the fixed assets and uncertain tax provisions; and
o Identifying and testing higher risk journal entries, in particular any journal entries posted with unusual account combinations, journals posted by senior management
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 on resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collision.
A further description of our responsibilities is located on the Financial Reporting Council's webste at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an 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 company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Jeffrey Baker (Senior Statutory Auditor)
For and on behalf of
Baker Friend Audit Limited
Chartered Accountants and Statutory Auditors
2nd Floor
32-33 Gosfield Street
London
W1W 6HL
30 September 2021
Michels Ventures 3 Limited
Statement of comprehensive income
Year ended 31 December 2020
2020 2019
Note £ £
Turnover 4 5,027,348 10,588,535
Cost of sales ( 192,600) ( 567,698)
_______ _______
Gross profit 4,834,748 10,020,837
Administrative expenses ( 4,197,070) ( 5,527,603)
Other operating income 5 829,394 -
_______ _______
Operating profit 6 1,467,072 4,493,234
Interest payable and similar expenses 8 ( 958,403) ( 1,013,784)
Profit before taxation 508,669 3,479,450
Tax on profit 9 ( 59,474) ( 661,096)
_______ _______
Profit for the financial year and total comprehensive income 449,195 2,818,354
_______ _______
All the activities of the company are from continuing operations.
Michels Ventures 3 Limited
Statement of financial position
31 December 2020
2020 2019
Note £ £ £ £
Fixed assets
Tangible assets 10 33,292,557 31,754,386
_______ _______
33,292,557 31,754,386
Current assets
Stocks 11 9,648 23,452
Debtors 12 3,591,941 5,504,108
Cash at bank and in hand 1,942,661 1,662,526
_______ _______
5,544,250 7,190,086
Creditors: amounts falling due
within one year 13 ( 1,960,932) ( 3,398,854)
_______ _______
Net current assets 3,583,318 3,791,232
_______ _______
Total assets less current liabilities 36,875,875 35,545,618
Creditors: amounts falling due
after more than one year 14 ( 32,679,470) ( 31,679,516)
Provisions for liabilities 15 92,023 ( 26,869)
_______ _______
Net assets 4,288,428 3,839,233
_______ _______
Capital and reserves
Called up share capital 19 100 100
Profit and loss account 4,288,328 3,839,133
_______ _______
Shareholders funds 4,288,428 3,839,233
_______ _______
These financial statements were approved by the board of directors and authorised for issue on 30 September 2021 , and are signed on behalf of the board by:
Sir D Michels
Director
Company registration number: 11165736
Michels Ventures 3 Limited
Statement of changes in equity
Year ended 31 December 2020
Called up share capital Profit and loss account Total
£ £ £
At 1 January 2019 100 1,020,779 1,020,879
Profit for the year 2,818,354 2,818,354
_______ _______ _______
Total comprehensive income for the year - 2,818,354 2,818,354
_______ _______ _______
At 31 December 2019 and 1 January 2020 100 3,839,133 3,839,233
Profit for the year 449,195 449,195
_______ _______ _______
Total comprehensive income for the year - 449,195 449,195
_______ _______ _______
At 31 December 2020 100 4,288,328 4,288,428
_______ _______ _______
Michels Ventures 3 Limited
Notes to the financial statements
Year ended 31 December 2020
1. General information
The company is a private company limited by shares registered in England. The address of the registered office is 32-33 Gosfield Street, London W1W 6HL.The financial statements cover a period of 12 months to 31 December 2020, as well as the comparative figures for the year to 31 December 2019. Given the surrender of the lease by Hilton in March 2019, the management of the hotel was subcontracted to Michels & Taylor (London) Limited who took over from 1 March 2019. Consequently the activity of the company changed during 2019 and the figures will not be fully comparable.
