HFD_OFFICES_LIMITED - Accounts

The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true

These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

HFD Offices Limited is a private company limited by shares incorporated in Scotland. The registered office is 177 Bothwell Street, Glasgow, G2 7ER.

The directors present financial statements for the period 1 July 2022 to 30 June 2023 utilising the 7 day variation to statutory year end for administrative purposes. The prior period accounts are drawn up for the period from 24 June 2021 to 30 June 2022, again utilising the 7 day variation to statutory year end for administrative purposes. Comparative amounts presented in the financial statements (including the related notes) are therefore not entirely comparable.

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 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

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.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 7 'Statement of Cash Flows': Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 'Basic Financial Instruments' and Section 12 'Other Financial Issues': Interest income /expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

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

The financial statements of the company are consolidated in the financial statements of HFD Group Limited. These consolidated financial statements are available from its registered office, 177 Bothwell Street, Glasgow, Scotland, G2 7ER.

The directors are required to prepare the statutory financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. In satisfaction of this responsibility the directors have considered the company's ability to meet its liabilities as they fall due.true

Following the reporting date, capital reduction demerger took place whereby the company was demerged from HFD Group Limited. At the time of approving the financial statements, all investment properties were sold to other related party entities, with the trade also being transferred to these entities. The business is continuing to operate as a serviced office provider via long-term leases. The company closely monitors and manages its funding position and liquidity risk throughout the year to ensure that it has access to sufficient funds to meet forecast cash requirements.

As such, the directors consider that it is appropriate to prepare financial statements on a going concern basis.

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

Turnover primarily represents amounts invoiced during the year for provision of letting and property management services.

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

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

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. Changes in fair value are recognised in profit or loss.

A provision for impairment is established when there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been impacted.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

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

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

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

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

Equity instruments issued by the company 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 company.

The company designates certain hedging instruments, including derivatives, embedded derivatives and non-derivatives, as either fair value hedges or cash flow hedges. At the inception of the hedge relationship, the company documents the relationship between the hedging instrument and the hedged item along with risk management objectives and strategy for undertaking various hedge transactions. At the inception of the hedge and on an ongoing basis, the company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

For derivatives that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of the hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

Any gain or loss previously recognised in other comprehensive income is reclassified to profit or loss when the hedge relationship ends. This occurs when the hedging instrument expires or no longer meets the hedging criteria, the forecast transaction is no longer highly probable, the hedged debt instrument is derecognised, or the hedging instrument is terminated.

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 profit and loss account 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 company’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 profit and loss account, 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 when the company has 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 fixed assets.

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

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

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

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 balance sheet 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 leases 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.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

An independent valuation of land and buildings was undertaken in October 2022 by a RICS regulated practice on a market value basis. The valuation conformed to International Valuation Standards and was based on recent market data transactions performed on arm's length terms as at October 2022.

The valuation report has been used by management to inform the measurement of the valuation of investment properties in these financial statements as at 30 June 2023.

As required by the loan facility the Company has an interest rate SWAP in place. The company has adopted hedge accounting and the value of the SWAP is recognised on the balance sheet with associated deferred tax in line with Santander UK plc specialist derivatives team.

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

A professional 3rd party valuation of investment properties was carried out by JLL, RICS Registered Valuers, as at 2 October 2022. The directors have concluded that this represents the fair value of the investment properties held and is an appropriate fair value as at 30 June 2023.

As part of the capital reduction demerger, following 30 June 2023 all investment properties were sold to new related party entities.

Amounts due from group undertakings relates to loan balances which are payable on demand and do not attract any interest.

The bank loan is secured by a bond and floating charge over the assets and undertakings of the company and a first ranking standard security over the company's heritable properties.

The loan is repayable by 30 consecutive payments of £306,375 each, on each quarterly repayment date, followed by a final payment of all sums outstanding on the Termination date of 29 February 2028. Interest is accrued at a rate of 3.439% per annum.

Following 30 June 2023, as part of the capital reduction demerger the bank loan debt was transferred between HFD International House Limited, HFD Duart House Limited, HFD Willow House Limited and HFD Phoenix House Limited.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

The Ordinary shares of £0.01 each and the Ordinary shares of £1 each rank pari passu in all respects except in relation to income. The £0.01 Ordinary shares and the £1 Ordinary shares shall rank separately with regard to entitlement to dividend such that the directors may at any time resolve to declare or recommend a dividend on one class of share and not on the other class.

A resolution was passed on 4 July 2023 following the capital reduction demerger. 12,922,500 ordinary shares of £1 each in the capital of the company were cancelled and extinguished. This resulted in a reduction to the issued share capital to 10,002 Ordinary shares of £0.01 each.

As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:

The auditor's report was unqualified.

The company has given its bankers a guarantee that in the event of Avondale House Limited and HFD Management Services LLP not repaying their bank loans, the company will satisfy this debt. At 30 June 2023, this debt was £3,734,250 (2022: £4,380,750).

As part of HFD Group's wider strategic review of operations on 4th July 2023 the serviced office business was demerged from HFD Group by way of a capital reduction demerger.

Investment properties held by HFD Offices Limited were sold to fellow subsidiary companies HFD Duart House Limited, HFD International House Limited, HFD Phoenix House Limited and HFD Willow House Limited and subsequently demerged from the Group.

As a result of this reorganisation from the 4th July 2023 HFD Offices Limited is now held by a separate legal entity HFD Offices Holdings Limited with no change to the ultimate controlling parties. HFD Offices Limited will continue to operate as a serviced office provider under its new corporate structure.

The company has taken advantage of the exemption available in FRS 102 section 33 "Related Party Disclosures" whereby it has not disclosed transactions with the immediate parent company or any wholly owned subsidiary undertaking of the group.

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

The following amounts were outstanding at the reporting end date:

Interest receivable from related parties was nil (2022: £85,141).

The parent of the smallest group for which consolidated financial statements are drawn up is HFD Group Limited, whose registered office is 177 Bothwell Street, Glasgow, G2 7ER.

The Hill 2011 Trust and The Alexander Trust and their members are considered to be the ultimate controlling party due to their majority shareholding in HFD Group Limited.