The directors present the strategic report for the year ended 31 December 2021.
The directors have continued their policy of investing in the hotel to improve operational performance and to promote the 'Hotel Football’ brand even post the pandemic year. The directors feel that whatever the case, the quality of the brand and of the property they manage cannot be sacrificed. There is a strong focus on always investing and enhancing the customer experience and providing a high level of service.
The directors appreciate that the financial year ending 31 December 2021 was not a normal year with the world still in the midst of a pandemic, even though business started to pick up. During this period, the hotel was open all year but the first six months of operation were hit drastically by the effects of the pandemic restrictions in place and this has obviously affected the financial figures of the business.
Financial Year 2021 continued to be a year of the “unknown”, especially in the beginning 6 months because of the pandemic but also because the challenges around inflation and the labour market continue up to this day. One also needs to not underestimate the significance that the hospitality industry is still regarded as a high risk industry by the financial markets in general and by employees.
Our sales team also made sure to continue with their networking albeit on a limited basis especially in the first six months of the year and after most of the restrictions were lifted physical meetings with present and potential new clients started taking place.
For 2022, the directors are looking forward for the hotel to get back to the performance pre the Covid pandemic with a healthy performance in rooms and F&B, where forecasts are showing a positive positioning for the hotel in terms of Average room rate, occupancy, EBITDA and cash generation. Figures are very encouraging, whereby the property has achieved record ADRs as well as outperforming its competitors.
This shows that our investment in service and operational delivery continues to be recognized with excellent review scores from leading internationally established online review sites as well as within the Marriott chain.
Like any other business, we are subject to a number of risks and uncertainties, which are influenced by both internal and external factors, often outside our control as we have seen in 2020 and 2021. In this section, we describe the principal risks that could have a material effect on the Company’s ability to deliver against its strategy together with the activities in place to mitigate such risks.
Quality of service, delivery and product
Risk and potential impact
Consistent delivery of service and product quality is vitally important to creating and maintaining the Hotel Football brand and in influencing consumer preference. As supply increases, particularly in our immediate vicinity, business may be lost to newer hotels and/or rates may have to be reduced to remain competitive.
Mitigating Activities
The Company operates and manages the property itself, and therefore is able to exercise control over the service and product quality. The Company has in place brand and operating standards, and regularly refreshes those, to provide for consistent service, delivery and product quality.
Intellectual property rights and brands
Risk and potential impact
Future growth and pricing power and the image and reputation of the Company in general will, in part, be dependent on the recognition of the Hotel Football and Cafe Football brands and perception of the values inherent in those brands.
The ability of the company to protect its intellectual property rights in those brands is instrumental in preventing them from deteriorating in value.
Mitigating Activities
The Company protects its investment in the brands by way of trademark registration, enforcement of intellectual property rights and domain name protection.
COVID-19 & Inflation
Risk and Potential Impact
We consider that inflation is our main risk in the current scenario the world is facing, since this will affect the disposable income available of our prospective clients, both corporate and private, which as a consequence can affect our revenue streams.
Inflation has also caused huge increases in our COS, labour costs as well as other areas of the business although when it comes to energy, we had taken steps to hedge against any potential increases in energy prices which luckily has helped.
Although the pandemic restrictions have been lifted there is still a level of uncertainty around the pandemic in the future which poses a risk to our industry due to a chance of a new variant emerging.
Risk and Potential Impact
The hotel industry operates within an inherently cyclical marketplace where competition, both online and offline, is increasing. An increase in market room supply, without corresponding increases in demand, may lead to downward pressure on rates, which in turn could negatively impact the Company's performance. With regard to online competition, the Company’s hotel rooms are booked through a number of distribution channels, one of which is the online travel agency ("OTA"). OTAs tend to have higher commission rates than more traditional distribution channels and are taking an increasing share of bookings across the sector. One of the effects of the Marriott brand is that the commissions from these OTAs are now lower. Over time, consumers may develop loyalties to the OTAs rather than to our brands. These trends may impact our profitability. In addition, sharing economy platforms, such as Airbnb, may expand their market share and compete with more traditional business and leisure accommodations.
Mitigating Activities
The Company's flexible financial control and revenue management systems help it to control costs and achieve better yields in volatile trading conditions. The Company continues to refresh its digital marketing strategy and invest in its e-commerce, customer relationship management, revenue management and reservations systems in order to help increase rates, retain existing customers and generate new business. The teaming up with Marriott as a Tribute Portfolio hotel has also meant that the Hotel has now access to the biggest database in the world and this was reaping benefits at the end of 2021, beginning of 2022.
