THE_BUCKINGHAMSHIRE_GROUP - Accounts

The directors present the strategic report for the year ended 31 May 2020.

The consolidated results for the year are set out on page 9.

During the year the strategy of the Group has been to maintain and grow revenue streams across its care rehabilitation businesses.

To achieve this and to concentrate on the core trade of the provision of care, the Group has disposed of its investments in subsidiary companies operating in the care training sector. The financial effects of this disposal can be seen from the disclosure relating to discontinued operations on the Income Statement on page 8. Furthermore, the Group generated a profit on disposal of £5,446,700 on sale of these subsidiary companies.

Total Group’s annual revenue was £13,680,842 for the year to 31 May 2020 which is relatively consistent with the prior year (2019: £13,875,146) despite divestiture of the care training subsidiaries in March 2020. Excluding discontinued operations, the Group’s revenue from continuing operations amounted to £11,724,019 for the year ended 31 May 2020 compared with £11,788,130 for the year ended 31 May 2019.

The Group recognised an aggregate operating loss of £918,877 for the year ended 31 May 2020 for both continuing and discontinued operations compare with an operating loss of £1,126,901 for the year ended 31 May 2019.

Group net assets increased to £1,516,210 in 2020 from a net liabilities of £2,510,200 in 2019, primarily resulting from subsidiary disposals and resultant reduction in bank debt.

The principal risks and uncertainties facing the group’s various businesses are:

COVID-19

COVID-19 has had a serious impact on the industry as a whole.

The Board and management have taken steps to steer their way through the crisis, implementing the strongest possible protection and prevention protocols. Key metrics have been, and continue to be, monitored closely, such as: facility level outbreaks, testing and vaccinations; occupancy and staffing levels; and supply of Personal Protective Equipment (PPE). Management have worked alongside key suppliers of PPE, agency workers, food, and medicines, in order to mitigate any shortage in supply. They have also been working with local authorities, CCGs, NHS, relatives, and residents to provide reassurance and the best possible care for our residents, despite these difficult circumstances.

Naturally, occupancy levels have dropped. Recovery will be slow due to there being less enquires as Local Authorities are placing residents in other facilities where much poorer occupancies are fuelling lower fees.

The Group has taken full advantage of the financial assistance provided by the Government. Nonetheless, the Directors cannot readily predict the longer-term impact of the crisis upon the Group. Including:

• What the NHS/Local Authority and self-pay medium to longer term demand for vacant beds will be.

• What the further impact of the crisis will be on occupancy levels.

• What the further impact of self-isolation, care home isolation and other social distancing measures, including PPE and sanitisation, will have on operating costs.

CQC

Changes to Care Quality Commission (CQC) legislation, which require the company to be responsive to all compliance matters in order to ensure the continued support of care regulators, presents a further uncertainty and principal risk to the Group.

Cash flow management

Loss of revenue through lack of demand for places, reduction in Government funding and external restrictions on new resident admissions present additional risks and uncertainties faced by the Group.

Furthermore, the Group’s debt facilities are due to mature in September 2021 and whilst the creates some uncertainties, the Group maintains a positive relationship with its bankers and continued support been provided despite breaches in covenants.

The Directors are actively seeking to increase the profitability of the Group by increasing occupancy at its rehabilitation care facilities. These activities are the core areas of focus for the group for the future.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 May 2020.

The principal activity of the company and group continued to be that of investment in the facilities of specialised care activities and other care activities.

During the year, the company strategically withdrew and ceased to invest in provision of training for the care community sector.

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 9.

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

The group’s activities expose it to a variety of financial risks. The Board reviews and agrees policies for managing these risks at regular intervals dependant on circumstances. The group’s principal financial instruments include assets and liabilities such as trade debtors and trade creditors arising directly from its operations. In accordance with group’s treasury policy, derivative instruments are not entered into for speculative purposes.

The group manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the group has sufficient liquid resources to meet the operating needs of the business.