2. Statement of compliance
These financial statements have been prepared in compliance with FRS 102, 'The Financial Reporting Standard applicable in the UK and 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
Since end of March 2020, the spread of COVID-19 has severely impacted many local economies around the globe, and in particular the hospitality industry. By the end of March 2020 to 30 April 2020, the Government legally required certain businesses and venues to close in order to reduce the spread of coronavirus (COVID-19).Our hotel was consequently temporarily closed. It opened only for key workers from 1 May to 3 July 2020, then opened as per government guidelines between 4 July and 4 November 2020. Thereafter it remained open for key workers only until 12 April 2021. Despite this long period of disruption, the hotel has managed to operate successfully within the government guidelines.During 2020, the company benefited from some support from the government such as the Coronavirus Job Retention Scheme, and deferred VAT and PAYE payments. As of 31 December 2020, the company had no overdue PAYE or VAT amounts. At 2020 year-end, the company had £1.9m cash in the bank. Additionally, the shareholders have indicated their current intention to provide financial support to the company, if required. A waiver on some of the company's loan covenants were agreed with Citibank in April 2020 and renewed in October 2020 for one year.We considered implications for the company's going concern assessment and appropriate disclosure in the Financial Statement, by developing stress test scenarios to model potential impacts. Based on the above and our current cash reserve, we believe we will be able to continue trading in the next 12 months. The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remain still unclear at this time. It is not possible to reliably estimate the duration and severity of these consequences, as well as their impact on the financial position and results of the company for future periods, especially given the nature of the business. Future potential measures, which could be taken by the government to continue limit the spread of the virus and its variants are still unknown and consequently, there is still a material uncertainty on the future of the Company.
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 London and Regional Group Property Holdings Ltd is which can be obtained from the Registered Office. As such, advantage has been taken of the following disclosure exemptions available under paragraph 1.12 of FRS 102: (a) Disclosures in respect of each class of share capital have not been presented.(b) No cash flow statement has been presented for the company. (c) Disclosures in respect of financial instruments have not been presented.(d) Disclosures in respect of share-based payments have not been presented.(e) No disclosure has been given for the aggregate remuneration of key management personnel.
Judgements and key sources of estimation uncertainty
In the application of the Company's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Estimated useful lives and residual values of fixed assets Depreciation of tangible and intangible fixed assets has been based on estimated useful lives and residual values deemed appropriate by the Directors. Estimated useful lives and residual values are reviewed annually and will be revised as appropriate. Given the Covid pandemic, the Directors also paid a particular attention to the value of the fixed assets in the accounts and believe, based on their projections that there is no need for any impairment as of 31 December 2020.
Turnover
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. Hotel Accommodation Revenue is recognised on customer departure on the basis it is probable the company will receive the consideration, and costs incurred in respect of the transactions can be measure reliably.
Taxation
The taxation expense represents the aggregate amount of current and deferred tax recognised in the reporting period. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in capital and reserves. In this case, tax is recognised in other comprehensive income or directly in capital and reserves, 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.
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:
Equipment - 10% to 33% reducing balance
If there is an indication that there has been a significant change in depreciation rate, useful life or residual value of tangible assets, the depreciation is revised prospectively to reflect the new estimates.
Impairment
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.
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 stocks to their present location and condition.
Government grants
Due to the COVID-19 pandemic and the closure of the hotel under UK Government legislation, the company utilised the Government support scheme: the furlough scheme whereby the Government contributed towards the wage costs of the company. The amounts received are reported under other income in the financial statements and the income is reported in the period that the relief relates to.
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 in finance costs in profit or loss in the period it arises.
Financial instruments
A financial asset or a financial liability is recognised only when the company becomes a party to the contractual provisions of the instrument. Basic financial instruments are initially recognised at the transaction price, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Debt instruments are subsequently measured at amortised cost. Where investments in non-convertible preference shares and non-puttable ordinary shares or preference shares are publicly traded or their fair value can otherwise be measured reliably, the investment is subsequently measured at fair value with changes in fair value recognised in profit or loss. All other such investments are subsequently measured at cost less impairment. Other financial instruments, including derivatives, are initially recognised at fair value, unless payment for an asset is deferred beyond normal business terms or financed at a rate of interest that is not a market rate, in which case the asset is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Other financial instruments are subsequently measured at fair value, with any changes recognised in profit or loss, with the exception of hedging instruments in a designated hedging relationship.