Financial
Risk and Potential Impact
Unhedged interest rate exposures pose a risk to the company when interest rates rise, resulting in increased costs of funding and an impact on overall financial performance. With LIBOR being removed, we have now shifted onto a SONIA model which should decrease slightly our financial risk in this area.
At the same time, the high inflation rate in the UK which has recently been calculated at being around 9% (July 2022), also meant that the central intervention rate of the Bank of England has increased substantially over the past months (2022) meaning that our cost of debt has increased substantially.
Mitigating Activities
Interest rate hedges are only used to manage interest rate risk to the extent the perceived costs are considered to outweigh the benefits of having flexible, variable-rate debt. We do not perceive that the higher Bank of England interest rate will be for the long term, so we are not looking at hedging against this for the time being.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2021.
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Cowgill Holloway LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The financial statements of the company have been prepared using the going concern basis which the directors consider to be appropriate for the following reasons:
The company has reported a net current assets position as at the end of 2021 of £1,342,330 (excluding the bank loan) which is a slight fall on the same position at the end of 2020 of £1, 3 69,782 but a massive improvement on the net current liability of £ 13 , 473 recorded in 2019.
Due to the pandemic and the limited operation of the hotel for the first six months of the financial year, the company has registered an operating loss of £328,724 after a larger operating loss of £1,242,431 was registered in the previous year.
As a result, the company registered a loss before tax of £1,148,879, down from the £2,042,812 registered in the previous year.
In this financial year we were still experiencing a number of restrictions due to the pandemic especially in the first six months.
When most of the restrictions were lifted and the hotel re-opened completely, revenues started to pick up. When the actual football season restarted, the fans started coming back mostly from the UK because a number of travel restrictions were still in place and international fans were reluctant to book in advance due to uncertainty.
The directors have approved profit and loss budgets and well as cash flow forecasts until December 2022, taking into account the slow recovery of certain markets in our industry after the pandemic.
As such the cash flow forecasts until December 2022 indicate that, taking account of reasonably possible downsides, the company will have sufficient funds to meet its liabilities as they fall due for that period. In addition, these forecasts show that the company will remain within the covenants set under its external banking facilities for the foreseeable future.
The external banking facilities were meant to expire on 31 March 2022. Negotiations with the banks started in the first quarter of 2021 and led to the facilities being renewed and agreement reached for the facility to expire on the 30 September 2023, albeit with some adjustments.
These cash flow forecasts are dependent on the company's immediate parent company, Orchid Leisure Limited not seeking repayment of the amounts currently due to the group, which on 31 December 2021 amounted to £10,2 97 ,98 4 . Orchid Leisure Limited has indicated that it does not intend to seek repayment of these amounts for the period covered by the forecasts.
In addition to the above, the Company has received a letter of support from its ultimate parent company RSP Holdings PTE Limited stating that it will continue to provide such funds as are needed by the company until at least 16 June 2022 and thereafter for the foreseeable future.
As with any company placing reliance on other group entities for financial support, the directors acknowledge that there can be no certainty that this support will continue, although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
Based on the above, the directors are confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for at least the next 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
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 directors 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 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.
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 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 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 .
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below .
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussions with the directors (as required by auditing standards) and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Through these procedures we did not become aware of any actual or suspected non-compliance.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
We design procedures in line with our responsibilities, outline below to detect material misstatement due to fraud:
Matters are discussed amongst the audit engagement team regarding how and where fraud might occur in the financial statements and potential indicators of fraud
Identifying and assessing the design and effectiveness of controls that management have in place to prevent and detect fraud
Detecting and responding to the risks of fraud following discussions with management and enquiring as to whether management have knowledge of any actual, suspected or alleged fraud.
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.
Old Trafford Supporters Club Limited is a private company limited by shares incorporated in England and Wales . The registered office is St Andrews Chambers, 21 Albert Square, Manchester, M2 5PE.
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 £.
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 . T he company has therefore taken advantage of e xemptions 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 RSP Topco PTE Limited . These consolidated financial statements are available from its registered office , 4 Shenton Way, #28-03, SGX Centre II, 068807, Singapore
The financial statements of the company have been prepared using the going concern basis which the directors consider to be appropriate for the following reasons:
The company has reported a net current assets position as at the end of 2021 of £1,342,330 (excluding the bank loan) which is a slight fall on the same position at the end of 2020 of £1, 3 69,782 but a massive improvement on the net current liability of £ 13 , 473 recorded in 2019.
Due to the pandemic and the limited operation of the hotel for the first six months of the financial year, the company has registered an operating loss of £328,724 after a larger operating loss of £1,242,431 was registered in the previous year.
As a result, the company registered a loss before tax of £1,148,879, down from the £2,042,812 registered in the previous year.
