The directors present the strategic report for the year ended 31 August 2020.
The Radis group of companies predominately provides care and support services in community settings across three reporting divisions: Domiciliary Care, Extra Care Housing and Specialist Services. 2019/20 continued to be a year of consolidation in the ongoing Domiciliary Care, a year of growth in Extra Care Housing and continued investment in Specialist Services.
The group increased turnover to £35,348,802 (2019: £31,787,090). The increase in turnover was achieved through limited fee increases on existing contracts and the underlying movements in contracts and through significant growth in Extra Care.
Inevitably, margins continued to experience pressure as costs continued to rise, particularly the additional increase in cost of National Living Wage and associated employment on-costs. Gross profit margins decreased to 25.1% (2019: 27.8%). In addition to National Living Wage increases, COVID-19 also impacted contract profitability although receipt of additional income from Local Authorities helped to mitigate this as is borne out by exceptional income of £1,259,774 (2019: £nil). The group will continue to review contracts for financial viability and strategic benefit and maintain its active dialogue on viability and cost pressures with Local Authority customers.
The group continued its investment in branch and support staff, funded new contract implementations, IT expenditure and bore significant increases in a number of general cost lines – particularly those of PPE (driven by COVID 19) and Professional Fees. As a result, there was an increase in administrative expenses to £9,094,589 (2019: £8,326,831). We expect to see further investment in wages, IT costs and new contracts and services which the company believes will position it to continue its growth in new contracts. The group will continue to manage the pressures on administrative costs as part of its business strategy.
Despite margin and cost challenges, turnover growth and the exceptional income from Local Authorities has resulted in an increase in Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) to £1,197,225 (2019: £641,324). The improvement in EBITDA was expected due to the consolidation, growth and investment undertaken by the company in 2019/20. The outlook for 2020/21 will be affected by further investment, capital expenditure, further erosion of margins in all services and the impact of the current virus pandemic which has seen an increase in costs, albeit we expect to see further revenue growth from existing and new contracts plus further diversification within the care sector.
The principal risks and uncertainties continue to be the following:
Reliance on Local Authority customers
This risk is managed by maintaining close relations with those customers and also looking for opportunities to expand into the private payer market. The group maintains a pipeline of tender opportunities to promote a diversity of contracts and selectively tenders for sustainable contracts. The group has a good track record of winning new contracts and retaining contracts on renewal.
Compliance with regulations
The group employs suitably qualified staff and provides access to staff training to ensure they remain compliant with the regulations of the sector.
Retention and quality of staff
Recruitment and retention of good quality staff is an ongoing problem in a sector which is traditionally low paid. The group ensures it complies with the requirements of the National Minimum and Living Wages legislation.
Trading conditions are expected to continue to be difficult with the continuing pressure on margins, however, demand for care and support services continues to be high and we do expect to grow both organically and acquisitively over the next 12 months.
The directors consider the key performance indicators to be turnover, gross margins, EBITDA (Earnings before Interest, Tax, Depreciation, Amortisation) and cash flow which are consistent with the size and complexity of the business.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 August 2020.
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.
Ordinary dividends were paid amounting to £168,000. The directors do not recommend payment of a further dividend.
The group's
policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information of matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
The auditor, Mercer & Hole, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Radis Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 August 2020 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including 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).
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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue .
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' r eport 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 identifie d material misstatements in the strategic report and the directors' r eport .
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' r esponsibilities s tatement, 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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s loss for the year was £27,168 (2019 - £221,345 profit).
Radis Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Mercia House, 15 Galena Close, Tamworth, Staffordshire, B77 4AS.
The group consists of Radis 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 a mounts 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.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 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 f low 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 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s loss for the year was £27,168 (2019 - £221,345 profit).
The consolidated financial statements incorporate those of Radis Limited and all of its subsidiaries (ie entities that the g roup 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 August 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 g roup.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the company and group ha ve adequate resources to continue in operational existence for the foreseeable future. Detailed trading cash flow forecasts have been prepared covering a period of greater than 12 months from the date of approval of these financial statements. These forecasts take into account the potential impact of the COVID-19 pandemic on expected levels of trade. The forecasts indicate that the company and group will have adequate resources to continue to trade for the foreseeable future without the need for additional sources of funds. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the provision of professional services is recognised by reference to the date of provision of the services.
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 profit and loss account.
Equity in vest ments 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.
I n 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.
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.
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 balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors 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 m ethod 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 assets, other than those held at fair value through profit and loss , are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and l oans from fellow group companies 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 paymen ts 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.
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 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 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 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 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 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 group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The group operates a defined contribution scheme for the benefit of its employees. Contributions payable are charged to the profit and loss account in the year they are payable.
The group also participates in two multi-employer defined benefit pension schemes, the Local Government Pension scheme and the NHS Pension scheme. Under the TUPE arrangements for employees who were already members of these schemes when their employment contracts were transferred to the company, the company's obligations are to pay current contributions but have been indemnified by the relevant local authority to contribute towards any scheme deficit that may exist.
As such, the schemes have been accounted for a defined contribution pension scheme and the pension costs in respect of these schemes represent contributions payable in the period.
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 lease d asset are consumed.
Government grants are recognised at the fair value of the asset receive d 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 group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
During the year the group received additional payments from a number of the Local Authorities to which it provides services. In some case the terms attached to this additional funding are not clear and there may be the potential for amounts to be clawed back by the Local Authorities in question. The directors have reviewed the position and have only recorded income where they believe that any conditions attached to the income have been met, and where there is not the potential for claw back.
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.
The directors review trade receivable at each balance sheet date for impairment. Impairment of individually significant balances is assessed with an appropriate impairment provision being made when it is probable that the cash due will not be received in full. Individual non-significant balances are measured on a portfolio basis and assessed for impairment using historical loss experience.
An analysis of the group's turnover is as follows:
Grants received relate to amounts received under the Coronavirus Job Retention Scheme.
Planning and architectural fees relate to costs for a potential property development project. Exceptional income connected with COVID-19 relates to additional income received to assist the group in dealing with the effects of the COVID-19 pandemic.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 August 2020 are as follows:
As permitted by the reduced disclosure framework within FRS 102, the company has taken advantage of the exemption from disclosing the carrying amount of certain classes of financial instruments , denoted by ' n/a ' above .
The bank loan and overdraft is secured by fixed charges over the company's assets and a cross guarantee from other group companies.
The bank loan is repayable by 2023.
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:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund. The group also makes contributions to multi-employer defined benefit pension schemes. Contributions to those schemes are accounted for as defined benefit schemes.
All classes of shares rank pari passu save in respect of dividends .
This reserve records the amount above the nominal value received for shares sold, less transaction costs.
This reserve includes all current and prior period retained profits and losses.
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 remuneration of key management personnel is as follows.
The group has taken advantage of the exemption available in the Financial Reporting Standard applicable in the UK and Republic of Ireland ("FRS 102") whereby it has not disclosed transactions between wholly owned undertakings.
GP Homecare Ltd also paid rent to Ridge/Patel Partnership amounting to £44,000 (2019: £44,000), a partnership in which D R Patel, a shareholder in Radis Ltd, is a partner.
Included in creditors falling due within one year (note 19) is a loan from directors of £121,502 (2019: £121,502) and directors' current account balances totalling £58,000 (2019: £nil).
Dividends totalling £168,000 (2019 - £100,000) were paid in the year in respect of shares held by the company's directors.
The ultimate controlling part ies are the Directors S R Patel and D R Patel and other family members.