The group is exposed to fair value interest rate risk on its borrowings and cash flow interest rate risk on floating rate deposits, bank overdrafts and loans. The group uses interest rate derivatives to manage the mix of fixed and variable debt so as to reduce its risk to expose to changes in the interest rates. Further details are given in note 22 to the financial statements.

Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which must fulfil credit rating criteria approved by the Board. All residents who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary. The group is not exposed to commodity price risk.

The Group is at the forefront of ground breaking innovation and new treatment strategies for rehabilitating patients with a wide range of disabilities. The Group continues to work with its own Innovation Group consisting of senior staff including directors and other staff throughout the group to develop its knowledge and to implement new innovative products within the Group with the view to establish treatments and procedures to be adopted globally.

The building from which the subsidiary company The Royal Buckinghamshire Hospital Limited operates suffered storm damage to the roof and lift in August 2020, with repairs now complete. The financial impact of this event cannot be estimated reliably as its effects on occupancy are difficult to separate from other factors such as the COVID-19 pandemic and because insurance claims are still in progress.

A £600,000 bank loan was received in the subsidiary company Alum Care Limited in December 2020 under the Coronavirus Business Interruption Loan Scheme (CBILS). The interest rate is effectively 0% for the first 12 months and then 4.50% over the Coutts Base Rate for the remainder of the 6 year term.

The Directors are actively seeking to increase the profitability of the Group by increasing occupancy at its rehabilitation care facilities. These activities are the core areas of focus for the group for the future.

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

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 financial statements;

•     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 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.

The directors are responsible for the maintenance and integrity of the company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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.

We have audited the financial statements of The Buckinghamshire Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 May 2020 which comprise the group income statement, 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, the company statement of cash flows 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 group's and the parent company's affairs as at 31 May 2020 and of the group's 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

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1.3 to the financial statements concerning the group and company’s ability to continue as a going concern. The group and company are dependent on the completion of the renewal or refinancing of the group and company’s current debt facilities. The group and company’s current debt facilities are due to mature in September 2021. In addition, the group and company are dependent on the cash generated from operating activities of its subsidiaries which are in turn subject to market and macroeconomic factors, including the potential future impacts of Covid-19 and Brexit. These conditions, along with other matters set out in note 1.3 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group and company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and company were unable to continue as a going concern.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial 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 its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept 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 group's and 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 group or 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.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s profit for the year was £3,000,435 (2019: £1,323,480 loss).

The Buckinghamshire Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 31/33 Commercial Road, Poole, Dorset, BH14 0HU.

The group consists of The Buckinghamshire Group 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. The principal accounting policies adopted are set out below.

As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s profit for the year was £3,000,435 (2019: £1,323,480 loss).

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. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following 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 financial statements incorporate those of The Buckinghamshire Group Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.

All financial statements are made up to 31 May 2020. 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.

The Board has carefully considered those factors likely to affect the future development, performance and financial position of the company and its group in relation to the ability of the company to operate within its current and foreseeable financial and operational resources.

The company is reliant on its directors and its wider group to provide continued financial support in order to remain a going concern. The company continues to benefit from the strong operational performance of key subsidiaries.

In addition, notwithstanding the ongoing challenges presented under the Covid-19 pandemic, the company and its group has navigated the financial challenges this has presented to the care sector by way of ensuring they have access to and have taken advantage of government backed funding, available government grants etc. to assist cash flow management.

Furthermore, the company has in this financial year taken restructuring steps with the disposal of two subsidiary companies as part of a designed strategy to improve immediate group cash flow and to streamline future operations into core market sectors, with the aim of focusing on future group profitability and minimising cash leakage.

The company and its group is also dependent on the support of its bankers. In this connection, the company has failed to deliver on banking covenants attaching to current borrowings. Notwithstanding, the company maintains a currently positive relationship with its bankers and continued support has nevertheless been provided as a result of ongoing discussion relating to potential cash flow uncertainties and notification of measures being taken by the company to address these, including the restructuring steps.