Financial assets that are measured at cost or amortised cost are reviewed for objective evidence of impairment at the end of each reporting date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss immediately. For all equity instruments regardless of significance, and other financial assets that are individually significant, these are assessed individually for impairment. Other financial assets or either assessed individually or grouped on the basis of similar credit risk characteristics. Any reversals of impairment are recognised in profit or loss immediately, to the extent that the reversal does not result in a carrying amount of the financial asset that exceeds what the carrying amount would have been had the impairment not previously been recognised.
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 in finance costs in profit or loss in the period in which it arises.
4. Turnover
Turnover arises from:
2020 2019
£ £
Rendering of services 2,577,676 8,432,755
Rental income - 376,348
Hilton Premium Payment 2,449,672 1,779,432
_______ _______
5,027,348 10,588,535
_______ _______
The whole of the turnover is attributable to the principal activity of the company wholly undertaken in the United Kingdom.
5. Other operating income
2020 2019
£ £
Government grant income 829,394 -
_______ _______
6. Operating profit
Operating profit is stated after charging/(crediting):
2020 2019
£ £
Depreciation of tangible assets 919,970 87,617
Fees payable for the audit of the financial statements 25,000 25,000
Bank arrangement fees 46,668 46,541
_______ _______
Operating profit includes arrangement fees for the refinancing of the acquisition of the freehold property with Citibank, which are being amortised over the duration of the loan as amended on 16 April 2019.
7. Staff costs
The average number of persons employed by the company during the year, including the director, amounted to:
2020 2019
Hotel staff 101 141
_______ _______
The aggregate payroll costs incurred during the year were:
2020 2019
£ £
Wages and salaries 1,740,737 2,032,368
Social security costs 130,176 150,923
Other pension costs 36,200 37,846
_______ _______
1,907,113 2,221,137
_______ _______
The wages and salaries include £829,394 which was covered by grants under the Government's Coronavirus Job Retention Scheme.
8. Interest payable and similar expenses
2020 2019
£ £
Bank loans 546,293 618,168
Other loans made to the company:
Shareholder loan 412,110 395,616
_______ _______
958,403 1,013,784
_______ _______
9. Tax on profit
Major components of tax expense
2020 2019
£ £
Current tax:
UK current tax expense 158,945 634,227
Adjustments in respect of previous periods 19,421 -
_______ _______
Deferred tax:
Origination and reversal of timing differences ( 118,892) 26,869
_______ _______
Tax on profit 59,474 661,096
_______ _______
Reconciliation of tax expense
The tax assessed on the profit for the year is lower than (2019: the same as) the standard rate of corporation tax in the UK of 19.00 % (2019: 19.00%).
2020 2019
£ £
Profit before taxation 508,669 3,479,450
_______ _______
Profit multiplied by rate of tax 96,647 661,096
Adjustments in respect of prior periods 19,421 -
Effect of expenses not deductible for tax purposes 101,391 -
Utilisation of tax losses ( 144,730) -
Rounding on tax charge ( 1) 1
Prior year adjustment to deferred tax ( 13,254) -
_______ _______
Tax on profit 59,474 661,097
_______ _______
10. Tangible assets
Freehold property Fixtures, fittings and equipment Total
£ £ £
Cost
At 1 January 2020 30,496,945 1,345,058 31,842,003
Additions - 2,458,141 2,458,141
_______ _______ _______
At 31 December 2020 30,496,945 3,803,199 34,300,144
_______ _______ _______
Depreciation
At 1 January 2020 - 87,617 87,617
Charge for the year - 919,970 919,970
_______ _______ _______
At 31 December 2020 - 1,007,587 1,007,587
_______ _______ _______
Carrying amount
At 31 December 2020 30,496,945 2,795,612 33,292,557
_______ _______ _______
At 31 December 2019 30,496,945 1,257,441 31,754,386
_______ _______ _______
The freehold property is depreciated over 50 years, however as it is maintained to a high standard the residual value is considered to be at least carrying value so no depreciation has been charged in the period.
