LFH_(Fowey_Hall)_Limited - Accounts
LFH_(Fowey_Hall)_Limited - Accounts
The director presents the strategic report for the year ended 31 December 2022.
The principal activity of the company continued to be that of trading as a hotel. The results for the year show a pre-tax loss of £564,102 (2021: profit - £10,132) on turnover of £1,820,693 (2021: £3,047,957).
As with all of the hospitality businesses in the UK 2022 was a challenge coming out of COVID, dealing with the increased Energy costs and consumers & businesses alike managing the cost-of-living crisis.
Trading in the school holidays was strong, however the off-peak demand dropped, and Average Room Rates (ADR) were pushed down through lower demands.
As a result the Board consider the hotel to have performed satisfactorily in the year.
The Board considers the principal risks affecting the company are the continued uncertainty of the UK cost of living crisis encompassing energy costs, rising inflation & reduced consumer confidence in committing to leisure spending. Some of this is passed on in direct form to our customers through increased tariffs, however the hotel’s ADR is primarily based on the competitor set and marketplace, thus not allowing a set increase to cover the additional costs borne by the company.
The Board manages its exposure to price risk through careful yield management, assessing the demand levels and adjusting the key tariffs accordingly. The Board does not consider it is exposed to credit risk.
The Board ensured sufficient funding is available to meet the company’s needs for the foreseeable future through a prudent combination of equity and bank debt; along with regular management and updates of forecasts cash flow and liquidity risks are managed.
The balance sheet shows that the company's net assets position has reduced from £3,259,393 in the prior year to £2,695,291 at the balance sheet date. The director is expecting significant growth in the foreseeable future.
The main KPIs of the business for the 2022 trading period, as traditionally assessed by the hotel industry are as follows:
Occupancy: 45.3% (2021: 86%)
ADR: £217.19 (2021: £323.43)
RevPAR: £98.28 (2021: £278.11)
Prior year significantly benefitted from the UK ‘staycation’ business as the country came out of COVID restrictions, along with reduced rates of VAT for the hospitality sector.
2023 is showing the economic issues of the past year to be slowly steadying. The outlook for the leisure industry does not look to be any more impacted than other sectors.
The Fowey Hall Hotel fully opened with its new keys taking it to 60 keys in Spring 2023. This presents exciting opportunities for the business to grow considerably through increased capacity and improved levels of quality.
The Directors have every confidence in the ongoing trading success of the hotel.
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 9.
No ordinary dividends were paid. The director does not recommend payment of a final dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
A resolution will be passed to re-appoint the auditors. Saffery LLP have expressed their willingness to continue in office.
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.
give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its loss for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.
Other information
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 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 have been prepared in accordance with applicable legal requirements.
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of 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 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.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the director, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with director and by updating our understanding of the sector in which the company operates.
Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.
Other laws and regulations which do not have a direct effect on the financial statements, but with which compliance is essential in order for the company to continue to operate or avoid material penalty include HSE regulations and UK employment law.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the 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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
LFH (Fowey Hall) Limited is a private company limited by shares incorporated in England and Wales. The registered office is Hyde Park House, 5 Manfred Road, London, SW15 2RS.
The 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 £.
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 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’ – Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of MBO Hotels Limited. These consolidated financial statements are available from its registered office, Hyde Park House, 5 Manfred Road, London SW15 2RS.
At the year end the net current liabilities of the company indicated that it may not be able to meet its liabilities as they fall due for payment. However, the company’s ultimate parent, MBO Hotels Limited, has indicated its commitment to the company and accordingly the director considers it appropriate to prepare the financial statements on the going concern basis.
No depreciation was charged on refurbishment additions as these were not in use during the year.
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.
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.
Basic financial assets, which include debtors, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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 company after deducting all of its liabilities.
Basic financial liabilities, including trade and other 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 receipts discounted at a market rate of interest.
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. Accounts payable are classified as 'creditors: amounts falling due within one year' if payment is due within one year or less. If not, they are presented as 'creditors: amounts falling due after more than one year'. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities, including debt instruments that do not meet the definition of a basic financial instrument, are measured at fair value through profit or loss.
Financial liabilities 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.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
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.
In the application of the company’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following are the critical judgements that the directors have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
The company’s key asset is its freehold property. The property, plant and equipment have been valued by the directors having regard to factors such as current and future projected income levels, location, and recent market transactions in the sector. Carrying value is then calculated on the basis of estimates of depreciation periods derived from the expected useful life of the hotel property, and residual values.
Refurbishment expenditure is judged by management as that which will enhance the business and provide return over a reasonable economic life, in line with the company’s depreciation policy.
The company’s management monitor macro and micro economic influences on the business, including the ability to maintain and improve pricing and demand levels, operating cost increases and macro influences, as well as the positioning of the company amongst its peers. The company considers that there are no factors other than recurring and perennial business challenges that would cause a material adjustment to the carrying value of assets and liabilities.
Total turnover arose from the provision of hotel services within the UK. Total turnover being £1,820,693 (2021: £3,047,957).
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
The company has estimated losses of £351,511 (2021: £48,434) available for carry forward against future trading profits.
This represents a deferred tax asset of £87,878 (2021: £12,109) which has not been recognised in the financial statements of the company as the criteria for recognition have not been met.
Included within freehold land and buildings is land of £1,000,000 (2021: £1,000,000) which is not depreciated.
The freehold property has been subject to revaluation. CBRE Limited carried out a valuation of the freehold property during April 2022, the valuation was made on an open market basis by reference to market evidence of transaction process for similar properties. The valuation report confirmed the valuation within the accounts.
If revalued assets were stated on a historical cost basis rather than a fair value basis, the total amounts included would have been as follows:
The total carrying value of freehold land and buildings has been pledged as security for the long term borrowings held in the ultimate parent company.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The ordinary shares carry full voting and capital distribution rights. The ordinary B shares carry full voting rights only.
The "revaluation" reserve represents the fair value uplift in the hotel value.
A deferred tax liability has not been recognised in respect of the revaluation due to there being sufficient estimated tax losses within the group to mitigate a tax charge.
The "profit and loss" reserve represents the cumulative realised profits or losses net of dividends paid and other adjustments.
Amounts contracted for but not provided in the financial statements:
The company has taken advantage of the exemption in FRS 102 Section 33 from the requirement to disclose transactions with group companies on the grounds that the company is a wholly owned subsidiary within the group.
The parent company of LFH (Fowey Hall) Limited is LFH Hotels Limited.
The ultimate controlling party is RBC Trustees (Guernsey) Limited as corporate trustee of the Levy G142 Manchester Settlement and Levy G143 London Settlement.