Furthermore, the financial position of the company and its group is in the more immediate term dependent on the renewal or refinancing of current debt facilities, which are set to expire in September 2021. The inability to renew or refinance existing debt would have a negative impact on the cash flow of the company and its group.

A number of the above factors indicate the existence of a material uncertainty which may cast doubt about the company and its group’s ability to continue as a going concern. However, the financial statements do not include the adjustments that would result if the company and its group were unable to trade as a going concern on the basis that the directors consider on balance that having committed to provide financial support to the company and its group for at least 12 months from the date of signing of its financial statements, with reliance on financial support from fellow group members and on the basis of its current relationship with its bankers, the company and its group would be in a position to meet its liabilities as they fall due. As such, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Revenue is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

Revenue from the supply of care services, care home management services, training services and domiciliary care services represents the value of services provided under contracts to the extent that there is a right to consideration and is recorded at the fair value of the consideration received or receivable. Where payments are received from customers in advance of services provided the amounts are recorded as deferred income and included as part of payables due within one year.

Interest income is recognised when it is probable that the economic benefits will flow to the group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is amortised over the FRS 102 default period of 10 years on a straight line basis, as the directors consider that it is not possible to make a reliable estimate of the useful life of the assets.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:

Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:

Freehold land is not depreciated.

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 measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which 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 and intangible 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.

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

Cost is calculated using the weighted average method.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of inventories over its estimated selling price less costs to complete and 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.

The best evidence of fair value is a quoted price for an identical asset in an active market. When quoted prices are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If the market is not active and recent transactions of an identical assets on their own are not a good estimate of fair value, the fair value is estimated by using a valuation technique.

Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

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

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

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit 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 trade and other payables, 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 payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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

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

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 tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and 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. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

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 non-current 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.

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

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

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.

Credit risk

The group implements appropriate credit checks on residents and service users prior to providing services. This reduces the exposure of the group in respect of credit risk.

Liquidity risk

The policy of the Group is to maintain a mix of short and long term borrowings to effectively manage liquidity risk.

Cash flow and interest rate risk

The Group’s interest rate risk arises primarily from long-term borrowings issued at variable rates which exposes the Group to cash flow interest rate risk. The cash flow interest rate risk is managed within the Group’s business projections and planning, in the monitoring of financial covenants and through negotiation of facility terms with the provider of the borrowing facility at specified intervals. In addition, the group hedges against variations in interest rates by entering into appropriate interest rate management products with their lenders.

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.

An analysis of the group's revenue is as follows:

Amortisation of intangible assets is included in administrative expenses.

Government grants received in the year relate to various Covid-19 support schemes.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2019 - 3).

Investment income includes the following:

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

On 26 March 2020 the company disposed of it's 100% shareholding of eLearning For You Limited. The disposal was effected as a strategic withdrawal from the provision of training for the care community sector by the company.

A profit of £5,806,776 arose on the disposal, being the proceeds of the sale, less the costs of sale, carrying amount of the business assets and attributable goodwill.

On 26 March 2020 the company disposed of it's 100% shareholding of myAko Limited. The disposal was effected as a strategic withdrawal from the provision of training for the care community sector by the company.

A loss of £360,075 arose on the disposal, being the proceeds of the sale, less the costs of sale, carrying amount of the business assets and attributable goodwill.

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

The impairment losses in respect of financial assets are recognised in other gains and losses in the income statement.

Intangible fixed assets with a carrying amount of £1,442,955 (2019: £2,136,247) have been pledged to secure liabilities of the group. Detail of these liabilities are given in note 22.

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

Property, plant and equipment with a carrying amount of £8,363,301 (2019: £8,563,813) have been pledged to secure liabilities of the group. Detail of these liabilities are given in note 22.

Fixed asset investments with a carrying amount of £1,412,655 (2019: £1,415,909) have been pledged to secure liabilities of the company. Detail of these liabilities are given in note 22.