In this financial year we were still experiencing a number of restrictions due to the pandemic especially in the first six months.
When most of the restrictions were lifted and the hotel re-opened completely, revenues started to pick up. When the actual football season restarted, the fans started coming back mostly from the UK because a number of travel restrictions were still in place and international fans were reluctant to book in advance due to uncertainty.
The directors have approved profit and loss budgets and well as cash flow forecasts until December 2022, taking into account the slow recovery of certain markets in our industry after the pandemic.
As such the cash flow forecasts until December 2022 indicate that, taking account of reasonably possible downsides, the company will have sufficient funds to meet its liabilities as they fall due for that period. In addition, these forecasts show that the company will remain within the covenants set under its external banking facilities for the foreseeable future.
The external banking facilities were meant to expire on 31 March 2022. Negotiations with the banks started in the first quarter of 2021 and led to the facilities being renewed and agreement reached for the facility to expire on the 30 September 2023, albeit with some adjustments.
These cash flow forecasts are dependent on the company's immediate parent company, Orchid Leisure Limited not seeking repayment of the amounts currently due to the group, which on 31 December 2021 amounted to £10,2 97 ,98 4 . Orchid Leisure Limited has indicated that it does not intend to seek repayment of these amounts for the period covered by the forecasts.
In addition to the above, the Company has received a letter of support from its ultimate parent company RSP Holdings PTE Limited stating that it will continue to provide such funds as are needed by the company until at least 16 June 2022 and thereafter for the foreseeable future.
As with any company placing reliance on other group entities for financial support, the directors acknowledge that there can be no certainty that this support will continue, although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
Based on the above, the directors are confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for at least the next 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
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 .
At each reporting period end date, the company 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.
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.
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 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 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. A m ounts 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.
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 s ubsequently 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 th r ough 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 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 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.
Where there is an indication that an asset may be impaired, the company is required to test whether assets have suffered any impairment. An impairment arises when net book value exceeds the recoverable amount. The recoverable amount is the higher of value in use or fair value less costs of disposal. The use of these methods requires the estimation of future cash flows and discount rates to calculate the present value of the cash flows. Actual outcomes may vary and hence there is an inherent uncertainty involved with this estimate. The directors have performed an assessment of carrying value as at 31 December 2020 and have concluded the carrying value is recoverable.
All turnover arose in the United Kingdom and related to the operation of a hotel and restaurant.
Other operating income is composed of £388,137 (20 20 : £ 4 3 1 , 645 ) for a suite rented out to a related party, along with £ 452,884 (20 20 : £ 915,525 ) of furlough grant income.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
Directors are not paid any remuneration by the company as their role in this company is incidental to their wider role in other group companies. As such they provide no material qualifying services to the company and thus no allocation of remuneration has been disclosed in these financial statements.
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Included within bank loans and overdrafts is a bank loan of £1 3 , 9 31,363 (excluding deduction of fees) which was secured by way of a fixed and floating charge over all assets of the company. The facility is due for repayment in full on 30 March 2022. Capital repayments of £50,000 per quarter are repayable from 31 March 2021. The loan carried interest of 2.7% + LIBOR.
Post year end the bank loan facility was extended and the revised repayment date is now 30 September 2023.
Included within other loans is a loan due to Orchid Leisure Limited (a fellow group subsidiary) totalling £ 10,2 97 , 984 (20 20 : £9,797,985) which is due for repayment on 30 March 2022. This loan carries no interest. Accordingly the loan has been recognised at present value by discounting the loan at a market rate of interest with a corresponding entry within capital contribution reserve. Changes in present value are recorded as an interest charge in the profit and loss account.
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.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Post year end the bank loan facility of £13,931,363, included within creditors due within 12 months was extended and the revised repayment date is now 30 September 2023.
A loan balance is due to Orc hi d Leisure Limited, the immediate parent company totalling £10,297,984 (20 20 : £9,797,985) as detailed in note 14.
Included within debtors are the following balances owed by related parties;
GG Hospitality Limited £1, 712, 4 46 (20 20 : £1, 834 , 75 2)
Finestday Limited £ 384,717 (2019: £ 454 , 195 )
Income was also received from a related party in respect of the rental of a suite at the hotel. This rental income totalled £ 388,137 (20 20 : £ 431 , 645 ) as disclosed in note 3.
The immediate parent company is Orchard Leisure Limited, a company registered in the British Virgin Islands.
The ultimate controlling party is RSP Topco PTE Limited, a company registered in Singapore. The largest group in which the results of the company is consolidated is that headed by RSP Topco PTE Limited. The consolidated financial statements of this group are available to the public and may be obtained from its registered office, 4 Shenton Way, #28-03, SGX Centre II, 068807, Singapore.