11. Stocks
2020 2019
£ £
Finished goods and goods for resale 9,648 23,452
_______ _______
12. Debtors
2020 2019
£ £
Trade debtors 192,185 468,522
Amounts owed by group undertakings 3,328,124 4,772,089
Prepayments and accrued income 32,721 151,900
Other debtors 38,911 111,597
_______ _______
3,591,941 5,504,108
_______ _______
13. Creditors: amounts falling due within one year
2020 2019
£ £
Bank loan 136,836 919,136
Trade creditors 395,747 691,402
Amounts owed to group undertakings 326,824 -
Accruals and deferred income 363,302 618,209
Corporation tax 485,769 873,669
Social security and other taxes 233,479 127,465
Other creditors 18,975 168,973
_______ _______
1,960,932 3,398,854
_______ _______
14. Creditors: amounts falling due after more than one year
2020 2019
£ £
Bank loan 20,501,426 19,913,572
Shareholder loan 12,178,044 11,765,944
_______ _______
32,679,470 31,679,516
_______ _______
The company has a loan agreement with CitiBank for a nominal amount of £20,861,687 which is being repaid in quarterly instalments and will be fully repaid in April 2023. The loan bears interest at LIBOR 3 months plus 2% and is secured by way of a charge over the freehold property owned by the company.
The company also has a loan from its parent company London & Regional Group Property Holdings Limited for an original amount of £30,927,976 which was partially repaid at the year end and the balance at 31 December 2020 was £12,178,044 including accrued interest. This loan bears interest at 3.5% and is repayable in August 2022.
15. Provisions
Deferred tax (note 16) Total
£ £
At 1 January 2020 26,869 26,869
Additions ( 118,892) ( 118,892)
_______ _______
At 31 December 2020 ( 92,023) ( 92,023)
_______ _______
16. Deferred tax
The deferred tax included in the statement of financial position is as follows:
2020 2019
£ £
Included in provisions (note 15) ( 92,023) 26,869
_______ _______
The deferred tax account consists of the tax effect of timing differences in respect of:
2020 2019
£ £
Accelerated capital allowances ( 13,721) 26,869
Timing difference on interest payable ( 78,301) -
_______ _______
(92,022) 26,869
_______ _______
17. Employee benefits
The amount recognised in profit or loss in relation to defined contribution plans was £ 36,200 (2019: £ 37,846 ).
18. Government grants
The amounts recognised in the financial statements for government grants are as follows:
2020 2019
£ £
Recognised in other operating income:
Government grants recognised directly in income 829,394 -
_______ _______
19. Called up share capital
Issued, called up and fully paid
2020 2019
No £ No £
Ordinary shares of £ 1.00 each 100 100 100 100
_______ _______ _______ _______
20. Related party transactions
During the year the company entered into the following transactions with related parties:
Transaction value Balance owed by/(owed to)
2020 2019 2020 2019
£ £ £ £
Parent company 412,110 395,590 ( 12,504,869) ( 11,765,944)
Michels & Taylor (London) Limited 68,908 435,471 - -
Other group company - - 3,319,122 4,759,723
_______ _______ _______ _______
As described in note 8 above, the company has an interest bearing loan from its parent company. During the year, interest of £412,110 was accrued on this loan, and the total balance of the loan due to the parent company at the year end was £12,178,044. During the year, the company paid hotel management fees to Michels & Taylor (London) Limited. The total fees in the period were £68,908.Also at the balance sheet date, the company is owed £3,319,122 from other group companies .
21. Controlling party
The immediate parent undertaking is London and Regional Group Property Holdings Ltd , a company incorporated and registered in England and Wales.The ultimate parent undertaking is London and Regional Group Properties Ltd , a company incorporated in England and Wales. London and Regional Group Property Holdings Ltd is the parent undertaking of the smallest group of undertakings to consolidate these financial statement as at 31 December 2020. London and Regional Group Properties Lt d is the parent undertaking of the largest group of undertakings to consolidate these financial statements at 31 December 2020. The consolidated financial statements of London and Regional Group Properties Ltd can be obtained from the company secretary at Quadrant House, Floor 6, 4 Thomas More Square, London E1W 1YW .The ultimate controlling parties are I.M. Livingstone and R.J. Livingstone through their joint ownership of London and Regional Group Properties Ltd.