Details of the company's subsidiaries at 31 May 2020 are as follows:

The investments in subsidiaries are all stated at cost, less provision for impairment.

The registered office of each of the above subsidiaries is 31/33 Commercial Road, Poole, Dorset, BH14 0HU.

Inventories with a carrying amount of £6,499 (2019: £5,611) have been pledged to secure liabilities of the group. Detail of these liabilities are given in note 22.

Trade debtors and other receivables with a carrying amount of £2,652,527 (2019: £3,307,035) have been pledged to secure liabilities of the group. Detail of these liabilities are given in note 22.

The obligations under finance leases are secured fixtures, fittings and equipment with a carrying value of £nil (2019: £53,618).

Bank loans included above totalling £7,889,224 (2019: £10,231,500) are secured by way of first legal charges over the properties and other assets of the group, a debenture and an intercompany guarantee up to an amount of £13,000,000. Interest is payable at a rate of 2.55% above LIBOR. and the loan matures in September 2021.

Loans from related parties totalling £1,500,000 (2019: £1,500,000) are secured by way of a fixed and floating debenture over the group's assets. Of this, interest was payable at 5% on an amount totalling £1,033,000. On the remaining £467,000 interest was payable at 10%. The loan is repayable on demand.

At the balance sheet date, the group and company were in breach of the covenants laid down by its bankers in respect of its bank loan totalling £7,889,224. As a result, the liability becomes payable on demand. In accordance with the Financial Reporting Standard 102, the loan has therefore been included in the financial statements as being due within one year due to the fact that at the balance sheet date the entity had no unconditional right to defer its settlement for at least 12 months after that date. At the date of approval and signing of these financial statements, the loan had not been called in by the entity’s bankers and they have issued a waiver letter in this connection.

Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 4.5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

Of the deferred tax asset set out above, an amount of £2,454 is expected to reverse within 12 months and relates to accelerated capital allowances and an amount of £4,353 is expected to reverse within 12 months and relates to fair value adjustments.

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.

Ordinary 'A' shares have voting rights but have no right to fixed income or fixed repayment of capital.

Ordinary 'B' shares have voting rights but have no right to fixed income or fixed repayment of capital.

Ordinary 'C' shares have voting rights but have no right to fixed income or fixed repayment of capital.

The share premium reserve contains the premium arising on issue of equity shares, net of issue expenses.

Other equity comprises unsecured borrowings repayable at the discretion of the group or on the occurrence of specific contingent conditions arising. Any interest payable on these borrowings is to be paid as part of a return of capital and the conditions attaching to the loan specify that the payment of interest must be matched to a dividend payment to Ordinary 'A' and Ordinary 'B' equity holders. As such the characteristics of the borrowings are that of equity instruments and they are therefore reported on this basis in the financial statements.

Other reverses comprises merger relief reserve.

Retained earnings represents cumulative profits or losses, including unrealised profit on the remeasurement of investment properties, net of dividends paid and other adjustments.

On 26 March 2020 the group disposed of its 100% holding in eLearning For You Limited. Included in these financial statements are profits of £603,184 arising from the company's interests in eLearning For You Limited up to the date of its disposal.

On 26 March 2020 the group disposed of its 100% holding in myAko Limited. Included in these financial statements are losses of £545,510 arising from the company's interests in myAko Limited up to the date of its disposal.

At 31 May 2020, the group had contingent liabilities amounting to £236,391 (2019: £236,128) in respect of possible additional charge to stamp duty land tax and corporation tax within Alum Care Limited. This possible charge is in respect of the initial apportionment on purchase of the care home held by the company and relates to the values attributable to freehold property and goodwill. The determination of any liability to charge remains under assessment as at the end of the financial period.

During the year, Affinity Care Management Limited, a subsidiary company, was party to a lease agreement to occupy premises whereby it is committed annually to pay rent, service charges and insurance costs totalling £108,392 (2019: £108,392). Alum Care Limited is a guarantor of the agreement.

At 31 May 2020, the group and company had contingent liabilities amounting to £1,010,829 (2019: £937,388) and £686,219 (2019: £635,619) respectively, in respect of interest due on equity loans made by the operators of a pension fund of which a director of the parent company is a beneficiary. The interest is only payable when specific contingent conditions are conditions are met. See note 27: Equity reserve for additional details in connection with these borrowings and the contingent conditions.

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

The building from which the subsidiary company The Royal Buckinghamshire Hospital Limited operates suffered storm damage to the roof and lift in August 2020, with repairs now complete. The financial impact of this event cannot be estimated reliably as its effects on occupancy are difficult to separate from other factors such as the COVID-19 pandemic and because insurance claims are still in progress.

A £600,000 bank loan was received in the subsidiary company Alum Care Limited in December 2020 under the Coronavirus Business Interruption Loan Scheme (CBILS). The interest rate is effectively 0% for the first 12 months and then 4.50% over the Coutts Base Rate for the remainder of the 6 year term.

The remuneration of key management personnel is as follows.

The remuneration of key management personnel of the parent company amounted to £859,162 (2019: £550,312 ), of which £171,748 (2019: £93,078) was paid by a subsidiary of the company.

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

The following amounts were outstanding at the reporting end date:

Included above within other related parties is an amount of £571,000 (2019: £571,000) owed by Ballinderry Limited Liability Partnership, a subsidiary company, to the operators of a pension fund of which a director of the parent company is a beneficiary. The loan is repayable on disposal of the limited liability partnership's interest in Alum Care Limited or at the lender's discretion.

Included above within other related parties is an amount of £7,716 (2019: £7,716) owed by Ballinderry Limited Liability Partnership, a subsidiary company, to a shareholder of the parent company. This loan is interest free and the loan is repayable on demand.

The following amounts were outstanding at the reporting end date:

During the year, amounts totalling £9,971 were written off relating to amounts owed by key management personnel.

As at 31 May 2020, an amount totalling £1,500,000 (2019: £1,500,000) was due by the company to a director. The loan is repayable on demand and interest was payable at 5%.

Additional interest was also payable at 5% on £467,000 (included in the £1.5m loan above).

At at 31 May 2020, an amount totalling £642,156 (2019: £164,045) was owed to the company from a director. Interest on this loan is payable at the official rate and the loan is repayable on demand.

At at 31 May 2020, an amount totalling £278,858 (2019: £125,000) was owed to the company from a director. Interest on this loan is payable at the official rate and the loan is repayable on demand.

At at 31 May 2020, an amount totalling £1 (2019: £nil) was owed to the company from a director. Interest on this loan is payable at the official rate and the loan is repayable on demand.

The company is controlled by the directors by virtue of their 80% shareholding of the issued share capital in the company.

For comparability, the financial statements for the company for the year ended 31 May 2019 have been restated in order to adjust the estimated interest accrued on shareholder loans in order to more accurately reflect the substance of the underlying agreements.

The effect of this adjustment on the Income Statement of the company is to increase distributable reserves by £788,931 and the effect on the Statement of Financial Position as at the reporting date is a decrease in accruals of £773,306 and an increase in net assets of £776,431.

In addition to the above and for comparability, the financial statements of a subsidiary entity, Ballinderry Limited Liability Partnership, have been restated for the year ended 31 May 2019 in order to adjust the estimated interest accrued on related party loans in order to more accurately reflect the substance of the underlying agreements.

The effect of this adjustment on the Income Statement of the Limited Liability Partnership is to increase other reserves classified as equity by £370,290 and the effect on the on Statement of Financial Position as at the reporting date is a decrease in accruals of £370,290 and an increase in Total Members’ Interests of £370,290.

The effect of the above prior year adjustments on the Income Statement of the group for the year ended 31 May 2019 is to increase distributable reserves by £1,159,221 and the effect on the on the net assets of the group as at the reporting date is a decrease in accruals of £1,143,596 and an increase in net assets of £1,146,721.